Becker, Foucault, Lacan

07/05/2014 § Leave a comment

Gary Becker passed on this week, so I did a mini-lecture in class yesterday on his contributions to economics (I managed to use Peaches Geldof as an example of a rational addict). I thought it was important to think about Becker because of the way he pushed economics in new areas. He used marginal analysis and specialisation — standard ideas — in new ways. It shows both the usefulness of a few simple economic ideas and the way late 20th century social sciences developed.

Crooked Timber has had a couple of good posts, one about Becker and Foucault  and one linking to a good post on Becker’s contributions and shortcomings. Reading ‘Becker on Ewald on Foucault on Becker’, I wondered how Lacan would react to it. Foucault, apparently, was taken with the way that Becker thought about people making decisions. Foucault showed how law created crimes and doctors created diseases, by the way they deployed power. But Becker had people making decisions within each of the categories created. So, within the family, clearly a site of power relations, men and women were making strategic decision to maximise utility subject to constraints, balance marginal costs with marginal benefits. So, there was agency.

But I’m not convince that either Foucault or Becker had it right. First, if we take Foucauldian analysis seriously, then the power is creating the categories and determining individuals’ positions in the structure. How is it that individuals still have some residual liberty to make their own decisions? That would mean either that the power relations are not fully defined, or that there is some slippage between expectations and actual behaviour.

Becker, similarly, promoted universal explanations. The article I know best is ‘De gustibus non est disputandum‘, and don’t agree with it that tastes and preferences do not vary significantly across people. In fact, my research (and others) in food choices show that people do have different preferences and those preferences do affect spending. This issue is similar to Thomas Piketty’s endnote in Capital in the 21st century, that Becker didn’t let data get in the way of theorising.

Which brings me to Lacan. Lacan provides a motive force for difference and decisions — this is the analysis that Copjec offers in Read my desire. The Foucauldian analysis fails because of the impossibility of ‘saying it all’: the law cannot fully establish all the required categories. The act of creating categories creates its own excess; the act of neoliberal analysis creates its own outside-the-analysis. Becker fails because of the impossibility of fully determining preferences and because of the idiosyncratic nature of desire and its impacts on behaviours. Becker seemed to move too quickly from the idea that people pursue that which they think will make them happy, to the idea that we know (he knew) what makes people happy.

Spreadsheeting r>g

01/05/2014 § 3 Comments

Thomas Piketty’s book, Capital in the 21st Century, has been getting press, some favourable, some lukewarm, some critical. There’s even a bluffer’s guide (bonjour paresse!).

I haven’t read it, but that won’t stop me commenting. Specifically, the little shorthand ‘r>g’ making the rounds had me thinking. Unfortunately, my thought is also the first entry in the bluffer’s guide: the thesis isn’t new. This is the tendency for the rate of profit to fall, by some 19th century economist, dressed up a different way. It’s also something my actuary/economist dad pointed out to me years ago — that stock market returns couldn’t keep outpacing economic growth forever. And something that can’t go on forever, won’t.

But it isn’t real until you can put it in a spreadsheet. So, I tried. My first attempt failed because ‘r>g’ isn’t enough by itself.

So, I tried again, this time including a marginal propensity to save, which you need in order to determine how much income gets converted into wealth. It turns out to make for interesting calculations.

Here’s one example. Start with GDP = 100, divided 60/40 into wages and rents. Assume g = 0.02 and r = 0.08. With the amount and rate of rent, you can calculate initial capital (K), which is here 40/0.08 = 500.

GDP Wealth
g= r= MPS_L= MPS_K=
0.02 0.08 0.1 0.8
Year total wages rent savings, L savings, K Final K
1 100 60 40 6 32 532
2 102 59 43 6 34 566
3 104 59 45 6 36 602
4 106 58 48 6 39 641
5 108 57 51 6 41 682

What happens in the second period depends on what happens to rents. If they are entirely consumed by dissolute third-generation scions, then they don’t add to the stock of capital. So period 2 depends on the marginal propensity to save, which here I’ve assumed is 0.8 (80%). Final K is higher than the initial K, and the amount of rents increases. The result over many periods is the following:


The picture, though, is sensitive to the assumptions. Assume g = 0.03, r = 0.08, and MPS_K = 0.4, and here is the 100-year picture:


It turns out that the results depend on initial allocations, relative rates of returns, and savings rates. Crucially, too, I haven’t actually created a stock of K wealth that is owned by the initial L. I created the category in the spreadsheet, but then didn’t use it. If labour starts owning bits of capital, well, either that’s employee-owned companies or control of the means of production by the proletariat — I’ll let you make the call.

It seems that the problem is prying rents out of the hands of capital-owners, rather than the rate of rent itself. One way, of course, is taxes. A 50% estate tax looks like a useful way to get MPS_K from 0.8 to 0.4, for example. And dissolute grandchildren should also be encouraged.

Happy May Day!

Where Am I?

You are currently browsing entries tagged with Thomas Piketty at Groping towards Bethlehem.