I Spend, Therefore I Am: The True Cost of Economics, by Philip Roscoe

Michelle Baddeley on an exploration of what makes us tick

February 13, 2014

In this wide-ranging and readable critique of economics, Philip Roscoe makes many interesting points about how we judge governments by market standards, and how the methodology that drives some areas of economics is self-referential. He illustrates this argument with Jorge Luis Borges’ fable Tlön, Uqbar, Orbis Tertius: an imaginary world is discovered in an encyclopedia, and its coherent structure is so compelling that it comes to take over the real world. Tlön history is taught in schools to the exclusion of real history; Tlön language teaching replaces French and Spanish. The imaginary construct’s logic is so seductive that it replaces reality. This fable captures something of the evolution of economic theory: the mathematical analysis that illustrates economic efficiency is seductively neat and relatively simple but it is ultimately self-referential.

Roscoe explores Jeremy Bentham’s metaphor of the panopticon: a prison tower with windows allowing a single warder to observe all prisoners while himself remaining unobserved, with uncertainty over whether one is being watched ensuring that rules are obeyed at all times. The logic of this theory finds an echo in ethologist Melissa Bateson’s recent experiments showing that images of eyes placed near charity boxes ensure greater contributions. In a world dominated by the internet, the sense of being constantly watched and observed is an important constraint on behaviour. Roscoe weaves this insight into his observation that panopticons are everywhere – for example, applying the idea to his exploration of Frederick Taylor’s early time-and-motion studies in management science, in which workers are exploited to their physical limits in shifting piles of pig iron in pursuit of mathematical efficiency to the exclusion of all human goals. The sinister forces are politics and power – “visible, external and hierarchical” – alongside economics.

When the demon of free-market economics is summoned, it is being used as a smokescreen to justify exploitative practices

Particularly well-judged is Roscoe’s critique of works such as Steven D. Levitt and Stephen J. Dubner’s 2005 best-seller Freakonomics: A Rogue Economist Explores the Hidden Side of Everything that seek to explain all behaviour in purely economic terms. Indeed, the real shame is that so many non-economists think that Freakonomics captures what most economists think and do. Roscoe offers a powerful example of the absurdities of such an approach: Allie is a “happy” prostitute who uses her body to exploit the laws of supply and demand. She has worked out the price that will earn her the most income, and what she earns brings her a high standard of living – she has become a convert to free-market economics. But any economist who believes that Allie’s decision to enter prostitution is driven purely by business motivations has a narrow, dangerous view of what economics should be about. Few economists would argue that prostitution is dictated purely by a mathematical calculation of costs and benefits.

Another of Roscoe’s examples is the low-paid construction workers with whom he worked while a student. With accidents common and severe, the consequences for each worker are enormous. They are not rewarded for taking excessive risks, but are forced out of necessity into badly paid, dangerous jobs. There is no doubt that a market-driven system plays a part here, but free markets are not necessary to exploitation: many died in the construction of Egypt’s pyramids and the Great Wall of China, and the deadliest such project in history was the “Road of Bones” – the Kolyma Highway – built in the Stalinist-era USSR. Again power and politics play a significant role in exploitation. When the demon of free-market economics is summoned, it is because it is being used as a smokescreen to justify exploitative practices.

Economists will not always be convinced by Roscoe’s attacks – mostly just on economics as a whole, but sometimes on “neoclassical economics” and other times on “neoliberal economics”. Economic research is cited selectively, focusing on Freakonomics’ “rational economic man” variety. I’ve immersed myself in economics for the best part of 30 years and I’ve never met a neoclassical economist; I don’t believe there are many neoliberal economists around any more, and I associate the term “neoliberal” with politics. Roscoe, however, asserts that the apolitical Institute for Fiscal Studies is a “neoliberal thinktank”, and concludes that “Through its systematic assertion of self-interest, economics has undone our capacity for relationship; in an age of unprecedented wealth, we are unhappier than ever before. This is the true cost of economics.” This is overly strong; it is not economics per se that is at fault but the selective use of certain types of economics as political and financial justification.

Some of Roscoe’s fire is trained on an economics that no longer exists. Many modern economists work a world away from the assumption-driven models associated with straw man versions of neoclassical economics – the most interesting new models do not rely on assumptions of self-interest and strict rationality; markets are not assumed to work and many economists explore behaviour in worlds of imperfect information, social influences, social capital and disequilibrium. They work on wide-ranging themes, often including issues of poverty, inequality and environmental degradation.

In his analysis of Norwegian fishing, Roscoe skips over the work of Nobel prizewinning academic Elinor Ostrom – whose research on common resources including fisheries explored the positive role played by communal organisation and social cooperation in the management of common resources. Behavioural economics is burgeoning, and much of its research agenda is about altruism, fairness and inequity aversion; another chunk focuses on non-monetary motivations and the role played by intrinsic motivations such as pride in a job done well and intellectual curiosity in guiding behaviour. The raison d’être of such scholarship is an understanding of how people behave that doesn’t rely on assumptions of selfishness and mathematical rationality.

In 2005, more than two years before the financial crisis, I was in the US for a conference. I attended a session on housing markets – a whole series of presentations by economists – that explored the implications of unsustainable sub-prime lending for macroeconomic instability. So it wasn’t the case that all economists were complicit. It was that the politicians, the bankers, the regulators, the accountants and the auditors decided not to listen to that group of economists and focused instead on the types of economics that suited their money-making zeal. There were alternative economic models, in other words, but they ignored them. As John Maynard Keynes observed: “Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually slaves of some defunct economist.”

Why weren’t people listening? Why do most people know so little about what modern economics is really about? Part of the problem is economics itself. Economics has become a tribal subject; the first tribe thinks the second tribe is stupid; the second thinks the first is evil. Both are arrogant and the outside world remains confused. Economics loses credibility. If economics could admit to itself and the outside world that it is not one monolithic subject dominated by one doctrine and one approach, then dialogue could smooth the path to truth – a truth that is difficult to find for a subject that explores the complexities of human behaviour.

This book offers a path towards consensus via an insightful account of some of the problems of mainstream economics – enhanced by the insights that draw on Roscoe’s knowledge of management, philosophy and theology. Some of his indictments of economics are severe, but I Spend, Therefore I Am is nonetheless a very engaging, erudite and illuminating account.

The author

Philip Roscoe, reader in management and director of postgraduate research in the School of Management at the University of St Andrews and a member of the debut 2011 cohort of the BBC Radio 3/AHRC New Generation Thinkers, lives “in a small fishing village on the edge of the North Sea, not far from St Andrews, with Jane, our three boys (Kit, 14; Charlie, 11; and James, 9), two lurchers, a greedy, idle cat and a hamster”.

St Andrews and its surrounding villages, he says, “are built of ancient stone, with narrow lanes and fishing cottages clinging to the cliffs over the waves. In the winter, the wind comes blasting down from the far north and gets into your bones. In the summer the thin, pale-blue light seems to go on forever. You can come out of a hostelry at closing time and the seagulls are wheeling overhead against the pink and gold flecks of dusk. It’s just extraordinary.”

Roscoe grew up in Berkhamsted, Hertfordshire, and attended Berkhamsted School, “where Graham Greene had lived in terror of the green baize door linking the headmaster’s quarters to the rest of the school.

“When I arrived in the mid-1980s not much had changed: rugby was king, and the prefects could order the new boys or ‘fags’ to run errands or perform for their amusement. I remember being commanded to stand on my head and sing by a giant 18-year-old prop forward, who was unimpressed by my rendition of Rat in the Kitchen.

“On Wednesday afternoon everyone marched round the quad, although I dodged that one and joined the small printing cadre, learning to work the Heidelberg press and churning out headed stationery for the school. Later on, desperate to be one of the boys, I tried out for the Parachute Regiment officer intake. I clung on to the log and leaped across the climbing frame, but they said I was too nice.

“What can one trace back to that education?” he muses. “Goodness knows…an extensive vocabulary and a knowledge of Latin verse. I did sing in the school choirs, not least because one was run by the girls’ school up the road, and I acquired a love for choral music and English liturgy that is still with me.”

Roscoe recalls, “I read a lot as a child, and still do. The scholarship I won aged 12 was the pinnacle of my intellectual achievement until I was about 25. I started to become intellectually curious in my final year or two at school, but I wouldn’t say I really exerted myself when I was an undergraduate. There was so much life that needed living. I didn’t get a first, but I did meet Jane, so things worked out very well indeed.”

He studied theology as an undergraduate at the University of Leeds. He recalls spending “about a third of my time studying Islam, so there was nothing spectacular about moving on [when taking his master’s] to study Islamic theology which, of course, was in its fullest flowering in the Middle Ages.

“I remember sitting in a lecture at Leeds as an undergraduate. John McGuckin, now professor of early church history at Columbia University in New York, was persuading us that Christ’s miracles were sites of political theatre. He was amazing. I thought: that’s what I want to be when I grow up.

“Nevertheless, I hadn’t found quite the right discipline. My master’s was a two-year taught course at the University of Oxford with a chunky thesis, a translation and edition of Abd al-Latif’s On Providence. That was enough. I finished my exams, got a job, got married, and life went on.”

Roscoe became a business journalist. Asked if he feels that reporters in that part of the media were too friendly with those they covered, he recalls that his own experience “was slightly different – I was very young, naive, easily fooled, or even scared.

“On one occasion, after a week in hot pursuit of a story, I found myself in Sloane Square, breakfasting with a South African businessman who had interests in mines, a representative of Robert Mugabe’s security forces and another who had links to a despotic regime in West Africa sitting on vast mineral wealth. The deal was about diamonds, of course, and these were serious men. After we had talked for an hour, the third leaned forward and asked me what kind of a story I intended to write. ‘A short one,’ I squeaked. A few months later the Financial Times got hold of the story and ran it on the front pages until the Foreign Office vetoed the deal.”

Roscoe continues: “A few years later, bored with journalism and having tried unsuccessfully to set up a small business, I went back to university. This time I wanted to try to understand the madness that I’d seen close up in the 1999 dot-com bubble and the years that followed. I started by reading banking theory, but what I didn’t realise at the time is that McGuckin and his colleagues at Leeds, as well as Chase Robinson (who is now provost at the City University of New York) and Fritz Zimmerman, who taught Arabic history and philosophy at Oxford, had done the groundwork for a lifelong interest in revisionist intellectual histories and the politics of power. I was a perfect candidate for a career in a British management school.”

Asked if he feels that modern university schools of management are receptive to scholars who are critical of neoliberal economics, Roscoe responds: “Although it may seem a fine distinction, I’m not an economist. I am a student of markets and organisation from a science and technology perspective – think Bruno Latour, Michel Callon and Donald MacKenzie.

“There is quite a diaspora of those of us who have been taught or influenced by these original and innovative scholars, and many of us are interested in the way that economic theories organise the world, so in I Spend, Therefore I Am, I have been able to assemble a wealth of academic literature to support the argument. While we’re not economists, I think there is a growing alignment between those of us who see ‘economic’ reasoning implemented in specific situations, and heterodox economists who are frustrated by the intellectual limitations of popular economic discourse.”

He adds: “Many interesting academics work in British or European schools of business or management. It’s a strange historical irony that when Mrs Thatcher squeezed the sociology departments in the 1980s, a generation of leftish industrial sociologists went to work in the new business schools. European schools have been successful in fusing the intellectual aspirations of the ancient university and studies of modern business: the works of Michel Foucault, for example, were extraordinarily influential in studies of organisations. And you can find more than a few autonomist Marxists in and around certain UK schools.

“So while it’s true that some British business schools have adopted a more transatlantic tone, others remain fascinating places to work. And managing, as in a school of ‘management’, encompasses much more than business: governments and non-governmental organisations, charities, universities, co-operatives, collectives, even the Occupy movement, all need managing, and managing responsibly. At St Andrews we have put this ‘responsible enterprise’ at the heart of our teaching and research. I really don’t think business needs us to help it make more money – it’s very good at that already. What we can, and must, do is try to improve way that management is done.”

Although many reviews of I Spend, Therefore I Am have been positive, others have been hostile. Asked if he would feel that the book had not done its job if it did not attract some negative reviews, Roscoe responds, “Certainly. I wouldn’t expect any book to be received uncritically. I wrote the book because I thought – and think – the message was important, and so the worst thing would be to go unheard. I welcome any kind of constructive engagement with the arguments.”

Roscoe continues: “I haven’t pulled any punches and I’ll expect a few back in return; whatever the critics do say, I hope that readers find it provoking and stimulating and that after reading it they see the world in a slightly different way.

Of his non-scholarly pastimes, he notes that he built a conservatory last autumn – “a bit of light relief after finishing the book. It doesn’t leak and it hasn’t blown away. I also brew quite good beer.”

What sort of consumer is he? “An ascetic one. I don’t like shopping, really. My car is ancient. Who cares?”

Karen Shook