Steinbeck on our Current Crisis

I found this interesting bit tying Steinbeck to the present in a blog entry by Justin Wolfers at the Freakonomics site.

I was reading John Steinbeck’s Cannery Row last night, and I was really struck by how the following passage speaks to the forces behind our current economic predicament:

“It has always seemed strange to me,” said Doc. “The things we admire in men — kindness and generosity, openness, honesty, understanding, and feeling — are the concomitants of failure in our system. And those traits we detest — sharpness, greed, acquisitiveness, meanness, egotism, and self-interest — are the traits of success. And while men admire the quality of the first, they love the produce of the second.”

The usual cheap shot after citing a literary figure would be to argue that modern economics can’t possibly grapple with such issues. But it can. The incentives that Steinbeck describes are the incentives described in standard economic models. Agency theory is almost entirely devoted to developing mechanisms to deal with the fact that private and social interests often diverge; information economics tells us a lot about when these incentives are active; and behavioral economics tells us how people balance the opposing forces Steinbeck identifies.

I think Wolfers is cherry picking. Sure, these fields of economics are trying to deal with elements of economic behaviour that underlie the crisis, but they didn't alert anybody to the potential problem and they haven't guided any actions during the current crisis. Wolfer's comment would be like Einstein surmising during WWI that his famous equation held the solution for the war. Sure, but it was applied only 25 years later and many, many billions of dollars later.

The tragedy of this current crisis lines up better with the comments that Paul Krugman has been making that the economics profession -- the "fresh water" economists -- has regressed. It is unlearned the lessons of the 1930s. The macroeconomics taught for the last 30 years have removed historical lessons and set people, and the profession, up for the current castrophe since the dominant economic ideas going into this crisis were so fundamentally wrong.

If I remember my literary history well, it was the reverse of what Steinbeck surmised. The fiction coming out of the catastrophe of the 1930s was a gritty realism that looked squinty-eyed at the grasping Wall Streeters while it sang the praises of the people who were the salt of the earth. The fact is fiction began rejecting this viewpoint: propserity in the 1950s gave rise to the beat generation, the boom in the 1960s gave rise to the post-industrial hippies, the stagflation of the 1960s created the me-generation of EST and rolfing, the revival of the 1980s gave us yuppies and Gordon Gecko with the claim "greed is good", the boom of the 1990s created the self-satisfied neo-cons and Newt Gingerich's rabid right wing politics, and finally with Bush in this decade you had the cherry-on-the-top with a completely dysfunctional government that let corporate corruption run rampant.

Steinbeck's comment is ahistorical. In reality there have been eras when what we admire isn't just the concomitants of failure and those that we claim we hate aren't just those of worldly success.