Against Ha Joon Chang - Part 3

Prefacing Remarks

This is the third in a brief series of blog posts in response to a paper I was sent by a student here in Tainan at Cheng Kung University (one of the "top" Universities in Taiwan). The paper was written by a Korean academic called Ha Joon Chang a decade ago for the UN's "Research Institute for Social Development". The paper is called "Breaking the Mould: An Institutionalist Political Economy Alternative to the Neoliberal Theory of the Market and the State". In the first and second of these blog posts I sketched out my disagreements with Chang's claims (presented in the third section of his paper) as to what he regards as weaknesses in a Liberal or "neoliberal" method of understanding political economy. In this post, I respond to Chang's methodological prescriptions for thinking about political economy, which he lays out in the fourth section of his paper.


Response To Chang's Prescriptions For Analysis Of Political Economy (Section 4.1)

In this first section of his prescriptions, Chang makes a list of both formal and informal, State and (nominally at least) non-State institutions variously involved with market exchanges and insists that any analysis of political economy must attend to them in addition to simple market exchanges themselves. For the sake of brevity however, I merely present Chang's own summary rather than the list itself. Yet first, I ask readers to reflect first on the question of what an analysis of political economy is for? Chang:

"In addition to property rights and the legal infrastructure that help their exercise and modification, which the neoliberals focus on, we also need to consider all the other formal and informal institutions that define who can hold what kinds of property and participate in what kinds of exchange, what the legitimate objects of exchange are, what the acceptable conducts in the exchange process are, on what terms different types of agent may participate in which markets, and so on. In other words, neoliberal markets are institutionally very under-specified, and we need a fuller institutional specification of markets if we are to understand them properly." (4.1p16)

Chang's use of the term "properly" there was no doubt intended to connote the virtue of accuracy, and I agree that these connexions between legal infrastructure and other informal institutions may be valid enough connexions to draw in composing empirical answers to particular questions of political economy, but Chang's apparent insistence on their necessity to any or all questions of political economy deserves stricture: this is nothing more than a presumption as to what questions may be asked, by whom and to what purposes. The point is germane since different people - with various ethics and motivations - may ask different questions of any such analysis and Chang's assertion that his institutional analysis is "proper" elides this crucial fact. Moreover, Chang's presumption that analysis of political economy must always be multi-institutional in respect of all questions serves also to dismiss from the naive reader's consideration the use of the a-priori, praxeological form of analysis which, in complement to empirical forms of analysis, may render a more powerful critique of political economy - but one sympathetic to a Liberal rather than a Statist point of view. The reader may recall that this a-priori, praxeological form of analysis was vulgarly misrepresented by Chang as an historical "primacy assumption" with his sardonic remark that "in the beginning there were markets" (I exposed this misrepresentation earlier in part two under my response to his section 3.3).

As to what Chang attempts to make of his insistence on the necessity of all these institutions for analysis:

"Emphasizing the institutional nature of the market in the way discussed above also requires that we bring politics explicitly into the analysis of the market (and not just into the analysis of the state) and stop pretending that markets need to be, and can be, de-politicized. Markets are in the end political constructs in the sense that they are defined by a range of formal and informal institutions that embody certain rights and obligations, whose legitimacy (and therefore whose contestability) is ultimately determined in the realm of politics. Consequently, IPE adopts a political economy approach not only in analysis of the state, but also in analysis of the market." (4.1p16)

Aside from his insistence on the necessity of these other institutions to analysis of market exchanges, with which I have already stated my qualified agreement above, there seem to be three distinct claims made in such proximity to one another as to be easily recalled from memory in conflated form by the naive or insufficiently critical reader. First, Chang's claim that Liberal critics merely pretend that markets need to be depoliticized just isn't true - but more than that, it presumes an insincerity on the part of its' proponents. In immediate addition to that claim, Chang asserts that Liberal critics also pretend that market exchanges can be depoliticized, i.e. he accuses them of arguing for the depoliticization of markets despite knowing, he says, that markets cannot be depoliticized (perhaps if Chang were to give up pretending to have read the Austrian-Liberal tradition he so criticizes, such gratuitous insults would not be so free-flowing from his pen in the future). The third claim infused across the latter half of that paragraph is that the "legitimacy" and "contestability", either of the range of institutions involved with market exchanges or the "rights" and "obligations" Chang says these institutions embody, is politically determined. Whatever the syntactic ambiguity to Chang's penultimate sentence there, I reject this claim on both counts.

With regard to institutions, although it may be true that their existence has been politically determined, their legitimacy turns entirely on whether they are supported by the sanction of consent from those over whose market exchanges they govern. This sanction may not be presumed. In respect of State institutions and of those "non-State" institutions whose essential functions and powers are subordinate to State oversight, this sanction of consent may very often be absent or even flatly denied. In the first place, express consent to the existence and constitutional form of any State from those born under the territorial jurisdiction it claims (such consent being commonly referred to as "the social contract") is merely presumed since those subject to it are typically never asked for their consent, except perhaps in the case of immigrants seeking citizenship. In addition, the assumption of express consent for those legislative measures passed by democratically elected governments hangs by the single, slender thread of "representation"; at the last Congressional elections in the United States (November 2010) for example, the unusually high voter turnout was estimated to be around 42% of registered voters, which represents approximately 90 million people - only about a third of the population, whilst the recent Tea Party demonstrations offer a striking example not merely of the absence of consent, but even the outright rejection of entire areas of legislation (e.g. the healthcare bill) as well as affiliated institutions and agencies to which the market is subject (e.g. the AMA). Since the legitimacy of the State, its' laws, and the institutions it supports turns upon consent and such consent may often be either weak, absent or expressly denied, the claim that legitimacy is politically determined is misleading. It would be more accurate to say that legitimacy is presumed by politicists on both the Left and the Right.

Whilst the claim for the political determination of institutional legitimacy is weak, the claim that "rights" and "obligations" are also politically "determined" hinges upon the sense in which this term "determined" is meant. Certainly, rights and obligations may be either recognized or repudiated and the political nature of this simple fact is obvious. In another sense, however, the claim is false. For prior to their political recognition or repudiation, any set of rights and obligations must be conceived and argued for - and this act of conception is subordinate to what ethical premises and principles are held - and to what degree they are understood. Thus, the assertion that rights and obligations are politically determined is undermined by the fact that it overlooks the critical prerequisite of their derivation from ethical premises.


Response To Chang's Prescriptions For Analysis Of Political Economy (Section 4.2)

In section 4.2, the second section of his prescriptive analysis, Chang proceeds to state that his "institutionalist" form of analysis differs from the Liberal form, not only in terms of the range and complexity of institutions it attempts to take into account, but also in terms of the range and complexity of human motivations it recognizes. This contrast Chang seeks to make between his "institutionalist" account of human motivation and the Liberal account turns on another misrepresentation of the Liberal point of view. Chang puts it thus:

"The neoliberal analysis of the state starts by questioning the public nature of the motivations of the agents that make up the state, such as politicians and state bureaucrats. The theory of human motivation and behaviour underlying this analysis, and for that matter neoliberalism as a whole, asserts that self-seeking is the only genuine human motivation, except perhaps vis-a- vis family members..." (4.2p16)

The problem with this description is that it seems to presuppose an extremely narrow concept of "self-seeking", one which I certainly would not use to account for all human motivations. Such a narrow concept of "self-seeking" or "selfishness" would indeed exclude "altruistic" behaviours, whereas a broader conception of selfishness would not. Again however, this is another misrepresentation by Chang, either because he has not taken the time to understand the Liberal position he criticizes, or because he merely projects his own narrow concept of self-seeking, or because he is deliberately seeking to undermine the Liberal position (or, of course, all three). A broader conception of "self-seeking", as applied either in a Liberal critique of the State or, in Austrian analysis of economic exchanges, resides in the fact that values are selected by individuals in choosing to act; since values are expressed in action (e.g. market choices), and since it is always individuals who act (even when part of a group), it is thus individuals who are the source of values. From this, all actions and their motivations can be categorized as "self-seeking". This broader conception of "self-seeking" is a-priori and cannot be refuted with empirical examples - its' necessity for thinking about political economy, and hence why it cannot be discarded is a point which I shall briefly return to. I insist however, that it not be conflated with an ethics of "self-seeking" as in the writings of Ayn Rand since this would involve the addition of a prescriptive standard (e.g."prospering") by which individuals may select from among values (1).

Having dismissed the concept of self-seeking by misrepresentation, Chang then relies on it in order to claim a reciprocal influence of institutions upon the individual:

"IPE does not see these motivations as given but as being fundamentally shaped by the institutions surrounding the individuals. This is because institutions embody certain values (worldviews, moral codes, social norms, or whatever one may choose to call them), and, by operating under these institutions, individuals inevitably internalize some of these values and thereby have their selves changed." (4.2p17)

"...and thereby have their selves changed." Except in those cases when they do not; for instance, in view of his several misrepresentations of the Liberal position, I am tempted to assert that Chang himself is an incarnate refutation of his own assertion here, given that he has always been employed at Universities publicly committed to the academic virtues. Nevertheless his point may of course be admitted: that people's motivations for acting may be influenced by the institutions they work within. Yet this seemingly trivial admission must not be allowed to obscure the fulcrum of individual human agency on which membership of institutions initially depends and through which all motivational influences flow - even "altruistic" or "public-spirited" motivations pertain, quite simply, to values selected by individuals.

The practical upshot to Chang of institutional influences upon human motivation is the recognition that social engineering tactics need not be limited to mere behavioural incentives based on a narrow concept of self-interest:

"Indeed, I would go a step further and argue that some of the neoliberal recommendations that are intended to improve the behavioural standards of public personages may be downright counter-productive, if they undermine the non-selfish motivations that had previously motivated the public personages in question that is, if they cause what Ellerman (1999) calls the atrophy of intrinsic motivation. Therefore, increased monitoring of public figures may make them behave in a more moral way in areas where monitoring is easier (e.g., diligently documenting their expenses for business trips). However, it may make them less motivated to behave in a moral way and take initiatives in areas where monitoring is difficult (e.g., taking intellectual initiatives without material compensation). This is because it will make them feel that they are not trusted as moral agents, and therefore that they are under no obligation to behave morally unless they are forced to do so." (4.2p17-18)

I quite agree with Chang that the use of narrowly conceived self-interest based incentives in State or State-supported institutions may in certain cases be counterproductive. At root, however, Chang overlooks a more basic problem behind this which is that the consequences for "public servants" (and similarly for State supported "capitalists") of inflicting bad service upon the choiceless consumers are not immediate (e.g. loss of revenue and respect), but rather, are perfidiously mediated by the State; "public servants" and State supported "capitalists" are often some of the most powerful rent-seeking groups from which, via promises of favourable treatment, a democratic government may draw its political support. Thus the difficulty of improving bad behaviour or poor service on the part of such people turns on the extent to which the interests of the State or of the governing party (or of individuals therein) coincide with the interests of consumers in improving such bad behaviour. I would submit that the simple and honest answer to this problem is to remove the mediation of the State via privatization of "public services", legislative repeal and other measures of rational deconstruction.


Response To Chang's Prescriptions For Analysis Of Political Economy (Section 4.3)

In this third section of his prescriptive claims for analysis of political economy, Chang prescribes an apparently non-committal view of politics:

"...IPE argues that we need to see politics as a process through which people with different, and equally legitimate, views on the contestability of the existing rights-obligations structure vie with each other, rather than as a process in which interest groups try to change the natural order of free markets according to their own sectional interests." (4.3p19)

Yet perhaps the reader may recall my earlier invitation to consider the question: what is an analysis of political economy for? The understanding sought by any such analysis is sought in order to be used as a basis for action to achieve some aim; analysis of political economy itself takes place within a political context. For Chang therefore to posit that different and, especially, conflicting political aims are "equally legitimate" is either naive, or in my view far more probably, a deliberate elision of his own motives as a Marxist in prescribing particular premises for analysis of political economy whilst proscribing others he terms "neoliberal". In summarizing, Chang proceeds to make additional claims:

"...the neoliberal claim that politics inevitably corrupts the market is problematic... because the neoliberal notion of the uncorrupted market is based on a particular set of political beliefs that cannot claim superiority over other sets of political beliefs. Moreover, the neoliberals fail to see politics as an institutionally structured process in the deepest sense. They see institutions as constraining political actions but fail to see that institutions also affect people's motivations and perceptions." (4.3p20)

The first of these claims, the imperative relativism of political beliefs, is self-refuting and is surely nothing more than a fast ploy by Chang to gain credit from his readers at almost no intellectual cost. The second claim, that liberals see politically supported institutions as constraints and not as constitutive of markets, is a misunderstanding or misrepresentation of the Liberal point of view - it is not that the constitutive aspect of political institutions is ignored, but rather that this aspect is objected to on political grounds (see my response to Chang's section 4.1 above).


Summary Of Responses

In my first blog post in response to Chang's paper I made three distinct arguments: first, that his attempt to blur the definitions of free market and state intervention are consequent to an unexamined dependence on the "positive" concept of liberty; second, that his further denial that some state interventions are in fact, state interventions is consequent to collectivist premises from which no conceptually coherent concept of justice can be derived and from which basic categories such as coercion are absent; third, that his disguised presumption of the inherently predatory nature of market relationships is conceptually incoherent and that the efficacy of legislative redress is, in the particular case of slavery, segregation and racism in the U.S., empirically false. That first blog post came to a close with reiterations of the first and second arguments as against other examples of Chang's.

In my second blog post I made several arguments: first, I reiterated the first two arguments from the preceeding blog post in rejection of Chang's analysis of "market failure"; second, I exposed Chang's misrepresentation of what he terms the market "primacy assumption" in Liberal analyses of political economy - Chang presented this as a set of historical claims rather than an argument for the use of a-priori concepts and categories in analysis; third, I argued against the extremely narrow concept of "self-seeking" or "selfishness" which Chang attributes to the Liberal position. That second blog post concluded with some reiterations of the earlier arguments from the first blog post together with the harshly worded observation that several instances of Chang's arguments are polemical (and poorly so) rather than academic.

In this, my third post, I first drew attention to the way in which Chang attempts to draw his reader's attention away from the political context of his own prescriptions and proscriptions for analysis; I then noted his direct accusations of insincerity, which, are both false and clumsy attempts at reader manipulation; third, I argued strongly against his double claim that the legitimacy of both institutions and rights and obligations is politically determined; fourth, I reiterated and perhaps clarified somewhat my own insistence upon a broader conception of "self-seeking" with some critical remarks as to its' significance both for analysis and critique of political economy.


(1) On the derivation of just such a prescriptive standard from facts of human nature, I consider it good to be first mindful of the outrageous nature of the question. There are answers to it, and one in particular I favour myself, but, to my taste, the question is best not approached without the appropriate sense of height and distance - which is not easy to put into writing.