Marginalist Microeconomics: The Path to Totalitarian Tyranny

by Philip Pilkington

Fixing the Economists Article of the Week

Kevin Hoover, although not generally well-known in Post-Keynesian circles, is easily one of the most interesting economists writing on epistemology and ontology today. He was originally an applied macroeconomist but, like anyone who is remotely philosophically literate, he quickly began to see an awful lot of problems with both the econometric approach and with the models that were generally being used — most particularly, microfounded macroeconomic models.

In his article Microfoundations and the Ontology of Macroeconomics he makes any number of interesting points. One that Lars Syll recently picked up on and which I highlighted in a book review last year is that the Rational Agent in microfounded models is an identical construction to the Hegelian notion of ‘Geist’ which embodies Reason-in-the-abstract. That is, it is a construction that attributes a sort of teleological rationality to social processes that guarantee and ideal outcome before the fact.

In the paper Hoover touches on something else which I have insisted on before: namely, that the marginalist, extreme rationality research program is inherently totalitarian. Unfortunately, he only does this in a rather superficial way. In discussing the fact that many economists will concede that current microfounded approaches are not up to the task of explaining the economy they nevertheless insist that they will one day get models that will. In response to this Hoover writes that this view,

…underwrites a kind of tyranny of the future, which is typical of totalitarian politics: as vision of heaven on earth justifies any misdeed today as long as it aims toward the future good, even when the path between the here-and-now and the future is obscure. (p388)

I think that Hoover is on to something here but he just hasn’t quite grasped what it is. He appears to think that this sort of reasoning is merely tied to some sort of epistemological totalitarianism. That is, it provides economists who should know better with an excuse that allows them to continue doing dodgy theorising. This is, in itself, an important component of the whole microfoundations research program. But it is not the most important.

It seems to me that this sort of totalitarian mindset is tied to the entire of marginalist microeconomics. Marginalist microeconomics, through its doctrines of rationality, seeks to describe the supposed behavior of every actor within the economy. It has, as I have argued before, absolutely no tolerance for any behavior that deviates from its a priori principles. Thus, implicitly it views any behavior that deviates from its a priori principles as ‘unfit’ behavior. Through arguments based on competition marginalists then argue that such ‘unfit’ behavior will be weeded out of the economy.

If this sounds similar to a certain other type of reasoning prevalent in the late-19th and early-20th century it should; because this is pretty much the eugenics research program. Eugenicists made almost identical arguments but rather than appealing to market-based competition they appealed to evolution. The task then became to legislate policy that would speed up the evolutionary process. This, as is now well-known, resulted in atrocities; not merely in the extermination of the mentally handicapped in Nazi Germany (the Action T4 program), but also in the sterilisation of many types of ‘defective’ people in many Western democracies.

While the type of market-eugenics implicitly promoted by marginalist microeconomics is not quite as dangerous it is, nevertheless, tyrannical in its own ways. Microeconomists working in this tradition will try to seek out policies that will weed out ‘inefficiencies’ through ‘simulated competition’ in various non-market sectors. Sometimes, in very limited spheres, this can work quite well. But when it is applied directly to trying to manage human behavior it will time and again prove disastrous. It will inevitably lead to absurdist micro-tyrannies, a good example of which were the target systems put in place in much of the British public sector in the 1990s.

Fortunately the totalitarian tendencies of marginalist microeconomics are kept in check in Western democracies to a very large extent. But one can imagine the social chaos that might be unleashed were a government ever to get in that allowed to microeconomists free-reign. Given the opportunity — especially by an authoritarian government — their attempts to impose their bizarre notions of rationality on the population could quickly turn into something out of a dystopian science-fiction novel.

Of course, the microeconomists will say that I’m misrepresenting them and that their doctrines are based on the idea of individual choice. This is entirely untrue, of course, because, as I have written before, in marginalist economics people are nothing but calculating machines — not actual decision-makers. But then, tyranny always comes selling itself as the path to greater freedom, now doesn’t it? And the harbingers of this tyranny often come wearing the frocks of the scientist and insisting on the ‘total objectivity’ of the evils that they do.