A Philosopher Opines on Economic Theory

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I had never heard of Elizabeth Anderson. That is not surprising; I do not keep up with modern philosophy. But I do subscribe to The New Yorker, and a recent “Annals of Thought” essay, the title of which described her as “The Philosopher Redefining Equality: Elizabeth Anderson Thinks We’ve Misunderstood the Basis of a Free and Fair Society”, caught my attention. Given that a goal of the GEM Project is the promulgation of a useful understanding of the importance of workplace equity in the construction of stabilization-relevant macroeconomic theory, I was interested in what philosophers had to say.

The New Yorker story is biographical. It begins with Anderson as a Swarthmore College student, a libertarian who intends to study economics, in a summer job that was her wake-up introduction to workplace hierarchies of authority. “In the spirit of liberal-arts exploration … she enrolled in an introductory philosophy course whose reading list included Karl Marx’s 1844 manuscripts concerning worker alienation. [She] was stirred by his observational writings about the experience of work. Her summer job drove home the fact that systemic behavior inside the workplace was part of the socioeconomic fabric…. Yet economists had no way of factoring those influences into their thinking. As far as they were concerned, a job was a contract—an exchange of labor for money—and if you were unhappy you left. The nature of the workplace, where most people spent half their lives, was a black box.”

At this point, I am seriously interested. If generalized-exchange economics has taken root a few decades earlier, perhaps around the active work on morale-centric efficiency-wage theory (see next week’s post), Anderson may have become an economist – probably a good one. I am now thinking that maybe modern philosophers can become allies in the GEM Project’s battle with mainstream macroeconomists’ placid acceptance of the black-box workplace. The Project has demonstrated that widespread acceptance to have disabled the macro academy’s capacity to describe the true nature of, and how to effectively manage, aggregate instability of the sort manifested in the hugely costly 2008-09 Great Recession. It is a very big deal.

Returning to our story, “Anderson grew intellectually restless. Other ideas that were presented as cornerstones of economics, such as rational-choice theory, didn’t match the range of human behaviors that she was seeing in the wild.” Oops. It looks that she is going to abandon economics before she understands its nature and use of rationality, a not atypical mistake that often leads smart people astray. Other of her youthful conclusions, however, are more promising: “She liked how philosophy approached big problems that cut across various fields, but she was most excited by methods that she encountered in the history and the philosophy of science. Like philosophers, scientists chased Truth, but their theories were understood to be provisional—tools for resolving problems as they appeared, models valuable only to the extent that they explained and predicted what showed in experiments. A Newtonian model of motion had worked beautifully for a long time, but then people noticed bits of unaccountable data, and relativity emerged as a stronger theory. Couldn’t disciplines like philosophy work that way, too?” The provisional nature of macroeconomics, e.g., the black-box-firm assumption was much less harmful prior to the Second Industrial Revolution and the modern ubiquity of large, bureaucratic establishments, is familiar to readers of this Blog.

Jumping to the present, Anderson is now both the chair of the University of Michigan’s department of philosophy and “a champion of the view that equality and freedom are mutually dependent, enmeshed in changing conditions through time. Working at the intersection of moral and political philosophy, social science, and economics, she has become a leading theorist of democracy and social justice. She has built a case, elaborated across decades, that equality is the basis for a free society. Her work, drawing on real-world problems and information, has helped to redefine the way contemporary philosophy is done, leading what might be called the Michigan school of thought.”

Anderson has clearly moved away from the less universal concerns of the GEM Projects. Its emphasis on understanding rational price-mediated exchange in mainstream  “black-box” workplaces that are restricted by costly asymmetric information is specifically directed at restoring stabilization-relevancy to the macro academy. Its goal is the make mainstream macro theory once again useful to policymakers confronting periodic disturbances in total nominal demand. It seeks to prevent the huge damage caused by Great Recessions and Depressions. But it does seem likely that the Anderson and her colleagues would be supportive of the Project’s design and objectives, especially rescuing the important economic behavior from the workplace black-box rubbish bin that has been consensus practice throughout the long macro dominance of the market-centric general-equilibrium paradigm.

Blog Type: New Keynesians Chicago, Illinois


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