Friday, May 8, 2015

FUDGE: False consciousness, rational choice, analytical Marxism and behavioral economics

One of the advantages of growing older is that you can remember intellectual fashions that have gone out of style but whose outlines are clearly discernible in the latest craze.

A long, long, long time ago -- the late 1970s and early 1980s -- critical theory, the Frankfurt School and Georg Lukacs was all the rage. An English translation of Lukacs's History and Class Consciousness was published in 1971 and reached the pinnacle of its celebrity by the end of the decade. Some people even read it (disclaimer: I did). The notion of false consciousness seemed to leftist university students to explain why The Proletariat hadn't brought about The Revolution.

I simplify, of course.

Then along came Analytical Marxism to bore and confound the academic left and Post-Modernism to entertain it (and bore and confound everyone else). Workers didn't suffer from false consciousness, after all. It was in their best interest to support capitalism and anyway they constructed a multitude of their own identities.
When workers pursue strategies that lead to a compromise, the state does what appears necessary to reproduce capitalism because this is the choice of the workers as well as the capitalists. The organization of the state as an institution and the policies pursued by this institution constitute an expression of a specific class compromise. ("The Structure of Class Conflict in Democratic Capitalist Societies," A. Przeworski and M. Wallerstein, 1982 [corrected reference])
Look, over there! It's Madonna, subverting the cultural codes!

Meanwhile, at around the same time false consciousness was been hounded out of respectable discourse, it was being revealed that "the most basic rules of the theory [of rational choice] are commonly violated by decision makers." Tversky and Kahneman argued that:
the deviations of actual behavior from the normative model are too widespread to be ignored, too systematic to be dismissed as random error, and too fundamental to be accommodated by relaxing the normative system.
So workers allegedly rationally calculate that capitalism is good for them even though they are probably incapable of consistently choosing between two identical pairs of options. How does this work, again?

I'm going to take a short cut here and quote extensively from a 1981 article, "Cognitive Psychology and Ideology," by Edward Sampson. In part, I'm doing this to save me the trouble of summarizing the argument. But also I want to emphasize the not inconsiderable detail that this argument was "already out there" and has been for 34 years.
It is clear from the treatment that Lukacs gives to reification, and from the subsequent critical analyses which Gergen and I have offered, that psychological reification tends to serve primarily ideological functions.Reifications are simultaneously an accurate portrait of existing social reality and a false consciousness, serving the existing framework of values and interests. Psychological reifications clothe existing social arrangements in terms of basic and inevitable characteristics of individual psychological functioning; this inadvertently authenticates the status quo, but now in a disguised psychological costume. What has been mediated by a sociohistorical process—the forms and contents of human consciousness and of individual psychological experience—is treated as though it were an "in-itself," a reality independent of these very origins. 
[Tversky and Kahneman] clearly adopt the forms of statistical and scientific analysis as the correct standard of judgment against which they measure the judgmental principles followed by lay people and even by professional clinicians and counselors. Tversky and Kahneman view most adults' intuitive predictions to be in error when compared with the true standard of excellence, statistical and scientific thought itself. They refer to these error-ridden everyday forms as "illusions" and express surprise that after a lifetime of experience most people still fail to "experience such fundamental statistical rules as regression toward the mean, or the effect of sample size on sampling variability," and so continue to make error-filled predictions.


Thornton Hall said...

Book idea:

Every knee-jerk prejudice of the Reaganists (so-called "conservatives") is true, but not for the reasons they think:

Academia really is just a bastion for reproducing ideology as demonstrated by Neo-Classical economics and Post Modernism. The Enlightenment model has run it's course.

The Press: The press really is biased against rural whites, because the press hates all institutions. Liberals only care about government, but the source vs. power model of "professional" journalism hates churches, hates bowling leagues, hates state fairs, hates gun shows, hates the Boy Scouts, hates your employer, hates your fourth of july parade....

Treason: Obama isn't an American. Because, according to Reaganists, an American is a white person who goes to a white church. Obama is, indeed, pledged to end what you think "America" means.

The East Coast elite really does hate your way of life. Humans should move to where the food and shelter is. In the modern world that means live where the jobs are: cities. We don't like sending money to places where people need to stop living. And it's killing the environment.

Thornton Hall said...

Having just read Thaler's piece in the NYT, I have the same problem that I discussed with Barkley Rosser here:

"SIF or supposedly irrelavant factors" The very nature of this term suggests that Thaler wants to add something to the theory of rational decision making. But why is rationality the base assumption to be modified by additional considerations?

A parallel problem occurs when Brad DeLong generates his list of market failures and other anomalous situations where orthodox neoclassical economics is true as long as it remembers to incorporate these 12 or so exceptions that at least one neoclassical economist in one paper has acknowledged exists. Neoclassical without exceptions is theology, but with exceptions it gets most things right and does better than all alternatives. At least that's DeLong's claim.

But both DeLong's approach and (what I can gather from the NYT piece of) Thaler's approach are deeply and obviously violating the basic tenets of empirical observation. It is logically impossible for all our observations to be exceptions. If you think that's what's happening, then what you think is the "norm" or the "base assumption" or theory is just plain nonsense. The goal isn't to fit our observations into our theory. The goal is to come up with a theory that matches the observations.

Our observations are not exceptions. Our observations are the rule. Or you are doing it wrong.

Sandwichman said...

As K.W. Kapp pointed out, those aren't market failures, they're cost-shifting successes.