Marginal utility fellas

I am becoming worryingly obsessed with the Chicago School of economics, and I think I've just worked out why. For sensitive, sociological souls such as myself, people who would never hurt fluffy animals or destroy the welfare state, tracing the development of the Chicago School is like watching a mafia movie. Take this piece of razor sharp script:

My recollection is that Ronald didn't persuade us. But he refused to yield to all our erroneous arguments. Milton would hit him from one side, hit him from another, then from another. Then to our horror, Milton missed him and hit us.

Bam! This is George Stigler describing the legendary evening in 1960 at Aaron Director's house, when Ronald Coase successfully changed the views of the other twenty attendees regarding his critique of Pigou, using an argument that later became his seminal paper, 'The Problem of Social Cost' [pdf]. The Milton in question is of course Friedman, who was renowned for a bit of intellectual argy-bargy. Stigler described the evening as "one of the most exciting intellectual events of my life", and I think (for reasons not to be discussed here) should register as a key moment in the development of our contemporary political economy.

You can imagine how Martin Scorsese would develop the plot over several generations. The forbears (Knight, Viner)  come over from the old country to establish their little outfit in the south side of Chicago, where they are safe from the bigger mobs (Harvard). A Godfather figure emerges (Aaron Director, played by Marlon Brando) and through the 1940s, 50s and 60s starts to challenge the accepted values of the day, acquiring a reputation for ruthlessness.*

But more terrifying still, the Godfather becomes the mentor of a new generation, who are hell bent on taking over the world, and will stop at nothing to achieve this. Two figures in particular come to the fore, one tall and jovial (Stigler, played by Robert De Niro), the other small and merciless (Friedman, played by Joe Pesci). [I'm aware that Gary Becker needs a part, but the fact that he made his name doing the economics of crime means my metaphor would be at risk of eating itself].

By the late 1970s, their dreams are coming true and the world is their's for the taking [cue montage of Friedman and Stigler in economic seminar rooms, smoking cigars, with two women on each arm]. But as the 1980s wear on, and the brutality of their reign becomes plain, winds turn against them and by the 1990s their heyday is over. Aside from Friedman's even more irascible son, the generation that follows retreats in search of a quiet life in the suburbs (mathematical formalism).

Intellectually speaking, I think there is more to this than a dramatic analogy (although the Friedman/Pesci thing is now lodged in my brain). The allure of the mobster is that he has no values, only determination to win combined with expert technique. The same is true of the aggressive price theorist. Friedman et al were absolutely determined that, although they did hold normative views about the world, that these had nothing to do with the validity of their economic analysis, and that it would be the latter that would ultimately destroy their enemies. Here's Friedman:

I have tried to influence public policy. I have spoken and written about issues of policy. In so doing, however, I have not been acting in my scientific capacity but in my capacity as a citizen, an informed one, I hope. I believe that what I know as an economist helps me to form better judgements about some issues than I could without that knowledge. But fundamentally, my scientific work should not be judged by my activities in public policy.

Those who he disagreed with politically or morally were no doubt in for a bit of a row. But those who he could prove were wrong empirically would be annihilated. For those such as Richard Posner, the very purpose of neo-classical economics is to progressively eliminate (what he described to me in an interview last year as) the "fluffy stuff" - terms such as 'justice', 'fairness', 'good' - from policy formation, in favour of an empty, mechanical basis for it that would be founded on nothing but cold economic rationality.

Whether it be torturing someone to get them to talk, or recommending the abolition of some cherished social protection programe, the nihilist is a frightening but compelling figure. You can't drag your eyes off him, in fact you kind of like him. Perhaps we (the viewer of the mafia film; the over-burdened sociologist) actually envy nihilists for their lack of ethical clutter.

* If someone points out that Scorsese didn't direct The Godfather I will do this to them.

Comments

[stet]

Maybe the Cuban parts in The Godfather Part II, played backwards, could be of use here for the Chilean chapter.

[Bill Thompson]

having just seen 'No Country for Old Men' I think that you could see the cold-hearted killer Chigurh (Javier Bardem with a truly frightening haircut) as a true example of 'only determination to win combined with expert technique', and certainly Friedmanesque in his approach!

[Will Davies]

As a fellow baldy, I would like to side with Friedman on this one. The architect of devastating early-1980s recessions he may have been; but he never descended to the haircut depths plummed by Bardem in that movie!

[pete]

There's a wonderful word eristic which would have benefited this post. Indeed, we increasingly live in an eristic age, and the above is just one example.