by Mario Rizzo
There have been many statements recently to the effect that we should not let “ideology” or “philosophy” stand in the way of solving our economic problems. Indeed, the Obama Administration (and the previous Bush Administration) are keen to persuade us to drop all of this prejudice and to go after each problem – banking, stimulus, and so forth – on its own terms. We should examine each solution on its own merits.
President Obama’s inaugural address includes an apparent attack on ideology:
“What the cynics fail to understand is that the ground has shifted beneath them – that the stale political arguments that have consumed us for so long no longer apply. The question we ask today is not whether our government is too big or too small, but whether it works …”
What appears to be a sensible idea to turn our problems into purely technical ones is, on the contrary, profoundly unscientific and, more generally, anti-intellectual.
This is a big subject and deserves comprehensive treatment. Let it suffice here to make a few crucial observations.
In the first place, this point of view is not new. I cannot trace the full extent of its intellectual roots – they are deep and wide – but we can find it in such essays, relevant to our current concerns, as “The End of Laissez Faire” (1926) by John Maynard Keynes.
Keynes believed that one of the most important functions of economics is to determine what belongs to the State’s agenda and what does not. “The important thing for Government is not to do things which individuals are doing already, and to do them a little better or a little worse; but to do things which at present are not done at all.” Keynes was referring to decisions that fall outside of the sphere of the individual “to those decisions which are made by no one if the State does not make them.”
The sphere to which Keynes referred is the aggregate outcomes of individual decisions. He did not have much confidence in the spontaneous order of the market. He rejected what he thought were the “metaphysical or general principles upon which, from time to time, laissez-faire has been founded.” So, “[w]e cannot settle on abstract grounds, but must handle on its merits in detail…to determine what the State ought to take upon itself to direct by public wisdom…”
1. Ideology as a Presumption
Keynes is rejecting any presumption that the “results of human action but not of human design” (F. A. Hayek citing Adam Ferguson) are beneficial. He seems to be saying that we can operate without any presumptions at all; we can simply look at each “problem” on its own merits and make an individualized decision in each case. But a presumption is not an arbitrary belief; it is not “metaphysical” in the sense that it is completely impervious to new evidence. A presumption is a belief we accept until sufficient evidence to the contrary is forthcoming.
However, evidence is rarely definitive or overwhelming. We need to begin from somewhere. The Bayesian statisticians say that we begin with prior probabilities and then update them with new evidence. Prior probabilities are only slightly modified with incremental evidence. These priors function is a manner similar to a presumption.
2. Ideology as Scientific Framework or Research Program
In the realm of scientific hypotheses, even the “falsificationist” Karl Popper accepted a principle of tenacity which had it that hypotheses are not to be dropped in face of any conflicting evidence. No hypothesis will have a 100% of the evidence in its favor.
Is this rational? It depends on the nature of the prior probabilities or the prior hypothesis. Suppose someone says: “By and large the free market is best, among all of the feasible alternatives, at promoting human welfare.” Is this ideology? I think most people would say it is. What is it based on? Well, for some people it may be a religion or faith or sorts. But then its negation can be as well. However, it need not be a faith.
I think that for almost all economists who subscribe to the statement, it is a generalization based on evidence. The evidence is in the form of a general way of looking at the world – a framework or research program that is supported in many specific cases. Note that the statement itself goes beyond the individual specific cases. It must go beyond them to deal with new problems and new events. It must function, in a specific application, as a conjecture about novel situations.
Looked at in this way, “ideology” is useful in scientific discourse. In fact, I suggest it is indispensible. How else can we approach new problems when the likely outcome of our search for specific evidence is inconclusive?
3. Ideology as a Window on Indirect or Long-Run Consequences
One of the difficulties attendant upon looking at each problem and each solution individually is the tendency to ignore indirect or long-run effects. Look at problem X, we are told, and just solve it. Suppose solution Y makes the adoption of further policies more likely, because, for example, it changes the balance of political forces, and these policies are likely to be negative. (See Eugene Volokh on slippery slopes and Mario Rizzo-Glen Whitman on slippery slopes.) Should we not care? Suppose solution Y solves problem X but causes another problem Z. Should we not care?
Ideologies stress the interconnections among policies and problems. They may point us in the direction of the general principle implied by a policy and hence the implicit rationalization of further policies. They may make us alert to unintended changes in incentives in related problem areas especially when this worsening of other problems has happened time and again. They show us that when the State intervenes there is more than just some pinpointed technology involved.
4. Ideology as Shortcut for Rationally Ignorant People (most of us)
Most people are not scientists, economists or intellectuals. They are not testing hypotheses. They have other things to do. They are often rationally ignorant. How can they make up their minds about public policy? Many, though not all, are ideological. They choose a set or complex of beliefs that comports best with their observations and experience. For them too it is not rational to give up the world view because some (few) observations seem to conflict. Forgive some of them who are not willing to throw away long-held beliefs on the say-so of a president who is someone most never heard of eighteen months ago.
5. Ideology as an Ethical Framework
Public policy questions are not simply technical questions. They involve ethical issues. The economist John Neville Keynes (the father of John Maynard Keynes) divided economics into: science, ethics and art. (See J.N. Keynes, The Scope and Method of Political Economy , Chap. 2). The science is the technical aspect: causes and effects. The ethics involves the standards that are applied to determine whether a state of affairs is good or just. And the art involves the sometimes intuitive judgments of how to apply the science to get (or allow) the outcomes policymakers want.
An ideology can serve as a rough guide to ethical considerations. For example, some people believe that it is immoral to “reward” people for irresponsible economic behavior. Maybe a policy wonk disagrees because he thinks that systemic effects are all that matter. Is the citizen to be faulted for acting or evaluating on the basis of this belief ? In general, the belief makes good sense. As a long-run rule of behavior, the idea that economic actors should bear both upside and downside risk would have saved us, for example, from the Fannie-Freddie over-expansion in the first place as shareholders would not have believed in implicit guarantees. Is this an idea we want people to give up without resistance? I do not think so.
Ideology is okay. It is fine to be ideological. It is indispensible to effective analysis of the world. Just make sure that the ideology makes real sense.