by From Richard Parker and current issue of RWER Let me now try to connect this little synoptic “longue duree” to the present and to the matter before us: neoliberalism and what might succeed it. We live in the early 21st century and the conventional economics we’ve inherited has now arrived at a moment when once-novel Victorian-era ideas seem not just inadequate but irrelevant. A similar moment seemed, to many, to have arrived before, back in the 1930s. But apostles of marginalism such as Lionel Robbins or Mies or Hayek – faced with what they saw as the socialist implications of Rooseveltian politics and Keynesian ideas about states and economies – insisted on the singular “efficiency” purpose of “economics” as theory, and theory’s realization in the modern market world around them. For
Topics:
Editor considers the following as important: Uncategorized
This could be interesting, too:
Merijn T. Knibbe writes ´Fryslan boppe´. An in-depth inspirational analysis of work rewarded with the 2024 Riksbank prize in economic sciences.
Peter Radford writes AJR, Nobel, and prompt engineering
Lars Pålsson Syll writes Central bank independence — a convenient illusion
Eric Kramer writes What if Trump wins?
from Richard Parker and current issue of RWER
Let me now try to connect this little synoptic “longue duree” to the present and to the matter before us: neoliberalism and what might succeed it. We live in the early 21st century and the conventional economics we’ve inherited has now arrived at a moment when once-novel Victorian-era ideas seem not just inadequate but irrelevant.
A similar moment seemed, to many, to have arrived before, back in the 1930s. But apostles of marginalism such as Lionel Robbins or Mies or Hayek – faced with what they saw as the socialist implications of Rooseveltian politics and Keynesian ideas about states and economies – insisted on the singular “efficiency” purpose of “economics” as theory, and theory’s realization in the modern market world around them. For these men, the matter was supremely “intellectual” and “scientific”, not a story of competing classes in capitalist societies. Robbins’ magisterial dictum that economics was “the science which studies human behavior as a relationship between ends and scarce means which have alternative uses” was in fact by the 1930s already, well, Victorian.
Let me be blunt here: the Marginalist Revolution is still today, just as in the 1930s, what it was first – the best attempt by a group of late-Victorian and Edwardian thinkers, confronting the 19th century’s emerging capitalist system and its “logic”, to “explain” (and thereby, in “scientific” terms, to justify) the emergence of that particular early stage of capitalism through “scientific reason”, mathematics (mostly geometry and simple algebra at first, then the calculus) and specifically-abstracted “models”[1] mathematically arranged to solve the question of “right price” – first of the transactional exchange of physical goods, then of labor, capital (fixed and financial) and natural resources.[2] Those thinkers moreover did so in ways they meant to consciously refute their Catholic theological ancestors and their moral basis for “just price” and “just wage” debates[3], as well as their Protestant social-democratic and their secular-socialist (especially Marxist) contemporaries on the implications – not just economic but moral and political – of this novel capitalism’s societal distribution of “surplus profit”, and with it, the ownership rights to the means of producing goods and organizing a great deal of social life.
From the start, there was disquiet within early academic departments about what they were doing. Alfred Marshall, the law-giving Moses of marginalism, himself warned,
In my view every economic fact whether or not it is of such a nature as to be expressed in numbers, stands in relation as cause and effect to many other facts, and since it never happens that all of them can be expressed in numbers, the application of exact mathematical methods to those which can is nearly always a waste of time, while in the large majority of cases it is positively misleading; and the world would have been further on its way forward if the work had never been done at all.[4]
Then, lest he be misunderstood or gainsaid, Marshall added this prescriptive injunction:
- Use mathematics as shorthand language, rather than as an engine of inquiry. (2) Keep to them till you have done. (3) Translate into English. (4) Then illustrate by examples that are important in real life. (5) Burn the mathematics. (6) If you can’t succeed in 4, burn 3. This I do often.[5]
In America, the founding of the American Economic Association in 1885 launched a battle between Progressive Era reformers, who dominated the early AEA, and their conservative and pro-business, often Social-Darwinian, opponents. The battle would go on continuously – simplified in later retelling as between Institutionalists and Marginalists. What followed were fights over tenure, publication, and funding for research that were relentless – until shortly after World War II, when the Depression-era Keynesianism and New Deal reformism were transformed into the Cold War’s Military Keynesianism and anti-communist liberalism. In short order, academic economists embraced a mathematicised macroeconomics called “the Neoclassical Synthesis” that validated specific ways states could “intervene” in economies but eschewed any questioning of the “military” in “Military Keynesianism”. Paul Samuelson was the dean of that “Neoclassical Synthesis”, which sought to “resolve” the profession’s inherited battles from the 1880s through the 1940s by wedding a mostly Keynesian “macroeconomics” through a shotgun marriage to a Marginalist “microeconomics”. Late in his life, he spoke of just how carefully he had written and repeatedly edited his legendary textbook to meet the Cold War’s anti-communist requirements about the sanctity of capitalism’s essentials: private property and its control through concentrated private ownership, while legitimating government’s role as macromanager of aggregate demand. Meliorative in prescription, academic economics could thereafter be; more than that, it could not and would not be allowed to consider becoming.
Long before “neoliberalism” arose, in other words, the separate and legitimate sphering of “economics” and “politics” – not just by university departments, but in the larger world, in the imaginations of policy makers, politicians, journalists and the talking classes generally, the right and natural hegemony of “markets” over “states” was established. It is a history that critics who consider “neoliberalism” a relatively new problem would do well to revisit and understand.[6]
read more here
[1] See Keith Thomas, Religion and the Decline of Magic and David Wootton, The Invention of Science. The fact that one can earn a PhD in economics today without slightest acquaintance with that history goes a long way for me in explaining why too many economists today behave more or less as “idiots” in the classical Greek sense of “idiotes”, as those who fail to understand where they came from, so do not take an active part in the life of the polis, and hence offer little wisdom the polis’s citizens can use.
[2] Phillip Mirowski, More Heat Than Light: Economics as Social Physics, Physics as Nature’s Economics handily covers economics’ “scientific” ambitions related to pre-Einsteinian physics. For the role of biology – especially the corruptions of Social Darwinism – Dorothy Ross, The Origins of American Social Science is a useful starting place, as well as for her handling of the rise of “departmentalism” and economics’ segregation from history, political science, law, philosophy and sociology.
[3] On the still-relevant questions the Middle Ages raised about “just price”, Hamouda and Price, “The justice of the just price”, European Journal of the History of Economic Thought, v.4, no.2 (1997).
[4] For this, Hans Jensen. ”Alfred Marshall as a Social Economist”, Review of Social Economy, v.45, no.1 (April 1987).
[5] Alfred Marshall, Principles of Economics, citied in Stanley Brue, The Evolution of Economic Thought, 5th ed., pg. 294.
[6] Binyamin Appelbaum, The Economists’ Hour, offers a readable Cook’s Tour of this postwar history.