Tuesday, 10 June 2008
There is much comment at the moment about the state of the economy: take a look at the financial crisis emerging from the sub-prime mortgage fiasco (and, let us not forget, a massively liberalised, securitised, debt-crazed decade or two’s momentum behind it…); the oil price; and global food prices. Some serious shit is afoot.
The environmental ‘movement’ – that is, a loose assembly of institutions and individuals that place particular importance on the environmental dimension to human affairs – is wondering whether this combination of circumstances is a threat (because everyone – the general public, business and the politicians – will stop all this environmental nonsense now that there’s some serious inflation/unemployment/recession to worry about) or an opportunity (because now is the time to show how a low-carbon economy can be forged from the wreckage).
Among the latter optimists – of whom I am one – there seem to be two camps. (At least, that’s what I deduce having attended an interesting event the other day organised by Green Alliance.) One group believes that the way forward is to mobilise the many millions of people that belong to an environmental group – Friends of the Earth, RSPB, the National Trust – and who, through that membership, dwarf the mainstream political parties, to make it clear to the body politic how important it is that the environment takes centre stage in tackling and then recovering from our present economic woes.
The second perspective – promoted, in that meeting at least, by figures such as Colin Hines and Tom Burke, as well as myself – is that the ambition should be to make an economic argument at the heart of the economic establishment, for it is there that the key decisions will be made. Hines, working with Caroline Lucas, is calling for a ‘New Deal’, harking back not to the New Labour manoeuvres on employment of the late nineties, but the economic reconstruction by Roosevelt back in the 1930s.
I’m hoping, of course, that ‘the economics of enough’ makes some sort of contribution here, but I’m wondering whether the Roosevelt approach is sufficient. I find myself thinking about Kennedy, and the moon-landings, and whether a grand statement, a big and thrilling plan is what is needed. How would it be, do you think, if we had a politician big enough to stand up and say: OK, enough with all this nonsense, we are capable of building a genuine low-carbon world, and we’re going to do it here, starting now, and we’re going to get it done by 2020, lock stock and full smoking barrel.
Would we join in?
Next time, I’ll turn to what the Government has been saying recently about how to make a low carbon economy. Sadly, it’s not very encouraging.
I received some interesting responses to the last post, two in particular from close friends that left me pondering, wondering.
One friend thought that attacking private schools was an easy target, that ‘everyone’ agreed that private schools ought really to be done away with, and that the economics of enough should be about bigger things.
The other thought that wanting to abolish private schools was essentially a little adolescent, that the political reality of modern Britain was that private schools were untouchable. The middle classes, and their aspirations, require an alternative to the state sector, and any political party that presented a policy explicitly to remove (or even dramatically reduce) fee-paying education would be unelectable.
These two positions – too obvious to bother with, too unpopular to try – are not quite antithetical to one another, but they are close. They reveal a weakness in the way I articulated my argument and, I believe, a strength in the underpinning logic of the economy of enough.
Mainstream neo-classical economics has no place for institutional and social norms: it describes and analyses the system in question (the system by which scarce resources are distributed) in terms of mathematical abstractions. The processes surrounding the distribution of resources – notably those associated with exchange – are codified in quantitative terms. Human beings (who are not quite assumed to be as rational as is sometimes supposed – their simulacra are assumed to be rational, because the macro-scale models developed on the basis of such simulacra often mimic very effectively the phenomena observed in the ‘real’ world) are interested in maximising their personal well-being (or utility). By ‘personal’, economics sometimes stretches to mean ‘household’, for which read family. One dimension of achieving this is to invest in human capital – that is, to devote present resources in expectation of some future return by means of education and learning (i.e. to invest in the belief that higher future income streams will accrue to an individual if they have greater skills) (in turn a function of the belief that such skills, being in shorter supply (because they were more difficult to obtain) will command a higher price). (Sorry about the parentheses.)
Investment in human capital can take place for the specific individual (you personally can choose to spend some of your time or money now in the belief that you will (more than) recoup your investment at some point in the future) or it can take place with respect to some other individual in which you have an interest (a partner, a child etc).
Why would you invest in your child? Mainstream neo-classical economics has little room for ‘natural love’, or even for the selfish gene, so its presumption is two-fold: on the one hand, by investing in a subsequent generation you are increasing the probability that your own (material) assets will be maintained beyond the point at which you personally are able to achieve that (which helps to ensure their present value); and, secondly, that by investing in a next generation you are maximising the chance that resources will be in place to look after you when you are old.
So it is perfectly ordinary, and well within the grasp of mainstream neo-classical economics, to understand that parents want their children to do well, and will invest time and money in pursuit of that objective.
But here’s where it gets interesting. Neo-classical economics puts pride of place to something called ‘efficiency’ – a circumstance in which, in an exchange (or a market – i.e. a whole series of exchanges) – you get most out for least in. Summed across a whole market, an efficient system is thus one in which everybody puts in the amount they want in return for the amount they want back. Do you want to spend just a little on your human capital? Or a lot? There is someone willing to provide just a little; and someone willing to provide a lot. And lots and lots of in-between, too.
Once upon a time, the number of people willing (and able) to provide an education was very small – in part because demand was itself so low. There was little need for an education, after all, except for a very small number of scribes and bureaucrat. The tiny numbers of individuals that received an education did so from tutors. There were no such things as ‘schools’, just smatterings of privileged individuals being tutored.
Over time – and we’re talking centuries here – a co-evolution took place, between the demand for education (i.e. a progressively more sophisticated society needed a progressively larger share of its population to have particular specialised skills) and the supply of education (which, beyond a certain point, could be done in groups rather than on a one-to-one basis). It is a matter of circumstantial accident precisely which path such a co-evolutionary process might follow, in much the same way that animals with common ancestors are today very different, yet nevertheless occupy a similar system niche.
In the British Isles, and in England and Scotland in particular, this process of teaching in groups – of ‘public’ education – began relatively early and was delivered to the various scions of the landed and the wealthy. Naturally enough, the institutions thereby established accrued to themselves progressively more and more resources, and began to shape the operating environment – in the jargon of evolution, the ‘fitness landscape’ – to suit their own ends. Again, it’s a co-evolutionary process, but – and here there is a subtle but important distinction from evolutionary processes in the natural world – there is ‘agency’ (and, by extension, power) involved.
Think of the elephant in the jungle, whose dietary habits shape the kinds of plants that can grow and survive; and, simultaneously, the fact that the survival and growth of the elephant is a function of the kinds of plants that are available. Augment that with the idea that the elephant takes an active, planned approach to its environment, and is able to effect those plans because it is much bigger than everyone else, and we’re getting in the ballpark.
Do you imagine that the elephant is pursuing its own interests, or the interests of the plants and all the other animals? Sure, it can’t afford to destroy its own home, but it’s hardly going to plan for its own demise.
What if the elephant – magnificent though it is – arrives in a new territory and, by virtue of its planning powers and strength, progressively eliminates, or prevents from coming into being, dozens of other splendid and wonderful fauna?
Back to the schools. By the time we reach the late twentieth century, there are three basic types of school in Great Britain: schools that require parents to pay a fee to have human capital injected into their children; schools that received, in the past, some sort of endowment from a benefactor (most frequently the Established church) but which rely for the bulk of their funding on the State; and secular, State-funded schools. Nominally, at least, these latter two are ‘free’; what in fact is happening, of course, is that the modern State is investing in the human capital of pupils, having collected the money in tax from the citizenry.
So the neo-liberal economic argument would vigorously support a distribution of options, on the grounds that this is more likely to mimic efficiency: if you want to invest more, you can, by paying for it yourself; if you don’t, the State will do so. And the fact that there is an array of private-sector options, from expensive to very expensive, merely further reinforces the argument.
But there are two big problems. The first comes from within neo-liberal economics itself: is the present system in fact ‘efficient’? Well, how would you know? Or, more accurately, what would you want to know in order to answer the question? If we were to consider the entire human capital question (i.e. for the economy as a whole), we would – presumably – consider an ‘efficient’ system one in which all skills were being used to the best possible extent, and in which all those with the potential to have such skills were equipped with the most suitable skills. This suggests a system with the fewest possible ‘rigidities’ – and it is hard to look at the present private/state division as a system without rigidities. One might almost call it a ‘market failure’…
One way of considering the practical implications of this is a simple thought experiment: do we think that the best possible people are running our major institutional devices – the law, the media, politics, our financial institutions – or do we think that they are dominated by individuals whose parents invested in their human capital so that they were able to access the routes to power?
The second problem takes the form of a more profound, normative critique: that ‘efficiency’ is inherently opposed to ‘equality’. The efficient distribution of educational resources inevitably implies an inequitable distribution of those resources; while the co-evolved institutional arrangement means that such inequity is ‘hard wired’ into the operating environment. A system that includes (such a large) private education sector, on the grounds of ‘choice’ [which is merely the acceptable vernacular translation of ‘efficient’] is inherently, systematically unfair.
(For an academic take on this, try “Equality & Efficiency: The Big Trade Off” by Arthur Okun.)
A synthesis exists between these two remarks: to borrow hard from economics, we might wish to consider the notion of ‘educational externalities’. There are costs associated with the particular shape of our educational arrangements that are not borne by those arrangements. Some of these costs are social, some are economic. Could it be, for example, that the UK economy’s over-dependence on the financial sector is in part of a function of a long-run trend in which the privately-educated elite has eschewed ‘manufacturing’? Could it be that the disassociation of too many urban youth is a function, in part, of their accurate perception that they are systematically excluded from a range of possible future paths, simply by virtue of their not having been to the right school?
And so forth.
Tricky things, these elephants. But just because they’re big, doesn’t mean we have to leave them alone.