Barack Obama’s Pragmatist Economics

No one should be surprised by Barack Obama’s economic vision. In The Audacity of Hope, President Obama clearly outlined his commitment to a pragmatist version of capitalism, in which markets play the key role of coordinating distribution, assigning prices, and creating jobs. A government role was part of this vision, too, not only as a police force limiting and punishing force and fraud, but as a direct agent of the general welfare: the primary purveyor of education, the assurer of a dignified minimum on nutrition, housing, and health care, and a directive source of spending and jobs. This has been a mainstream moderate view of economics since the Great Depression and FDR’s experimental remedies for the particular problems in America’s economic system it revealed. It is a pragmatist vision in its flexible commitment to continue to experiment in order to solve new problems and to promote the evolving ideal goals pursued by the Founders and the generations who have lived after them: inclusion, fairness, opportunity, freedom from domination by others, shared power and responsibility to shape a common future.

What is unsettling to many about Obama’s economic vision is its non-ideological character. The introductory economics courses required by most business schools still teach as an accurate description of reality the over-simplified picture of market institutions operating on supply and demand, in which small business owners compete for sales on the basis of price and quality alone to rational, self-interested individuals who want nothing more than the best deal they can get and know it when they see it. In spite of its obvious differences from the way American life really works, true believers have equated this simplistic vision with freedom, and politicians with a transformative agenda have made it a litmus test for conservatism, even though it describes a way of life that has never been real. In the ideology-laden communicative environment created by continuous repetition and evocation of this short story about a past that never was accompanied by calls to make it our shared future, the only possible alternative seems to be its complete repudiation: rejection of markets in favor of centralized decision making on some other basis that denies freedom to ordinary people, in short, the evil twin vision of communism.

In reality, however, there are many other ways to think about economics, including the way Barack Obama does: the market story is a starting place for understanding how things work, useful as a tool, not a standard recipe. The larger questions are whether President Obama and his economic advisors use that tool as effectively as possible and toward what objectives, what other tools they combine it with, and what rival powers are at work against them in our complex, non-ideal world in which they employ it.