This is the first part of a chapter of the Schumpeter-buch that we have been posting over the last few weeks. At the cost of sounding "quite contrary", we certainly do not agree with the "Heidegger=Schumpeter" notion (quite a stupid idea, to be perfectly blunt). "Heidegger" here stands for the phenomenological application of Nietzsche's ontological insights - which were far "deeper" than Heidegger's, but at the same time less "sociological". This is why I thought it more appropriate to refer to Heidegger rather than Nietzsche even though Schumpeter developed his own sociological ideas far more profoundly and eruditely (at least in the "socio-logical" sphere, clearly not in the philosophical one!) long before Heidegger even dreamed up Sein und Zeit! Schumpeter's now famous "Chapter 7" of the Theorie dates back to at least just after the publication of Das Wesen in 1908. But again, to have con-fronted (contrasted and compared) Schumpeter's socio-economic theses with those of Nietzsche seemed far more difficult than doing so with Heidegger, if for no other reason than that Heidegger's views are delineated far more "systematisch" than those of the great "Anti-Systematizer" himself - Nietzsche. Cheers.
The commonsense of this tool of analysis may be
formulated as follows: first, if we deal with, say, the organism of a dog, the
interpretation of what we observe divides readily into two branches. We may be
interested in the processes of life going on in the dog, such as the
circulation of the blood, its relation to the digestive mechanism, and so on. But
however completely we master all their details, and however satisfactorily we
succeed in linking them up with each other, this will not help us to describe
or understand how such things as dogs
Joseph Schumpeter, Business Cycles. (1939) 29
have come to exist at all. Obviously,
we have here a different process before us, involving different facts and
concepts such as selection or mutation or, generally, evolution. In the
case of biological organisms nobody takes offense at the distinction. There is
nothing artificial or unreal about it and it comes naturally to us; the
facts indeed impose it on us.
It is incessant change in the data of the
situations, rather than the inadequacy of the data of any given situation,
which creates what looks like indeterminateness of pricing. We
conclude, on the one hand, that we must take account of this pattern when
dealing with the process of change which it is our task to analyze in this book
and which must be expected to create precisely such situations, and, on the
other hand, that it does not paralyze the tendency toward equilibrium
[Gleichgewichtstendenz](Business Cycles, p.43)
There
comes a time when even the bourgeoisie must contemplate its own surcease. In
this revealing passage, Schumpeter canvasses with Heideggerian Entschlossenheit (or, as the Freiburg philosopher would put it, with “resoluteness” in
confronting “being-toward-death”) the eventual demise of capitalism. The very
reality of social change and of economic evolution contains the certainty of capitalist extinction: “The facts indeed impose it on us.” This is a reality that
equilibrium analysis by its very formal character quite simply cannot
countenance. There is no “being-toward-death” in equilibrium, no Da-sein – and no “extinction”. But the
important realization in Schumpeter’s reflection above is not so much this
“existential” dread, the fact that
formal theory can never encompass existence (cf. Kierkegaard’s vehement
critique of Hegel’s dialectic); it is rather the fact that equilibrium theory
completely neglects the most essential aspect of economics – the “pro-duction”
of goods and services and therefore the “metabolism” of the economic system with
the physical environment of which human beings are part (this is indeed the
very first concern of Schumpeter’s intellectual mentor, Eugen Bohm-Bawerk, at
the beginning of The Positive Theory of
Capital).
The
certainty that equilibrium theory affords lies in the axiomatic determination
of prices. Yet, once we allow the market participants of equilibrium, which as
we have shown are merely mechanical inert bodies, to become political “economic
agents”, then the prices of the economic system become wholly “indeterminate”,
precisely because the system undergoes “incessant transformation” or mutation.
For Schumpeter, the problem with both Classical and Neoclassical economic
theories is that their formalization of the relations between the component
parts or functions of the economy
(supply, demand, investment, consumption, interest, monetary mass), is entirely
“static” or “closed” or “self-referential”, and is therefore entirely incapable
of accounting for the equally observable fact of the “dynamic” movement of the
capitalist economy, for its mutation
“from one equilibrium to another”, - equilibria that are quite different not
only in quantitative but also in qualitative terms! Capitalist
development is not just horizontal quantitative
growth or development (Wachstum); it is above all vertical qualitative mutation or evolution (Entwicklung). Schumpeter’s initial
objection to the translation of Entwicklung
with “development” rather than “evolution” is all here: “development” refers to
incremental change; “evolution” points starkly at the possibility of
extinction. Of course, the term “evolution” has its own problems in the sense,
first, that capitalism is not a “dog” (however much we Marxists woud like to
think of it as such), in other words it is not an animal species with genes so
that the analogy is very imperfect; and second that “evolution”, as Schumpeter
himself pointed out, has a tone of “complacency” about it. Indeed, it is even
possible to challenge the status of equilibrium economics as “science” given
that, to reprise Schumpeter’s metaphor of the “circular flow” or Kreislauf, equilibrium analysis is just
that – mere ana-lysis! It is, as it
were, a descriptive or “ana-tomical” schema
that can only “photograph” or sketch an economic system and “classify” its
individual organs. It relies exclusively on “pure exchange” and on the maximization
of welfare or utility from the redistribution of “given endowments”. Above all
else, because equilibrium is quite simply a formal descriptive schema, it exists only logically, but it does not ec-sist in the sense that it does not
face the certainty of death, in the case of its “individuals”, or the certainty
of “extinction”, in the case of the capitalist economic system. Once the
certainty of ontogenetic death and phylogenetic extinction are taken into
account, then we understand that the “individuals” that make up the economic
system must deal with their physical environment, with their physis: – this is the “metabolism” that is entirely and
conceptually absent from the equilibrium schema
and that is instead essential to the notion of market process, that is, to the
unfolding or extrinsication of an economic system in the physical world.
What
equilibrium analysis cannot do is understand and explain how the economic
system metabolises, how it interacts
with its social, political, and physical environment, how it grows, mutates,
and dies – or, phylogenetically, how it evolves and becomes extinct. Seen from
the point of view of “market process” – which, as we explained earlier, is the
quasi-logical or dialectical conceptual extrinsication or unfolding of the
concept of equilibrium, its Heideggerian ec-sistence
– seen from this perspective, equilibrium is a purely descriptive or
classificatory exercise: it merely describes the logical and functional relation
of each component of an economic system to other components, and then
determines the price matrix that will maximize the individual utility schedules
of its self-interested individuals.
But
two essential points must be made and understood: first, the “prices” or
exchange rates of goods at equilibrium are mathematical identities that do not
tell us “what” is being exchanged except for the purely metaphysical notion of
“utility”. The equi-valence of the
“exchange” in a static framework merely destroys or dissolves in the identity of the objects exchanged, in
their formal equi-valence, their difference (cf. Heidegger, Identity and Difference) - in such a way
that the “exchange is not “pro-ductive”, it is not meta-bolic – there is no
“change” in this “ex-change”! Even
then, this “exchange” of “utilities” is quite simply impossible when we
consider the “atomicity” of the “self-interested individuals” of equilibrium
theory. For it is quite absurd to imagine that such absolutely
“self-interested” and “in-dividual” entities – Aristotelian entelechies! –
could ever be able to exchange anything
at all! For any “exchange” to be possible or meaningful, there must be a sub-stance that makes the objects of
exchange “equi-valent” – “of the same value”. But it is precisely this Objective
Value that is utterly absent in equilibrium analysis because of the bottomless
“in-dividuality” and irreconcilable “self-interest” of its market entities, of
its “individuals”! The only “value” present in equilibrium is Subjective Value
which, as an inevitable result of its “subjectivity”, is quite simply
“incommensurable”. But every self-interest must share some common element with other
self-interests to give meaning to the conflict of interests (the difference)
that makes exchange possible. Every com-petition
must have an “object” over which competitors “com-pete” (seek together)!
This “object”, this sub-stance or quidditas, this subject-matter that forms the communion
of the exchange (the
contractual “meeting of the minds” over an “object”, its syn-allagmatic [to bring the different together] or cat-allactic [to turn enemy into friend
through exchange] character) is entirely missing in the theory of
equilibrium!
Second,
as a corollary of the first point, equilibrium theory allows only for the
“exchange” of goods and services: it tells us nothing about how they are
“pro-duced”, that is, it tells us about the “subjective” estimations by market
participants of their goods for exchange with respect to one another, but tells
us nothing about the relation of market participants to their natural
environment. Third, market participants are mere inert bodies that obey the axiomatic conditions imposed by
equilibrium theory: they are certainly not “economic agents” making their own
spontaneous decisions. And finally these economic agents are not allowed to
interact with one another or with their physical environment – an exclusion
that automatically removes the “object”, the subject-matter of economics and eschews
politics from the field of economic
inquiry because (a) there is no “object” over which to haggle (there is no disputandum, no com- of com-petition and no con-
of con-flict), and (b) atomic “in-dividuals” cannot form “friends” with
whom to fight “foes” (cf. Carl Schmitt’s definition of the Political in The Concept of the Political).
In
other words, seen from the perspective of
the market process, equilibrium (a) is internally inconsistent because it
contains aporetic and antinomic concepts, (b) does not allow for the
ontological and phylogenetic ec-sistence
of its “individuals” in the sense that their “existence” is purely
logico-mathematical , (c) does not allow for pro-duction, that is, for the metabolic
interaction of human beings (alone or together) with their physical
environment, and (d) is entirely devoid of Politics
because of its “individualistic” existential or ontogenetic axioms which
exclude phylogenetic reality. As we have seen, without this metabolic or
frictional interaction with themselves (the Political) and with the world
(phylogenesis) – without the physis -,
capitalist competition or enterprise is unthinkable because innovation and
profit-making are unimaginable, and so too therefore is economic “change”. The
self-interested individuals that make up the market mechanism of equilibrium
analysis are “inert bodies” that obey mechanically the axiomatic “pure laws of
competition” imposed externally and logico-mathematically on them.
There
are two essential aspects to metabolism
here that are entirely different from and make it incompatible with equilibrium
analysis. The first is that the economic system is trans-formed “from within”
by the spontaneous actions of its “economic agents”. And the other aspect is
that these economic agents transform the economic system not merely relatively to one another as atomistic
individuals, that is, considered ontogenetically – as they must do
axiomatically in equilibrium theory which involves only “relative prices” or “exchange rates” and therefore only “pure
exchange” – indeed an exchange so “pure” that it lacks an “object” -; but they
also transform the economic system by interacting (a) with one another as
aspects of being human, that is to say, phylogenetically, and (b) with their
physical environment, which includes not just surrounding nature, but also
their own physical being, their physis.
We
have therefore two questions: the first is the transcendental question of existence,
and the second is the immanent
question of metabolism. The former involves
for the study of economics the ontological
question of why is there an economic system at all and not nothing (cf.
Heidegger’s question “why is there something and not nothing at all?” in Einfuhrung in die Metaphysik); and the
latter involves the question of why the economic system is what it actually is
now – what is its material history.
These are the crucial questions that Schumpeter attempts to consider and fails
because he limits himself to the transcendental
question but never even remotely tackles the most important question – the
historico-materialist one of metabolism.
It is
simply irrelevant and incorrect to accuse Schumpeter of failing “to integrate theory and history”. Given
that Schumpeter never even considers the question of immanent metabolism, given
that he considers only the question of transcendental existence – that is to
say, the application of an abstract formal schema to empirical facts -, there
was simply no way in which these antithetical concepts could ever be
“integrated”! Such a criticism of Schumpeter is a lucus a non lucendo – a fire that will not light – because of the
antithetical terms in which the question is posed by Schumpeter. And Schumpeter
poses the question in these terms precisely because he is attempting “to make
whole” – the literal meaning of “to integrate”! – the social reality of
capitalism that is broken and fragmented! As a result, Schumpeter’s theory must
forever oscillate, like a pendulum,
between logico-mathematical formalism constituted by the functional-analytical,
descriptive-anatomical schema of
equilibrium theory, on one side, and the subjective-voluntarist,
ethico-political hypostasis of the Innovationsprozess on the other.