Streetwise Professor

March 27, 2016

A Practical President, Who Believes Himself Exempt From Intellectual Influence

Filed under: Economics,Politics — The Professor @ 7:26 pm

Obama caused a kerfuffle with his remarks in Argentina on Thursday. The most common interpretation of his remarks was that he was drawing an equivalence between communism/socialism and capitalism. Yes, one can interpret his speech that way, but I don’t think that’s the most accurate way to parse it.

Obama was denigrating all ideological frames as interesting subject matter for academic debate, but of little interest or relevance to practical politics:

I guess to make a broader point, so often in the past there’s been a sharp division between left and right, between capitalist and communist or socialist. And especially in the Americas, that’s been a big debate, right? Oh, you know, you’re a capitalist Yankee dog, and oh, you know, you’re some crazy communist that’s going to take away everybody’s property. And I mean, those are interesting intellectual arguments, but I think for your generation, you should be practical and just choose from what works. You don’t have to worry about whether it neatly fits into socialist theory or capitalist theory — you should just decide what works.

In short, he advocated a rigorously pragmatic approach. Or put differently, a Chinese menu theory of government: take one item from menu A, another from menu B, depending on your taste and what “works” for you.

The criticism here should be directed at his vapidity and superficiality and question begging. By what criteria are the things that “work” to be determined? How do liberty, individual autonomy, and reliance on coercion and repression come into play when evaluating what works?

Further, real world decisions always involve trade-offs. Works-Doesn’t Work is binary: trade offs aren’t.

Obama also apparently believes that it is possible to design policies without a theoretical framework. Hayek was closer to the truth when he said without theory the facts are silent. Theories are about causal mechanisms, and policies are all about manipulating cause to achieve particular effects. You can’t make a reasonable evaluation ex ante of what policies will “work” (based on your objective function) without some theoretical framework. Further, those who don’t think deeply about cause and effect when designing policies inevitably unleash unintended consequences that are usually more baleful than beneficial.

All that said, the fact that Obama apparently believes that some socialist or communist policies “work” by any criteria held by non-socialists/communists is revealing. All empirical experience is that explicitly communist and socialist systems have delivered lower standards of living (often dramatically so), less freedom, and more coercion. Further, their alleged virtue–equality–is largely chimerical. There is always a privileged elite in socialist/communist systems, and what equality there is tends to be an equality of misery. What’s more, inequality can be palliated (and is considerably even in the US) by transfer programs that fall well short of communism or socialism. The Bernie worshipping millennial idiots who point to Denmark or Sweden as socialist paradises have no clue: they are welfare states, which is a very different kettle of fish.

The examples from Cuba that Obama cited as things that “work” in a communist system are something of a joke. Non-communist/socialist systems deliver better education and health care than Castro’s Cuba.

Obama was not revealing that he is a closet commie, although he clearly does not think communism is inherently a bad thing. In fact, he was being an old school progressive, making arguments old school progressives have made since Wilson and through FDR. The New Dealers were of a similarly pragmatic bent, and like Obama, openly advocated using policies adopted by fascist or communist countries if they “worked.” Stalin, Hitler, and Mussolini all had admirers among the New Dealers, who believed that they had found better policies than voluntary contract and exchange, and open competition.

When I read Obama’s remarks, I immediately thought of FDR’s speech at Oglethorpe University in May, 1932 (while he was running for president):

Do not confuse objectives with methods. When the Nation becomes substantially united in favor of planning the broad objectives of civilization, then true leadership must unite thought behind definite methods.

The country needs and, unless I mistake its temper, the country demands bold, persistent experimentation. It is common sense to take a method and try it: If it fails, admit it frankly and try another. But above all, try something. The millions who are in want will not stand by silently forever while the things to satisfy their needs are within easy reach.

“Bold experimentation” is basically a prescription to try anything and see if it “works.” If one thing doesn’t “work,” (i.e., “if it fails”) try something else. Once the “broad objectives” are defined, any method that achieves those objectives is fair game. Roosevelt in Georgia, like Obama in Argentina, was saying that all methods should be open for consideration and evaluated on purely pragmatic grounds.

Roosevelt was also making a favorable reference to planning, which at the time was associated with the USSR. Like Obama, he was saying don’t rule out a particular policy just because it originates in communism.

Of course, the implementation of this theory of government in the New Deal led to a confused hodge-podge of policies that largely failed to achieve their stated objectives, and indeed, in many cases worsened the nation’s economic crisis: that is, these policies were rife with unintended consequences.

This provides an excellent example of Hayek’s dictum. Those operating based on standard microeconomic (e.g., capitalist) principles/theories rightly predicted that cartelizing product and labor markets would not lead to higher output, and they were right. Contrary to Obama, “capitalist theory” was more than an intellectually interesting subject for classroom debate: it was a very useful guide to evaluating the practical effects of policies, which the New Dealers ignored, to the nation’s detriment.

And those progressives like Wilson, FDR, and now Obama who touted the superiority of pragmatism, and claimed their practicality and independence from theoretical abstractions and systems, were largely fooling themselves. The Pragmatism (note the capitalization) that has infused progressive thought for well over a century isn’t a-theoretical or a-ideological. It is an ideological and philosophical system developed in Germany in the 19th century. Not that Obama gets that.

No, Obama seems to be exactly the kind of man that Keynes so trenchantly described in the General Theory 80 years ago:

Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.

What Keynes describes is a form of intellectual conceit common among politicians, and especially progressive ones. That conceit, rather than some soft spot for socialism, is the problem with Obama’s “do what works” nostrum.

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  1. Of course, one of the key elements to experimentation is being able to admit when a policy has failed. Not a strong point of politicians generally, especially those of a leftist bent, and even more especially of Obama.

    Comment by Tim Newman — March 27, 2016 @ 10:49 pm

  2. Tim:

    Conceit prevents that. As well as even having a debate, hosting one, or even witnessing one.

    Too busy with golf, basketball brackets, etc.

    Busy busy busy.

    Don’t forget the travel. Where he goes. Who he visits. And who he takes along speak volumes about who this clown really is.

    VP VVP

    Comment by Vlad — March 28, 2016 @ 12:19 pm

  3. With capitalism, you have a system in place that rewards achievement and effort, while under socialism you are rewarded based on your loyalty to the system and your social or ethnic affinity to the existing elite. You can imagine why this is very enticing to a lifelong politician like Obama.

    Comment by aaa — March 28, 2016 @ 8:01 pm

  4. Perhaps he wasn’t revealing that he is a closet communist by his statements. But considering how much detailed planning goes into every Presidential photo opp, that picture of him framed by the Cuban thug Che in the background is a Communist Manifesto worth a thousand words.
    It is his strategy to constantly blur the definitions. Like “you didn’t build that”, which blurs the distinction of real accomplishment, equating socialism and capitalism sneaks that thought into the general discussion as if it were true. It relates to his use of straw arguments that you point out, Prof. They enter the consciousness of the unthinking who come to believe that to be true, just because they heard it.
    Has there ever been such a case in which such a pathological liar and conniving dullard was billed as the smartest guy in the room?

    Comment by Richard Whitney — March 29, 2016 @ 5:13 pm

  5. ‘And I mean, those are interesting intellectual arguments, but I think for your generation, you should be practical and just choose from what works. You don’t have to worry about whether it neatly fits into socialist theory or capitalist theory — you should just decide what works.’

    What about if it fits into fascist theory and it works – should governments not worry about it and adopt it too?

    I have a quibble with your quotation from Keynes. Keynes was talking about practical men. I don’t think the president qualifies for that description. Other descriptions – certainly!

    Comment by Ex-Regulator on Lunch Break — March 30, 2016 @ 3:33 am

  6. @Ex-reg. The New Dealers definitely borrowed from fascism, and many spoke of it favorably.

    Re the Keynes quote, I think there was some sarcasm in his use of the phrase “practical men.” I interpret it to mean that he was insinuating that these were men who viewed themselves as practical, but really weren’t, because they were the slaves of some dead academic scribbler. Obama certainly believes he’s a practical person, but as you note, he’s anything but. That is one of his many conceits.

    The ProfessorComment by The Professor — March 31, 2016 @ 4:02 pm

  7. If one wants to confront the opponent at his strongest, then the interesting question for Latin American countries is why the kind of dirigisme practiced by Taiwan, Japan, etc. in their take-off stages would not work for them. I am perfectly prepared to entertain the possibility that these countries could have done even better with more liberalism, but there is at least something to debate there. Peronism and socialism ought to be straw men by 2016, even though they still have political life.

    Comment by srp — March 31, 2016 @ 8:30 pm

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