I took part in a fascinating round table discussion on macro-economics yesterday. Many quite well known names were present. Th debate was lively and focussed on what the pressing issues needing to be addressed are at present.
The most interesting contribution of the afternoon did, however, come from Prof Victoria Chick. Her question was a very simple one. "What is the economy for?" she asked.
I suggested an answer to that yesterday on this blog. But that is but a start: this is the hardest question of all, especially if, as I think and said at the meeting, we are at an inflexion point where the economy is between eras in its development. That means this is a question that has t be answered,
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As time goes by and variations of traditional economics either fail to correct past mistakes or create new ones this is the question that should be top of pile.
Somit and Peterson, in their book, Darwinism, Dominance, and Democracy offer an alternative view to the Neolib paradigm.
“Although it shares the proclivity of its fellow social primates for hierarchical social organisations. Homo sapiens is the only species capable of creating and, under some circumstances, acting in accordance with cultural beliefs that actually run counter to its innate behavioural tendencies.”
They offer democracy as an example.
This view is expanded further by R. H. Frank who comments on Neolib economics with this thought: “Darwin’s view of the competitive process was fundamentally different. His observations persuaded him that the interests of individual animals were often profoundly in conflict with the broader interests of their own species. In time, I predict, the invisible hand will come to be seen as a special case of Darwin’s more general theory. Many of the libertarians’ most cherished beliefs, which are perfectly plausible within [Adam] Smith’s framework, don’t survive at all in Darwin’s.”
The Darwin Economy: Liberty, Competition, and the Common Good
Agreed
Humans have been very successful at creating institutions to counter our primate instincts. We’re inclined to favour the strong and beautiful over the weak and ugly so we have a judicial system to ensure all are treated alike. We’re inclined to sleep around so we have the institution of marriage to keep us faithful.
Crucially for the economy one of institutions is the odd one out: school. Our instinct is to organise society into a hierarchy and school indulges that, teaching children that their status is derived from their academic ability. Change that, change society.
Thanks
A good perspective, good point, although, changing will take time and be difficult.
It was a question raised also by my late colleague when he asked:
“At first glance, it might seem redundant to emphasize people as the central focus of economics. After all, isn’t the purpose of economics, as well as business, people? Aren’t people automatically the central focus of business and economic activities? Yes and no.
People certainly gain and benefit, but the rub is: which people? More than a billion children, women, and men on this planet suffer from hunger. It is a travesty that this is the case, a blight upon us all as a global social group. Perhaps an even greater travesty is that it does not have to be this way; the problems of human suffering on such a massive scale are not unsolvable. If a few businesses were conducted only slightly differently, much of the misery and suffering as we now know it could be eliminated. This is where the concept of a “people-centered” economics system comes in.”
Marx’s great insight was that economics is a system of social relationships-whereas neo-liberalism posits itself a s a metaphysical truth which is why the present Tory gathering has a quasi-religious fundamentalist feel about it with the union jack being used as a swastika-like emblem (sorry for the Godwinism).
We need to return to the notion that economics is largely what we make it together. If populations are passive and narcoleptic, as is largely the case no, then they will be treated with condescension and even cruelty (Hunt!).
I hope Richard is right and that we are in between eras-or is neoliberalism going to stretch beyond the horizon?
Silly me.
I thought the economy was about co-creating and sharing sustainable wealth for the good of humanity and the planet.
Oh well……………….
On the basis of observable reality, where what we perceive as the economy is wholly dependent and based upon systems of finite resources at one end and degradation of life support systems through externalising costs (dumping exponentially growing pollutants) at the other, it is reasonable to anticipate the liklihood that we are indeed on the cusp of a paradigm shift.
But what sort of paradigm shift? Forwards or backwards?
In his polemic on post capitalism Paul Mason, in essence, observes that neo liberalism has effectively done for Capitalism. The basic analysis being that the approximate 50 year cycles originally posited by the executed Soviet economist Kondratiev, which periodically regenerated Capitalist development through investment in new technologies (canals and steam power; railways and the telegraph; electricity, automobiles, aeronautics, factory production methods, transistors and electronics, computers etc) has broken down. The key reason Mason gives for this is that previous up swings in the cycles/waves were driven by the need to find and develop new technologies to invest in because wage level values were high as a result of the newly created industrial working class having sufficient clout to wrest concessions from Capital.
Mason argues that this is no longer the case, with an ever increasing gap between wage levels and values and profit levels and values there is no longer any pressure to invest in longer term development where it is now much easier to extract value from rent seeking – covering everything from land, property, commodities, carbon and pollutant trading, and personal data and money itself. Whereas sixty years ago, in Wilsons ‘white heat of technology’, we would be expecting to see investments in new areas like nano fabrication etc the trend is now to consolidate existing and developing power relation imbalances through secret global trade deals ( TTP, TTIP etc) and a competitive race to the bottom by monopolising rent seeking economic relationships and processes in what are effectively permanent copyright and patenting rights.
Where Mason is perhaps a tad optimistic is in his observation that, whilst Capitalism is unlikely to survive the neo liberal parasitic virus and the physical realities of impossible exponential economic growth, this will open up sufficient space for what he terms Post Capitalism.
The reason being that although his analysis is based on cycles his model seems to be based on linear progression. A linear paradigm shift from Feudalism to Capitalism, followed by another linear paradigm shift from Capitalism to Post Capitalism or something similar. Applying the same analysis to the model it could easily be argued that the era the economy is currently between is oscillating back to a form of Feudalism via a longer cycle.
Certainly, when issues such as land ownership (the UK Crown estates and therefore the Queen of England owns one sixth of the earths land mass), the continued existance of the City of London Corporation, the rentier economy, the social hierarchies still embedded in the British Ruritania type State, and the now open warfare declared on democracy – from embedding corporate rights over society and public rights through to what Henry Giroux refers to as the disposablity of the rights of citizenship of the majority who do not accept the program or who have no further extractable value- it is difficult to argue that the mindset and ideology of Feudalism ever went away. Certainly many of the institutions, whilst they have changed during the Capitalist era, have survived, along with the purveyors of hierarchical and minority privileges.
It certainly seems reasonable on the available evidence that the economy, and therefore society, is entering a period where it moves from one era or paradigm to another. However, assumptions based on outcomes that it will settle on what should be are by no means a foregone conclusion written in tablets of stone labelled “progress.” We could just as well swing back the other way towards a new Feudalism. The historical evidence suggests that in order for progress to be made the economy will have to be prised from the cold dead hands of those currently building walls, ramparts and enclosures around it.
After all there is nothing to lose other than the Jeremy Hunts, George Osbourne’s, Liam Fox’s and similar assorted empty vessels.
Thanks
I am musing on this issue
I enjoyed Papul’s book but felt it was not enough
Your comments appreciated
What Mason says has been said before, by one who put business for social benefit into action. He was influenced by Alvin Toffler and Peter Drucker among others.
https://www.linkedin.com/pulse/end-capitalism-jeff-mowatt
Personally I would argue that the economy should be about public purpose. It should directed towards the maximisation of happiness for the maximum number of people etc etc.
But in a democracy any one view doesn’t really matter. The purpose of the economy is what the electorate considers it to be. The government has to gauge and satisfy the electorate’s wishes – risking defeat in an election if it gets it wrong.
I think we have done utility
We have to move beyond Bentham now
great point Richard, we need much more multi-dimensional understanding of what makes us human and to see humans as mere ‘utility maximisers’ has got us to where we are now!
Marx had Bentham sussed:
“Jeremy Bentham is a purely English phenomenon. …..in no time and in no country has the most homespun commonplace ever strutted about in so self-satisfied a way. The principle of utility was no discovery of Bentham. He simply reproduced in his own untalented way what Helvetius and other Frenchmen had said so spiritedly in the 18th century. To know what is useful, say, for a dog, one must study dognature. This nature itself is not to be deduced from the principle of utility. Applying this to man, he that would criticize all human acts, movements, relations, etc., by the “principle of utility” must first deal with human nature as modified in each historical epoch. But for Bentharn these questions are inconsequential. With the dullest naivete he takes the modern petty-bourgeois philistine, especially the English philistine, as the normal man. Whatever is useful to this queer variety of normal man, and to his world, is useful in and for itself. This yardstick, then, he applies to past, present and future. ”
Marx wrote some good stuff-not to be sniffed at!
It may be easier to define what an economy should be doing as in, “producing socially useful wealth with minimal waste and full employment of available resources”. What it’s for seems the sort of question that might never be satisfactorily answered.
Worth trying though
Was this a public discussion? Is there a video of it that we can watch?
Neither filmed or recorded that I know of
Does the event have a website? Could email them.
No web site yet
The economy, like business, exists to serve society. Sadly this government thinks the inverse, that society exists to serve business / the economy.
You are right
Feminist Economics says ‘social provisioning’ or ‘how people organise themselves to get a living’. Neither presumes nor excludes market processes.
And I like both ideas
It’s refreshingly bottom up and also macro
What are Economists for?
If they ask the right questions, a great deal
If they just build mathematical models unrelated to any world ever known if, nothing at all
I’d say the purpose of the economy is the creation and maintenance of an artificial elite. Wealth creation and extraction. It’s working very well, witness the social positions of Cameron and Osborne, for example, two absolute nonentities once removed from privilege.