A Pascal Wager for France

How can we influence the economic policies of the new administration? I have lists ready: a short list of principles, a slightly longer list of institutional boundary rules, and an infinite list of market-friendly policies. I need an entry point, an avenue to the decision makers...

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I know! I will spend My Night With Maud.

It is a film by Eric Rohmer in which a French Engineer allows his important life choices to be dictated by Pascal’s Wager -- it pays to believe in god because if god exists you gain eternity and if god does not exist you lose nothing. If you wager against god and god exists you have misery. Either way, if god exists you keep the status quo but make a few little sacrifices. Such as no more passionate love outside marriage. The Engineer is not persuaded by the seductive Bohemian divorcee who tells him ‘choose love not god’. He goes to church. There, in silence, he chooses a pretty girl sitting in the pews opposite. The Engineer even persuades his agnostic marxist-philosopher friend to accompany him to church. He has carnal eye-contact with wife-to-be over the shoulder of the philosopher.

In my secular script the marxist-philosopher friend will offer to personally introduce the Engineer into President Hollande’s inner circle. They discuss how they will do this over coffees and mineral water in a cafeteria in Tulle, where Francois Hollande built his political base.

In my film, the equivalent of Pascal’s Wager will be Schumpeter’s Wager. I know... it does not have quite the same ring to it. We don’t love German language as much as we do the French dulcet tone. And perhaps we trust Pascal’s impressive calculus more than we do Schumpeter’s statistical sources.

Nevertheless, Joseph Schumpeter, the so-called Prophet of Innovation provided ample secular (Darwinian) evidence for the pattern of recurring long waves of innovation-driven economic growth. Evolution has more solid foundations than spiritual belief. If you want to play safe you will see recessions or depressions as the necessary counterparts to prosperity. Recession follows prosperity and recession precedes prosperity as sure as night follows and precedes day. Recession exists for the purpose of ruthless cost cutting, retrenchment, restructuring, rationalization, and the upsetting of comfortable routines and cherished values. Depression clears the way for innovation. This is capitalism. If you want the up side you must take the down side on the chin, like a Ronald Reagan punch in a film noir.

In Schumpeter’s Wager things are reversed. The cycle is equivalent to god; the recession is equivalent to providential design. If you wager for the cycle and the cycle exists then you get equal alternations of misery and happiness for eternity.

If you wager for the cycle and the cycle does not exist… well, you might lose a little and gain a little. If you wager against the cycle and the cycle does not exist you… again, you might lose a little and gain a little.

But if you wager against the cycle and the cycle does exist you may lose all the prosperity that capitalism *created*. In Schumpeter’s Wager there is no status quo.

To cut a long story short, the Engineer chooses the positive rather than marxist view of crises and goes to President Hollande with the wager that the long wave cycle does exist. The French people must face a period of devilishly sacrificial retrenchment and gloriously creative institutional reform. In this film the Engineer’s part could be played by a French institutional economist Robert Boyer who looks like Indiana Jones and formalized a Schumpeterian model of structural crises. According to Boyer, “the very functioning of regulation comes into contradiction with existing institutional forms which are abandoned, destroyed, or bypassed… The system can no longer reproduce itself in the long run”.

Monsieur le Président, France cannot continue as before.

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    The world’s leading thinkers and policymakers examine what’s come apart in the past year, and anticipate what will define the year ahead.

    Order now