Truth, Ideology and the Economics of Information.

Disclaimer: This is topic actually not that boring!

In one of my postgraduate political science readings I came across a fascinating argument linking ideology and the economics of information. Now, bear with me: that might that sounds technical or uninspiring, but it really isn’t when you think of the implications of the theory. Let me give a brief outline of the argument made by Douglass North in his book Structure and Change in Economic History, in Chapter 5.

North talks about the limits of neoclassical and neoliberal theories in fully explaining how social organisations like a State operate. He argues that the self-interested, rational Neoclassical individual will always act in his best interest and will, for example, only follow rules or honour his obligations so long as the benefits outweigh the costs. However, if this were true, social organisations could not survive as individuals would end up cheating, shirking or otherwise undermining rules which are not in their advantage. The cost of monitoring and enforcing laws or contracts would be far to great to allow organisations to be viable. To add another dimension to these neoclassical assumptions, North argues that people behave according to “ideology”, which is used to provide a degree of legitimacy to organisations such as a State, to the extent that this persuades people to obey rules of their own accord. He argues that every society invests huge amounts of resources and time in building up their legitimacy, including through ideology, so as to avoid the costs of policing reluctant compliance by every member.

The next part of the author’s argument is what fascinates me most. North outlines what ideology is from an economic perspective. He reminds us that information “costs” a lot. For example, it takes up a person’s time and energy finding relevant facts and using their brain to make sense of the facts to inform their decisions. Indeed, facts don’t let us make sense of the world: this requires thinking and using logic to make theories which can then be tested against other facts and eventually used to inform our understanding of the world. An example that our teacher gives is that if you were one day stuck in unusually heavy traffic, you would use previous experiences (or facts) to come up with a theory like “there must be an accident up ahead”. This is then tested when you eventually drive past and find out whether or not there was an accident. If there wasn’t, this is a new “fact” which you add for future reference, while dismissing your initial theory that “every heavy traffic jam is caused by an accident”.

Now what does this have to do with ideology? Put simply, an ideology is a set of rational structures like theories, which can be applied in a wide range of cases and can be used to make sense of the world. Ideology is in essence a set of assumptions about what is “true” about the world built on some theories which are themselves based on facts. These theories are then applied in every aspect of the person’s life, as a guiding mental model. North makes a very interesting point about ideology, which he describes as “an economising device by which individuals come to terms with their environment”. Put simply, it is impossible for anyone to be constantly trying to make sense of the world by evaluating every single fact that they come across and trying to make a theory from it. Ideology provides an overarching mental “model” that allows a person to make quick judgements and decisions about what facts mean and what they should interpret. North also points out that ideology is deeply interwoven in a person’s understanding of morality and values like fairness. This implies that there are alternative “models” or ideologies which could be applied based on how the individuals understands and weighs up different values such as fairness. The author also explains most people will revise or modify their ideology when new experiences come to challenge their previous theories.

What is important about this argument is that ideology is intrinsically not the same as absolute truth (which does exist, sorry Relativists). An ideology is a simplified model, a set of theories, judgement calls and points of view that are used to make sense of the world given a person’s limited time and brainpower. Another point is that ideologies evolve and change over time as they become less relevant or challenged by more experiences. Even more importantly, an ideology is very deeply engrained in a person, to the point that it is well below consciousness. Everyone knows the expression of looking at the world through “coloured lenses”, which is basically how an ideology works.

To conclude, I think it is important to remind people that just people have wildly different understandings of the world and of what is true, good and beautiful, doesn’t mean that these things do not exist objectively. A big part of our subjectivity  is the ideology which we subscribe to at a given point of time to make ethical or practical decisions. It is also important to be aware of our inherent ideologies. The better you understand the set of theories and value judgements which make up your “ideology”, the easier it is to judge whether you are really doing the right thing and the freer you are to adjust your ideology, rejecting the parts that you have discovered to be untrue and embracing those that lead you closer to what is true, good and beautiful.

Work Cited:

North, Douglass. 1981.  Structure and Change in Economic History.  New York: W.W. Norton. (Chapter 5)

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