By Richard R. W. Brooks
My comments on Foucault’s The Birth of Biopolitics will focus on the distinctions he observes (in discussing neoliberalism) between abstract economic and legal subjects (subject of interests and subject of rights) and actual individuals in concrete interactions of civil society. Interestingly, a number of the features and fractures that Foucault identifies between the German ordo-liberalism and the American (Chicago School) neo-liberalism, surfaced earlier in the U.S. context between advocates of the marginalist revolution in economics and their counterparts among progressive institutional economists (themselves, to a non-trivial extent, influenced by the German historical tradition) at the turn of the nineteenth century. I hope to usefully relate this marginalist-institutionalist debate to Foucault’s insightful analysis of economic subjects as developed by the Chicago School, significantly in the Journal of Political Economy, and particularly through Gary Becker’s theories on human capital and criminality.
Beginning with human capital, it is important to emphasize that the optimal allocation of human capital has long been part of contested discussions in economics, visible in the earliest arguments over theories of value. Contestation over the ‘optimal’ allocation of labor, for instance, crystalized in the debate over slavery in Jamaica (and famine in Ireland), which led Thomas Carlyle to indelibly dub economics the “dismal science,” for its failure to recognize and follow the godly order of things. Releasing labor to the impulses of the market, Carlyle argued, only magnified the governance problem of ordering differently abled actors (different by divine design):
what relations the Eternal Maker has establish between these two creatures … in the respective qualities, strengths, necessities and capabilities … this will be a long problem; only to be solved by the continuous human endeavor, … to ‘find the rights terms’ of a contract that will endure, and be sanctioned by Heaven, and obtained prosperity on Earth between the two.[1]
Here Carlyle invokes a call to the governance form that Foucault labeled ‘truth’ or ‘wisdom’: “governing according to the knowledge of human and divine laws … governing according to God’s prescriptions … according to what general human and divine order may prescribe.” [BOB, 311] How, then, can practical governance identify and exploit the truth of the heavens? Carlyle asks, “What are the true relations between Negro and White, their mutual duties under the sight of the Maker of them both; what human laws will assist both to comply more and more with these?” Certainly not the laws of supply and demand, he answered,—“this of declaring that Negro and White are unrelated, loose from one another, on a footing of perfect equality, and subject to no law but that of Supply and Demand according to the Dismal Science; this which contradicts the palpablest facts, is clearly no solution, … and every hour we persist in this is leading us towards dissolution instead of solution.” Carlyle offers an early and clear argument regarding the “dissociative bond,” the ‘disequilibrium introduced as a result … of the economic mechanism.” [BOB 306]
To be sure, classical economic theorists also recognized ‘natural’ distinctions among economic subjects, but this was a feature of their framework (not a problem per se) that resolved, or better, aligned itself by allowing subjects to engage each other without artificial and ancient restrictions, observed Jeremy Bentham, handed down from by “custom and ‘ancestor wisdom’ (or worse, worship)”.[2] These differences, Adam Smith told us, produce arbitrage opportunities and provide incentives for specialization, which increases individual and social wealth through the operation of the market. However, as Foucault points out in his discussion of Adam Ferguson’s tract on the history of civil society, the “de facto bonds which link different concrete individuals to each other” also operate outside of the marketplace, strictly speaking. “These spontaneous differences immediately give rise to divisions of labor in the decision-making processes of the group: some give their views, others give orders; some reflect, others obey.” [BOB 304, emphasis added]. When differently-situated actors come together in the marketplace, as economic subjects, then wealth is produced. When differently-situated concrete individuals come together in the space of civil society, as not necessarily as economic subjects, then power is produced. Foucault quotes Ferguson’s central insight that “Prior to any political institution whatever [ ] men are qualified by a great diversity of talents, by a different tone of the soul, and ardour of the passions, to act a variety of parts. Bring them together, each will find his place.” [304] Subordination and power evolve spontaneously and naturally in the civil space. I will come back to this important observation about the evolution of power in civil society.
At the moment I would like to return, briefly, to what Foucault saw as Becker’s (as well as Theodore Schultz’s among others) essential contribution in the economic theory of human capital. This theory changed certain terms of the debate, rejecting a central premise that both Carlyle and Ferguson (not to mention the classical economists and practically everyone else at the time) took for granted—which is to say that human distinctions were givens. When distinctions are natural and fixed, the economic problem is simply one of optimal allocation of labor. When distinctions are endogenous the economic problem also entails optimal investment into human capital. By making this move, says Foucault, Becker pushed us to “adopt the point of view of the worker and, for the first time, ensure that the worker is not present in the economic analysis as an object—the object of supply and demand in the form of labor power—but as an active economic subject.” [223] By taking the point of view of the worker—”the set of all those physical and psychological factors [e.g., ability, skill] which makes someone able to earn this or that wage,” and which are in some important sense inalieanable from the subject and generates a stream of earnings over the subject’s lifespan—it is a just a small step to bring investment into the analysis of “the machine” that generates this earning stream.
Highlighting investment in human capital is an important element in Foucault’s analysis and it remains central in economic debates today. Recognizing that the marginal contribution of investment in human capital appears greatest when the subject is youngest, neo-liberal social policy is now largely promoting early childhood education as a key moment intervention, but it is hard to miss the correlate implication (of what to do with older subjects having low marginal productivity from investment) which other neoliberal mechanisms appear to address through carceral policies rather than rehabilitation, training and educational interventions. It follows entirely from the theory. Current immigration policies are only implicated by the theory (“[m]igration is an investment; the migrant is an investor” [230]). Yet the theory, by itself, does not, cannot, account for the observed racial and ethnic disparities across these various domains. Answers, Foucault suggests, may be found where the abstract theory intersect with concrete civil society. I will come back to this point too.
Regarding race, it may be worthwhile to draw a distinction between two types of human capital investments, which I will loosely label productive investments and reproductive investments (supporting, for instance, assortive matching and search). Consider education, for example. Education may make one more able to carry out a task (i.e., make one more productive). But even if education is not productivity-enhancing, investments in it may be justified it is a costly signal of desirable unobservable qualities (see e.g., Spence, 1973). In that case education does not increase productivity directly, but rather makes one better able to separate himself from the masses, becoming a more desirable “partner of exchange,” as Foucault puts it, or partner in reproduction as Veblen emphasizes in his Theory of the Leisure Class. Becker is largely concerned with productive human capital investments. Foucault, however, also attends to reproductive investments: “as soon as a society poses the problem of the improvement of its human capital in general, it is inevitable that the problem of the control, screening, and improvement of the human capital of individuals, as a function of unions and consequent reproduction, will become actual, or at any rate called for.” [228] At this point in the text, Foucault dismissed race as neither useful nor interesting in the analysis. While acknowledging the potential and threat of “racist effects,” he concludes “this does not seem to me to be the major political issue at the moment.” [229]. The dismissal seems too quick. At least in the American context, race was certainly an issue at the time, as it remains today, and neo-liberal ideology has not been indifferent to this fact. Indeed, a great achievement of the American neo-liberal project has been its success in reducing, or rather in eliding, the apparent role of race in everyday governance. Gary Becker’s doctoral dissertation, subsequently published as The Economics of Discrimination (1957), was the first fortification in the broad neoliberal view espousing the inevitable decline of “racist effects” in a free and unregulated economy. It stood alone and ascended as truth, notwithstanding observed empirical facts (at least until theories of a persist dual labor market were subsequently advanced).
In this volume, Foucault is less interested in the investment implications that follow from Becker’s theory of human capital than the fact that the theory forces us to adopt the perspective, “for the first time,” he says, of the worker, the economic subject. Here, I would resist this particular attribution to Becker (although he is rightly credited with much else) of generating the master theme of American neo-liberalism—that is to say, taking the perspective of an agent subject to law and political power, who himself does not take an internal point of view with respect to those sources of power and potential authority, but rather responds, always and solely, to his own interests as an economic subject. Surely, this is precisely the perspective Oliver Wendell Holmes advocated at the turn of the nineteenth century in legal circles with his “bad man” theory of law. Even among economists at the time, and even at Chicago and within the Journal of Political Economy, Thurston Veblen and other institutional economists were bringing light to the abstract perspective of disconnected economic agents who responded only to their interest; subjects without a sovereign, answering only to their predictions of pain and pleasures from various actions, which brings us to Becker’s theory of crime and the criminal. Becker again, this time in his essays on the Economics of Crime, encourages us to take the perspective of the actor subject to criminal enforcement/sanctions but not genuinely subject to the authority of law. Becker’s approach dispenses with the “criminal mind”—the economic subject is a psychologically anonymous and rational ideal type (which is also a signature mark of German neoliberal theorists von Mises and his students Hayek and Malchup, who was also significantly influenced by Alfred Schutz). Now the criminal is any man, every man. Unaddressed by this approach, however, is the problem of the criminal category. Becker doesn’t dispense with the criminal category, he takes it entirely for granted. Foucault argues that this is a necessary step, because economics cannot offer to content to entitlements; that was Bentham’s and (to a lesser degree) Beccaria’s conceit and ultimate failure. How, then, is the juridical structure determined?
At last, we arrive at the role of civil society, elaborated in Foucault’s final chapter. Relying on Ferguson we are reminded, again, that civil society possesses a power from the first social encounter. Hence we are moved from the problem of locating the “juridical form at the origin of society” to recognizing that civil society (with forms of subordination and, therefore power) has been there from the start. The juridical challenge is then one of incorporating the legal/political form over a sovereign space where prior forms of deference already govern civil subjects and where pursuit of rational interests always govern economic subjects. Holmes suggests a solution. Reduce the juridical form to the pragmatic concrete determinations of a rational economic subject, the so-called “bad man,” and define the obligation of the contract (social and private) as an option (subject to sanction from the sovereign) allowing the subject to respond to her interests. This is fleeting. The central questions remain unanswered. How does the sovereign determine the correct juridical structure and how is the exercise of power plausibly restrained? How are the rules and the limits identified?
Three possibilities exist. First, recall the form of governance that Foucault labeled “truth” or “wisdom,” wherein the sovereign discerns from them the divine plan while at the same time being always limited by his inability to comprehend the plan. The second two forms abandon God and put their faith in an attempt to “peg governance to rationality,” either the rationality of the governor (sovereign) or the governed. In the former case, expert advisors may provide the tons of data, but the inability to integrate the requisite knowledge in a unitary rationality, limits the capacity and effectiveness of governing based on the “rationality of the governor.” Turning to the “rationality of the governed,” the neoliberal favorite, one may find the basis of governance and a limitation on its exercise of power (i.e., so as to not interfere with the rational pursuit of individual interests which through the invisible hand, or the ‘marvel of the market’, promotes social welfare). Although recent neoliberal expansion has promoted that last modality, Foucault argues, it would be a mistake to imagine that the prior forms (or “arts”) of governance are gone: there still remains “all these different types of ways of calculating, rationalizing, and regulating the art of governance, which overlap each other broadly speaking constitute the object of political debate from the nineteenth century.”
I would emphasize that these are ideal type of governance (all three competing always on the stage of ideology). What actually results, the actual form that governance takes, is determined by the implementation of these competing ideologies within the concrete localized domain of civil society. Unlike divinity or basic rationality, which are universal in application to all, civil society is bounded. It “appears in the family, village, and corporation, and, of course, at higher levels, reaching that of the nation.” [302]. While abstract economic subjects come together as equals, loosely, unrelated, disconnected, (recall Carlyle’s objection to the Dismal Science: “this of declaring that Negro and While are unrelated, loose from one another, on a footing of perfect equality, and subject to no law but that of Supply and Demand”), subjects in the civil space are connected by “instinct, sentiment, and sympathy,” says Fergusson, as well as benevolence, loathing, repugnance and contempt. This implies limits and distortions in ideal governance; even when one form (e.g., neoliberalism) is in clear and sustained ascendency, we will still observe outcomes divergent from what the universal ideology calls for and predicts (see e.g., distortions and debates in trade, investment, immigration and incarceration policies). These distortions suggest a final question that I would like to raise for consideration. What is the optimal size or boundary of civil society?
There is, I think, a rather useful connection here with Ronald Coase’s first and arguably most important article, The Nature of the Firm.[3] As a young man Coase, who recently passed away at age 102, received a travel scholarship from the London School of Economics, which he used to visit U.S. to study economic organization, particularly the burgeoning automotive manufacturing industry in Detroit of the 1920s.[4] Based on his empirical observations of business organizations, Coase framed his article around two central questions concerning the optimal governance of business transactions. Importantly, Coase’s questions were not the product of pure imagination, if such a thing exists. The questions were revealed to him against a backdrop of highly charged debates over political governance. As Coase recalls his time studying contracts and organizational structure among car manufacturers in Detroit, bigger political and economic questions preoccupied much of the academy and the world. “The Russian Revolution had taken place only fourteen years earlier. We knew then very little about how planning would actually be carried out in a communist system.”[5] This was the central matter of markets and civil society at the time. Contemplating the nature of state organization of economic activity, Coase seized on the metaphor of the firm (or maybe it was the other way around). Whatever the order, these ideas led him to challenge the confidence economists held in the market as the ideal way to organize production and allocation of resources. He posed his first question: if markets are ideal, then why do firms and large organizations bypass the market and organize many of their transactions through internal governance? Alternatively, the second question asked, if firms are superior to markets, then why aren’t all transactions organized within a single giant firm? The question was hardly facetious, as Coase observed: “Lenin had said that the economic system in Russia would be run as one big factory.”
For Coase, the answer to both questions was found in the notion of transaction costs. On the one hand, the transaction costs associated with the market—such as the costs of negotiating, writing and enforcing contracts—make firms relatively more desirable; on the other hand, the transaction costs associated with firms (or internal) procurement—such as bureaucracy, agency and administrative costs—limit the effective scale of firms. Subsequent work by others refined this question of the optimal of governace beyond the firm market dichotomy, particularly by including long-term relational exchanges. The theory of the firm is far from complete, but many insights have been made. I close with these questions: might we usefully probe issue concerning the boundary and forms of relations within civil society based on these insights? What forms of transaction (and transaction costs) result from with the contested civil space over so-called immigrant labor, the criminal category, policing, affirmative action, national security and so on? By what criteria is the optimal evaluated?
NOTES
[1] Thomas Carlyle, “Occasional Discourse on the Negro Question, Fraser’s Magazine for Town and Country (London, Vol. XL., February 1849) at 677. See also, John Stuart Mill, “The Negro Question,” Fraser’s Magazine (1850).
[2] Jeremy Bentham, The Works of Jeremy Bentham, chap. 1, General View Ends of Judicature, vol. 2 (1843). Bentham raises this point in his scathing critique of the common law and its principle proponent at the time, William Blackstone. “Shall Blackstone, then, be our oracle?” he rhetorically asks.
[3]. See Ronald H. Coase, “The Nature of the Firm”, Economica 4(16): 386–405 (1937).
[4] R.H. Coase, “The Institutional Structure of Production,” Lecture to the memory of Alfred Nobel, December 9, 1991.
[5]. Id.