I know last time we talked about Minsky, but we’re going to talk about him again, as he is very important. Today we’re going to be talking about the drive to investment and the difference between Freud’s “desire” and Gilles Deleuze and Felix Guattari’s “desiring-production.” This is a really preliminary sketch, but I wanted to share it, because it has been a long while. Probably I will come back to this topic later and spend a bit more time on the microstructural questions, as well as path-dependency. This piece gets at what I think the core thesis is, which is that everything in the economy is ultimately a function of the investment decision. We’re having fun here, but the world really is downstream of the provision of investment goods.
In Freud, you have a Subject and you have Reality. The subject has Desire for things – it wants to hang onto them. The problem is, that Subject always ends up desiring more things than it can actually get. It sees itself as Subject, sees things in the world that it wants, and tries to get them. If its confrontation with the world demonstrates that it can’t actually have what it desires, the Subject has a couple possible responses. The most common is repression, claiming that it didn’t actually desire the thing in the first place, and forcing the remaining desire into its unconscious where it can run wild. This is Civilization and its Discontents or Neon Genesis Evangelion. However, this repression creates all kinds of strange symptoms, as the unconscious desire spills out in all kinds of weird ways that prevent the subject from meeting its own needs. The subject has a hard time sorting this out on their own, as the desire they need to work through is repressed to a part of themselves they can’t access – the unconscious. One part of psychoanalysis is sorting out what kinds of repressed desires the patient has and figuring out how these can be channeled in less symptomatic ways.
This is a classic story and we’ve all heard some form of it. If we shift a couple of definitions around, it also looks a lot like the mainstream story about how firms decide to invest in capital goods. The firm wants to produce widgets, all the way up to where price equals marginal cost. It faces a real world – “reality principal” in Freud’s terms – entirely defined by the cost of capital and the cost of labor. It moves along a production function to make as many widgets as it can while also satisfying price = marginal cost. The cost of labor is ultimately outside of its control, and the cost of capital is given by the interest rate (to a first approximation). If the interest rate is too high, the firm is forced to repress its desire to invest. At the same time, the firm has no control over the interest rate. In these accounts it’s given as a function of the amount of savings and the demand for loans, subject to “manipulation” by the central bank.
Now, say investment is too low. Using this model, one assumes that firms have an unlimited desire to invest, blocked only by the extent to which the reality principal – the interest rate – intervenes. So, the central bank lowers interest rates, and assumes that the desire of the firm to invest will take over and expand to the level consistent with the new reality. We have more or less seen this strategy over the last 10-12 years, but investment has remained low. Corporate savings have increased, the interest rate has fallen, but fixed capital has not surged forward. There is very little this paradigm can say: it can blame workers for not working hard enough, blame wages for being too high, blame Total Factor Productivity for whatever it does. The world is fixed, the firm is fixed, and the symptom persists.
In Minsky however, it is a different story. Investment as a process drives the entire system, both the financial side and the productive side. At the core is a Keynesian model, where the act of investment produces the savings required to finance the investment itself. Investment also generates the income and employment necessary to purchase the output of the capital goods which an entrepreneur invests in.
Investment is produced by a demand for cash-flows, rather than an attempt to bring the firm to a point where their marginal cost of producing a good is equal to the price that good commands in the market. Investment is a productive force, rather than a response to a lack or absence. These marginal movements don’t matter to the decision to invest: each capital good is figured as a kind of physical bond that commands “quasi-rents.” Entrepreneurs demand these capital goods regardless of what they produce, because they demand the quasi-rents produced by their operation, and the sale of their output. What is produced doesn’t matter – it’s just a function of where entrepreneurs believe they can get their investment validated.
At the same time, the financial sector has the same demand for cash-flows. One way of putting these together is to finance the investment in capital goods by entrepreneurs, in the form of loans. When an entrepreneur decides to invest, they do so because of the fact that both they and the banking sector demand certain cash-flows. Banks buy and sell financial assets in order to structure their cash flows, while entrepreneurs buy capital goods and sell finished goods to structure their cash flows.
Both of these actors are reflexive, though. Banks only want to make loans that they think will be repaid, and entrepreneurs only want to make investments that they think will be profitable. “Reality,” as a principle, only intrudes through expectation formation on the side of both the banks and the entrepreneurs. Rather than a world where firms have unlimited desire to invest and are thwarted only by the level of the interest rate, we have a world where the decision to invest generates both the firm itself, as well as the interest rate. Beyond that, future investment decisions are strongly influenced by past investment decisions, both in terms of level and what particular things are invested in. The decision to invest generates the subject and object of investment, while also creating the reality required to validate its own expectations.
In Freud, both the subject and the world are given rather than constructed. There is a field of well-defined objects that the subject engages with. Desire comes about as a felt lack of one or more of these objects and forms a psychological motivation. This can remain a feeling at the psychological level, it can structure the worldview of the subject, and it can be a guide to action. The subject wants what it wants. Usually, however, the world intrudes on the desires of the subject through what Freud calls “the reality principle.” Some wants just can’t happen, out here in “the real world.” We hear all the time about people sublimating their excess and frustrated desire into artwork, into terrifying crimes, into being uncomfortably online. Only so much desire can be acted on, only so much can be achieved, and for Freud, the reality that enforces this exists and is well-defined independently of the desiring subject.
To paraphrase Owen Wilson, what D&G’s idea of desiring-production presupposes is, “what if it didn’t?” In place of the desire of a given subject in a given world is the drive (what D&G call “machine”) of desiring-production. This drive produces the subject that does the desiring (the firm), as well as the world that the subject is in (the interest rate, profitablility, everything else downstream of the investment decision). In our terms, there aren’t already objects in the world that are capital goods, instead, investment is the name for the force that creates firms, capital goods, and savings simultaneously. Desiring-production – like investment – is free to roam and has no reality principle to clamp down on it, since the objects that it generates make up the reality that would – in the Freudian scheme – intrude. Anything is possible, on a long enough timeline.
Where this becomes useful for thinking about the economy is when we realize that no amount of tinkering with interest rates is equivalent to the decision to invest. Investment isn’t a constant desire in all firms in the economy only blocked by the level of the interest rate. Instead, it is the very thing that generates both firms and the interest rate itself.
It’s worth noting that Anti-Oedipus was written at the tail end of the trente glorieuses, an era when the French government stepped in to drive investment if the private sector wasn’t doing it. Desiring-production suffused the economy, simply because the government sought to insure adequate investment. Some readers of D&G have worried that their force of desiring-production – a pre-personal, pre-psychological machine for producing desire and subjects alike – meant that capitalism could never be superseded. Accelerationists believed it meant that capitalism itself was a pre-personal, apsychological force that it was both impossible and illegitimate to fight against, as it constructed the very subjects who claimed to fight it. Really, it’s just a good way of extending the idea of Keynes’ animal spirits, and the long-run hysteresis and path dependence engendered by the production and financing of capital goods.
This is ultimately kind of boring, so nobody really wants to argue for it as a reading, it’s much more fun to have desiring-production as an inhuman force that generates both capitalism and goofy sci-fi stories. Or Roko’s Basilisk! Anyway, the way to higher investment is not to attempt to remove a repressive reality by dropping the interest rate, but to produce new realities by having the only politically responsible actor – the government – invest directly.