Wednesday, October 31, 2007

Lindblom on The Market As Prison

Today the democracy reading group I am involved with at UW met to read Charles Lindblom’s very interesting article entitled “The Market as Prison” (published in The Journal of Politics in 1982). I was not familiar with Lindblom’s work so I was pleasantly surprised by this excellent paper. In fact, I have added his latest book to my list of must reads.

So what does he argue in “The Market as Prison”? He examines the way the market works in democratic societies. Many kinds of market reform automatically trigger punishments in the form of unemployment or a sluggish economy. And thus the market represses (but does not completely stop) change. Why, for example, shouldn’t the government just double the minimal wage overnight or implement the most stringent environmentally friendly regulations on industry? Such proposals might sound attractive to some voters, but why would no political party really do this? Because such policies would trigger massive punishments, and thus the costs would outweigh any potential benefits we think such reforms could achieve. Doubling the minimum wage is not desirable if the result is massive unemployment and capital flight. But why would these adverse effects happen? Why is it the case that market reform doesn’t have the desired outcome expected by those who argue passionately for it?

Lindblom argues that we must recognize that the market is an inducement system. You cannot compel people to invest in industry, employ more workers, reduce their prices, etc. They must be induced. Inducements direct and control many of the leaders in business. And thus Lindblom’s analysis reveals how complex the relation between democracy and the market really is. On the one hand, argues Lindblom, no democratic nation state has ever arisen anywhere in the world except in conjunction with a market system. And yet, because the market imprisons the policy-making process, no market society can achieve a fully developed democracy.

I think Lindblom is basically right about this. At least I think he is right that it is important to realize that there is a tradeoff involved here. If you want efficiency, economic stability and prosperity, you need a market. If you want democracy you no doubt believe that “the people” should govern society. But the principle of inclusion entailed by the latter conflicts with the elitism entailed by the former.

Lindblom’s paper helped me make a bunch of links with some other issues (like ideal theory) I have been thinking about over the past few years. Take Rawls, for example. Lindblom’s argument in many ways overlaps with the kinds of concerns that Rawls introduces when derives the difference principle. But Lindblom’s story shows how Rawls’s account is artificially constrained in many ways. For Rawls, who begins by assuming that society is closed, the role of incentives is much more constrained. And this explains why the debate between Rawls and his critics (like Cohen) have focused on things like the work attitudes of talented high fliers. “Are their attitudes just or unjust?”…and so on…

But once you relax Rawls’s idealized assumption, and recognize that the story of inducements is way more complex than the story Rawls paints in his just closed society, it is much harder to determine to what degree inequalities can be described as “just” or “unjust”. In the Rawlsian closed society industry doesn’t have the option of going somewhere else. But in the real world it does. So the inducements government will have to provide to open societies, to attract and retain business and investment , are very different than those needed in the Rawlisan closed society. Does justice demand that business leaders invest in our country rather than another country? That question doesn’t even arise when ideal theorists assume that we are talking about closed societies.

This really illustrates my central concern in this forthcoming paper. When philosophers function at the level of ideal theory they overestimate their ability to gain privileged insights into what “the best foreseeable conditions” are. Reflecting on what justice demands in an abstract, closed, fully complaint society doesn’t help us gain any truly helpful practical insights. In fact, it can impair the development of such insights. And the evidence of this is, I believe, the debate between Rawls and Cohen (and others) concerning the role of inequality-inducing incentives. Any insights derived from that debate have assumed that we are talking about closed societies. But no society in the world is like this. And once you relax that assumption our moral and pragmatic sensibilities are drastically altered. So, for me, ideal theory is a real dud.

Going back now to Lindblom… his argument reaffirmed my belief that a really useful normative framework will be both pluralistic (e.g. democracy doesn’t reign supreme, nor does efficiency) and provisional- our attitude concerning what the best tradeoff is will change and evolve as our circumstances and sensibilities change and evolve. And this is why I believe that a “virtue-oriented” public ethic is really the most useful and defensible one to invoke. It’s all a matter of *degree*. The just society will track reflective and balanced preferences (rather than knee-jerk reactions, etc.) and will push through market reform when the likely benefits outweigh the likely punishments, and will abandon such reforms when those punishments outweigh the proposed benefits. But this is not a simple cost-benefit analysis, because the tradeoff is complicated by the fact that the stakes at risk are often things we cannot easily compare and rank. For example: how do we compare

(a)a benefit to the environment and future Canadians WITH
(b)a benefit to those currently living in poverty (small % of population) WITH
(c)a benefit to the middle classes (vast majority of population) WITH
(d)a benefit to those in need of life-saving medical treatment WITH
(e)a harm to the economy and our ability to re-pay the debt we leave to future Canadians WITH

And add to this other non-ideal factors- like uncertainty about the likely benefits and harms, our fallibility, indeterminacy, etc.- and you begin to appreciate how hard it really is to know what the right thing to do is. Things are never as simple as they appear in the hypothetical abstract examples employed by ideal theorists who champion the supremacy of one particular value or principle (equality, democracy, liberty, etc.).

So a move from ideal to non-ideal theory, coupled with a shift from a principle-oriented ethic to a virtue-oriented ethic, is where I believe things need to go. Then we can talk sensibly about moving from where we are to a more fair and humane social arrangement.