Wednesday, December 30, 2009

why study traditional economic institutions? part I of a week-long series

Part I: Background, motivation, initial challenge

Lately I've read some libertarian arguments criticizing the "nostalgia" some American leftists have over what were "better times." The libertarians argue that we shouldn't be looking backward and praising primitive societies for being more democratic, more equal, more communal, etc. One basic reason, they argue, is that we should not engage with essentialist human nature theories (although I would question whether the libertarians in general have a better response). Their arguments against the nostalgic views are well taken. Furthermore, I think they are right to a degree, that some leftists in the U.S. like to pine over better days and that influences their stance on economic policy (for example, labor or financial institutions). In fact it can plague the most radical of leftists. But where the libertarian critique and my own views diverge is in that I do not think a careful study of these alternative societies, whether they existed hundreds of years ago or still exist now, is counterproductive.

This is an extremely important point: themes of social policy; of more academic or theoretical issues; even themes concerning the very future of economic systems arise from a discussion of what we can learn from precapitalist forms of society. (See the Tocqueville quote on the right side of this blog.) Here's a quick question to demonstrate my point: where was the first social security program enacted? Answer: Bismarck's Germany, 1889. Interestingly enough, the social security act page on the government website has at the top a disclaimer: THIS IS AN ARCHIVAL OR HISTORICAL DOCUMENT AND MAY NOT REFLECT CURRENT POLICIES OR PROCEDURES.

I beg to differ. History can tell you a lot about contemporary policy, especially an act such as this one which was introduced in the U.S. as part of New Deal legislation in the 1930s. But why did Bismarck enact it? In part, to quell labor unrest. He did it to appease labor which was obviously pushing for more radical reform. Social security was just enough to keep them happy with a labor reform and to not hurt capital too much. The fact that social security was instituted as part of New Deal reforms at a time when, as Sombart would later write, "workers learned to look toward the State to solve their conflicts with capital" (paraphrased) tells you a lot about historical contingency and how it influences contemporary policy. In short, policies that are sometimes seen as a victory for leftists were really, at another point in time, merely a compromise between parties who were looking towards much more radical change -- that goes for both labor and capital! And even further, that very fact changed how future labor radicalism in unions was expressed!! (Think carefully about the Sombart quote!)

So given the importance of history, might we find elements of so-called "primitive societies" in our contemporary one? And if so, how do they interact on the scene of policy or academic discussions? It's a big question to tackle but their are clues in the example of Bismarck's policy. This is my specific thesis: The historical and contemporary existence (both of which need to be proved) of moral economies -- more specifically, institutions of democratic governance of the economic sphere-- work against capitalist institutions that have aimed, since day 1, to separate the spheres of politics and economy.

The first important question is: how do we demonstrate the existence of these moral economies? (But don't forget, we eventually want to arrive at an answer to the question of "why study traditional economic institutions?") A helpful related question is, how do you "see" capitalism? I've never written a blog post on "Why 'Imagining History'?" but this is exactly what I mean by it: we must accept that we are largely informed of history through other people imagining historical events, constructed of course from letters and other documents, other evidence that is necessarily incomplete. The task of understanding history is to imagine for yourself in the most complete way how events took place and then unfolded as a sequence. Here we are confronted with the possibility of imagining what capitalism looked like in the early 1800s U.S. and imagining its alternatives.

This is the end of part I, which has summarized the background, motivation and initial problems for exploring the question of the uses and abuses of praising traditional economic institutions. Part II to come in a day or two! And please, feel free to post your own thoughts/answer to the question. I will try to incorporate these views into future posts.


  1. So I am wondering....without bothering to do the background reading myself....
    Do the libertarian arguments you read claim that it is counterproductive to study past societies, or rather that it is counterproductive to be nostalgic for them, and by extension try to return to them?
    I think there is an important difference inherent here. Attempting to return to an ideal (that probably never existed as in the case of the wholesome American family of four)is counterproductive in trying to advance modern society.
    On the other hand studying why we have those ideals, and why people are nostalgic for them can advance our understanding of the modern society we are trying to shape.
    I am not trying to be "nice" and claim that maybe you and them are right, but rather expressing my ignorance of the idea that you are refuting here.

  2. The libertarians disagree with both, I think, but for different reasons.

    They disagree with being nostalgiac for them because those times are ones that, e.g. "no liberal would ever want to return to" (in context of praising the 50s and 60s as a great period of prosperity in the U.S.). Here, you're right in saying that it doesn't make much sense for advancing society.

    They disagree with studying past traditional economies and traditional institutions because they believe that those who do this have an incorrect theoretical model in their minds with which they view traditional institutions -- a theoretical model which rests on a faulty view of human nature (too optimistic! and Marxist of course)

    This really is the root appeal of the "New Left" historians who study moral economies. They are not, in essence, trying to blindly praise these pre-capitalist institutions but rather they believe that the "decommodifying and communal spirit" of these traditional economies is something which can be carried into the Revolution towards socialism. Now, I want to note that this above point is by no means absolute: there _are_ some moral economists out there who are all about going back to this previous period; I am merely stating that I don't think you can make this blanket argument against the moral economists.