Sunday, June 23, 2024

olivier blanchard and the free lunch: a comedy of errors



 The neolib economist Oliver Blanchard tweeted a very funny comedy bit, in which he played the part of “social democrat”. And he wrote:

“As a social democrat, I believe in equalizing chances, in improving education, in redistributing income from rich to poor. As an economist and someone sometimes involved in policy design, I also know there is a delicate balance between reducing inequality and maintaining strong growth. The NFP program simply ignores this balance, and can only, like many of its predecessors, lead to an economic catastrophe.”
Now, it takes some gall for Oliver Blanchard, one of the poohbahs of the worldwide collapse of 2008-2009, to instruct anybody about economic catastrophe. But the illness goes deep – for instance, that bit about redistributing income from rich to poor. It is a “butter is not I repeat not melting in my mouth” neolib phrase. In fact, what happens is that the original “re-distribution” is from the working class to the rich. To capital. But if you include this in your hip hop ecomix, peeps begin to wonder – what is that re-distribution about and does the state know about this?
In social democracy, the state knows about this. Among the neo-libs who cosplay social democrats, they don’t.
So, by popular demand – a little economics ditty I call:
On free Lunches Written first for Willetts Magazine. And still relevant!
I want to cull this from page 2 of Greg Mankiw’s popular Essentials of Economics – used by hundreds of Econ 101 classes, tucked under the arms of thousands of students, who paid a hefty price for it:

“You may have heard the old saying, “There ain’t no such thing as a free lunch”. Grammar aside, there is much truth to this adage. To get something we like, we usually have to give up something else that we also like.”

I like to think of them, those thousands of scions of upper class households, products all of them of years of free lunches, nodding to this crackerbarrel truism. One of the great principles of education is to blind yourself to the self-evident. It is part of one’s self-fashioning, and it is especially useful as these scions go on to get positions in the upper ranks of management, investment, etc., and can look about them and say: I earned this.
By their truisms you shall catch them – this is the rhetorical ratcatcher’s faith. My faith, really. The crack in the neo-classical economics façade – the underpinning of that big neo-other, Neoliberalism – appears here. If one looks deeply enough, many of the ideological decisions that go into the neoclassical model congregate around the idea that there is no free lunch – or as Mankiw translates it, there are almost always trade-offs.
The first and most important of those decisions is that the local difference between the person who pays for and offers the lunch and the person who eats it, free, is of no concern to economics. Or to put this another way, they are fully symmetrical variables. Thus, all sociology is given the bum’s rush at this banquet. The economist’s truth stops at the fact that if there is a free lunch, someone is paying for it, and that in the end, we are all someone.
And it is true that if x is paying for y’s lunch, if we just move a level upward we can treat them as variables, so that y paying for x’s lunch is the very same thing. But what if that move up the level is missing an essential fact – which is that there is always somebody paying for the lunch, and somebody eating it free? And what if there is a whole class of x’s who offer a whole class of y’s free lunch? What if the x paying is, say, Mom, and the y eating is, say, baby?
Of course, the neo-c’s have dealt in some vague way with this by calling it all “investment”. So when x is the parent and y is the child, the x is really not giving y a free lunch, but preparing for the distant future when y has to decide whether to pay for the medical bills of x or let x die in the street.
This, it seems to me, however clever it seems to Gary Becker and his followers, is humanly as dumb as possible. Spell it out this way and there will only be a few of the 18 year olds who will nod sagely. These we can safely assign to the libertarian camp.
However, we are certainly not done with the free lunch model. For there are, of course, less benign examples of the free lunch relationship. One could say – if one was a classical, rather than a neo-classical, economist – that the most obvious one comes in the ability of Capital (that devourer of free lunches) to get its free lunches from the performance of Labor (that provider of profit) through exploitation. And if we grant this model, then free lunches abound, and one of their systematic forms is called Capitalism.
It is here that the ideological decision to treat x and y and variables on either side of the free lunch situation shows its genius, and demonstrates the dialectical position of “individualism” in Capitalism. For both y and x, in this model, are individuals – and nothing else. Their individuality is without content, which is all the better for founding a society based on individualism. Because content actually creates solidarity. Content would actually point to differences of all kinds between x and y. If x is the laborer and y is the corporation, for instance – but the corporation, per the Supreme Court, treated as a “person” – than we can ignore all power imbalances, and regard individuals as “earning their worth”, each and every one of them, as they cleverly engage in tradeoffs – for instance, allowing the free lunch set to fire all the surplus value giving workers and relocate the factory to some other pool of x-s, because in the end that means the corporation can produce goods cheaper, and won’t all x-s be happy with the endpoint: a world of cheap tat to which they will now have access? And put in these terms, hmm, it is almost as if it were the laborers living off the free lunches!
Which is why Oliver Blanchard is careful to put his redistribution model not in terms of labor, but in terms of “rich” and “poor” – two theological categories.
But the idea that not only does the “entrepreneur” earn all his billions, but that his ungrateful serfs are demanding free lunches, is an idea that has boldly occurred to many a neo-classical economist. Because while the billionaire – which, remember, in the humanly truer model of the world are living massively off free lunches piled one on top of the other until we can’t see the summit – is working and working, day and night, his little head full of inspirations that awe all the boys at the University of Chicago, labor is inclined, sadly, to laze around, and will only be encouraged if we tax the billionaire to build a system of social insurance for the labourer. It is so sad, the rough ride given the “rich”. During the Great downturn, in the years between 2009-2011, the NYT gave a column to a University of Chicago economist, Casey Mulligan, who invariably sounded this note. The worry expended by Casey Mulligan over some worker, somewhere, slacking because he or she didn’t need to worry about paying the monthly vig to the insurance company to get the terrible $10,000 deductible all fault health insurance policy was enough to make the angels on high weep – with laughter.
To wind this up: the free lunch is what civilization is built on, for good or ill. Limiting the free lunches of Capital is an excellent way to ensure better free lunches for the kids.

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