Commentary on Political Economy

Sunday 2 September 2012

Politico-Economic Theology: The Exception, the Decision, and the Apories of Bourgeois ‘Economic Science'

All significant concepts of the modern theory of state are secularized theological concepts….(Carl Schmitt, Political Theology, p36)

Equally, our main contention in this piece is that all significant concepts of modern economic theory and “science”, too, are secularized theological concepts. A “theory” is an explanation of life and the world that attempts to encompass them in their “totality” by “con-necting” their “parts” in a “systematic” manner that is internally consistent and that, through this “consistent nexus rerum”, achieves the adaequatio rei et intellectus of Scholastic fame. It follows that a theory must connect the relationship of the parts to one another in a manner consistent with the “systematicity” of the whole. Consequently, regardless of the content of the theory, the con-nections between parts and of the parts in their totality must be “necessary”. This “necessity” removes any “freedom” that the parts may have had in relation to the totality in such a manner that the theory admits of no “exception” that is not re-conducible to or con-sistent with the totality and its “systematicity”.

This logical notion of “freedom” as the opposite of logical necessity has nothing to do with the political notion of freedom. Indeed, political freedom is not analogous to “contingency” or “chance,” it is instead their opposite and in fact ought not to be called “freedom” at all! Freedom is a political notion – the opposite of “coercion” (Arendt in ‘Life of the Mind’). Once the notion of “freedom” is reduced to the opposite of logical necessity, then it becomes mere “contingency” and is reduced to an “onto-logical” problem. The fact is that, as we are demonstrating here, there is no such thing as “logical necessity” so that all “truths” are “contingent”. But the fact that “truth” can be understood as logical or scientific “necessity”- that the “necessity” of logic or science is what makes it “true” - and that “freedom” can be mistaken for “contingency” or “chance” means that “truth” or logico-mathematical necessity can be abused or be used instrumentally for the purpose of political coercion! By this process, “freedom of the will” can be mistaken for a “telos” that, by positing the “systematicity” of life and the world as a “totality”, becomes a quest for “freedom from the will” – which is what the negatives Denken quite correctly declaims in bourgeois theory and “science”, whilst at the same time, by denying the existence of “freedom” in a political sense (because it understands freedom only ontologically), it in turn quite incorrectly denies the possibility of political freedom or else reduces it to contingency, to superfluity (Sartre’s “de trop”, Heidegger”s de-jection and Dasein as pro-ject). So whereas bourgeois theory and science either eliminate political freedom with their “totality” and “systematicity”, in natural and social science as in logico-mathematics, or else hypostatize it as “God” or “free will”, in the negatives Denken freedom is understood as “universal Eris”, as total conflict: freedom is no longer a function of the will but the will becomes a function of “free-dom” understood as cosmic “contingency” (Schelling), as “chance” or “uncertainty” (Keynes).

It is this reduction of political freedom to contingency or chance – to free-dom - that is clearly most objectionable in the negatives Denken. Yet the valuable and valid aspect of the remarkably novel and revealing approach to freedom taken by the negatives Denken is that it re-introduces the notion of “decision” (in Schmitt, “resolve” [Gewiss] in Nietzsche, and “resoluteness” or “dis-closure” [Entschlossenheit] in Heidegger), and therefore of the effect of individual wills coming into conflict with one another in an institutionally organized manner - which is the essence of the Political. It is this Political, this organized conflict of wills, that is totally eschewed by all bourgeois science, from economics to jurisprudence and political theory. The supreme aim of bourgeois science is to e-liminate (to place beyond the boundaries) this Political from the subject-matter of its inquiry, to ob-literate the decision on the exception as the conflictual antithesis to the bourgeois homologation of all elements of life in the interests of “science”.

At the foundation of his [Kelsen’s] identification of state and legal order rests a metaphysics that identifies the lawfulness of nature and normative lawfulness. This pattern of thinking is characteristic of the natural sciences. It is based on the rejection of all “arbitrariness”, and attempts to banish from the human mind every exception. (PT, p41)

It is most important to note that whilst bourgeois “science” seeks to remove all “decision on the exception”, all “arbitrariness”, from the object of its inquiry, it is the most distinctive mark of bourgeois political praxis to concentrate decision-making power in fewer hands – in effect, to present society as “homogeneous” so as to be able to equiparate its “scientific method” (Popperian falsifiability) which implies the necessity of competing theories with democratic public opinion based on competing opinions, whilst removing all real decision-making power from the demos and entrusting it to sovereign institutions, such as Heads of State and Government or “scientific experts” who then reduce the Political to Technique. The “ideal type” of bourgeois science involves the elimination of conflict from theory in such a way that its Science becomes mere Technique (cf. Heidegger’s Technik) wholly impervious to “decision” and therefore to critical review. Bourgeois theory and science therefore eschews first and foremost what we may describe as “the time of decision”, understood in the objective genitive. In other words, bourgeois science and theory always postulates that “decisions are made in time”, whereas one of the mainstays of the negatives Denken is that our perception of time as an experiential rather than “spatial” notion requires the assumption of an initium, a creative act, of a “de-cision” that makes an “in-cision in being” – a novus actus interveniens that replaces the “causal chain” of bourgeois science.

The aim of bourgeois neoclassical economic theory, for instance, is to reduce economic activity – and therefore the subiectum of “economics” – to the mere, pure, formal “exchange” of “endowments” between individual economic agents. The very purity and “formality” of this exchange, the absence of any possible conflict in it – even in terms of how individuals came to possess the “endowments” they exchange with others -, means that an “economic equi-librium” is possible a priori, deductively, given that any dis-equilibrium can exist only as a “distortion” or “disturbance” of the “exchange” that is axiomatically implicit in the definition of “the market” as “free exchange of endowments” that are purely “economical” in the sense of “utilitarian”, where the utility schedules of individual market agents exclude again axiomatically anything that may interfere with the “free exchange” that defines “the market”. Consequently, individual market participants do not “decide” the ratios of exchange (what Schumpeter therefore senselessly called “coefficients of choice”, given that there is no “choice” involved in this exchange!) because these ratios or “prices” are pre-determined by the axiomatic definitions of “the market” and by the “utility schedules” of economic agents. (This was the gist of Hayek’s devastating early [1920s] critique of the concept of economic equilibrium, now in Individualism and Economic Order.)

The market assumes thus in neoclassical economic theory the semblance of a Leibnizian “pre-established harmony”, of a Hidden God (deus absconditus) identical with Adam Smith’s Invisible Hand. “The market” eliminates all conflict, and with it all “exceptions” to “market rules”, by defining market equilibrium tautologously. The point of equi-librium or “equal weight” is that point at which all the exchange ratios between goods in “the market” can be “weighed” interchangeably in terms of each good taken as a numeraire. In other words, each good for exchange on the market can be “weighed” in terms of a “homogeneous medium” (numeraire) that provides a “common measure” so that the individual exchange ratios between goods can be expressed as “prices”. This is another reason why all conflict is eliminated from general equilibrium analysis: once all its component parts are “homogeneous” because reducible to a “homogeneous medium”, then it is not possible for these com-ponents to be in-com-patible with one another, which is what the notion of “conflictual decision” and of “the exception” make manifest in the negatives Denken. (The analogy between this “homogenization of free and fair exchange” and the bourgeois theory of democratic or constitutional liberalism in political theory and jurisprudence will be discussed in a later section of this study. Cf. for a preliminary discussion, Part IV of CB Macpherson’s The Life and Times of Liberal Democracy.)

Once all conflictual decision, all exception is removed from “economic science” and its “market mechanism” of “free exchange” through the homogeneity of all its constituent parts, then the sphere of the Political can be neatly separated from that of the Economic as the sphere of “scientific necessity” and be homologated as the realm of free-dom, the sphere of public opinion (ethics, morality, religion, taste) that can remain “free” only on condition (!) that it does not interfere with the scientific necessity of the Economic sphere and its “economic laws”. (As we showed in the Weberbuch, the identification of science and economics with the realm of “necessity” and that of politics and beliefs with that of “freedom”, is a common erroneous thread running through thinkers as disparate as Marx, Weber and Arendt.) It is this harmonious homologation of the Political and the Economic from which all “conflictual decisions” are removed (!) to the extent that “free” political choices and opinions do not interfere with the “necessary” laws of economic reality that is the supreme achievement of the “science” of Political Economy both in its Classical and Neo-Classical expressions. (Arrow and Hahn were quite right then [pace Lawson] to insist on naming Adam Smith as the father of neoclassical general equilibrium theory.)

In this regard, whilst the theoretical “necessity” of all science – its “systematicity” – becomes immanent to “the totality”, to its “truth”, and therefore is deprived of any political freedom, at the same time this immanent identification of “the system” with a “mechanism” turns the so-called “mechanism” into a Supreme Will or Sovereign, into a Hidden God (deus absconditus) as in Leibniz’s pre-established harmony and Adam Smith’s Invisible Hand or Hobbes’s Leviathan or State-machine or deus mortalis.

The sovereign who in the deistic view of the world, even if conceived as residing outside the world, had remained the engineer of the great machine, has been radically pushed aside. The machine now runs by itself. (PT, p48)

But “the machine”, “the market”, cannot “run by itself” because the Ratio-Ordo behind it, the “scientific truth” that is its “law of nature”, cannot be “legal” if it is not “necessary”, if it is not an “order” that is an immanent feature of the world; and this “scientific truth” cannot be “legitimate” if it is not “free”, if it is not “spontaneous” or "contingent" as a feature of the world that is com-prehensible by a transcendental consciousness. (The phrase “spontaneous order” is used by Hayek in Law, Legislation and Liberty.) Indeed, starting from its own axiomatic assumption of “self-interested individuals”, neoclassical economic theory in particular has developed its theoretical premises of economic liberalism whereby the Political and the Economic are homologated to a point where, once a “free market” is established in the sense prescribed by the theory, even political interference no longer suffices to condition or disturb or constrain “the economic laws of the free market economy or commerce” because, as Benjamin Constant argued, it is possible for capitalists to discipline such “political” interference by means of the simple “mobility of capital”, that is, by setting up “competitive political regimes” that reward those States that respect the laws of the market and penalize those that do not, until such time as these “anomalous” States either perish or return to free market conditions! Constant offers the most pervasive example of how the so-called “laws of neoclassical economic science” come to be applied to human history and to be hypostatized as the culmination of the interests of individuals and of humanity in its entirety and for eternity! Whence comes Constant’s famous distinction between “ancient freedom”, meaning the direct participatory democracy of Antiquity, and “modern freedom”, which refers to the “exchange” by individuals in mass societies of their direct participation in politics for the “guarantees” of their “private rights” by the all-powerful modern “representative State” of liberal constitutional regimes founded on the capitalist “market economy”. Thus, in Constant’s thesis, “private” hedonistic consumption has replaced “public” political involvement.

Today nothing is more modem than the onslaught against the
political. American financiers, industrial technicians, Marxist socialists,
and anarchic-syndicalist revolutionaries unite in demanding
that the biased rule of politics over unbiased economic
management be done away with. There must no longer be political
problems, only organizational-technical and economic-sociological
tasks. The kind of economic-technical thinking that
prevails today is no longer capable of perceiving a political idea.
The modem state seems to have actually become what Max
Weber envisioned: a huge industrial plant. Political ideas are
generally recognized only when groups can be identified that
have a plausible economic interest in turning them to their advantage.
Whereas, on the one hand, the political vanishes into
the economic or technical-organizational, on the other hand the
political dissolves into the everlasting discussion of cultural and
philosophical-historical commonplaces, which, by aesthetic characterization,
identify and accept an epoch as classical, romantic,
or baroque. The core of the political idea, the exacting moral
decision, is evaded in both. The true significance of those
counter-revolutionary philosophers of the state lies precisely in the
consistency with which they decide. They heightened the moment
of the decision to such an extent that the notion of legitimacy,
their starting point, was finally dissolved. As soon as Donoso Cortes realized that the period of monarchy had come to an end
because there no longer were kings and no one would have the
courage to be king in any way other than by the will of the
people, he brought his decisionism to its logical conclusion. He
demanded a political dictatorship. In the cited remarks of
de Maistre we can also see a reduction of the state to the moment
of the decision, to a pure decision not based on reason and
discussion and not justifying itself, that is, to an absolute decision
created out of nothingness.
But this decisionism is essentially dictatorship, not legitimacy. (PT, pp65-6)

This reduction of the Political to the technical sphere is common to all economic theory, Classical and neoclassical. Let us recall that for general equilibrium theory in economics it is the aforesaid political interference – the decision, which it dismisses and eschews as a “disturbance” or “noise” - that confutes the validity of the theory, that provides its insuperable exception . As Don Patinkin sharply observed, one of the chief objections to equilibrium theory is that if the theory of “economic equilibrium” were to be accepted as reality or even to be applicable to any reality, then it would be quite impossible for an actual economic system ever to be historically in dis-equilibrium because “equilibrium” is a “state” of simultaneous exchanges incompatible with any notion of “time”, whether chrono-logical or dia-chronic, that is understood as a “time of decision” in which an “act of will” can occur. Equilibrium theory is time-less in the sense that we have described: in the sense that it does not allow of any “time of de-cision”, of any act of will upon which the Political may be founded. Equilibrium theory therefore understands “time” as a mere logico-mathematical sequence, only in its “spatial” sense, and consequently its description of how equilibrium prices are reached through the “mechanism of free market choice” is entirely devoid of meaning! Yet this is not to say, as we argue below, that equilibrium theory is thereby devoid of purpose: its “purpose” is to allow the instrumental mathesis of human action, the measurement of human political activity in accordance with a “rule” aimed at preserving the existing bourgeois political, social and economic order. A “market mechanism” that must be in equilibrium is a “system” or “rule” from which all notion of “decision” or “choice” has been removed and which by that very reason is not and can never be – a “market”!

Hayek’s early essays in Individualism and Economic Order, and Brian Loasby’s Equilibrium and Evolution where he defines “the state of equilibrium” as a state of “total slavery” offer insuperable critiques of these antinomies and apories of bourgeois theory and science. Both theoreticians quite validly and definitively confute the “reality” of Walrasian tatonnement or “groping auctioneering” whereby the final equilibrium or “market-clearing” prices are “reached” through a series of auctions that last until every market participant has maximized his welfare. They do this by noting correctly that this process is illusory because the market participants can “grope” their way to equilibrium prices only on condition that they are already ab initio (from the beginning of the auction) in possession of all the information that will allow them to reach those “final” equilibrium prices! In other words, the “simultaneity” of this tatonnement deprives it of any reality whatsoever as a historical process. As a result, partial prices before equilibrium is reached, when market participants can still be said “to decide freely and independently of one another” on these “prices”, cannot be the “final equilibrium market prices”.

But worse still, once equilibrium is reached and prices can therefore be said to indicate the “real market exchange ratios” of all endowments between all market participants, at that precise point these “exchange ratios” or “equilibrium prices” lose all meaning because it is then impossible to determine what these “equilibrium prices” actually indicate – equilibrium prices are only “relative” (in terms of a numeraire) and cannot tell us what they are “pricing”! Once again, market participants cannot be said to be exercising any “free choice” in the determination of “market prices”. At that precise point, were it not for its instrumental purpose as a means of “measuring” human activity, bourgeois economic “science” is exposed most damningly as sheer and abject metaphysics of the most contemptible kind, that of an astute theology in which “the market” and its “laws” serve as a Hidden God, one who in its guise as a “pre-established harmony” does not decide, and yet, in its guise as legislator does nothing but decide by enforcing “the laws of free market competition”!

What bourgeois economic “science” removes from economic relations is their political foundation in the “decision”, which Schmitt above erroneously confines to “an exacting moral decision”. And it does so above all in the name of a mythical homogeneity of “the people” and “the will of the people” – homogeneity that is supplied fundamentally by “the laws of economic science” and the homologation of Politics and Economics that they allow, as we just described above.

Although the liberal bourgeoisie wanted
a god, its god could not become active; it wanted a monarch,
but he had to be powerless; it demanded freedom and equality
but limited voting rights to the propertied classes in order to
ensure the influence of education and property on legislation, as
if education and property entitled that class to repress the poor [60]
and uneducated; it abolished the aristocracy of blood and family
but permitted the impudent rule of the moneyed aristocracy,
the most ignorant and the most ordinary form of an aristocracy;
it wanted neither the sovereignty of the king nor that of the
people. What did it actually want?
The curious contradictions of this liberalism struck not only
reactionaries such as Donoso Cortes and F. J. Stahl but also
revolutionaries such as Marx and Engels…..
In his Geschichte der sozialen Bewegung in Frankreich Lorenz
von Stein spoke in detail about the liberals: They wanted a monarch,
in other words a supreme personal authority, with an independent
will and independent action. Yet they made the king
a mere executive organ with his every act dependent on the
consent of the cabinet, thus removing once again that personal
element. They wanted a king who would be above parties, who
would thus also have to be above the people's assembly; and
simultaneously they insisted that the king could not do anything
but execute the will of this people's assembly. They declared the
person of the king to be inviolable but had him take an oath on
the constitution, so that a violation of the constitution became
possible but could not be pursued. "No human ingenuity," said
Stein, "is sufficiently sharp to resolve this contradiction conceptually."
This must be doubly peculiar to a party such as the
liberal, which after all prides itself on its rationalism. (PT, pp59-60)

In other words, the scientific immanentism of bourgeois theory and science – its “systematic necessity” – immediately turns into formalistic transcendentalism the very instant that it reaches its “apotheosis”, its Ver-geist-igung, - when, that is, its claim to “scientific truth” or “necessity” collides with the empirical “falsifiability” or “contingency” or “arbitrariness” of that “truth” which otherwise would lose its “scientificity” because of its “freedom” or “contingency” and its “truth-fulness” because of its “necessity”! The concept of “truth” is im-possible, as we demonstrated in our exegesis of Nietzsche’s In-variance in the Nietzschebuh, because truth cannot be “necessary” for the reason that it must be com-prehensible, and it cannot be “free” because, as “truth”, it cannot be partial or contingent. Politically, the bourgeoisie desires a world in which “the king reigns but does not rule” – in which, that is, the capitalist system, its “market”, and its “science” is “spontaneous” (free and therefore “legitimate”) and yet is “orderly” (necessary, and therefore “legal”)! In reality, however, what bourgeois theory and “science” manage to reveal is the im-possibility of their “truth” because bourgeois “truth” must be at once “free” (transcendental) and “necessary” (immanent).

It is simply not possible to argue then, as does Weber, that bourgeois science, like general equilibrium in economic theory, is an “ideal type” that merely approximates reality – and thus transcends it ideally - without ever being able to embody it immanently. As we have shown in our Weberbuch, any “ideal type” that is antinomic and aporetic exactly at that point where it is ful-filled and com-plete, at the point where it presumably becomes real – any such ideal type or theory is entirely devoid of any and all theoretical merit and analytical usefulness however “proximate” (!) except as a tool of coercion, as an “instrument” of policy – for the simple reason that it ceases to be a “theory” or a “science” and becomes instead an inexorable fate! (This is the great insight of the Italian Marxist theoretician Massimo Cacciari in Krisis, pp65 et ff.)

Weber himself often comes very close to this crucial realization in his work. It is myopic in the extreme, however, for Gunnar Myrdal (and the likes of Joan Robinson) to chide equilibrium theory for being “meaningless” (in The Political Element in the Development of Economic Theory) – because the whole point of equilibrium theory is not to be “true” or “meaningful” but rather to be, as Schumpeter perceived, an “instrument” – we would say, a political instrument, or worse still, a Kafkaesque condemnation as fate. The whole point of bourgeois economic “science” is not to describe reality as it Is (Sein) or still less as it Ought to be (Sollen): rather, the whole point of bourgeois “science” is to theorise reality as it Must be (Mussen).

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