Economics might be a dismal social science. But in its normative analysis economics asks policy-makers to do what is in the public good – even if economists might disagree on exactly how to achieve that social advancement.
(Some readers have accused me of attacking the entire field of International Relations in what follows – which I certainly do not intend and that I feel would be a totally ridiculous thing to do anyway. I’ve titled this blog entry what I have, not because that title is exhaustively descriptive. Instead, it is because I couldn’t put in the title all the qualifying statements that make what I’m about to say coherent and useful, at least in my view. To be clear, the key word in the title, “dismal”, in economics doesn’t mean bad or disappointing. It just means taking a realistic view of humanity. It means hypothesising that individuals in society are motivated to do what’s good for themselves, that no one is altruistic. Both economics and International Relations [in Realism] share this feature as a badge of honour. But if, as a reader, you do feel offended by the title and by what you think this blog entry is going to go on to say, still please bear with me, and let me try to clarify in what follows.)
Economics applies this principle of normative analysis ruthlessly, in every problem and situation it examines, whenever it considers policy-makers and policy-making. The field of International Relations, in many parts, uses the same lens of analysis. The magnificent work of Robert Keohane, for instance, deals with fostering cooperation in the community of nations, to achieve good international outcomes, whether through benevolent hegemony or explicit institutions. John Ikenberry speaks eloquently of the US building an inclusive, rules-based, democratic, and transparent world order, open to all nations who share its noble ideals. Henry Kissinger describes how Harry Truman and successors in the US were proudest of their having put together a community of nations “observing common rules and norms, embracing liberal economic systems, forswearing territorial conquest, respecting national sovereignty, and adopting participatory and democratic systems of governance.” International Relations carries a vast and growing subfield on global climate change, in many ways more deeply embedded than in economics. In all this, International Relations analysis puts at its core advancing the well-being of the world.
But that isn’t always the norm. Indeed, in what many would agree to be the key issue of the 21st century – the rise of China and the possible emergence of a new world order – the perspective is quite different. On this important problem, some of the world’s leading International Relations scholars seem completely comfortable arguing not for the good of global society, but for who should be the number 1 country (surprise, yes, their own). This is so even if that sometimes entails setting up multiple, inconsistent standards for the conduct of different nation states – the US, China, Europe, all the other countries on Earth – without the slightest acknowledgment of cognitive dissonance. Disagreement is over whether being number 1 involves either conflict between the great powers or, instead, peaceful co-existence.
As an example, take the excellent and thought-provoking documentary film by my LSE colleague Bill Callahan. This work features two iconic International Relation theorists. John Mearsheimer, the extreme realist, is convinced China cannot continue its claimed peaceful rise. Confrontation with the US is inevitable. In the video at 07:00 Mearsheimer says “From China’s point of view, it makes perfect sense to want to dominate Asia, the way the US dominates the Western Hemisphere.” At 16:22 he says, of course, “The US has a deep-seated interest in doing everything it can to prevent China from dominating Asia.”
Mearsheimer is scrupulously even-handed in his discussion of both the US and China. China will want to dominate Asia, exactly as the US has dominated the US. The unspoken implication by symmetry is that China will seek to dislodge the US from its domination of the West. The vista is entirely great-power centred. There is no recognition whatsoever that the 5bn people who live outside the US and China count, or that they together with many Americans and Chinese themselves might seek a vision that aspires to noble, universalist instincts. Where now are the ideals Keohane and Ikenberry sought? What has happened to the inclusive international order in which US Presidents since Truman took pride, that Kissinger described?
I’m not suggesting there is anything uniquely American to this. The Chinese academic Xuetong Yan provides, in mirror image, exactly the same discourse: both in the even-handedness with which he thinks through the position of the US and China, and in his insistence that conflict is inevitable: “China’s quest to enhance its world leadership status and America’s effort to maintain its present position is a zero-sum game.” (How China Can Defeat America, New York Times, 21 November 2011). One will gain only to the extent the other loses.
The only significant difference I see might be in that however the Western Hemisphere feels about being dominated by the US, Asia has not had the same decades to work through its feelings on its imminent China domination. A western observer might say this structure of domination is only to be expected of the autocracy that is China. It’s harder to square with the Lockean ideal of “consent by the governed” that is referred to in the beautiful second paragraph of the US Declaration of Independence. True, the Western Hemisphere does not comprise citizens of the US. But that cuts both ways in this narrative: if the US does not have to seek their consent, perhaps neither should it dominate them.
Many economists recognise easy kinship in this hypothesising that the actors under study look out for only themselves. That framework is the one in which economists work, and have done ever since Adam Smith. Yes, obviously, it’s the nation state here; while it’s consumers and businesses in economics – but it’s not the identities that matter. It’s the idea that players are self-seeking that both economists and international relations scholars share comfortably. We don’t do altruism.
But an economist – who understands basic theory and thinks about these actions as policy-making – would ask further, Where is the market failure that world order should now, in light of China’s rise and current US hegemony, seek to solve? How does China’s growing weight in the world affect the calculation of global well-being? What are these large state actors doing to promote the global public good?
International Relations scholars who I deeply admire and respect often ask me what theory underlies my observations about world order. Those questions I’ve just posed? That’s the theory. And, to be clear, as economics also hypothesises that players are self-seeking and not altruistic, these challenges raised are not for any one nation to solve – they are for the global system we design to tackle.
Joe Nye, who I hold in the highest esteem and with whom I have been lucky enough to engage on a number of occasions, is identified in Bill’s film as being in the opposite corner from Mearsheimer. In the film, Joe argues that peaceful co-existence is possible through diplomacy and international organisations – as he has done consistently, gently, and persuasively in his professional life. Callahan describes Nye’s views as a mixture of Realism and Liberalism.
That’s it. Mearsheimer versus Nye: those are the two opposites identified in the film, with Yan and others arrayed around them.
I think that if, on this question of world order – the place of the US, the rise of China – analysis took more on board the lessons of economics – welfare economics and mechanism design – the discourse on world order might well turn out different. We all recognise there is a collective action problem: individual nations are self-seeking; all want to free-ride; none wants to undertake the costly action to provide global public goods. The question for scholars and researchers is, do we then say, fine, let’s just do the best we can, taking the system as given? There is certainly a need to address this question, and many of International Relations’s most outstanding scholars do exactly that on this question of the rise of China and global power shift.
Or instead we might ask, how can we put in place a better-designed system, so that even though that system asks individual nations only to look out for themselves, and no one needs to be altruistic, nonetheless, the system generates a surprising, emergent outcome that advances the well-being of all humanity? In a different setting and for a different purpose, economists do know exactly such a mechanism: it’s called Adam Smith’s Invisible Hand, or the Fundamental Theorem of Welfare Economics. What is the counterpart of that fundamental theorem for world order? Such an economics-driven design for world order might better serve all of humanity than trying to determine who remains or has just become number 1.