The Economic Agent

By Ezra

Quick note: Yes I'm in Brazil. Yes I'm occasionally blogging. Don't laugh at me, I have a problem. Also, I have nothing to do in the morning till the unwieldy organism that is my family decides what's on the agenda. And it's raining. And I want to hear Kathy and Chris's thoughts on this...

When Time picked the Man of the Century in 2000, they played it safe. Albert Einstein, baby. That wouldn't have been my choice. I'd have picked the Economic Agent.

It's the economic agent, after all, who's sat at the center of every economic current and fad in the last century. He's the oppressed worker or fattened landowner mindlessly pursuing his class interests. He's the hyper-rationalist merrily -- and nearly-infallibly -- pursuing self-interest and rendering free market economics viable. He's the "bounded rationalist" and imperfect creature whose blind spots and missteps require a community of similarly flawed beings to pool their resources and protect. He is, basically, everything. And it's only through imagining his preferences and extrapolating his actions that economics works. So it's quite kind of New School professor Duncan Foley to have charted (some) of the Economic Agent's many incarnations in the last few decades. Here he is, for instance, as Marx imagined him:

The economic agent of Classical political economy is thus basically a representative of his class, a Worker struggling to survive under the pressure of downward pressure on wages towards subsistence through a hand-to-mouth way of life, a Capitalist boldly building the future by obsessively accumulating the profits won from the exploitation of workers, or a Landowner parasitically and idly consuming rents by maintaining armies of unproductive personal servants and enormous numbers of horses. The individual behavior of these agents, such as they are, is of importance only insofar as they instantiate the social situation of their class.

And here she is as Milton Friedman imagined her:

The Rational Consumer’s function is to Choose. Thus he (or perhaps even she) becomes Sovereign in the neoclassical picture of the function of the capitalist society. The immense investment of resources in productive facilities and infrastructure is simply the most convenient device by which the Rational Consumer can transfer her wealth from the present to the future. Her Tastes govern the allocation of social resources among competing ends. Though to the undiscriminating eye the enormous capitalist firms and trusts of the late nineteenth and early twentieth century might appear as formidable centers of economic and social power, the penetrating economist recognizes that they are actually pussycats under the heel of the Rational Consumer, whose whim expressed as demands on the market bring them to heel.[...]

the Rational Consumer also has some extraordinary, even superhuman, capacities, particularly in the area of information processing and computation. She is somehow able, in her role as an investor, to collect and integrate an enormous amount of information about investment opportunities and prospects and management competence of firms so that she can correctly price them on the stock market. She is equally adept at sifting through the properties of millions of perhaps billions of commodities offered on the market to allocate her purchasing power optimally among them. This is all in the day’s work. Actually this is all even before the real day’s work of the Rational Consumer, which is the generation of utility from the actual consumption of her rationally chosen basket of commodities, that being the end of the whole elaborate process of social production.

Economic liberals were less impressed, and so constructed a counter-agent -- one capable of correcting for the old agent's flaws and failings. Enter the Clever Civil Servant:

Keynes sees no hope for the rehabilitation of the Economic agent, and proposes instead to replace him in his most important economic functions, particularly determining the volume and direction of social investment, with another figure, the Clever Civil Servant. This public-spirited manipulator, who is brighter and more charming than the Economic Agent, and who bears more than passing resemblance to Keynes himself, can be counted on to provide investment adequate to maintain Full Employment, alleviate human suffering, and in a generation or so eliminate the Economic Problem by driving the rate of profit down to zero. At this point the average standard of living in industrial capitalist societies will be so high that people will be relieved of most of the anxiety of earning a living and can devote their attention to exploring their sexual identities, following the path pioneered by Keynes and his Bloomsbury friends.

To some degree, sane people eventually came to a sort of synthesis of this set, and trust the economic agent to act rationally at times, recognize that those actions may reflect class biases, blind spots and failures of judgment, and try to employ the clever civil servant in limited capacities when his intervention can correct for an obvious failure. Sadly, very few of these sane people govern the country or the discourse, and we're still stuck with Larry Kudlow on the financial channels, and George W. Bush in the White House...