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OpEdNews Op Eds    H2'ed 6/12/14

Yes, Theoclassical "Economists [are] Basically Immoral"

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Doctors Without Borders

Doctors Without Borders is an NGO that provides medical care in regions with health crises. The NGO has equipment and medicines that can be stolen, including many vaccines such as those that protect against polio. The NGO faces three major crime problems. First, combatants may kidnap its personnel to hold them for ransom. Second, combatants may murder NGO personnel and destroy the equipment because they are engaged in terror tactics or believe (or purport to believe) that the vaccines are a Western plot against Muslims. Third, thieves steal the NGO's medicines and equipment. It is not true that the theft of drugs from the NGO inherently aids society because thieves inherently have superior incentives arising from their "more effective incentive." Doctors and other volunteers from this NGO have died due to the strength of their incentive to aid those that most need their help. Heyne's casual dismissal of altruism in favor of a thief's greed as an inherently superior incentive and a demonstration of the intrinsically moral nature of capitalism is another example of our family rule that it is impossible to compete with unintentional self-parody.

A criminologist (or anyone who worked with the NGO) would know that Heyne's "efficiency" claims for theft was typically nonsense. First, people and property frequently suffer damage during a theft. Second, the people who steal medicine from such an NGO often have to grab quickly and try to escape rapidly. This too can destroy drugs. Other drugs may be ruined without refrigeration or because they are contaminated unintentionally by the manner of theft. Third, when the thieves go through what they have stolen they may destroy or abandon (and allow to be ruined) drugs or equipment that are too hard to sell without a material risk of detection or simply lacks a sufficient profit relative to the risk of sale. Fourth, the people who steal the drugs from the NGO may use the proceeds to purchase arms and IEDs that they use to murder and maim hundreds or thousands of people. Fifth, the group that steals the medicine from the NGO may not sell the medicine -- or use it. It may reserve it for use only by a particular Somali clan. It may build up an inventory of medicines and supplies such as bandages that will be necessary for the clan's own medical needs once the clan initiates a war against rival clans. Sixth, medicines and medical equipment may require skilled nurses and/or doctors to be effective, so once they are stolen they may be far less effective in helping people in need. Seventh, the thieves may dole out the medicine and equipment to aid rival clan leaders in order to recruit war allies and punish opponents. Eighth, stolen medicines and medical equipment may not be sold, but instead traded for sexual favors by mothers who are desperate to get medicines for their children. Ninth, stolen medical equipment can easily be misused, e.g., by reusing needles, in a manner that spreads disease. Tenth, stolen medicines and equipment will, at best, go to those best able to pay for it rather than to those who most need them. Eleventh, people who steal often also cheat the purchaser by ripping them off entirely or providing inferior, contaminated drugs and medical equipment. This is the reality of thieves, rather than Heyne's "fable of the bees" (or, more aptly in the case of those who steal huge amounts of relief aid, "myth of the maggots").

Theft of Food Aid in Somalia

The massive thefts of food aid in Somalia, primarily by the dominant clan, have worked just like Heyne predicted. As a result, Somalia is a true utopia. (It is also an NRA paradise in which because nearly everyone has an automatic weapon the streets are perfectly safe.) The reality of course is the same as what I described above in my discussion of thefts from Doctors Without Borders -- except that thefts of food aid have caused far more deaths and widespread malnutrition. As with Heyne's tale of economists' invariably false predictions about voting based on a primitive misunderstanding of incentives the common denominator is that theoclassical economists are terrible at understanding the true nature of human incentives. The very thing that theoclassical economists claim to the defining element of their approach to predicting behavior, understanding incentives, turns out to be a great weakness.

Iraq: a similar ode to "privatization" via theft becomes a nightmare

As I write, Sunni Iraqi extremists have taken over Mosul, Iraq's second largest city, Tikrit, much of Falluja, and key facilities in a key oil city. This is eleven years after President Bush's infamous "Mission Accomplished" propaganda event on an aircraft carrier. One of the primary reasons that the U.S. occupation turned into a strategic disaster for Iraq and the U.S. is that the Bush administration took Heyne's approach to epidemics of the theft from the Iraqi and U.S. governments. They treated epic thefts of state assets as "privatization" -- and assumed it made Iraq's government, society, and economy stronger. Rajiv Chandrasekaran wrote a classic, deeply disturbing book revealing the theoclassical dogmas that underlay so much of our occupation policy failures entitled Imperial Life In The Emerald City -- Inside Iraq's Green Zone (2005). On pp. 135-136 he describes how the ideologues interpreted the theft of government trucks and police cars as desirable "privatization" -- and the reality that the thefts crippled police effectiveness and the ability to distribute aid to the needy. We will never know how many people died as a result of the "privatization" of these vehicles by those who used them, and continue to use them, to transport terrorists, heavy weapons and ammunition or to create car and truck bombs.

Conclusion

Heyne demonstrates the unintended consequences of trying to create ethical apologia for theoclassical economics. He demonstrates that theoclassical economists are not simply wrong but wrong in areas in which an eight year old would consistently get the right answer. It is good to vote and tens of millions of Americans vote for reasons that reflect well on them and the Nation. The inability of theoclassical economists to comprehend this fact and their efforts to destroy the legitimacy of democratic government demonstrates a sad combination of incompetence, intellectual dishonesty, and immoral shilling for their plutocratic patrons.

Eight year olds understand that theft is morally wrong and harmful. Excluding sociopaths, only theoclassical economists think that if they assume an incentive or the non-existence of an incentive they can predict results without determining though a real factual inquiry whether their assumptions are correct. When they make those assumptions about incentives implicitly they are most vulnerable to disastrous error.

Heyne's editors have, unintentionally, selected an article by Heyne that self-destructs his thesis that theoclassical economists are "basically moral" on the first page of the book by demonstrating the opposite. Heyne unintentionally proves that theoclassical economists make massive predictive errors based on false assumptions about incentives -- and refuse to abandon their dogmas no matter how many times they are falsified by reality. He also unintentionally demonstrated the folly that comes from the arrogance that he shared with theoclassical economists that leads them to ignore the literature not only of other social sciences with expertise in the subject matter they are guessing about but also of economists like George Akerlof and Paul Romer who have successful predictive records but contradict theoclassical dogmas.

I would have loved to see how Heyne sought to justify private sector fraud as optimizing, but the book contains the word "fraud" only once -- and that is a brief mention that opponents of evolution originally tried to claim that the theory was a "fraud." There are, of course, strong reasons why libertarians so religiously ignore fraud led by CEOs. Control fraud falsifies a vast array of theoclassical dogmas, reveals their policies to be criminogenic, and makes their econometric studies and pricing models perverse. When the concepts of control fraud and the Gresham's dynamic are combined the core immorality of theoclassical economics emerges. Worse, the paramount function of democratic government -- the provision of a rule of law and effective regulation and prosecution of the unethical CEOs who breach that rule of law -- is revealed as a necessary condition for efficient and moral markets.

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William K Black , J.D., Ph.D. is Associate Professor of Law and Economics at the University of Missouri-Kansas City. Bill Black has testified before the Senate Agricultural Committee on the regulation of financial derivatives and House (more...)
 
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