Sustainability, Structural Change and the Ethics of Globalization
Talk at a conference on Agricultural Competitiveness and Change under Globalization.
NDSU, Fargo, North Dakota, October 12, 2004
M. Ali Khan∗
Abstract: This talk explores the meaning of perfect competition (free markets) and the ethics of globalization in the light of several texts, recent and not so recent.
Department of Economics, The Johns Hopkins University, Baltimore, MD. 21218.
Abstract (Provisional): This essay revolves around four questions and the reading of four (disparate) texts to answer them. The questions are already implicit in my title: To what extent do ‘free’ markets sustain or shatter the structural supposition of an economy on which they are based? To what extent is an economy implicated in a society, a polity and/or a community? To what extent is globalization simply another term for the freedom of commerce, an aspiration to the formation of free markets? To what extent is ‘ethics’, and the meaning that is given to the term, implicated in the way that the above three questions are framed and answered? I consider these questions in the context of a recent book by the philosopher Peter Singer titled One World: The Ethics of Globalization. I read it in the light of seventy years of meditation on markets, classics of neo-liberal resurgence as represented by the following texts: 1. canonical accounts of general competitive analysis (Debreu’s 1959 Theory of Value, McKenzie’s 2002 Classical General Equilibrium Theory), and a 1964 paper of Aumann’s 2. three essays of Hayek on knowledge and competition dated 1936, 1945-6, 3. Arrow’s 1986 essay on the Rationality of Self and Others in an Economic System 4. three 1987 accounts of the economic literature connected with the terms structure and structural change).
Structure of the Talk
1 2 3 4 5 6 7 8 9 10
A Question of Language and Expertise Debreu’s Conception of Competition 1959 McKenzie’s Conception of Competition 2002 Aumann’s Conception of Competition 1964 Hayek’s Conception of Competition: First Pass 1936 Hayek’s Conception of Competition: Second Pass 1945-46 On Approaches to Ethics Globalization, Sustainability and Structural Change Singer on Globalization A Tentative Conclusion
A Question of Language and Expertise
Debreu on Theorizing The theory of value is treated here with the standards of rigor of the contemporary formalist school of mathematics. The eﬀort toward rigor substitutes correct reasonings and results from incorrect ones, but it oﬀers other rewards too. Allegiance to rigor dictates the axiomatic form of analysis where the theory, in the strict sense, is logically entirely disconnected from its interpretations. In order to bring out fully this disconnectedness, all the deﬁnitions, all the hypotheses, and the main results of the theory, in the strict sense, are distinguished by italics; moreover, the transition from the informal discussion of the interpretations to the formal construction of the theory is often marked by one of the expressions: “in the language of the theory,” “for the sake of the theory,” “formally.” Such a dichotomy reveals all the assumptions and the logical structure of the analysis. (G. Debreu 1959)
A Question of Language and Expertise
Hayek on Theorizing All I have tried to do is has been to ﬁnd the way back to the common-sense meaning of our analysis, of which I am afraid, we are likely to lose sight as our analysis becomes more elaborate. You may even feel that most of what I have said is commonplace. But from time to time, it is probably necessary to detach one’s self from the technicalities of the argument and to ask quite na¨ ıvely 1 what it is all about. (F. A. Hayek 1936)
From the concluding paragraph of Hayek’s Presidential Address to the London Economic Club; see Hayek (1948, p. 56).
On Approaches to Ethics
Singer on Ethics It would, of course, be easier to agree to common ethical principles if we could ﬁrst agree on questions that are not ethical but factual, such as whether there is a god, or gods, and if there is, or are, whether he, she, or they have or has expressed his, her or their will or wills in any of the various texts claimed by adherents of diﬀerent religions to be divinely inspired. Unfortunately, on these matters we seems to be even further from agreement than we are on basic ethical principles (142). In the end, at least as far as we are concerned with practices based on propositions about the existence of a god or gods and the authenticity of divinely inspired scriptures, it is our capacity to reason that is the universal solvent. But that is not a question that we can go further here (144).
On the Ethics of Globalization
Singer on Globalization How to prevent global bodies from becoming either dangerous tyrannies or self-aggrandizing bureaucracies, and instead make them eﬀective and responsive to the people whose lives they affect, is something that we still need to learn. It is a challenge that should not be beyond the best minds in the ﬁelds of political science and public administration, once they adjust to the new reality of the global community.2 We need to learn from the experience of other multinational organizations (199).3
See Singer (2004); from the chapter titled One Community. From the last chapter whose title asks it A Better World?
On the Ethics of Globalization
Jameson on Globalization Everyone is now willing to mumble, as though it were an inconsequential concession in passing to public opinion and current received wisdom (or shared communicational presuppositions), that no society can function eﬃciently without the market, and that planning is obviously impossible. (F. Jameson 1991) The fundamental level on which political struggle is waged is that of the legitimacy of concepts like planning or the market.
My Motivating Questions The question is what are the presuppositions – how commonly presuuposed are they? Are there diﬀerences in conception? If the spontaneous order of the market is to be resorted to, if ethics is to be provided entirely through the domain of the economic, we need a robust and workable conception of the “economic”, an understanding of the meaning that Debreu, McKenzie, Aumann, Hayek Arrow and Singer give to the terms market and to competition.
Aumann on the Theory of Perfect Competition 1964 It is suggested that the most natural model for a market with “perfect competition” is one in which there is a continuum of traders (like the continuum of points on a line). It is shown that the core of such a market coincides with its set of “equilibrium allocations,” i.e., allocations which constitute a competitive equilibrium when combined with an appropriate price structure. Of course, to the extent that individual consumers or merchants are in fact not anonymous (think of General Motors), the continuous model is inappropriate, and our results do not apply to such a situation. But, in that case, perfect competition does not obtain either.
On the Role of the Expert in a Free Society
Hayek on Knowledge It may be admitted that, as far as scientiﬁc knowledge is concerned, a body of suitably chosen experts may be in the best position to command all the best knowledge available – though this is of course shifting the diﬃculty to the problem of selecting the experts. Today it is almost heresy to suggest that scientiﬁc knowledge is the sum of all knowledge. But a little reﬂection will show that there is beyond question a body of very important but unorganized knowledge which cannot possibly be called scientiﬁc in the sense of knowledge of general rules; the knowledge of the particular circumstances of time and place (80). The shipper ... the estate agent ... the arbitrageur ... [the “man on the spot”] ... are all performing eminently useful functions based on special knowledge of circumstances of the ﬂeeting moment not known to others (80).
Hayek on the Theory of Perfect Competition 1948 ... if the state of aﬀairs assumed by the theory of perfect competition ever existed, it would not only deprive of their scope all activities which the verb “to compete” describes but would make them virtually impossible.4 ... we should worry much less about whether competition in a given case is perfect and worry much more about whether there is competition at all ... 5
See Hayek (1948, p. 92). See Hayek (1948; p. 105).
Arrow on the Theory of Perfect Competition 1987 Even if we make all of the structural assumptions needed for perfect competition (whatever is needed by way of knowledge, concavity in production, absence of suﬃcient size to create market power, etc.), a question remains. How can equilibrium be established? The attainment of equilibrium requires a disequilibrium process. What does rational behavior mean mean in the presence of disequilibrium? Do individuals speculate on the equilibrating process? If they do, can the disequilibrium be regarded as, in some sense, a higher order equilibrium process? Since no one has market power, no one sets prices; yet they are set and changed. There are no good answers to these questions, and I do not pursue them (70-71).