The Future Ain’t What It Used to Be

The Master: John Maynard Keynes

Niall Ferguson, a Scot @ Harvard

Robert "Baron" Skidelsky

A short while ago I wrote about Jeff Sachs’s criticisms of Paul Krugman on fiscal stimulus. Since then, in an intellectual volley worthy of a Wimbledon final (all Brit, no less) pits Niall Ferguson on behalf of Cameron-Osborne austerity against Robert Skidelsky representing proponents of Keynesian stimulus. The two have squired off at in order: Ferguson 1, Skidelsky May 19, Ferguson May 19, Skidelsky May 28,  Ferguson June 1 ). As I set forth in my Sachs-Krugman post, I’m more persuaded by the Keynesian position. Following Ferguson, I agree that Keynes indeed was an austerian when austerity was appropriate (around the wars). But a Keynes quote cited by Ferguson—hoping to hoist Keynes biographer Skidelsky on his own petard—captured my attention. Ferguson writes, quoting Keynes: 

Responding to some early critics of his General Theory, Keynes showed that he recognized the importance of uncertainty in economic life, and consequently the difficulty of making predictions. “The whole object of the accumulation of wealth,” he wrote, “is to produce results, or potential results, at a comparatively distant, and sometimes at an indefinitely distant, date.” 

But, Keynes continued, “our knowledge of the future is fluctuating, vague, and uncertain.” There are simply too many things – from the “prospect of a European war” to the “price of copper and the interest rate 20 years hence” – about which “there is no scientific basis on which to form any calculable probability whatever.” 

 http://www.project-syndicate.org/commentary/keynes-skidelsky-british-austerity-by-niall-ferguson-2015-06#sSe9twJASCsTRTxL.99

Ferguson doesn’t mention it, but Keynes wrote about probability and uncertainty in his A Treatise on Probability. Keynes was a complex and deep thinker, perhaps muddled? Did he contradict himself by writing the above about uncertainty while (at times) recommending active government intervention in the economy by way of fiscal stimulus? I think not. And this brings us to the crux of my concern. 

While Keynes at times recommended stimulus and at other times austerity, there is no reason to believe that his appreciation of the uncertainty about the future and the consequences of any current course of action upon the future changed with his policy recommendations. Yet even in the face of acknowledged uncertainty, he acted. He chose (or recommended) courses actions that he believed would most likely bring about a desired result. Was he certain of either cause or effect? No, but as any decision-maker, he was confronted with choices to spend or not to spend, to provide only one example. He or any policymaker could, of course, chose to do nothing, but barring ignorance or negligent indifference, that too is a choice. So with any economic decision. We don’t very often have the luxury of knowing for certain that our choices will bring about the results that we intend. That’s been the downfall of many an economic prediction. Thus, when we make economic decisions, we have (but do not necessarily know) a range of probabilities that our choice will bring about a desired effect, much like a weather forecast (“a 50% chance of rain today”). If we cut the price of our widgets, we’ll probably sell more. Probably. If we invest in Acme Corporation, we may make money, or we may find out that the market for widgets has collapsed, and with it our investment. Only rarely can we act with a sense of certainty, especially in a complex system like the economy.

I think that wise decision-makers put faith—and money—on the soundness of the decision-making process and not on theories about results. Repeated experience is the best guide, but it’s often only available by analogy. History can provide many lessons, but it’s easy to apply the wrong lesson to a problem. And history never—exactly—repeats itself. (“History does not repeat itself, but it does rhyme”—attributed to Mark Twain.) We judge by analogies. Humans, societies, governments, and economies: all are complex organisms that defy consistent mechanical interpretation and manipulation. Human culture mutates too quickly to pin too much certainty on a mechanical prediction of action. We can gain some insight into behavior demonstrated by large numbers, but even that method is subject to change. 

So when Ferguson says to Skidelsky and Krugman that you can’t prove  that the British economy would have performed better with a fiscal stimulus instead of austerity, he’s correct in a limited but inconsequential sense. Ferguson is talking about an alternate course of history, a counter-factual, as Ferguson has used and practiced the concept. (See his Virtual History, a book of counter-factual essays that he edited and contributed to.) The only path we know with (some) certainty is the path taken—and even then the contours of that path are hard to discern, as the Ferguson-Skidelsky war of stats shows. 

The NYT recently published a feature on Paul Ehrlich’s The Population Bomb that predicted social and economic collapse with rising population within a decade or so of its publication. It didn’t happen. Ehrlich was wrong—but how wrong? Is Ehrlich wrong because there are no limits to the carrying capacity of Earth to support any human population? I don’t suspect many knowledgeable people will support this conclusion. If so, at some point, over-population could trigger a catastrophic decline in human well-being. (If you don’t believe that an over-stressed environment could lead to civilizational collapse, then you should brush up on your Diamond (here under Social Science and here via Stephen Walt), Tainter, Homer-Dixon (here and here), Ophuls, Mark Buchanan,  and Ferguson*, for starters.) We can conclude that Ehrlich’s initial predictions were inaccurate, but we can’t conclude that his basic premise (limits to human population) is unfounded. 

This leads us to territory explored by Nassim N. Taleb, who has argued along lines I believe appropriate. Because we don’t know the magnitude or probability of some risks, we should not take the risks. That is to say, we are in a territory marked by uncertainty, no probability. We should not run some experiments where, if the experiment turns out badly, N=1 because we are no longer able to repeat the experiment. For instance, how much do we want to experiment with nuclear war? How many times could humanity run a nuclear war experiment?  Taleb argues that genetically modified foods and human-caused global warming should be addressed with the acknowledgement that we don’t know with any real certainty the potential consequences or the likelihood of a catastrophic (or slow motion) event. Without referring to it directly, Taleb seems to follow a negligence theory that judges behavior by the magnitude of the risk of harm (perhaps measurable, probably not) times the likelihood of the occurrence of the risk (perhaps measurable, probably not) to decide whether a particular course of action should be undertaken. (Taleb would add “skin the game” as well: consequences if the wrong choice is made. But in some of our examples, we’d all suffer the consequences.) The difference of course from a court of law (one of many) is that this formula can be applied to judge what action to take (or not) prospectively to avoid loss instead of using it to apportion loss retroactively. (I’ve written more on this general topic in this earlier blog post, “Thinking Like a Lawyer and Antifragility”.)

In both economics and population predictions, the other wild card variable is human action, which is responsive and strategic. Did Paul Ehrlich’s cry of wolf affect the wolf and not just the villagers? (And this assumes that population is not a problem; based on personal observation from living almost three years in India and China, I’m not willing to concede that population density doesn’t remain a crucial challenge.) Does the possibility of stimulus or austerity change the calculations of innumerable economic decisions? Certainly, and you can observe that most easily in markets. But what you see may surprise you and upset your expectations, for instance, some—like Ferguson—have not seen the high interest rates and inflation that they predicted with lose monetary policy from the Fed and a bit of fiscal stimulus. Even the common benchmarks can fail. Krugman, on the other hand, has called it right on the inflation issue.

So what are we left with? Educated guesses, uncertainty, caution, and a need for resilience when things don’t turn out as we hoped. The public dialogue can at its peril ignore risks and probabilities, but we do so to our detriment. We should specify our judgments about likelihoods of benefits and harms and our standards of proof. Voters, unlike jurors, get a second bite at the apple, and we should keep a track record of those who seek to guide and lead the public. And decision-makers and those who advise them would do well to become more sophisticated in this perspective. Our future depends upon it.

*This article by Ferguson displays a lot about Ferguson. The first part draws upon a deep ground of historical knowledge and sheds light on  the phenomena of collapse by applying current thinking about complexity. Thus, as Ferguson argues, “declines” are less dangerous than precipitous “falls”. In a complex system, including financial systems, a system can collapse very quickly, or as Ferguson’s felicitous prose describes it, there can be a “sudden shift from a good equilibrium to a bad mess”. Financial collapses and regime changes, such as the French Revolution, Ming China, the fall of the Hapsburg and Ottoman Empires, and the disintegration of the Soviet Union, happened quickly and to widespread surprise. Although Ferguson doesn’t make the point, such examples should provide some measure of humility in making predictions. However, he goes on to suggest that the Obama Administration and the Fed in spending and printing money might trigger a financial collapse (this was published in 2010). His forecast is vague but ominous. Once again, Ferguson the historian gets sidetracked by Ferguson the political hack. But I must say overall, the article is well argued and perceptive when it sticks to history and avoids forecasting.

The Other Machiavelli--Quentin Skinner's Machiavelli: A Very Short Introduction

When anyone reads Machiavelli, it’s inevitably The Prince that’s read, and reading Machiavelli usually stops there. Short, pungent, and provocative, The Prince is an easy choice that facilitates endless consideration. But in some sense, while it’s The Prince that puts Machiavelli on the map—beginning immediately upon its publication and continuing to today—this does some disservice to Machiavelli and his underlying project. The Prince is a manual for those wanting to establish a regime in the world of the Italian city-state during the Renaissance. It also serves as a job application, prompted by the hope that the Medici family that had ousted Machiavelli from his position as a Florentine diplomat would bring him back from exile to serve them. (It didn’t work—but what a great audition!) But despite its later acclaim, The Prince addressed only the short game for Machiavelli. Machiavelli most wanted to see the re-establishment of a republic in Florence that could follow in the glory of Roman Republic, the ultimate template for a political regime according to Machiavelli. 

One the values of Quentin Skinner’s Machiavelli: A Very Short Introduction (part of the Very Short Introduction books published by Oxford University Press) is that Skinner explores all of Machiavelli’s work. Skinner is a preeminent historian of political thought, especially that of the early modern period. His aim is to relate Machiavelli’s thought, not to comment upon it. Thus, we receive a direct, concise, and thorough introduction to Machiavelli’s life and work. Because Machiavelli’s The Prince elicited such strong opinions—most often in the form of opprobrium—from the time of its first readers and continuing to today—it’s an extremely valuable service to learn exactly what Machiavelli thought in total (short of reading it all ourselves). I don’t think that I’ve encountered a more comprehensive and useful guide to the whole of Machiavelli’s thought. 

The comprehensiveness that Skinner provides the reader in his chronological account of Machiavelli’s writings and life provides an opportunity to see Machiavelli’s writings address the whole of his concerns, and his primary concern was not with would-be princes, but with republics. Machiavelli was first and foremost a republican. Not a democrat, mind you, but a disciple of liberty and mixed government. Neither monarchy or aristocracy nor democracy alone works as a form of government (ordini) that promotes liberty; only a careful mixture of all three allows liberty to flower. Machiavelli’s concept of liberty requires that a city-state (his preferred political entity, exemplified by classical Rome and (sometimes) Renaissance Florence) must remain independent of outside powers and remain internally balanced between the rich, who will seek for forward their private agendas, and the people, who will seek to counter-balance rich. Machiavelli believes that a republic can only survive through the existence of virtu within the individuals that form the polity as whole. But virtu in individuals and the states that they create is subject corruption and decay, and this worm in the rose becomes a central preoccupation for Machiavelli the republican. 

One of the pleasures of reading Skinner’s work on Machiavelli was the careful consideration of the issues that Machiavelli addressed. After reviewing this book, you will understand why Machiavelli remains topical. Even if you don’t agree with all of Machiavelli’s prescriptions and analyses (that are often harsh), you will appreciate that Machiavelli raises and frames a great number issues that we must still address today. For instance, the practice of the super-rich to dominate political decision-making through buying the favor of political candidates via (often anonymous) “campaign contributions” injures our Republic. Machiavelli identified this tendency, although he suggests that the mass of people would see through this ploy and rebel. That has not happened in the U.S., where only a small, vocal, and (mostly ineffectual) minority raises a cry against this corruption. Machiavelli also struggles with the problem of decay that corruption entails, and he attributes decay to the loss of virtu among the people and their leaders. Machiavelli’s perspective on this problem is similar to that of Ibn Khaldun, the medieval North African thinker considered by contemporary authors such as Earnest Gellner and Peter Turchin. And on the corruption of our republic, Machiavelli seems as if he’d be right at home discussing these concerns with our contemporaries such as Lawrence Lessig or Francis Fukuyama, who’ve penned valuable works on the corruption of our political system. Lessig, for instance, has been a leader in trying to stem the influence of very big money—think Koch Brothers and Sheldon Adelson—on our political process.

Almost any introductory course about political philosophy or political theory will address Machiavelli, but probably only as the author of The Prince, but this is a disservice. In an ideal world, student would, at a minimum, read the Discourses as well. (I admit I haven’t—yet.) But having read this book by Quentin Skinner, I can now claim a much greater appreciation of this thinker-actor who brought political thought deeper into the world of political reality.

Time and Narrative, vol. 1 by Paul Ricoeur

I recall the first time that I read a complete book by Hannah Arendt. I was on a break from college. Reading Between Past and Future, I was awed. And more often, overawed. I felt that I gained insights from her only in glimpses, reading by lightning flashes—moments of insight followed by darkness and confusion. With time—that is, with multiple readings of her works, I gained some comprehension of what she intended to convey. When a reader confronts a dense, challenging text, if you can see lightning bolts of insight, those sentences or even phrases that we feel compelled to highlight or about which we utter a silent “yes!”, then you can feel confident that what you’re reading isn’t gibberish or pretentious baloney. The challenge comes from stretching your mind, not from poor writing or garbled thinking. So with this work of Ricoeur. I’ve read Ricoeur in limited doses before, but this is my second book- length dive into his work. (I read The Symbolism of Evil some years ago. All I can recall of it was that I was impressed, but I’m now hard-pressed to recount its argument.) This book proved just as challenging and intellectually bracing. With this review, I hope that I can provide a glimpse of what Ricoeur does in this project.

In this first of three volumes on the subject of time and narrative, Ricoeur opens with a consideration of St. Augustine’s meditations on time and its three-fold nature. Memory is a key concept for Augustine, and Ricoeur considers Augustine’s scheme of the past recollected now, the now, and the now-imagined future (or memory, direct perception, and expectation). (Augustine perhaps the quintessential Trinitarian.) After laying this marker with Augustine and establishing the notion of time, he shifts to Aristotle’s Poetics to consider the Philosopher’s use of muthos (plot, story, account—narrative?). In the finale of his account of the “circle of narrative and temporality”, Ricoeur explores how time and narrative mesh through the several senses of mimesis (the representation or imitation of reality in literature and art) that he identifies. Ricoeur, by the way, makes his own three-fold division of mimesis. 

From this starting point, Ricoeur begins his consideration of history as a form of narrative, which provides my primary interest for reading this book. How does history deal with these issues of time and narrative? Is narrative an essential ingredient of history or an impediment to a more analytical understanding? Here I’m going to drop any pretense of summarizing Ricoeur’s argument. It’s long and complex, but I will share the course of dealing with these issues, the works of Ferdnand Braudel, Paul Veyne, Raymond Aron, Max Weber, R. G. Collingwood (far too briefly), William Dray, Carl Hempel, Arthur C. Danto, and Hayden White (among others) all receive consideration. The depth and breadth of Ricoeur’s learning is impressive. While I name-drop, Ricoeur engages.  

In the end, Ricoeur, by deeply engaging with Braudel and Hempel on various issues, preserves and celebrates the role of narrative in history without negating the value of Braudel’s long-duree or Hempel’s covering laws. 

I will not attempt further at this point because I can’t yet do full justice to the diverse and complex arguments and explorations of this book, and I’ve already started volume 2. This is just a teaser for the reader and for me. To grasp and appreciate Ricoeur will take more than a single reading, so I intend to write more about this impressive foray into history, narrative, and time.

The Invisible Bridge by Rick Perlstein

From Perlstein's webpage

Rick Perlstein's The Invisible Bridge: The Fall of Nixon and Rise of Reagan picks up where Nixonland left off, with Richard Nixon at the pinnacle of his power and then falling from the triumphant political height he had finally attained into the disgrace of his resignation. Nixon’s fall allowed the enigmatic former governor of California, pitchman, and movie star to emerge as a beacon for (extremely) conservative Republicans. As Perlstein provided a mini-biography of Nixon in Nixonland, so he provides a mini-biography of Reagan as the central character in The Invisible Bridge. These mini-biographies provide context for the roller-coaster narrative of political, social, and economic upheaval that Perlstein chronicles.

I began this period as a college sophomore, and as the book ends, I'm about to enter law school. In between, I married. To say that for all of my interest in politics, I wasn't paying as close attention to events as I might have is an understatement. In fact, I learned or was reminded of a lot that I didn't know or recall about this era, and for the most part, it wasn't a good time. The 60's were a time of significant change and some chaos, but events unfolded with a certain sense of hopefulness that was a counter-current to the shocking violence of that decade (1962-1972). The 70s, too, were a time of change, but the underlying theme during this period was one of pessimism and despair. Watergate, the War, inflation, crime, race relations, and a host of other problems poisoned the political atmosphere—except perhaps for one person: Ronald Reagan. He seemed (or was) oblivious to the downsides, except to use them (in his loose-with-the-facts way) as campaign fodder.

Perlstein is as much a chronicler as he is a historian. He rarely comments on the narrative, letting the facts speak for themselves (a deceptive turn of phrase). Indeed, one shortcoming of his work stems from his lack of comment and explanation. Perlstein bathes--perhaps more accurately, drowns--the reader in facts. (802 pages of text.) But other than following a central character (Reagan), Perlstein imposes no unifying theme or provides no explanation. I recall reading somewhere that Perlstein reported himself a disciple of R.G. Collingwood, the great British philosopher of history. Collingwood argued that history properly understood must (as it were) get inside the heads of the characters and experience their world and their choices as they did, but I don't think he argued that a historian could not use his own perspective, which has the benefit of knowing "the end of the story", to augment those original perspectives. But Perlstein takes little advantage of his perch from the future to provide further context. That said, Perlstein immerses the reader in the period by his exhaustive use of multiple original sources and thereby provides the reader with a “You Are There” feel.

Over the course of the three books that Perlstein has published to date, beginning with Before the Storm (which I haven't read yet), he's documented the tectonic shift to the right in the American political spectrum. This body of work provides a narrative background upon which other historians and social scientists can work to develop a more comprehensive account of this dramatic change. Could it have been different? If Nixon had served out his term, would the shift to the right have actually faded? (Nixon was by current lights a raging centrist.) One receives a strong sense of the randomness of change from Perlstein's narrative, and it leaves one with a feeling of "if only . . .” But here we are with a Republican Party more reactionary, nativist, and anti-intellectual than at any time in its history (starting with Lincoln). It maintains a libertarian and laissez-faire economics bent that provides a patina of intellectual respectability (and that accords with the money), but that aspect of the party trails in the wake of the angry voters, those cultivated by the simple, optimistic nostrums of the man with the invisible bridge, Ronald Reagan.

Japan Through the Looking Glass by Alan Macfarlane

Published 2007

In anticipation of an upcoming trip to Japan with C and the Glamorous Nomad, I read Cambridge anthropologist Alan Macfarlane's Japan Through the Looking Glass. Macfarlane is a relatively a relative latecomer to Japan, having arrived there for the first time only in 1990, although he’s been back several times, in addition to reflecting upon what he saw and learned there. Macfarlane completed his anthropological fieldwork in Nepal and he’s written a great deal about early modern England. He's a keen student of the transition to modernity and the early theorists who dealt with that change from Montesquieu to Maitland, including Adam Smith, Tocqueville, Malthus, Marx, and others who have attempted to explain the advent of modernity. It was with this background that Macfarlane approached Japan, and he found that Japan confounded many of the characteristic dichotomies that classical theorists had developed about modern versus traditional societies.

The main theme of Japan Through the Looking Glass is that nothing seems quite as it first appears in Japanese culture; indeed, even upon closer examination, paradoxes and uncertainties abound. As Macfarlane notes, many outward similarities exist with Great Britain. Both are island nations, both have a feudal history, both have a long history of a strong work ethic, and both were the first to industrialize in their regions. But as Macfarlane points out, despite the similarities, westerners have a continuing challenge in understanding how Japan works.

For instance, Japan has a mix of individualism and status relationships. It is a modern (often hyper-modern) capitalist society, yet the profit motive is not glorified. Individuals in the sense of Western individualism don’t exist. Instead, people are defined by relationships. People think in terms of relationships and emotions rather than in terms of  logic whenever dealing with other people. Thus, while the Japanese can be quite reticent in speech and seemingly cold, in their observation of the subtlest behaviors and assessments of responses they’re finely nuanced and responsive. As to religion, in a land filled with temples and shrines, the Japanese are, according to Macfarlane, some of the least religious people in the world. If we measure religiosity by belief in a soul, the afterlife, or belief in God, we find few Japanese adhere to these beliefs. The Japanese perceive little difference between nature and culture, and none between the natural and the supernatural. This does not mean that the native Shinto religion, Confucianism, and Buddhism have not had an effect, but rather than suffer a transformation by any one religion, Japanese culture has transformed the religions to fit Japan. Thus, Zen Buddhism lies a far distance from the more traditional Buddhism of South Asia. This lack of distinction between nature and culture also helps us appreciate Japanese attitudes towards nature and the beauty of ephemeral things like cherry blossoms and the phases of the moon. Macfarlane even ventures into the difficult question of why, when Japanese became a conquering military power in the 1930s, there were so many instances of the Japanese atrocities. How did such an otherwise docile people, who have an extremely low crime rate and few incidents of criminal violence, turn into war criminals? Macfarlane, adopting the opinions of some others who have considered this paradox, suggests that the perception of extreme differences between native Japanese and others accounts for this stark dichotomy. But it remains in some sense another one of the enigmas of Japan. 

Macfarlane has an open, inquisitive mind that is well trained in attempting to understand how societies work. He readily admits that Japan has confounded his preconceived notions about the transformation to modernity and the role of the Axial religions in modern cultures. In this way, he serves as an outstanding guide him for a venture into understanding Japan and the Japanese. If you're looking for us a sink, a well constructed and broad ranging work on the enigma of Japan, I highly recommend this book to you.