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Saturday, January 28, 2012

on to the sovereign consumer II

In 1948, Mary Jean Bowman wrote an article concerning the rise and relative decline of the consumer in economic theory: The Consumer in the History of Economic Doctrine. Phillip Mirowski has shown that the enormous powers of control systems such as were put into operation by U.S. during World War II had left an impress on the economics profession at that time. It was an impress deepened by the merger of mathematical economics and Keynesian ideas about demand management in the Anglosphere in the years after the war. There was never, in that period, any real threat that the private enterprise system would be taken over by the state – but there was enormous confidence in the state’s ability to direct the economy. Against this background, Bowman’s history seems to be an exercise in antiquarianism. For readers who have experienced the collapse of confidence in the state’s ability to direct the economy – at least on the surface of economic thinking – and the dominance of the neo-liberal framework, it is the antiquarianism that is antiquated.

Bowman divides into four the approaches to the consumer in economics. Her third approach is closest to what would be called the idea of the sovereign consumer: “The consumer is viewed as the originative and active agent in determining the allocation of resources. .. Since the late 19th century the normative stress has been mainly on realizing consumer preferences, but a resource allocation analysis has been applied in other normative contexts…” (1)

For Bowman, Say was “probably the first economist to become an unqualified exponent of the normative postion that the satisfaction of consumer preferences, whatever those preferences might be, was an end in and of itself.”

But in Bowman’s history,  Say was a little to early to have been able to exploit the subjective turn that came about with the marginal utility approach. Furthermore, if Say were to reach for a physics model of the economy, it would have had to have been Laplace – whereas by the late nineteenth century, better statistical tools and and models of physics gave economists a sense that mechnics could be transferred to the matter of exchange. Wicksteed, for Bowman, is the key figure in this history (which, as she admits, is skewed towards England and America):

“Wicksteed was the first of the British economists explicitly to join the utility and cost approaches through opportunity cost. The concept was applied in both the allocution of resources among different uses and the margin of choice between leisure or idleness of resources and income. In the former application consumers’ rule was carried back through the economy by imputation.”

So Bowman’s history stands as a tale of events unfolding in a particular department of knowledge. The motives, here, are generated, or so we are to believe, by the structure of science – although it is already a question of whether this is the science of discovery, or whether the experimental and the empirical are being pre-processed in a gesture of scientific aspiration. The economist’s understanding of themselves as scientists was expressed by Mill, and repeated by Carl Menger, one of the important pioneers of the marginalist school, in his Investigations (1883):

‘The will of men are lead by countless and in part contradictory motives; in this way, any strict law-likeness of human action in general and economic in particular is excluded from the beginning. Only when we think of man in his economic activity as being continually guided by the same motive, i.e. his self-utility, does the mmoment of arbitrariness appear excluded, and every action strictly determined. Only under the above presupposition is accordingly the laws of political economics and even national economics thinkable.” [My translation, 73]
The language of determination leads us into the logic of economic indvidualism, which presents itself firstly as a methodological norm. The individual’s motives may be granted free reign – but as far as the economist is concerned, they must be formally enveloped in a modality that will make them calculable and determinant.

Character is never the rubric under which the economist goes about his business. Rather, at the heart of the subjectivist move was an oddly vacuous subject – the ‘individual’, or the consumer.  In mainstream economics, the decisive rupture with the classical school centers on the replacement of the laborer, the producer, by the individual consumer, the preferer. But this change of focus creates an oddly dysymmetric picture of economic activity, as though individuals existed in some series, isolated from one another, the realization of their choices cut off from any interference one with the other.  continually chosing goods and services, an eternal monologue of want. One imagines them as Beckett characters, buried up to their necks in purchases, balancing costs and benefits. Far from being a choice of method, a choice of connection within a network of connections as in Simmel, a choice for salvation that leads to a new life, the choice of believing in the eternal return of the same that leads to the transcendence of the human, the choice of revolution that throws off the yoke of alienation, the choice of the economic agent has a curiously muffled, a passive aggressive nature. It is a choice of, as economists like to put it, one bundle of goods over another, with the world of supply, of production, of creation, absolutely subservient to choice.

The inversion of the economist’s protagonist – from producer to consumer – follows the logic of individualism in as much as it clears a space in which economics can be a social physics, or mechanics. The individual shoppinng is a distinct unit. The individual producing, on the other hand, is a collaborator. The steelworker does not make a fleck of steel distinct from the fleck of steel made by his fellow steelworker. The classical economists made great strides in abstracting to gain a sense of economic objects as produced, by postulating a fully substitutable abstract labor time – the time that is represented in the time card. But Marx revealed that there was an unconscious total social fact following upon this way of analysis: producers were exploited within the class stratified social whole. This would bother few in a world in which the servant/master relationship was assumed, but it did bother a world in which that relationship had to be justified. And yet, of course, in a further paradox, the first world, by depending on non-liberated labor, could never bring about the  industrial and financial system  of capitalism – capitalism must free the laborer if the laborer is to be exploited in a proper capitalist manner.

Moreover, the genesis of value, following the classical route, created insuperable problems of quantification – and could only be approximately quantified from surface indices. That this may just be the way the economy functions was not a good answer for an economics that wanted to be not simply a social science, but the most scientific social science.

Still, the turn in economics from the producer to the consumer, from labor value to marginal utility, was not received in the social sciences or among policy makers without skepticism and outright resistance. Among the paths of that resistance was: the sociology that took as its primary units certain collectives; the path of therapeutic nihilism; and the positive pather of socialism. The first took collectives to be, at least for the purposes of explanation, agents  – crowds, public opinion, class, etc. The second exploded the notion of the unified individual, with his unified consciousness, from within –a move which was variously made by William James, Nietzsche and Freud. This path eventually led, in the twentieth century, to another notion of the person in terms of sovereigny and abjection. And the third path centered upon the idea that the individual’s consciousness of himself was always mediated by class, a state of affairs that could only be changed by revolution.

Wednesday, January 25, 2012

the sovereign and the sovereign consumer

In 1967, Robert Solow wrote a disparaging review of John Kenneth Galbraith’s New Industrial State, which was a bestseller that year, in the Public Interest, a fairly hot academic journal at the time. In the same issue, Galbraith replied. The quarrel spilled over into the next issue in 1968, with an ideological comrade of Galbraith’s, Robert Marris, pitching in, and Solow finally counter-attacking his two adversaries.

The original review raised the doubt that Galbraith was using a scientific method, instead of an ad hoc method of magisterial observation. Solow felt that Galbraith’s themes were often invalidated by modern economic theory. And, in particular, he did not think that Galbraith could be right about one of the theses that had by that time become associated with his name: that corporate demand management, that is, marketing, shaped both production and the market.

At one point, Solow, in responding to a supporter of the Galbraith view, Marris, wrote: “What I said was: … But I should think a case could be made that much advertising serves only to cancel other advertising, and is therefore merely wasteful.” I should think it obvious that this almost has to be true – i.e., that much advertising merely cancels other advertising – for otherwise there would be nothing to stop both the cigarette industry and the detergent industry from expanding their sales to their hearts’ desire and to the limits of consumers’ capacity to carry debt.”

This was written in 1968, when the consumer’s ability to carry debt was not itself a great matter of advertising. It proved to be so in the 2000s, and as we have seen, mortgages and credit card debts did expand to the hearts’ content of banks and financial service companies – until the limit of the consumers’ ability to pay debts was reached. The ghost of Galbraith is entitled to smile about Solow’s naïve idea that debt itself can’t be commodified, advertised and amplified.  But more here is on display than  Solow’s limited imagination. There is, in Solow’s statements, a classic economist’s blindness to the relationship between goods, and indeed, people – to the novelist’s truth that people live in other people’s lives.

Thus, when Solow writes: “It must be harder to influence the consumer’s choice between purchases of cigarettes and purchases of beer, and much harder still to influence his distribution of expenditures among such broad categories as food, clothing, automobiles, housing…”, he falls into a rather puzzling trap in which the purchase of beer and cigarettes is a one time purchase with no effects on one’s lifestyle. His dissociation of goods and people make it impossible to see the connection of a good like cigarettes and a broad category like housing – a connection that came into view very clearly for the 300,000 some people who died of lung cancer in 1967. Indeed, 1967 marked the high water mark of the increase in cigarette smoking. The next year, the government and private organisations began to feature a massive anti-smoking marketing campaign. And the incidence of smoking started to fall.

Solow’s notion that advertising countered advertising is, indeed, an observation about the content of some advertising – the comparative subgenre. However, it was evident even to Solow that this couldn’t account for all advertising. Nor was he happy with the idea that advertising was simply waste, for if that were the case, the government could happily ban advertising without economic damage –and this was not something Solow’s economic ideology would allow. At the University of Chicago, a school developed that contended that advertising did, indeed, have an economic benefit, by giving consumers – whose preferences were made through the same act of freewill by which sinners in an evangelical church accept Christ as their Lord and Saviour – with information that will help them find their preferred goods and services. Since advertising doesn’t look like it is in the business of providing this kind of information, the Chicago school was reduced to saying that advertising signaled bundles of qualities – such as comfort – even if the information it gave looked more like the rhetoric of persuasion.

Why were economists so eager to dispatch Galbraith’s idea? Or I should, perhaps, say the idea of the marketers themselves – there have been many sociological studies of, say, the internal paper generated by advertisers of tobacco, and it is nothing like the Chicago Economics ideas about what advertising does. There is some support for Solow’s other notion, which is that mostly, advertising produces brand switching, but not a demand for the particular good. Yet it is unclear what this means – especially as a good like cigarettes was indeed used by more and more consumers in the years from the turn of the century up long past the medical evidence that it caused cancer. Is switching a brand ontologically different from switching to a good? And what is really being switched? What goods are really in competition?

Galbraith, in his reply to Solow, pointed out that the reason Solow attempts to dismiss him out of hand is that Solow is protecting a certain ideology, one that is shared among mainstream economists:

“The issue concerns the future of economics in general and of the highly pretigious work with which Professor Solow is associated in particular. That work is within a highly specific frame…
            What is the frame? It is that the best society is the one that best serves the economic needs of the individual. Wants are original with the individual; the more of these that are supplied, the greater the general good. Generally speaking the wants to be supplied are effectively translated by th market to firms maximizing profits therein. If firms maximize profits they respond to the market and ultimately to the sovereign choices of the consumer. Such is the fame and given its acceptance a myriad of scholarly activities can go on within it. Any number of blocks can be designed and fitted together in the knowledge that they are appropriate to – that they fit somewhere in – the larger structure. There can be differences of opinion as to what serves the larger structure. Mathematical theorists and model builders can squabble with thos who insist on empirical measurement. But this is a quarrel among friends.”

Galbraith is here describing the flow sheet of mainstream economics since Walras’s time, a narrative with one monological character – the sovereign consumer. I am going to go back and look at the oddity of this construct, which arose when economics made a subjectivist move at the end of the 19th century, in marked contrast to the direction of the other social sciences.