October 25, 2007

Freedom and Power

Filed under: Economics, Friedman, Philosophy, Politics — duncan @ 5:24 pm

So last month I wrote an unsatisfactory post about Milton Friedman’s use of the opposition between freedom and coercion. I said that Friedman imagines the state as always and essentially coercive, and market exchange as always and essentially voluntary; and that this understate the extent to which the relation between citizen and state can be beneficial, and, more importantly, the extent to which market exchange can, and does, involve violence, and the threat of violence, and a host of marginally more subtle but nonetheless just as powerful mechanisms of coercion and control. Well, I didn’t say that, but I should have done. What I actually said was that any exchange or relationship involves an admixture of both freedom and coercion: that even torture leaves a sliver of freedom, and that even the most bilaterally voluntary exchange involves dissymmetries of power.

What was I thinking? In the first place – it’s obvious and sinister nonsense to imply that the self’s freedom can survive any violence inflicted on it. Violence can destroy anything; it’s nothing more than a consoling or self-exculpating fantasy to believe that the true free self is untouchable by the exigencies of physical trauma. Moreover, to phrase the matter in this way – to speak of an admixture of freedom and coercion – is to perpetuate the idea of a fundamental (if you like, metaphysical) opposition between the sovereign self and the world around it. Friedman uses the terms ‘voluntary’, ‘freedom’, ‘coercion’, etc., with an alarming lack of investigation into what they mean. If we take on board Friedman’s uses, and simply argue about the terms’ appropriate fields of application… well, we’ve already fucking lost.

In his 1976 lectures, which I’m reading now, Foucault discusses the concept of sovereignty, which he believes has dominated Western political discourse since the end of the middle ages. (I should have known all this already, of course, but I’m behind the curve, trying to catch up…) Foucault says that all theories of right are based on the attempt to establish a line between legitimate contract and illegitimate oppression. They attempt to establish a space of sovereignty, within which power is exercised legitimately, but beyond which power turns into coercion. And Foucault affiliates himself with (or expresses strong sympathy for) an alternative tradition, for which “the pertinent opposition is not, as in the previous schema, that between the legitimate and the illegitimate, but that between struggle and submission.” (‘Society Must Be Defended’, p. 17).

In other words, Foucault’s trying to do away with the opposition between freedom and coercion as our fundamental tool for political analysis. Power is everywhere; every relationship is a power relationship. The individual who exercises freedom, or is subject to coercion, is already a product of and conduit for power.  “The individual is not… power’s opposite number; the individual is one of power’s first effects.” (p. 30). We therefore need to, as it were, strategically suspend the concept of freedom, and instead examine our societies and economies in terms of power relations. “[T]his means that rather than starting with the subject (or even subjects) and elements that exist prior to the relationship and that can be localized, we begin with the power relationship itself, with the actual or effective relationship of domination, and see how that relationship itself determines the elements to which it is applied.” (p. 45).

This is obviously relevant to economics. Rather than seeing the economy in terms of utility-maximising individuals, we should start by examining the power-relations that influence any given exchange – and create the possibility of exchange. “The possibility of co-ordination through voluntary co-operation rests on the elementary – yet frequently denied – proposition that both parties to an economic transaction benefit from it, provided the transaction is bi-laterally voluntary and informed.” (Friedman.) This valorisation of individual freedom destroys at its origin any attempt to examine the real power relations behind market transactions; and one of the ways it does so by inventing a fictional, subjective, and thoroughly un-analysable concept of ‘utility’.This means that an alternative economics, which takes power rather than freedom as its starting point, could in fact be more empirical and objective than the mainstream orthodoxy.

All this is probably desperately obvious. More to come as soon as I actually know something about anything.


  1. Well…power struggles in any type of exchange are ruled by endogenous and exogenous factors, subjective and objective, freedom and coercion, etc. If–I think what you’re saying is–there is no power struggle between these forces, that in fact exchange is a form of power, how do hierarchical structures thrive? For sake of argument, let’s look at subprime lending and advertising as a subtle form of coercion. I may be tempted by the dream of owning a home or by sexy models on billboards, but I have the freewill to reject these incursions into my imagination, do I not? The ad screams, the mortgage offer looks too good to be true, but I still reject them. I have been victorious and big business is the loser–a veritable power struggle has occurred–yet no exchange has taken place. In fact, rejecting coercion in Western society means retaining one’s solvency. This is a form of victory for the consumer, and it is a display of power, yet no transactions have taken place. I do not know if Freeman mentions this but I just thought it was interesting.

    Hierarchies, I assume, would be dependent upon acquiescence from consumers (to take big business as an example). This would mean that power–from a consumer point of view–is engendered by the majority. Marginal groups of consumers, however, hold little power if their interests conflict with the majority’s. I guess a similar dynamic could be applied to political structures and what not. Fuck it! I won’t even try to understand it right now.

    I assume Freeman has a way of peeling away the onion skin layers of all of this and dissecting it so that it makes sense. It’s a dense thesis nonetheless and one that needs a few examples if it is going to fly with me. Maybe if I give it more thought I’ll be able to think of some real world examples of his whole exchange as power argument but right now I am stuck on the whole “power struggles and hierarchies” theme (fucking half-wit that I am).

    Comment by robertjerome — October 26, 2007 @ 5:23 pm

  2. Right, okay. So: I agree about consumer power and solvency – debt is certainly one of the main ways in which the economic system exercises control over people. And we can’t – mustn’t – do away with analysis in terms of freedom and coercion. In the post I mainly mean two things. 1) Orthodox economic analysis tends to underplay the influence of power in market transactions. 2) We can perhaps find an better approach by looking at the economy entirely in terms of power, and then building on that (no doubt adding new elements to our analysis as we build). So, for example, you can imagine an analysis of freedom in terms of power: basically, you’re free to do what you want if and only if you’ve got the power to do it.

    To take sub-prime mortgages: at one level everyone’s free here; no coercion has taken place. No one held a gun to the heads of mortgage lenders, and told them to lend at potentially punitive rates to those who couldn’t afford the repayments. Similarly, no-one forced the borrowers to take out loans which if they’d read the small print they’d have realised had initial teaser interest rates then variable rates with no upper limits, and so on. But the sub-prime crisis happened anyway. Why?

    First off, information. A.k.a. lies. In the economists’ imaginary perfect market, everyone is ‘bilaterally informed’. (Even the economists know that this is never actually the case, but still…). In the case of subprime lending, everyone in banking circles knew that lots of borrowers were being duped by unscrupulous lenders. Here’s a Paul Krugman NYT article which talks about a Federal Reserve official called Edward Gramlich. (Via Economist’s View)


    Gramlich was trying to increase regulation of U.S. subprime lending as long ago as 2000. In a recent paper he wrote: “Why are the most risky loans sold to the least sophisticated borrowers? The question answers itself – the least sophisticated borrowers are probably duped into taking these products.”

    Knowledge is power. The banks knew how the mortages worked; the borrowers didn’t.

    So – knowledge needs to be increased (and lies diminished) through regulation that penalises misselling. But the broader point, with regard to economic analysis, is that these assymetries are essential to market transactions. You’re never going to get a scenario in which everyone knows everything about everything. Those offering a product are almost always going to know more about it than those purchasing it. So right away you have a power relation.

    My problem with orthodox economics is that when dealing with market transactions it tends to treat these power relations as deviations from the norm. It’s not that economics is unaware of them. It’s that even when economists discuss informational assymetries, or whatever, they seem to take their bearings from the thought of a perfect market in which power is universally and equally distributed, and in which power can therefore basically be ignored.

    So what I’m saying is: start from power. “Bilaterally voluntary and informed” exchanges can still be accommodated within this view of the economy – but as a special case. Orthodox economics starts from the special case, then adds ever more baroque nuances in order to accommodate the facts.

    More to say, but I’ll call an end here.

    Comment by praxisblog — October 27, 2007 @ 4:41 pm

  3. A tax levy could be an example of an exchange that occurs independent of this bilateral power system. Services are returned to citizens and voters have the power to elect politicians, but the allocation of any governmental budget will never satisfy the needs and desires of every citizen. This may be straying away from economics a bit, but I don’t think it’s too unfair an assertion to claim that power favors ruling governments.

    Let this be a segue to the point I want to make.

    I agree with you that orthodox economic analysis typically tends to perceive economies as hierarchical structures making Focault’s thesis a “deviation” or a “special case.” I think in the West–or at least here in America–there is a tendency in the media and among consumers to invariably view big businesses as monolithic institutions that possess an unmatched pool of talent, intelligence and various other resources that enable them to always stay several steps ahead of the un-savvy and lazy everyday consumer. This is a viewpoint that has been pounded into the American conscious for as long as anyone can remember. Consumers naturally see themselves as too weak willed, lazy and impulsive to ever challenge the existing power structures.

    On the positive side, big businesses offer us a tremendous sense of comfort because they provide us with the ammentities that we so desperately crave. Corporation logos invoke a similar sense of calmness and satisfaction because they remind us wherever we go that the corporate blanket protects us and is there wherever we go to supply our every need and want.

    Why would we ever want to challenge such a system that gives us so much? We know some of the tricks these corporations employ to keep us loyal: we are not too stupid to assume that certain products we eat or imbibe may be manufactured using addictive additives; we know credit providers use arcane language and tiny print to dupe us (alas, we will always be too lazy to read the fine print); we know that corporations will arbitrarily raise prices knowing full well that we will pay a higher price for a service because we depend upon the service they provide too much. It is times like these when we want to rise up, but always, we quickly forget our qualms about buying from the big businesses and we go back to being their loyal acolytes.

    Focault’s thesis is unique and possibly even radical because it asserts that consumers do indeed possess as much power as the corporations we rely so much on. His argument conflicts with the normal way of seeing big business as mighty and consumers as lambs. As lambs, consumers have always relied on the media to guide and protect them. It makes one ask why is this the dominant viewpoint in present day economics? Why should the name of a large corporate institution always induce skepticism in the average suburbanite whenever they hear that corporation mentioned on the news? The big corporations can even seem more imposing by the fact that every cityscape is dominated by large bank high rises. Their reign extends through television, magazines, billboards, the internet and radio. It would seem like they own the land!

    Anyway, I’m starting to ramble because my writing is starting to sound emotionally fueled. But Focault’s thesis could be a good way to reestablish a favorable reputation for big business and consumers at the same time. I don’t know how practical it is to hope that the status quo could be replaced and someday become outmoded, but it is definitely time to give consumers more credit and take some of the blame off of big business. When will people stop suing fast food corporations and big tobacco for what can reasonably be considered their own penchant for unhealthy lifestyle choices? In a litigious, shoot-first society like America there is a gut reaction to blame the other guy. As Christians would say, “Don’t hate the sinner, hate the sin.” We have a propensity in The United States to view the big corporations as the sin and the consumer as the sinner. If one thinks about it, this viewpoint is impractical because it is defining the economical system as essentially being corrupt.

    Okay, maybe now I’ve gone too far. But I hope you get the point.

    Comment by robertjerome — October 27, 2007 @ 8:50 pm

  4. I hope the negative tone of my last response didn’t overshadow the positive aspect of American economic analysis–which is the symbiotic relationship bewtween corporation and consumer–that I was discussing at the beginning. Corporations do many good things in addition to being a “blanket.” Many of them give some of their profit back to communities and charities and there is a current altruistic trend among bussiness moguls that mirrors the humanitarianism of the roaring 1920s. It might be impetuous to interpret Focault’s thesis as a philospher’s stone for economical analysis given the negative cloud of skepticism and doom that lingers around big bussinesses and corporations (I would no doubt guess that this perception is hardwired into the study and public dialgoue of economics and it likely gets its fuel from attrition and conservatism in ways of thinking). I happen to like Focault’s thesis, however, and I think it would be good if people involved in the economics community called for some sort of revisionism based on his views. I am not sure if Focault is calling for a revision of the current ways of seeing things or if he was just postulating an alternative. I was an English major in college. The only time I took an Economics class was when I was 17 and a junior in high school. Sadly, I didn’t pay attention as much as I should have.

    I find the whole thing very intersting. Hhhhhmmmm…

    Comment by robertjerome — October 27, 2007 @ 9:31 pm

  5. Well, corporations certainly do have fuckloads of power. But I guess Foucault’s attitude would be: don’t focus your critique on either corporations or consumers, but rather on the system of which we’re all products. But I’ve got a lot more thinking to do. (Also, I’m posting this from my mobile; the predictive text function recognises ‘Foucault’, but not ‘blog’…)

    Comment by praxisblog — October 28, 2007 @ 9:22 pm

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