The Upside of Down: Chapter 2

THE VIRTUOUS SOCIETY: What Two Economists and an Anthropologist Can Teach Us about Free Markets

A.K.A. Hey, Did You Guys Know That Liberals and Conservatives See Things Differently?

Chapter 2 is significantly more coherent than Chapter 1. This isn't to say that it's more compelling or more sensible, just that McArdle does a better job at sticking to a single topic. It's also more thorough, though the cynic in me suspects that this is another ploy to keep the page count up. Throwing away the editor's pen is a trick used in everything from book reports to best-selling literary novels to create the illusion of weight, so why deny it to a hacky blogger?

The chapter open with a description of Enron's involvement in the 2000 California energy crisis. The crisis was, of course, a famous failure of deregulation for which we know the names of the people responsible, which makes this an odd route for a libertarian to take. However, for McArdle, this ugly counterexample to her entire worldview serves two purposes, the first of which is that it provides a segue into the world of experimental economics.

Experimental economics is a more hands-on alternative to theoretical economics (the "neoliberal" method where you make up all the numbers and then force a poor country to sell off all its assets) and empirical economics (that filthy socialistic discipline of studying how finance works in the - ugh - real world). The idea is that, as with the theoretical approach, you invent a hypothetical market, but then rather than working out the numbers on your own, you have a group of people "play" those markets to see what happens. Those of you who have studied game theory might find this familiar, and might even feel a little queasy since game theorists haven't exactly had a sterling record over the past few decades. RAND made more headlines than accurate predictions, after all.

McArdle is going to try to use experimental economics to prove why markets fail in the bad way, like in California, as opposed to failing in the good way. The latter is what those in the business world call "creative destruction," which most of the commoners interpret at "Well, you lost your jobs, but we made a ton of money, so on balance this went great." And of course, she has specific examples:

Apple makes the Newton handheld computer, which bombs - but lays the groundwork for the iPhone.

And, by extension, one of the worst personal experience columns of the last ten years (Don't click on that link, it's solely there for the sake of completeness. Save the headache for something worthwhile).

What fresh hell Apple and The Atlantic hath wrought.

So back to the economics: We now start on a relatively long section on Vernon Smith's attempt to use economic games to predict behavior in unregulated markets. Short version: He doesn't pull it off. Without definite rules in place, sometimes the games work and sometimes they don't. As it turns out, people are just too damn unpredictable to figure out what they're going to do when there's no preexisting economic framework or legal authority. Or are they?

This next section is about anthropology, which in the hack's playbook is on the page following the section on misusing behaviorism. McArdle has at least enough humility to stay back from this and let the experts talk. She won't jump in until the very end, and her addition is hilarious.

Speaking of things that aren't funny, how about another McArdle joke?

In July of 2012, a Texan working at the Jane Goodall chimp sanctuary near Johannesburg lost an ear, some fingers and toes, and a testicle when two chimps pulled him under a fence and dragged him a hundred feet. It's believed they were reacting to a perceived imposition on their territory. "Sounds like Hollywood," you may be tempted to remark, and fair enough.

Jokes about Hollywood! How fresh and topical.

The next seven pages concern socioeconomic behavior in tribal societies and McArdle has nothing to add here, so I'll just give you the executive summary. Hunter-gatherer societies usually work under what's termed the "gift economy," basically a communal system in which necessities are shared freely. Agrarian societies, on the other hand, are marked by less generosity. The hypothesis is that this is because hunting produces irregular amounts of food (often none at all), survival depends on sharing, whereas the more predictable nutrition afforded by agriculture allows people to be self-sufficient without relying on sharing. This tends to result in conflict when a society moves from one to the other, which is why hunter-gatherer groups (from ancient to contemporary) tend to suffer a significant short-term decline in stability when they switch to agriculture.

It's an interesting theory. On a more cerebral blog, we might now stop to analyze this in light of other competing theories, such as those of "moral revolution" thinkers like Steven Pinker. There is some conflict there - Pinker's version of pre-agrarian society was one of perpetual low-level war for survival, a state of conflict that was only cooled by the stability brought about by agriculture and peaceful trade. But this isn't a cerebral blog, and I'm not ready to give McArdle much credit for writing about someone else's work for over a dozen pages. We're here to analyze the conclusions she derived from the above.

So what is that conclusion?

When you see a liberal and a conservative hotly debating welfare policy, isn't this what they are arguing about? The liberal says "It's not their fault that they were born poor" and the conservative says "They could stop being poor if they waited to have kids until they got married, worked full-time, and finished high school." Both statements are true. And so how you feel about poverty and social policy depends on whether you think that living in the American economy is mostly like being a big-game hunter, where rewards are largely dependent on luck, or whether it's like being a farmer, where rewards are mostly a function of effort.

For the moment, let's ignore all the ways that the above is demonstrably wrong. I know it's hard. You're already pulling out your studies on early childhood socialization and nutrition, on nepotism, on subconscious class and race bias in hiring, on the absurdity of the "marriage makes you rich" argument. Or maybe you're just preparing jokes on the premise that farming is primarily a function of effort, as though there wasn't one honking huge variable over which farmers have absolutely no control. Let's set that aside, because McArdle has. She has taken the classic bigbrain libertarian approach of ignoring those disgusting biased facts and solely focusing on abstract philosophical issues, so of course there's no point in discussing whether what she's saying is true or false in reality.

No, I'd rather we looked at the philosophical conclusion, which is - and I hope you're not reading this on the go, because you need to be sitting down for this - that liberals and conservatives see  the issues in different ways. Bravo - if I'd had a hundred years, I never would have figured that out on my own.

We end by returning to California. You, littlebrain that you are, may think that Enron was the bad guy, because they did all of the things that broke California's grid. But McArdle, who has been failing up since birth, knows better. She knows that it's everyone's fault, if you think about it. I mean, the state could have done more to stop Ken Lay from breaking the grid, couldn't they? This is the other reason McArdle brought up the crisis, to weave a revisionist account in which Lay was only doing what was in his best interest and we really can't blame him for being a greedy scumbag.

This extremely convenient "no villains in the economy" thing deserves a more thorough takedown, and I'll do that - six chapters from now, when McArdle returns to this particular dog's breakfast. For now, I'm going to try and keep a tighter focus than McArdle and only dwell on what's in front of me.