Approaching economics – from the individual to society and beyond

I have long found debates between different schools of economic thought to be an attractive aspect of the subject. And there are many such schools. This blog is indeed partly focussed on what is known as heterodox or non-mainstream economics, which is not a school in itself, rather it is a banner which brings together those who are critical of the mainstream. In today’s universities, particularly in the UK and US, an economics education will quite possibly leave the student with the impression that economic theory is a settled and uncontested body of thought. When economic crises are neither foreseen nor explained particularly well by the mainstream, economists may for a while search for and adopt ideas from heterodox approaches, which are then dropped once the crisis has passed, or absorbed into orthodox thinking, stripped of any radical notions or ideas that might threaten the hegemony of the mainstream canon.

Exploring heterodox economics and the work of its practitioners, one can find significant controversy, and plenty of critique of the mainstream. Sadly there seems to be little chance these days that any of the alternatives might supplant it. We have in recent decades lived through a major financial and economic crisis centred in the west, and a global pandemic. Government responses in the face of potential disaster have been unorthodox, but when the worst is thought to have passed, there follow efforts by policymakers to return to the status quo.

Again, there are many schools of economic thought. The neoclassical approach dominates the mainstream, and there is variety within that approach, from free marketeers to more progressive interventionists. There are Keynesians of different kinds, from those who don’t stray far from the mainstream, to more radical leftist post-Keynesians, who adhere more closely to Keynes’ and his colleagues’ and original followers’ work, as well as drawing on some Marxist ideas. There are Marxists who reject the work of Keynes and that of the neoclassicals altogether, and make their case for the overthrow of an irredeemably flawed capitalism.

Considering the power of economics

Reflections on the influence of economics in modern society, and how to improve its usefulness in the face of the multiple challenges facing humanity.

Economics has been variously nicknamed the ‘queen of the social sciences’ and the ‘dismal science’. In the modern world, the discipline surely has significant power, both for good and for ill. But why? Perhaps it wields influence via its attempts to explain and improve the creation of wealth. Or maybe this is due to its pretentions to be the most scientific and rigorous of all the social sciences via the mathematical formalism which dominates the mainstream economic approach. The latter leads it to attempt to be more science than social, with aspirations to a status akin to physics rather than sociology.

Things have not always been this way. Even today, many heterodox economists are highly critical of the mainstream, and draw on the greats of the past such as Marx and Keynes, whose work took a more literary rather than formalist approach. Keynes was an accomplished mathematician, so this was not due to a lack of ability or understanding. Prominent heterodox economists, such as Steve Keen, are happy to use mathematics and economic modelling, but remain critical of orthodox thinking, which Keen argues employs inadequate and outdated methods: in short, the ‘wrong’ kind of mathematics.

Economics is important for understanding the modern world. It purports to explain and, through its employment by policymakers, to change our lives for the better. It is far from always successful in this. But there is no doubt that capitalism’s power to create wealth, to incentivise the creation and use of ever-improving technology, to drive economic growth, raise living standards and generally to transform the condition of humanity, is remarkable and historically unprecedented. As a socioeconomic system or, in Marxist terminology, a mode of production, it has given us the power to transform nature and the environment. Despite all this, and as we are becoming increasingly aware, if the balance of nature is itself neglected in this process, we end up damaging it and, ultimately, ourselves as part of the natural world.

Some reflections on my current reading: Marx, nature, holism and sustainable development

Distinguished Marxist geographer David Harvey has a new book out: A Companion to Marx’s Grundrisse, which guides the reader through Marx’s collection of notebooks which prefigured Capital. Given that Marx’s voluminous later writing can often make difficult though ultimately rewarding reading, Harvey’s latest offering will be welcome for those who want to take it seriously but find it hard going.

I have also recently dived into studies of the relationship between Marxism and nature, in particular John Bellamy Foster’s Marx’s Ecology.

I will not be reviewing these works here. Rather I want to share and explore some of the ideas provoked in reading them.

Money and Power: the making of history, from “great men” to dialectics

Following Monday’s post introducing a series inspired by Vince Cable’s new book Money and Power: The World Leaders who Changed Economics, this is the first of several posts in that series. To reiterate, I will not fully review the book, as I am sure that is being done sufficiently elsewhere. Rather I will try to look in depth at some of the key issues tackled in the book, by taking them as a point of departure. Broadly speaking, they are to some degree inspired by the book, but they will also critique it.

In the book’s introduction, Cable discusses his approach:

“I try to pursue the links between economics and politics through individual politicians. Carlyle once observed that ‘history is the study of great men’ and I adopt that approach. It can reasonably be argued, however, that the study of ‘great men’ (and women) is to trivialize economic history: to reduce it to the world of ‘good’ and ‘bad’ kings in the manner of 1066 and All That. It ignores the power of technological change, demographics and migration, nutrition and medicine, changing social mores and popular movements…much of the critical commentary on the market-based transformations of the last few decades tends to dismiss individual leaders as mere flotsam on a tide of ‘neo-liberalism’.

Yet it is possible to overdo the impersonal. When future generations look back on the twentieth century with the same detachment as we currently see the Middle Ages, it will very likely be a tale of three destructive monsters (Stalin, Hitler and Mao) as well as the less memorable and more anonymous people who helped to create unparalleled prosperity and technological advance in Europe and North America and who lifted poor countries out of centuries of destitution…

Through my examples, I hope to better understand the links between good (and bad) politics and economics…sometimes, politicians emerge who make a big difference. That is my focus here.”

Marxism without guarantees – the economics of Resnick and Wolff

Richard Wolff is perhaps the most prominent Marxist economist in America today. He hosts the weekly program Economic Update, which can be found on YouTube and elsewhere. Whether or not one agrees with his views, he comes across as a thoroughly engaging communicator. With his colleague, the late Stephen Resnick, he developed an original approach to Marxist political economy over the last few decades. He sees political activism and public education as the way to promote and achieve the socially transformative goals which arise from his academic work.

Although I have found there to be much to admire and absorb in Marx and plenty of his multifarious followers, I would not call myself a Marxist. Wolf unashamedly does so, in his quest to end exploitation in the workplace, which he and Resnick see as the key to unlocking the workings of capitalism and ending it in order to achieve greater social justice in a transformed society.

What I have learned from post-modernism

Post-modernism has something useful to offer economic analysis. Some of its wilder assertions are that truth is relative, and therefore ‘anything goes’ when it comes to theory. If this is the case, it would seem to be debilitating. Debates in the social sciences would reach no firm conclusion and simply result in a plethora of ‘discourses’ without end. More interesting is the idea that the theories chosen by those who would put them into practice are done so from positions of power.

Class and exploitation: worth overcoming?

Marxist political economy makes the concept of class an organising principle in its analysis. It emphasises that under capitalism, as under previous and less sophisticated modes of production, exploitation of the subordinate by the dominant class is inevitable and part of the definition of a particular mode.

Overdetermination and anti-essentialism, within and beyond Marxism

I have recently been reading some of the work of two American Marxist scholars, Richard Wolff, and the late Stephen Resnick. Both are committed to a form of Marxist theory which promotes the concept of overdetermination and an anti-essentialist epistemology.

Holistic theory and political economy

Holism is the view that natural systems (from physical to social) should be studied from the point of view of wholes, rather than parts. In political economy, a holistic analysis could proceed from the study of society, rather than individuals, and assume that individual behaviour is determined by the social whole, rather than the converse. Karl Marx, in his study of political economy, analysed capitalism as a whole system, with particular structures and tendencies, while also using class as the key building block of society. Thus individual behaviour is said to be determined by the properties of the class within which it is situated.

More generally, heterodox approaches to economics, such as Marxism or Post-Keynesianism, tend to take a more holistic approach to analysis and reject the reductionist approach of mainstream or neo-classical theories. As already mentioned, the former view individual behaviour as being determined by social categories such as class or society, whereas neo-classical economics models individual behaviour as the key determinant of social outcomes.

But if we move beyond the confines of a purely economic analysis, and employ an inter-disciplinary perspective, what determines whether a particular approach to social science is holistic or not? One could argue that the individual is an holistic category if we draw on biology and accept that he or she is a whole composed of interdependent organs, bones, fluids etc. These latter categories interact to affect individual behaviours and outcomes. Similarly, biologists analyse particular organs as composed of constituent parts, but also the whole organ whose functioning is determined by the interaction of those parts. In all these cases, the behaviour of the whole can be seen as more than simply the sum of its parts.

From a larger perspective, the global economy affects individual behaviour through its impact on national economies through trade, capital flows, migration and the exchange of ideas and technologies. The question needs to be: what is the appropriate level at which to conduct analysis? Is it the global or national economy, the region, sector or company, or the class or individual?

In political economy, as inter-disciplinary social science, we can draw on methods and perspectives beyond the purely economic, from political science, sociology and philosophy for example. But from social wholes to the individual, even if we take a holistic view of what determines behaviour, the units of analysis are necessarily partial views of reality. They are models. The model we select when setting out on the path of analysis may depend on what has worked well in the past and also on the object of analysis. Perhaps just as important are the values of the analyst, or the politics implied by the outcome of the analysis. These latter subjective factors are bound to influence the objective methods. A Marxist might have sympathies with socialist politics and policies, a post-Keynesian with social democratic outcomes and a neo-liberal with more free-market ones. These political sympathies may have causes in the personality of the analyst, with genetic and psychological or learned values as causes of the personality. The social and academic environment in the past and present may in turn be a determinant of these learned values. These environments also have determinants in the structure and behaviour of social categories, as well as individuals. And so on.

Marx argued that the material relations and conditions of society determined human consciousness, but while this is a powerful idea, this need not be the end of the analysis. Human consciousness, men’s ideas and will, can alter the material conditions of society. In fact, by calling for social revolution, Marx accepted this idea too. We can view this as a kind of circuit running between material conditions and human consciousness at the social level, which structures the evolution of society.

These thought exercises question the objectivity of social science and show that analysis can start from the end point where the outcomes are consistent with particular values and subjective choices, and subconsciously justify the method or model used. It also shows the importance of overdetermination, the idea that an observed effect has multiple causes. This makes for a more complex analysis but, I would argue, a richer one, and calls for an emphasis on inter-disciplinarity. In social science, it underlines the importance of a genuine political economy, which draws on insights from across the field and outside it.

With holism, we analyse whole systems, greater than the sum of their inter-dependent parts. With over-determination, we stay open to potential causes both within and outside the primary subject matter. A political economy open to its own origins and method, with a great potential for evolution, is a hoped-for result.