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Towards a new narrative I: America vs. Europe

“We live in the absence of a narrative.” I wrote this somewhere, but I don’t remember where. Nor does it matter. What matters is being convinced that, as a consequence of the general crisis, there’s no other choice but to build a new, alternative narrative in multiple fields, and not just in economics, where the absence of a narrative frequently takes the form of an incoherent babbling, which may not be obvious, due to the existence of a broader verbal barrage. This is why I believe I’m going to try to begin another kind of series entitled “Towards a new narrative,” and whose first chapter is today’s post. Here I go.

The presumed rupture, or fissure, of the Atlantic link associated with the different ways of dealing with the crisis that began in the middle of 2007 has unveiled a notable discovery. It turns out that America (which is what I will call the USA) is not the same thing as that heterogeneous amalgam of peoples, states and languages that we call Europe. We spend our lives making jokes about the “froggies,” the “krauts,” or the “cowboys,” (you may have heard some tasteless jokes that start there was a Frenchman and a Spaniard) and then we’re stunned to realize that, in fact, we’re not the same.

America isn’t the same as Europe and we would do well to think about the differences. Sticking with the field of Economics, and in very general terms, the obvious thing is to distinguish between two kinds of capitalism. The American capitalist is subject to greater risks and inequalities (mitigated by social mobility) in exchange for a relatively high average available profit. The European capitalist, on the other hand (who lives in what was known as Rhine capitalism in days gone by) would prefer a smaller available profit with less inequality and smaller risks (perhaps because of the lack of mobility imposed by linguistic heterogeneity).

In Spain today, a lot of emphasis is put on this distinction and the PP government and a good part of society, especially the part associated with the business-class right wing, is betting on American capitalism. However, there’s no obligation to take that bet, because it’s not obvious that American capitalism is better than European under any circumstances. For example, in good times, the American style is less scary, and the older one is, the more one likes the European style.

In spite of the differences, the debate between the two ways of organizing production and the and the distribution of profits and wealth is at the point of being settled, without having been exhausted, by the uncritical announcement of the victory of the American way as of the second half of the Nineties. I, however, think we need to reopen the discussion, or not close it yet, and I propose a debate — essential in the knowledge society — about the economic system as an epistemic device, as Hayek would say, which is to say, about the different ways of generating information.

To put this debate in order, I’ll paraphrase an article by Sah and Stiglitz from twenty years ago (The Architecture of Economic Systems: Hierarchies and Polyarchies, American Economic Review, 76, 4, 1986, pp 716-727), in which they inquire about the differences between a heirarchy and a polyarchy when it comes time to select what, for our purposes, we could consider pieces of information, or, more simply, ideas. America would be a polyarchy in which the idea filters are installed in parallel, such that an idea rejected by one filter can be accepted by another. Europe, on the other hand, would be best represented by a heirarchy in which the filters are installed in line, in such a way that any one of them can veto an idea. This description agrees with general prejudices about America and and Europe and corresponds to my personal experience in education on one continent and the other.

What do Sah and Stiglitz teach us? If the filters are imperfect (and they are), American polyarchy accepts more ideas (both good and bad) than the European heirarchy, which is easy to understand, based on the different installation of filters. What’s not immediately obvious is that the American polyarchy opts to avoid the Type I error (namely, vetoing good ideas) while the European heirarchy opts to avoid the Type II error (namely, accepting bad ideas).

As you see, elitist Europe worries about avoiding intellectual trash, and populist America would prefer not to run the risk of killing a promising idea. We need to know what’s better in terms of the useful information we end up with, which is to say, we have to use the expected epistemic benefit as a criterion. Hayek would be proud of this criterion, but its application causes casuistry when we have to move in the realm of the subsidiary optimum since the first best is not reachable because of a lack of information or because of limits in the capacity for calculation. In broad terms, we could say that the cited authors are able to show that in good times (when the ideas ideas in the air are of good quality or of high proportion, America (which is to say, polyarchy) provides a greater expected epistemic benefit. However, in bad times (in which there is a a high proportion of tentative ideas of low quality), Europe will function best in terms of the expected epistemic benefit. This is all intuitive enough; but to write a final and useful moral for these days without a narrative, we still need to know if the times are good or bad.

My intuition tells me that for biotechnology, the times are good, while for the economy or telecommunications, the times are bad. I’d know how to weigh the consequences if I had to decide where to learn biology, economy or telecommunication. But how are the times for political science, to which we return with unusual frequency in the search for ideas for the new narrative? In my judgment, and even if we were prepared to pay attention to the ideas of Republican neoconservatives in the US, there are no great ideas budding today, and the ones in circulation aren’t even novel.

If my judgment is correct, we should listen to old Europe. What’s cooking here, and what we’re front-row spectators of, must be heard with full attention. Let’s not get knotted up when we hear about zany ideas like asymmetrical confederalism, the economy of abundance, P2P production or the need to dissipate rents. My intuition is that ideas like these, which are often looked down on as utopian, or merely theoretical, will be listened to in Europe in these days of tribulation. These ideas have an enormous epistemic potential.

Translated from the original (in Spanish) by Steve Herrick of

«Towards a new narrative I: America vs. Europe» recibió 0 desde que se publicó el Miércoles 12 de Septiembre de 2012 . Si te ha gustado este post quizá te gusten otros posts escritos por Juan Urrutia.

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