Category Archives: Book review

Project and system

There are two ways of seeing order in the world: as a spontaneous system or as an intentional project. Which way lies freedom?
By Paul Kahn – Once we are alert to the distinction of ‘project’ and ‘system’, we see that it is by no means unique to law. These two pictures dominate our accounts of order. Traditionally, those accounts extended into the natural order: is nature God’s project or a spontaneous system? Today, the duck/rabbit problem of ‘project’ and ‘system’ presents itself whenever we give an account of the human world, from the individual to the society. Do we make ourselves according to an idea or do we realize an inner truth of ourselves?

The social sciences approach society as system; the regulatory state imagines it as project.

The picture of a project offers the simplest explanation of the origin of order. Projects can extend from an individual artisan to a creator god; they can involve objects in the world (eg, a house) or social structures (eg, a corporation).

A legislature has law-creation as its project; a people can take up the project of creating a constitution. A project has a beginning in the action of a free subject. That subject explains his project by referring to his intentions. Those intentions can reflect a well-thought-out theory or simply the agent’s interests.

Projects are the way in which a free agent occupies the world. An animal will look for food, but it will not plan its dinner. A bird might build a nest, but that is not a project because the bird could not have decided to experiment with a new design. It could not have been other than it is. That ‘might have been’ is critical to projects and thus to freedom.

In a world of projects, we are always thinking of what we might do, what we might have done, and what we might do better. Projects are successful when they meet their goals; they are redesigned when they fail. Projects then, whether of law or anything else, put at stake not just an idea of order, but also an idea of freedom. Freedom ends where projects end.

Systems have the capacity for maintenance and some ability of repair. An injured organism can heal itself; a market in disequilibrium can return to equilibrium. Of course, some systemic disturbances are beyond these capacities: systems do die.

Projects, though, ordinarily have no such capacities of repair. When a watch breaks, we take it to the watchmaker for repair. When legislation fails, we go back to the legislature for a new plan. Today, artificial intelligence is challenging that distinction precisely to the degree that we can teach machines to learn and to respond. more>

There is No Economics without Politics

Every economic model is built on political assumptions
By Anat Admati – There is absolutely no way to understand events before, during, and since the financial crisis of 2007-2009 while ignoring the powerful political forces that have shaped them. Yet, remarkably, much of the economics and finance literature about financial crises focuses on studying unspecified “shocks” to a system that it largely accepts as inevitable while ignoring critical governance frictions and failures. Removing blind spots would offer economists and other academics rich opportunities to leverage their expertise to benefit society.

The history of financial economics is revealing in this regard. By the second half of the 20th century, when modern finance emerged as part of economics, the holistic approach of early thinkers such as Adam Smith—which combined economics, moral philosophy, and politics—was long gone. Narrow social-science disciplines replaced the holistic approach by the end of the 19th century. In the 20th century, economists sought to make economics formal, precise, and elegant, similar to Newton’s 17th-century physics.

The focus in much of economics, particularly in finance, is on markets. Even when economists postulate a “social planner” and discuss policy, they rarely consider how this social planner gets to know what is needed or the process by which policy decisions are made and implemented. Collective action and politics are messy. Neat and elegant models are more fun and easier to market to editors and colleagues.

Lobbyists, who engage in “marketing” ideas to policymakers and to the public, are actually influential. They know how to work the system and can dismiss, take out of context, misquote, misuse, or promote research as needed. If policymakers or the public are unable or unwilling to evaluate the claims people make, lobbyists and others can create confusion and promote misleading narratives if it benefits them. In the real political economy, good ideas and worthy research can fail to gain traction while bad ideas and flawed research can succeed and have an impact.

Having observed governance and policy failures in banking, I realized that the focus on shareholder-manager conflicts is far too narrow and often misses the most important problems. We must also worry about the governance of the institutions that create and enforce the rules for all. How power structures and information asymmetries play out within and between institutions in the private and public sectors is critical. more>

Europe Wants ‘Strategic Autonomy,’ but That’s Much Easier Said Than Done

By Stewart M. Patrick – Strategic autonomy has obvious appeal to Europeans at a time of fraying trans-Atlantic bonds and deepening great-power competition. Aspiring to self-reliance is one thing, however. Achieving it will require much more from the European Union. The heterogeneous bloc will have to develop a coherent strategic culture and come to some agreement on a shared assessment of threats—and on how the EU should pursue its interests and promote its values internationally.

Europeans must also reassure the United States that any new EU military capabilities will complement rather than undermine NATO.

Europe’s strategic reappraisal is largely, though not entirely, a function of President Donald Trump. While his predecessors in Washington often pressed the Europeans to ramp up defense spending, Trump has upended the trans-Atlantic alliance in several ways. He has depicted it as obsolete, questioned America’s commitments to NATO’s mutual defense as outlined in Article 5 of the North Atlantic Treaty, and taken precipitous actions without consulting allies in Europe—such as his recent unilateral withdrawal of U.S. troops from northeastern Syria. Confronting such uncertainty, Europeans naturally want to hedge their bets. One way to do so is by developing autonomous military capabilities that permit them to act outside NATO, including with a post-Brexit United Kingdom.

Washington’s own identification of China as America’s primary economic, technological and strategic adversary reinforces these instincts. Few Europeans share such a zero-sum assessment, seeking instead to pursue what Beijing terms “win-win” relations. While Americans seem bent on a new Cold War with China, Europeans must confront a more immediate military and political threat: an aggressive Russia under Vladimir Putin, right on their doorstep.

Beyond defense matters, Trump’s disruption of U.S. foreign policy has persuaded a growing number of Europeans that they need to pursue strategic autonomy across the board. America’s abdication of global leadership has thrust the EU into an unaccustomed role—that of chief defender of the rules-based, liberal international order. As Trump has embraced unilateralism and protectionism, cozied up to dictators and ignored climate change, the EU has become the primary champion of collective security, multilateralism, human rights and the preservation of the global commons. more>

The planet is burning

By Stephen J Pyne – From the Arctic to the Amazon, from California to Gran Canaria, from Borneo to India to Angola to Australia – the fires seem everywhere. Their smoke obscures subcontinents by day; their lights dapple continents at night, like a Milky Way of flame-stars. Rather than catalogue what is burning, one might more aptly ask: what isn’t? Where flames are not visible, the lights of cities and of gas flares are: combustion via the transubstantiation of coal and oil into electricity. To many observers, they appear as the pilot flames of an advancing apocalypse. Even Greenland is burning.

But the fires we see are only part of our disturbed pyrogeography. Of perhaps equal magnitude is a parallel world of lost, missing and sublimated fires. The landscapes that should have fire and don’t. The marinating of the atmosphere by greenhouse gases. The sites where traditional flame has been replaced by combustion in machines. The Earth’s biota is disintegrating as much by tame fire’s absence as by feral fire’s outbreaks. The scene is not just about the bad burns that trash countrysides and crash into towns; it’s equally about the good fires that have vanished because they are suppressed or no longer lit. Looming over it all is a planetary warming from fossil-fuel combustion that acts as a performance enhancer on all aspects of fire on Earth.

So dire is the picture that some observers argue that the past is irrelevant. We are headed into a no-narrative, no-analogue future. So immense and unimaginable are the coming upheavals that the arc of inherited knowledge that joins us to the past has broken. There is no precedent for what we are about to experience, no means by which to triangulate from accumulated human wisdom into a future unlike anything we have known before. more>

War once helped build nations, now it destroys them

By Mark Kukis – Organized violence – the term war boils down to – has long been a unifier of peoples. Archaeological evidence shows that nearly half those who lived during the last part of the Stone Age in Nubia, an area along the southern reaches of the Nile River, died violent deaths. Many other tribal societies through the ages have shared this mortality pattern, which suggests large-scale mobilization for killing rather than widespread random violence.

Cooperation, mutual dependence, trust – even in killing others – are building blocks of political order, the foundational elements of states.

The advent of agriculture was a prerequisite to long-term human settlements – cities – of any significant size. It gave rise to larger societies, capable of bigger and more elaborate wars. For the dynasties of ancient China, the empires of Mesopotamia and, centuries later, the kingdoms of Europe, waging war was one of their reasons for being.

Frederick William founded and built Prussia to wage war against its many hostile neighbors. Prussia’s clashes with regional rivals during the 17th and 18th centuries made the nation we know today as Germany.

Across this long history from the Stone Age to the modern era, the basic political formula remained the same. Disparate elements of a society learned to cooperate outside familial structures in order to arm themselves for plunder, defense – or both. They formed hierarchies, bureaucracies and institutions that endured and evolved. For emerging nations, the aftermath of the wars imparted important shared experiences too. Defeat could be even more unifying than victory.

The last major nation-building war came in 1980, when Iraq under Saddam Hussein attacked Iran following the Iranian Revolution. When Hussein launched a ferocious assault reminiscent of fighting from the First World War, Iran was woefully unprepared. The Iranian revolutionaries drew on religious commitments to help galvanize legions of fighters. Iranian men young and old flung themselves against Iraqi tank attacks, again and again, until Iraq’s advance ground to a halt.

For Iran, it is difficult to overstate the legitimacy this achievement gave the new regime, and the cohesion the war imparted to Iran. Iranian society cohered around grief, fear and a renewed sense of Persian identity in response to Arab invaders, both Sunni and Shiite.

Since the Iran-Iraq War (1980-88), wars have tended to be mainly destructive forces for nations. more>

New Microeconomics: How Evolution Explains Resource Distribution

By Blair Fix – Through years of schooling, mainstream economists are trained to ignore the obvious facts about human nature. The theories that economists learn make it impossible for them to understand human sociality.

Economists are trained that humans are asocial ‘globules of desire’. This is Thorstein Veblen’s satirical term for ‘homo economicus’, the economic model of man.

As Veblen makes clear, economists’ model of human behavior is bizarre. Indeed, the assumptions are so far-fetched that one wonders how this ‘theory’ ever gained acceptance. I’ve spent years trying to make sense of homo economicus as a scientific theory. I’ve concluded that this is a waste of time. Economists’ selfish model of humanity is best treated not as science, but as ideology.

Unlike scientific theories, ideologies are not about the search for ‘truth’. Instead, they are about rationalizing a certain worldview — usually the worldview of the powerful. Economists’ selfish model of humanity is a textbook example.

The discipline of economics emerged during the transition from feudalism to capitalism. During this period of social upheaval, business owners battled to wrench power from the landed aristocracy. To supplant the aristocracy, business owners needed to frame their power as legitimate (and the power of aristocrats as illegitimate). Their solution was devilishly clever. The new business class appealed to autonomy — the mirror opposite of the ideals of feudalism.

Feudalism was based on ideals of servitude and obligation. Serfs were obligated to perform free work for feudal lords. And these lords, in return, were obligated to protect serfs from outside attackers. This web of obligation was rationalized by religion — it was a natural order ordained by God.

To upend this order, business owners championed the ideals of autonomy and freedom. Business owners claimed to want nothing but to be left alone — to pursue profit unfettered by government or aristocratic power. From this world view, the autonomous model of man was born. It had nothing to do with how humans actually behaved. It was about rationalizing the goals of business owners. They wanted power, but they framed it as the pursuit of freedom and autonomy. “Power in the name of freedom” is how Jonathan Nitzan puts it. more>

Ending short-termism by keeping score

By Klaus Schwab – As finance ministers gather in Washington, DC, for the World Bank and International Monetary Fund’s annual meetings, they will face no shortage of urgent matters to discuss. Fears of a global recession, the US-China trade war, the fallout of the Brexit talks, and a dangerous debt overhang make this the most stressful economic juncture in a decade. These issues must be discussed, and we should all hope that they can be resolved with minimal damage.

All of this assumes an end to the economic short-termism that underpins policymaking today. For that, we should develop scorecards to track our performance on these long-term priorities. To that end, I have three suggestions.

First, we need to rethink GDP as our “key performance indicator” in economic policymaking.

Second, we should embrace independent tracking tools for assessing progress under the Paris agreement and the SDGs (United Nations Sustainable Development Goals).

Third, we must implement “stakeholder capitalism” by introducing an environmental, social, and governance (ESG) scorecard for businesses.

On the first point, we desperately need to change our overall economic frame of reference. For 75 years, the world marched to the beat of the drum called “Gross Domestic Product.” Now, we need a new instrument. GDP gained traction when economies were primarily seen as vehicles for mobilizing wartime production. Yet today’s economies are expected to serve an entirely different purpose: maximizing wellbeing and sustainability.

It is time to consider a new approach. A group of economists from the private sector, academia, and international institutions, including Diane Coyle and Mariana Mazzucato, has already been working on alternate measures and ways to correct for the failings of GDP.

Their Wealth Project, which evolved from efforts initiated by the World Bank, has offered a number of proposals for how we can move forward. more>

Obama’s Idealists

American Power in Theory and Practice
By Peter Beinart – In different ways, each book traces a narrative arc that begins with a vow, made in young adulthood, to use the United States’ might for good and ends with a sober realization about how hard fulfilling that vow actually is. For Rice, the arc begins with her failure, as a young NSC aide, to rouse the Clinton administration to halt the 1994 Rwandan genocide, after which she pledged “to go down fighting, if ever I saw another instance where I believed U.S. military intervention could . . . make a critical difference in saving large numbers of human lives.” For Power, it starts during her time as a war correspondent in Bosnia, where the besieged residents of Sarajevo asked her to “tell Clinton” about the horrors she had seen. For Rhodes, it begins with 9/11 and the Iraq war, which left him yearning to harness the idealism he felt the Bush administration had squandered.

In each book, three moments during the Obama administration play outsize roles in chastening this youthful idealism: the decision to bomb Libya in 2011, the decision not to bomb Syria in 2013, and the 2016 election.

The problem isn’t that Rice, Power, and Rhodes shade the truth to make themselves look good. To the contrary, all three are, at various points, admirably frank about their mistakes. The problem is that by refusing to reveal what happened behind closed doors, they fail to help readers understand what lessons to draw from the Libya debacle. Is the lesson that presidents who lack the stomach for nation building shouldn’t topple regimes? Is it that the United States needs greater diplomatic capacity? Is it that brutal dictatorships are better than failed states? By not explaining Libya’s lessons, liberal internationalists like Rice, Power, and Rhodes make it easier for nativist bigots like Trump to proffer a lesson of their own: that Washington should care less about people overseas, especially if they are not Christian or white.

In each, the saga of disillusionment reaches its nadir in 2016, with Russia’s electoral interference and Trump’s election. After witnessing the limits of the United States’ ability to defend democracy and human rights abroad, Rice, Power, and Rhodes realize to their horror the limits of its ability to defend those principles at home. When Obama asks Mitch McConnell, the Republican Senate majority leader, to issue a joint statement condemning Russian interference in the election, McConnell refuses, a move that Rhodes calls “staggeringly partisan and unpatriotic.”

Although none of the authors puts it this way, it’s possible to read their books not only as tales of tempered idealism but also as chronicles of America’s declining exceptionalism. In retrospect, the belief in democracy promotion and humanitarian intervention that Rice, Power, and Rhodes embraced early in their careers rested on a faith that democracy was stable at home. With that faith now eroded—and the United States battling its own rising tribalism, authoritarianism, and brutality—it is hard to imagine a book like Power’sA Problem From Hell,” a critique of the country’s repeated failure to stop genocide, becoming the sensation it did in 2002.

As Americans have grown more preoccupied with, and more pessimistic about, their own country’s moral condition, they have turned inward. As a young woman, Power helped expose concentration camps in Bosnia. Today’s young activists are exposing them in Texas. As of September, foreign policy has barely figured in the Democratic presidential debates. more>

The EU’s rule-of-law test

By Tytti Tuppurainen – In his book The Origins of Political Order, the political scientist Francis Fukuyama argued that the rule of law is the most difficult pillar for a successful modern society to construct.

Organizing government administration and staging elections to a legislative body is relatively easy, and only a small number of failed states have no functioning public administration or legislature. But in far more countries, the absence of the rule of law is the primary source of instability and political decay.

For the EU, the rule of law is of central importance, because the EU is not simply a joint economic undertaking (although, as the economist Hernando de Soto has emphasized, the rule of law is also a prerequisite for a developed market economy). The EU’s raison d’être, like that of its predecessors, is to guarantee peace between European countries and to safeguard human rights within its member states. And the bloc is founded on common values enshrined in its treaties.

The EU’s commitment to the rule of law, set out in Article 2 of the Treaty on European Union, is straightforward. It stands for legality, legal certainty, the prohibition of arbitrary exercise of authority, the separation of powers, and an effective and independent judiciary. Respect for the rule of law affects different layers of society in very practical ways: at the level of the Union, the nation-state, companies, and citizens.

Within the EU, the rule of law is not a political statement or unattainable moral ideal, but a principle that public officials and courts are responsible for upholding. more>

The dirty secret of capitalism

By Nick Hanauer – I am a capitalist, and after a 30-year career in capitalism spanning three dozen companies, generating tens of billions of dollars in market value, I’m not just in the top one percent, I’m in the top .01 percent of all earners. Today, I have come to share the secrets of our success, because rich capitalists like me have never been richer. So the question is, how do we do it? How do we manage to grab an ever-increasing share of the economic pie every year? Is it that rich people are smarter than we were 30 years ago? Is it that we’re working harder than we once did? Are we taller, better looking?

Sadly, no. It all comes down to just one thing: economics. Because, here’s the dirty secret. There was a time in which the economics profession worked in the public interest, but in the neoliberal era, today, they work only for big corporations and billionaires, and that is creating a little bit of a problem.

So, what is a society to do? Well, it’s super clear to me what we need to do. We need a new economics. So, economics has been described as the dismal science, and for good reason, because as much as it is taught today, it isn’t a science at all, in spite of all of the dazzling mathematics. In fact, a growing number of academics and practitioners have concluded that neoliberal economic theory is dangerously wrong and that today’s growing crises of rising inequality and growing political instability are the direct result of decades of bad economic theory. What we now know is that the economics that made me so rich isn’t just wrong, it’s backwards, because it turns out it isn’t capital that creates economic growth, it’s people; and it isn’t self-interest that promotes the public good, it’s reciprocity; and it isn’t competition that produces our prosperity, it’s cooperation. What we can now see is that an economics that is neither just nor inclusive can never sustain the high levels of social cooperation necessary to enable a modern society to thrive.

So where did we go wrong? Well, it turns out that it’s become painfully obvious that the fundamental assumptions that undergird neoliberal economic theory are just objectively false, and so today first I want to take you through some of those mistaken assumptions and then after describe where the science suggests prosperity actually comes from. more>