Saturday, October 6, 2012


INTERVIEW WITH JON WISMAN, ECONOMICS PROFESSOR 
AND PAUL KNUTSON, WANDERING REPORTER

October 6, 2012

The economic situation of recent years has confused your wandering reporter, Paul Knutson.  This interview might help you, like him, to be a little less confused.  Fifty years after struggling through Econ 101, I found a book last year that explained a few things:  "The Worldly Philosophers" (about the great economists).  I discovered that  I don’t really understand capitalism (the system I’m living in.)  And when I talk to people, I find out they don’t understand it either.  (There's an "easy" book list at the end.)

     "It is the little people who pay taxes."  New York heiress Leona Helmsley

     "It is not that humans have become any more greedy than in generations  
     past.  It is that the avenues to express greed had grown so enormously."  
    (and suggested that financial markets need to be regulated.)
    Alan Greenspan (One of Time Magazine's "25 People to Blame for the Financial Crisis")

“Capitalism is the legitimate racket of the ruling class.”  Al Capone
 

So, Paul wandered into an economist who might explain things a bit better.  Jon Wisman, our classmate, is Professor of Economics at American University, and has the following review by one of his students:  “Brilliant professor! Easy to understand, gives great notes, and his lectures won't put you to sleep.”  


 
Jon lives with his wife Josette (a retired professor of French Medieval Literature at AU) in American University Park (a 25-minute walk to the University).  “We don’t have children.  We’re passionate skiers and play tennis, when joints are accommodating.  We enjoy cooking, travel, do a lot of biking, and we like to party.”


Part I:   Jon becomes an Economist

Paul:  I understand that you were not " . . . born on a mountain top in Tennessee."  

Jon:  It’s true, I am a Virginia hick, born in Woodstock, in the Shenandoah Valley, where I spent the first decade on a very small farm about a mile west of Toms Brook, a town of about 200.  We were quite poor, with two or three cows, a few pigs, chickens, guinea hens, and a large household garden.  The house had no running water and the only heat was a single stove.  In the summer we bathed in a creek. My mother made our shirts and underwear from feed sacks and even made our soap.  Some of my early money-making gigs:  seining minnows and tadpoles to sell to fishermen; trapping muskrats, skinning them, and mounting their pelts for sale (my older brother and I would check the traps along the creek before going to school). Although poor, we didn’t live in poverty.  We were proud.  And lots of very respectable families had equally little.  Moreover, we were a rather happy lot. My parents were happy loving folks.  There were two sets of grandparents, aunts, uncles, and cousins not far off.  We went to school in Toms Brook, a school running 1st-12th grades.  

My parents wanted good educations for their three boys.  Our escape route was my father getting a job with Allstate Insurance in DC in 1952, in the old Sears building, and living with an aunt for 2 years until he could bring along the family in 1954.  We lived in the infamous horseshoe apartments on Bradley Boulevard for 3 years, and then a small house my parents bought on West Virginia Avenue, about 6 blocks west of B-CC.

Paul:  When did you first feel like a philosopher or economist?  What were the major influences that suggested that’s what you wanted to do?

Jon:  Although never a good student--I never had terribly good grades--I’ve always been curious about practically everything.  And then it occurred to me sometime in my senior year at B-CC that I couldn’t decide how to live my life properly unless I had an appreciation of what the greatest questions are and how they’ve been dealt with.  With that realization, I felt compelled to major in philosophy.

Paul:  How was the University of Maryland?  

Jon:  U. of Md was because I didn’t have the grades or the funds to go anywhere else.  I lived at home and commuted for those 4 years, making enough in summer jobs to easily pay the low tuition. Philosophy turned out to be a great major.  There were only about 35 majors (in a university of 15,000), so the professors gave us lots of attention.  I had a very intellectually intense college experience, much of it outside the classroom.

Paul:  And then the University of Strasbourg, France? And then teaching English in Freiburg, Germany?  And then economics?  

Jon:  My goal was to do my doctorate on Hegel in Germany (but I didn’t speak German.)  Four days after graduation, I sailed to Europe, destination Strasbourg, a bilingual city, where I would learn German.  At the University of Strasbourg I soaked up French culture, learned some German, and met Josette.  After a year, I went on to Freiburg, Germany (65 miles away), enrolled in the University in pursuit of Hegel and began teaching English for Berlitz to pay the rent, and feed myself and my little car.  I often returned to Strasbourg to see Josette and my French friends.  However, it was during that second year abroad that I became more interested in an active social role and thus my commitment to follow Hegel wavered.  I returned to enroll in a PhD program in Economics at U. of MD, but before starting the program, I met a professor at AU who really impressed me, and decided to switch to AU.  I soon got an assistantship that provided a monk’s income.  Josette and I got married.  (I had gone to Europe to find my existential freedom and it cost me my bachelorhood!!).  She taught French at the State Department for a while before deciding to do a PhD in medieval French literature at Catholic Univ.  She too got an assistantship and on the two assistantships, we scraped by.

Paul:  What happened in 1970-71 when you won the Simon Naidel Prize?  Sounds like you hit your stride?  

Jon:  Although not a very good student, grades wise, I outperformed all others on the comprehensive examinations (these come at the end of studies, the last step before the dissertation.)  I won a dissertation fellowship, then was hired full time as an instructor, then a year spent on the dissertation, another year as a full time instructor, got my PhD, and they put me on a tenure track job.  I’ve been part of the AU’s furniture ever since.

Paul:  Other important events/influences during your "rise to fame"? 


Jon:  I’ve never sought fame, nor do I pretend to have it.  In fact, I’ve always lacked ambition.  Likely part of why I was never a good student.  I’m a hedonist* and what has unfolded is the consequence of me following my desires.  It just so happens that after sex, food, booze, and physical adventure, what I most enjoy is the intellectual pursuit.  
 
         *"Hedonist," as expressed in John Stuart Mill’s utilitarianism, whereby the highest attainment, and hence the highest desire and pleasure is for self-esteem, which is only possible if one struggles to be a good person.
 

Paul:  You seem to love and be good at teaching (as my hero Feynman was).  Where do you think this comes from?

Jon:  Hedonism once again.  For a number of years I conducted a teaching workshop for our PhD students.  One of the lessons I shared with them is that the prof should go into the classroom to have a great time, like going to a party, only better because the prof doesn’t have to compete for attention.  Like at a party, you have to perform in an interesting manner so others enjoy being with you.  Show great enthusiasm for what you’re talking about and you’ll find the enthusiasm contagious.  And if you don’t love what you’re talking about adequately to generate enthusiasm, then perhaps another career would be more appropriate.  I like being with other people.  I like people and I like helping them.  I have the privilege of helping young people gain the knowledge they pursue.  I greatly enjoy watching the lights go on in the classroom as students grasp complex concepts.  

Paul:  Are you an economist?  A philosopher?  Or what?

Jon:  I’m a sort of meta-economist.  I look upon the discipline with a bit of remove and view it as inadequately linked to social thinking more generally (e.g., other social science disciplines).  I don’t believe that the economic can be understood without tossing the net far more broadly.  Thus all of my work is interdisciplinary.  I suspect that many economists would not be readily willing to see me as fully one of them.  Nevertheless there are heterodox economists (non mainstream) who seemingly appreciate my work, enough so that one of their associations selected me as their president and has granted me all the awards they possess (The Association for Social Economics).

Paul:  It’s not clear what your specialty is.  Don’t all professors have to specialize in one particular aspect of their field?  

Jon:  I’ve avoided narrow specialization.  Too boring (hedonism again).  Coming from philosophy, I developed two broad specializations early on:  the history of the discipline and methodology.  Within the latter I’ve examined the nature of economic science from the vantage points of the philosophy of science and the sociology of knowledge.  Much of my early published work was in this broad domain and I’ve still a lot of projects that are partially crafted/written in this area that I hope to return to.  I stepped a bit away because of my interest in the nature of work, inequality, and more recently ecology.

Paul:  What would you like to achieve / see achieved before you retire?

Jon:  I have no ambitions other than that this continue.  I choose my research topics because they interest me, which is not independent of my thinking that they have social importance.  I like that my work gets attention.  It gives me some confirmation that I may be on the right track. But I think it’s a mistake to strive for recognition.  Recognition should be the consequence, not the goal.  As for retirement, I may die with chalk in hand.
 

Part II:  Economics & Capitalism

      "The Nobel Prize (for Economics) confers on an individual an authority which in economics no man ought to possess... This does not matter in the natural sciences.  Here the influence exercised by an individual is chiefly an influence on his fellow experts; and they will soon cut him down to size if he exceeds his competence.  But the influence of the economist that mainly matters is an influence over laymen:
politicians, journalists, civil servants and the public generally." Friedrich Hayek  (Great economist and Nobel prize winner)
 

Paul:  How would you define "economics"?        

Jon:  Economic science is a social science that studies our primordial struggle to be free of material privation, to have our needs met.  Because we are social beings, it focuses on how we coordinate with each other to achieve our economic goals.  Because we can’t do anything (make art, literature, music, nookie) without having our basic survival needs met, economics studies our most fundamental social condition.  

Paul:  You call it "economic science."   I have an almost automatic reaction when people put up "scientific facts" and lots of numbers that distort rather than clarify.  Surely any "social science,"  which is dependent on human behavior, is going to be "proving" only that "this is what happens some of the time with these people in this period of time."  Aren't current "mainstream" economists focused on proving that perfect markets work with perfect people (most of the time)?

Jon:  Physics studies regularities in nature that are everywhere and everywhen the same, at least in our universe.  The laws of physics capture these regularities in theory.  Economics, like other social sciences, studies subject matter where it is not readily possible to identify significant transcultural-transhistorical regularities.  Causality in the social world is never simple.  The causal variables are too multiple. The subject matter is constantly evolving, becoming differently complex.  Note for instance that predictions in the social sciences can be self-confirming/self-defeating depending on how they change people’s behaviour.  Because of this, it’s unclear whether there can be actual non-trivial laws in economics.  Instead, the discipline must cope with patterns of phenomena that exist in specific, but not all instances. The upshot is that explanations can never be as neat as in physics, and the discipline’s imitation of physics is a serious mistake. It’s for this reason that I believe economic science must be interdisciplinary and historical.  I don’t believe the mainstream’s preoccupation with theory formalism and econometrics (using statistics to measure economic phenomenon) will alone yield great insight.  All science is, of course, open to corruption, and this threat is greater in the social sciences than the physical ones.  My dear discipline of economics frequently serves as ideology.  Ironically, the widespread imitation of physics makes this corruption by ideology much greater.  

Paul:  That helps me.  For the last 30 years or so the economics that has gripped the U.S. seems to be based around Milton Friedman and free market capitalism.  Now I know Friedman was a great economist and deserved his "Nobel Prize"* for specific work.  But Friedman was always certain about and an advocate for free markets, from his early days.  And, in my view, he espoused his beliefs/ideology just like any politician or preacher.
 
    *The “Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel,"
      was set up by the bank in 1968, similar to the proper Nobel, but regarded as
      inferior by many.
 

Paul:  The Chicago School, and others, pursue a belief that they have proved that free markets work.  How are we to distinguish fact, fiction, and opinion among economists?  Or are we, like them, just slaves to our prejudices?

Jon:  Laissez faire economics legitimates not using the government to revise the rules of the game that are biased in favor of the owners of corporate wealth.  It has played this role ever since Adam Smith formulated it in sophisticated terms.  That said, I don’t believe that economists who espouse this doctrine are in bad faith.  They truly believe it.  And there is in fact a kind of beauty about laissez faire economics--so neatly logical.  But it’s based on untenable premises.

Paul: How might we distinguish fact, fiction, and opinion; or do we just go with the economists (and politicians) we agree with?

Jon:  Although experiments are carried out in economics, they are quite limited in scope and usually deal with rather small issues.  But the big questions--the ones we really care about--cannot be tested in any manner that would satisfy the requirements of testing in the natural sciences.  This leaves the door ajar for ideology, against which in the social sciences, there is no easy defense.  However, if we become aware of this vulnerability to misuse as ideology, we can more readily work against it.  We can do so by methodically showing how a theory serves ideology rather than science.  But note, the pretense held by most mainstream economists that economics  is a science like physics makes them blind to the manner in which economics so frequently serves as ideology.

Paul:  It seems that capitalism, in its current form, is responsible for the current crisis, the inequality, and many problems many of us perceive.  But capitalism is also praised by almost all economists (even Karl Marx) as being an incredible system for creating wealth, for creating more massive and more colossal productive forces than all preceding generations before (capitalism).  Can you explain what the essence of it is, that makes it so very different and successful, preferably in a way that might lead some Americans to even think about it, learn about it? 

Jon:  Along with the adoption of agriculture, the evolution of capitalism stands out as one of the two greatest transformative events in human history.  In the last 200 years or so we have seen and learned to understand the transformative power of capitalism.  It has been described as "creative destruction" (Schumpeter), a process that creates ever new production possibilities as it destroys the old ones.  Earlier, Marx and Engels captured the same phenomenon in broader terms by observing that under the regime of capitalism, "All that is solid melts into air.”  Not only are the processes of production and distribution of economic output constantly revolutionized, but all other domains of life are also continually transformed. Villages die while cities grow, traditional families fade away as individuals become more independent of traditional ties, old ideas and values are delegitimatized by growing science and new ideas and values more consistent with new evolving social structures.  All ideas, therefore become relativized, leading many people to feel there's nothing left to hold onto.  To some of them, this makes the certainty of religious fundamentalism and doctrinaire political ideology highly attractive.

Paul:  This sounds a bit catastrophic.  We're happy when it happens to other countries, or even other states.  We grew up with the GE ad on TV telling us, every week, that "Progress is our most important product." And we saw all the material gain, the cures to many diseases, an awful lot of good being done.  So I, we, can say we like that part.  And replacing (destroying) outdated processes and habits is maybe OK as well.  If we don't someone else will.

Jon:  This is why it's important to understand what capitalism requires, so that we can make informed judgments about how to use it.  The problem is not capitalism per se.  It’s the inequality and the command it gives an elite over ideology and hence politics.  Capitalism created the social context within which democracy and freedom could evolve.  The struggle should not be about capitalism, but instead about inequality and ideology.  At present in the U.S., the focus should be on the fact that over the past 35 years, as an elite took every EVEN larger shares, it gained increasing control over ideology and the state.

Paul:  So, as I said in the introduction, we can't go very far in discussing economics or capitalism without getting into politics?

Jon:  No, not really.  Our understanding of society and capitalism depends upon understanding how power is allocated and used.  Critical to capitalism’s evolution were the slow development of markets (a spontaneous coordinating mechanism) and a state that would define and enforce property rights.  Once they achieved monopoly control of the state, the capitalists (bourgeoisie) used it, as had the aristocracy, to extract the maximum amount possible of society’s output for themselves.  But in steering capitalism forward, it created an urbanized working class that began, especially in the 19th century, to fight back.  By threatening the bourgeoisie’s state with violence, it forced them to begin to democratize the franchise, provide universal education, labor laws, etc.  

Paul:  And we grew up in a period of mass education, improving economic conditions for (almost) all, and real growth in productivity.  That was normal.   And now we're in a period of very expensive education, falling behind other countries, with declining economic conditions for almost all, and, arguably, stagnation in productivity.  How bad is it and what should we do to improve things?

Jon:  Over the past 35 years, inequality has so dramatically increased that the overwhelming majority of Americans no longer grow up with the opportunities and optimism that characterized our generation.  An important consequence of this inequality is that a small elite has gained far greater control over our society’s ideology and politics.  Note for instance, that today, the wealthiest 1% of Americans owns 49.3 percent of stocks and mutual funds, the richest 10%, 89.4%, leaving the bottom 90% with only 10.6%.  Because corporations are considered to be persons, their almost complete ownership by a small elite dramatically leverages the latter’s political power.  Note how this concentrated wealth provides its owners with disproportionate control over ideology (think tanks, increasing control over an increasingly concentrated media, lobbyists, etc.).  Note how in the U.S., political campaigns are financed by private interests and thus those who own corporations wind up with very impressive influence.  Is it even possible to seriously run for an important political office without corporate support?  Corporations are not stupid.  Making campaign contributions is a savvy business decision that anticipates handsome returns.  And, of course, these handsome returns accrue to the small elite that predominately owns these corporations.  

Paul:  So, how might we fix or at least improve things?  Can we get the goodies without the pain and still call it democratic capitalism?

Jon:  The framework for democracy is still there.  In principle, the losers (the bottom 90%) could use the political process to their own advantage.  That’s what they were awakened to do by the suffering of the Great Depression in the 1930s.  The ideology of an elite that had became ever more powerful in the 1920s as inequality soared, was slowly delegitimized after the 1929 crash.  Consequently, from the mid-1930s until the mid-1970s, the bottom 90% had enough influence over ideology and hence politics such that inequality declined substantially and the welfare of the masses dramatically improved.  We were privileged to come of age during that period.    

Paul:  Sounds like things have to get worse before they'll get better (“Only a crisis--actual or perceived--produces real change.”).

Jon:  All social systems evolve.  Capitalism is no exception.  In fact, it is the fastest self-transforming system in human history (excepting the state socialist systems of the 20th century that have now mostly disappeared).  Marx was right about capitalism’s dynamism, although he got the part about revolution, followed by socialism to communism wrong.  And Francis Fukuyama is surely wrong in viewing capitalism as the end of history.  Capitalism will itself prove him wrong!

Paul:  Are you optimistic?  

Jon:  Until recent years, I was, like most of our generation, highly optimistic.  It could be argued that given that D.C. was the Soviet’s bull’s eye, you had to be optimistic to live here!  But the recent explosive growth of inequality and its consequences have crushed that optimism.  There are two dimensions to this:  First, I fear that an elite has amassed so much income, wealth, and privilege that we may have passed a point of no return, in the sense that their command over ideology and hence politics is so great that it can’t be reversed.  The severity of the Great Depression deligitimatized that ideology and awakened America to the possibility of using the political arena to get a fairer share.  And as noted earlier, that worked until the mid-1970s.  But suppose that an elite has adequately learned how to keep the crises consequent to rising inequality from becoming so severe as to provoke an awakening similar to that of the 1930s. This seems to be the case in this crisis.  With fiscal and monetary intervention, combined with bank bailouts, the state they virtually control has been able to limit the damage of the crisis.  Whereas unemployment reached almost 25% in 1933, it has mostly stayed below 10% this time.    

The second dimension is that I fear we may have passed a point of no return concerning the environment.  This may be physical, as many ecologists have already claimed.  Or it may be political:  an elite’s command over ideology and politics may be so great that they are able to effectively block the necessary measures to avoid environmental catastrophe.  Jared Diamond’s book, Collapse,catalogues how political control by elites in many earlier civilizations led to ecological and social devastation (collapse), precisely because their immediate self-interest impeded the necessary measures to preserve their environments.  The wealthy benefit more financially from pollution than do the less well off.  They consume far more and products are cheaper because many are produced without adequate environmental controls.  Second, as noted earlier, they mostly own the corporations that have higher profits because adequate pollution controls are not imposed upon them.  Third, they can better shield themselves from many of pollution’s negative consequences.  And fourth, the greater inequality, the higher the consumption standards set by the wealthy.  This puts pressure on all below to also consume more as they struggle to maintain their relative social status and self-respect.  Thus, as inequality rose dramatically over the 30 years leading up to the crisis of 2008, household savings vanished, households went deeply into debt, and their members worked longer hours, all in their attempt to maintain their relative standard of living as the consumption bar was being raised ever higher by an elite who with far greater incomes could spend far more as they competed among themselves for the highest pinnacle of status, using consumption (think McMansions, Ferraris, etc.) as flashy evidence.  

Paul:  This ends on a rather pessimistic note.  Earlier you give capitalism the possibility of reinventing itself and changing things.  Might the horces it unleashes and the competition it requires not lead to changes to the U.S. from outside?

Jon:  Ironically, there is one awful scenario that could conceivably provide grounds for optimism:  The political logjam continues, or even worsens such that the economy slides from the Grand Recession into another Grand Depression, inflicting suffering so horrible that a political awakening similar to that of the 1930s follows (in tune with your Friedman quotation above).   But who could wish for this?  Economic catastrophe leads to political extremism (as we’re already witnessing), and we mustn’t forget that the most homicidal war in human history capped the 1930s.

Paul:  Thank you Jon.  I know we've only scratched the surface.  And I'll end with a quote from Robert Heilbroner (in The Worldly Philosophers):  “I think it’s important that we start understanding different capitalisms, as opposed to one overarching capitalism. That there is only one way in which a capitalism can function and that it is up to overly broad economic theorizing to describe this one way is one of the premier myths of the current economic era.”  And also:  “The cure for capitalism's failing would require that a government would have to rise above the interests of one class alone.”

Jon:  Thank you, Paul. I've enjoyed it too.  And thank you for your penetrating questions and for the opportunity to reply.
Capitalism:  The 'Easy' Booklist  (PK recommendations) 

1.  “23 Things They Don't Tell You About Capitalism”, by Ha-Joon Chang, is the place to start.  He's practical, clear, and organises the "things" for you, so you can dip in and learn a bit at a time.  And you don't have to agree with everything he writes.  But you will learn.

2.  “The Worldly Philosophers: The Lives, Times, and Ideas of the Great Economic Thinkers”, by Robert L. Heilbroner, will give you a wonderful overview of the how the greats have understood things in their time and added to our understanding.  Each life can be read when you have time.

3.  “Marxism:  For and Against”, by Robert L. Heilbroner, is harder work, but the best place to start to understand some of his concepts.  And Marx, whether you like it or not, is one great thinker, who has affected almost everyone.  The 'Marx for Beginners' type books gave me no understanding whatever.
 
Jon's CV is available at:  http://www.american.edu/uploads/docs/wismanCV.pdf.  




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