Monday, 10 October 2011

Autonomy and Heteronomy - Individualism and Bourgeois Social Theory

Today we wish to engage in a far-reaching and sweeping discussion on the notion of "the individual" in bourgeois social theory (by which we mean everything from political to economic studies). Let us begin with bourgeois economic theory and its "methodological individualism" which begins economic analysis with each "being human" (that is what we call "human beings" to emphasise our inter-dependence) treated as an in-dividual (Latin for "indivisible"), as the ultimate "a-tom" (Greek for "cannot be cut or split further") or element of social analysis (which itself means "retroactive separation").

We admire Paul Krugman's valiant progressive stance on most matters - but certainly not in the sphere of economic theory. Krugman lately has come out in defence of orthodox "neoclassical synthesis" economic theory by defending the "IS-LM" neo-Keynesian analytical framework that was developed by people like Hansen and Samuelson in the US and Hicks in the UK from the early 1940s. Krugman begins his defence by pressing the "heuristic" or "propaedeutic" qualities of this "model" which, he says, allow us a clearer understanding of "economic reality" than more complex "models" that may well be more "inclusive" but less "focussed" than IS-LM. The benefit of IS-LM for economic analysis is that it permits the close examination and clear conceptual separation of the three central "ingredients" of economic analysis: - "goods, bonds and money". Bourgeois economic theory has always sought to camouflage social reality as being "objective" and "natural", and therefore as being categorically different from "political and social relations of production". The theory of "marginal utility" as developed by Gossen, Menger and Jevons after 1850 seeks to isolate the "subjective" notion of "utility" (no two "utilities" can ever be alike because they are "psychological", and therefore "inscrutable" realities) from its "objective" manifestation in the "market price mechanism" - at the "margin", when the "addition" or "subtraction" of a putative "marginal unit" of utility for an "in-dividual" is equivalent to its addition or subtraction for another "individual".

The "measurement" of this "putative marginal unit" can then be expressed in terms of "marginal physical quantities" once all the individuals with "goods" to exchange have done so "freely" in an "auctioning" process (Walrasian "tatonnement") in which prices can be adjusted relative to the various goods until a final "equilibrium" set of prices is reached that can be expressed by taking any one of the "goods in exchange" as the "numeraire" to express all "prices". It is obvious to see how such a method of price determination is tautologous (purposeless, like a snake biting its tail) because it assumes what it seeks to establish, as Hayek demonstrated with his trenchant early critique of Walrasian equilibrium. In other words, this framework of analysis assumes that we know from the outset what final prices will be so that "prices" are really only "relative" numerical entities defining one "good" in terms of another: one apple is equal to two pears in the market price mechanism because that is the exchange ration at which the marginal utility schedules of the individuals in the freely competitive market are mathematically "equal". Anybody with any sense will see that in this "framework", prices do not stand for anything except for the "observable" market rates of exchange which - so we are told - truly and really reflect the "inscrutable" marginal utilities of all individuals.

This is pure metaphysics, of course. In such a "system" or "market" not only is there no need for "money" (as Krugman himself readily admits), but also "money" itself is impossible as a separate "measure" of value - because money itself does not have to be yet another "good" used as a numeraire in the calculation of (relative) prices! As Don Patinkin elegantly put it, "money buys goods, and goods buy money; but goods do not buy goods"! Krugman is well aware of the difficulty, but he chooses to ignore it, blithely assuming that his "heuristic" IS-LM Model is still the best to illustrate how a capitalist economy ("the" economy for Krugman, who still has not understood that in history there have been many different types of "economy") works! The reason why Keynes and Krugman (no less than Samuelson and Hansen or Hicks) "need" the IS-LM "fiction" is that it neatly "eludes" or "elides" the need to explain the existence and the function of "money" as a standard and measure of "value" - and not just a "unit of account" - in a "capitalist" economy: "capitalist" precisely because (!!) it cannot be conceived of without the existence of "money"!

What "money" entails in a "capitalist" economy is the fact that "value" constitutes a reality that is "separate" from the pure and simple "exchange of goods": although goods can "buy" money and money can "buy" goods, goods cannot (!) "buy" goods because "goods ain't money" and "money ain't just goods"! We will return to the significance of this in our next intervention.

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