progressivism, individualism, and the public ... - Telmarc Group

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The Telmarc Group Sen stated 170 : PROGRESSIVISM, INDIVIDUALISM, AND THE PUBLIC INTELLECTUAL Historically, capitalism did not emerge until new systems of law and economic practice protected property rights and made an economy based on ownership workable. Commercial exchange could not effectively take place until business morality made contractual behavior sustainable and inexpensive—not requiring constant suing of defaulting contractors, for example. Investment in productive businesses could not flourish until the higher rewards from corruption had been moderated. Profit-oriented capitalism has always drawn on support from other institutional values. Here Sen is looking at capitalism and in turn individualism during the current economic crisis. However, Keynes can be our savior only to a very partial extent, and there is a need to look beyond him in understanding the present crisis. One economist whose current relevance has been far less recognized is Keynes's rival Arthur Cecil Pigou, who, like Keynes, was also in Cambridge, indeed also in Kings College, in Keynes's time. Pigou was much more concerned than Keynes with economic psychology and the ways it could influence business cycles and sharpen and harden an economic recession that could take us toward a depression (as indeed we are seeing now). Pigou attributed economic fluctuations partly to "psychological causes" consisting of variations in the tone of mind of persons whose action controls industry, emerging in errors of undue optimism or undue pessimism in their business forecasts. [5] The discussion of Pigou is quite interesting since in many ways he was one of the first of modern economists to deal with the psychology of the consumer. The contrast between Pigou and Keynes is relevant for another reason as well. While Keynes was very involved with the question of how to increase aggregate income, he was relatively less engaged in analyzing problems of unequal distribution of wealth and of social welfare. In contrast, Pigou not only wrote the classic study of welfare economics, but he also pioneered the measurement of economic inequality as a major indicator for economic assessment and policy. [7] Since the suffering of the most deprived people in each economy—and in the world—demands the most urgent attention, the role of supportive cooperation between business and government cannot stop only with mutually coordinated expansion of an economy. There is a critical need for paying special attention to the underdogs of society in planning a response to the current crisis, and in going beyond measures to produce general economic expansion. Families threatened with unemployment, with lack of medical care, and with social as well as economic deprivation have been hit particularly hard. The limitations of Keynesian economics to address their problems demand much greater recognition. 170 http://www.nybooks.com/articles/archives/2009/mar/26/capitalism-beyond-the-crisis/ Page 170
The Telmarc Group PROGRESSIVISM, INDIVIDUALISM, AND THE PUBLIC INTELLECTUAL A third way in which Keynes needs to be supplemented concerns his relative neglect of social services—indeed even Otto von Bismarck had more to say on this subject than Keynes. That the market economy can be particularly bad in delivering public goods (such as education and health care) has been discussed by some of the leading economists of our time, including Paul Samuelson and Kenneth Arrow. (Pigou too contributed to this subject with his emphasis on the "external effects" of market transactions, where the gains and losses are not confined only to the direct buyers or sellers.) This is, of course, a long-term issue, but it is worth noting in addition that the bite of a downturn can be much fiercer when health care in particular is not guaranteed for all. For example, in the absence of a national health service, every lost job can produce a larger exclusion from essential health care, because of loss of income or loss of employment-related private health insurance. The US has a 7.6 percent rate of unemployment now, which is beginning to cause huge deprivation. It is worth asking how the European countries, including France, Italy, and Spain, that lived with much higher levels of unemployment for decades, managed to avoid a total collapse of their quality of life. The answer is partly the way the European welfare state operates, with much stronger unemployment insurance than in America and, even more importantly, with basic medical services provided to all by the state. 6.5 CAS SUNSTEIN Cas Sunstein is an attorney by profession and has been on the faculties of University of Chicago and Harvard. He is a self styled libertarian paternalism, which he contends means that people should have the freedom to choose yet Government should subtly influence the choice for the "better". It clearly is the quintessential oxymoron. Libertarians are extreme individualists, individualists who take themselves and their freedom as a sine qua non. Having the Government act in a paternalistic manner to steer your choices is a direct conflict with the freedom sought. But we shall return to that later. 6.5.1 The Constitution Sunstein is in many ways a Wilsonian progressive. The prime example of this is his work on the Constitution, specifically the trade press book, A Constitution of Many Minds. As Wilson had thought the Constitution as it was a hundred years ago had already outworn its use, so too does Sunstein in this work. He begins with the defining of what he calls Burkean minimalists. He states 171 : "Burkean minimalists believe that constitutional principles must be built incrementally and by analogy and with close reference to long standing practices. Like all minimalists 171 Sunstein, Constitution, p. 36. Page 171
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The Telmarc Group and the Progressi
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