Reflections at the Intersection of Economy & Society: Chicago Schooled

Wednesday, October 7, 2009

Chicago Schooled

The visible hand of the recession has revitalized critics of the Chicago School of Economics. This intellectual school has led U.S. domestic and foreign policy for the last 3 decades. Will the current economic shock force the Chicago boys to change or adapt? Or will they simply keep prescribing to the same models? Is the Chicago School to blame for the economic disaster? According to Stiglitz, the 2001 Nobel lareate in economics, “The Chicago School bears the blame for providing a seeming intellectual foundation for the idea that markets are self-adjusting and the best role for government is to do nothing.” Enjoy the article and let me know if you have any comments or concerns.

By Michael Fitzgerald--On a sunny day this spring, more than 1,000 people streamed into the Sheraton near the Gleacher Center for a conference on the Future of Markets. Its keynote panel, headlined by Nobel laureate Gary S. Becker, AM’53, PhD’55, featured six Chicago economists with differing viewpoints. The stock market was in the early part of a rally that would yield its best quarter since 1998. Stock-market turnarounds usually signal better times coming, but in an economy contracting 6 percent, better was relative.

So the rally didn’t change the feeling among the free-market enthusiasts at the University of Chicago Booth School of Business management conference that market economics was on shaky ground: most of the financial industry, they felt, had been nationalized in all but name. Two of the three U.S. automakers looked like they would follow suit. The government was capping pay in the financial services. What in the name of the Chicago School was going on? (read more)

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Economy & Society Quotes:

"The central characteristic of agents is not that they reason poorly but that they often act intuitively. And the behavior of these agents is not guided by what they are able to compute, but by what they happen to see at a particular moment." -Daniel Kahneman

"The problem is a lot of what is called economics is not economics. It is more ideology or religion." - Joseph Stiglitz

"Formal rules are an important part of the institutional framework but only a part. To work effectively they must be complemented by informal constraints (conventions, norms of behavior) that supplement them and reduce enforcement costs." -Douglas North

"The science called 'economics' is based on an initial act of abstraction that consists in dissociating a particular category of practices, or a particular dimension of all practice, from the social order in which all human practice is immersed." -Pierre Bourdieu

"Rational economic man, in the narrow mainstream sense, is close to being a social moron. The inability to think about other people is not a proof of reason - it's the absence of reason." -Amartya Sen

"It is not the consciousness of men that determines their being, but, on the contrary, their social being that determines their consciousness." -Karl Marx

"Actors do not behave or decide as atoms outside a social context, nor do they adhere slavishly to a script written for them by the particular intersection of social categories that they happen to occupy. Their attempts at purposive action are instead embedded in concrete, ongoing systems of social relations." -Mark Granovetter

"Once a transaction has been made, in which the principal satisfies interests of the agent (for example, through a monetary payment) in return for the agent's using his actions to pursue the principal's interests, a social system has been created." -James Coleman

"Given the fact that economists and sociologists each hold half of the truth, so to speak, when it comes to markets, it seems natural that they should try to coordinate their efforts. Economists need to better understand the role of the social relations in the market, and sociologists need to better understand how prices are formed and what effect these have on the economy." -Richard Swedberg

"My aim is to integrate a focus on social relations and institutions into a modern sociological approach to the study of economic behavior by highlighting the mechanisms that regulate the manner in which formal elements of institutional structures in combination with informal social organization and networks and norms facilitate, motivate, and govern economic action." -Victor Nee

“But this long run is a misleading guide to current affairs. In the long run we are all dead. Economists set themselves too easy, too useless a task if in tempestuous seasons they can only tell us that when the storm is long past the ocean is flat again.” -John Maynard Keynes

"The more people accept the neoclassical paradigm as a guide for their behavior, the more their ability to sustain a market economy is undermined." -Amitai Etzioni

"The great bulk of controls over social behavior are not external but built into the relationships themselves." -George Homans

"While economics is about how people make choice, sociology is about how they don't have any choice to make." -Bertrand Russell

"It is difficult to get a man to understand something, when his salary depends upon his not understanding it." -Upton Sinclair

"It takes centuries of culture to produce a utilitarian such as John Stuart Mill." -Henri Bergson

"The contract is not sufficient by itself, but is only possible because of the regulation of contracts, which is social in origin." -Emile Durkheim

"The care for external goods should only lie on the shoulders of the ’saint like a light cloak, which can be thrown aside at any moment.’ But fate decreed that the cloak should become an iron cage.” -Max Weber

"A hardhitting economic sociology would attempt to draw on the best of sociology and economics, and to unite interests and social relations in one and the same analysis. Interests, in all brevity, are always socially defined, and they can only be realized through social relations." -Richard Swedberg

"As economic sociology moves beyond the earlier embeddedness perspective, the challenge is to specify and explicate the social mechanisms determining the relationship between the informal social organization of close-knit groups and the formal rules of institutional structures monitored and enforced by organizations and states." -Victor Nee

"I had stumbled on one of the fundamental truths of economics that no one in graduate school had ever told me about: If you want markets to expand, you need governments to do the same." -Dani Rodrik

"When the facts change, I change my opinion. What do you do, sir?" -John Maynard Keynes

"The difference between the most dissimilar characters, between a philosopher and a common street porter seems to arise not so much from nature, as from habit, custom, and education." -Adam Smith

“The businessman is only tolerable so long as his gains can be held to bear some relation to what, roughly and in some sense, his activities have contributed to society.” -John Maynard Keynes

"Markets are most developed and most effective in generating wealth when they are backed by solid governmental institutions. Markets and states are complements, not substitutes, as simplistic economic accounts would often have it." -Dani Rodrik

"Social relations, rather than institutional arrangements or generalized morality (e.g. shared beliefs and norms), are mainly responsible for the production of trust in economic life." -Mark Granovetter

"The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist." -John Maynard Keynes

Wednesday, October 7, 2009

Chicago Schooled

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