Structure vs agency in economics

Will Davies made a typically good point yesterday when he tweeted that the “impoverishment of the ‘sociological imagination’ over decades” has left people “people unable to speak critically of systemic problems, without personifying them”.

What we have today is a crude moralistic tribalism in which people divide simply into goodies and baddies. We see this in the “two minutes hate” against Shamima Begum – which is oblivious to the fact that one’s rights do not depend solely upon one’s moral character. We saw it in the silly debate about whether Churchill was a hero or villain, much of which effaced the fact that he was a complex character who happened to be exactly the type we needed in 1940. And we see it when lefties blame low pay upon greedy bosses and the financial crisis upon greedy bankers. I agree with Will that this mentality is also behind the rise of antisemitism on the left; antisemitism is the socialism of moralizing fools.

What such crude discourse misses is an aspect of the sociological imagination – the ability to see that society is shaped by structural forces which can cause outcomes to differ from the intentions and moral character of agents. It was this imagination – in fact, important insight – that Adam Smith was using when he wrote that “"it is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest."

The converse can also be true. Marx thought that exploitation and low wages arise not from the greed of capitalists but from the forces of competition*:

Capital is reckless of the health or length of life of the labourer, unless under compulsion from society…But looking at things as a whole, all this does not, indeed, depend on the good or ill will of the individual capitalist. Free competition brings out the inherent laws of capitalist production, in the shape of external coercive laws having power over every individual capitalist.

Chuck Prince, then boss of Citi, made a similar point in 2007 when he said:

When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. 

What he was driving at was that excessive risk-taking wasn’t caused so much by “greed” as by men responding to incentives: each individual bank had an incentive to gear up for fear of falling behind others.

Prince, Smith and Marx all agreed upon the key point for my purposes – which is that structure trumps agency, that social outcomes cannot be reduced to individual morality or character.

But is this true?

A good reason to suspect not is the existence of monopoly and monopsony. These relax competitive pressures and so give bosses room for agency, to offer better wages. Jeff Bezos would not become a pauper if Amazon gave its workers better pay and conditions.

Even here, though, structure isn’t wholly absent. When Amazon was a smaller company, higher costs and prices might well have attracted competition and thus hurt the company. Many ideas outlive their empirical base: it could be that Bezos’s desire to screw down wages is one of these.

Also, of course, firms’ ability to hold down wages and conditions is facilitated by weak aggregate demand. Is this a failure of agency – simple bad policy-making? Or is it instead structural – a result of capitalists’ political pressures upon governments?

What’s more interesting to me, though, are hybrid theories – ones which combine structure and agency. I’m thinking of two classes here, though there are no doubt more.

One is the role of social norms. These have structural origins but shape morality. We can think of the rise of neoliberalism as being in part a sign of an erosion of norms against rapacity, short-termism and rent-seeking: this is Jesse Norman’s theory in Adam Smith: what he thought and why it matters.

A second category are selection mechanisms. It’s very possible that bad character – psychopathy or narcissism – is selected for in at least some businesses, and that incompetent overconfident fanaticism is selected for in politics.  

There is, I think, a good debate to be had upon these issues. What is unacceptable to me, however, is a simple-minded attempt to blame social problems upon bad people. Such silly moralizing is a barrier both to understanding and changing the world.

Comments

[Daniel]

I like to think of society as made up of agents connected to each other like nodes in a graph. Each agent has it's own agency, but that agency is either increased or decreased depending where it is placed on the graph. So someone like Jeff Bozos agency is dicated to some degree by where he lies on the graph and has to respond to the multide of individally weaker nodes, his agency may be weaker than the sum of all the weaker nodes combined (amazon is reponding to a demand), but individually he has a whole lot more agency than a single weaker node.

[Daniel]

I will also add some personal experience of the capitalist class. When I graduated I spent 6 months working in a warehouse. From one of the managers I learned the company had enough capital to expand its operation by buying a bigger warehouse. If the capitalist agent behaved how marx said he should he would have sold his current warehouse and gone for a bigger one and increased his profit. Instead he refused to do so as the current warehouse was in an old family mill dating back to then 1700s.

So the owner was using his personal agency to decide against expanding and settling for reasons other than capital expansion. He wanted to remain in the mill for sentimental reasons relating to family and history. So he clearly had enough spare cash to pay his underpaid exploited workforce, many of who were polish immigrants. The working conditions there were terrible. I only got two 15min breaks on an intensive none stop 8hour shift. He had enough cash to buy a bigger warehouse and expand his operation, but didn't want to pay his workforce more than min wage or give them better working conditions.

I couldn't stand the site of him and I was right to do so as far as I am concerned. I regard him as scum.

[Guano]

Will Davies tweet (that CD quotes at the start of this article) leads to some comments by Penny Andrews, who says that "you can be anti-capitalist or critical of globalisation, without stomping through anti-Semitic tropes".

Is she referring to some particular piece of writing or some particular tendency? Penny tweets so much that I couldn't find the tweets on her twitter feed so I would be interested to know what the original issue was.

[dilbert dogbert]

you mentioned Amazon so I had to go look: https://qz.com/1196256/it-took-amazon-amzn-14-years-to-make-as-much-net-profit-as-it-did-in-the-fourth-quarter-of-2017/
Thanks for the interesting place to spend my idle hours.