Commentary on Political Economy

Monday 7 July 2014

Economics As Metabolic Interaction

The novel metabolic framework of social analysis that we are outlining here allows the assessment of the capitalist mode of production not from the theoretically meaningless viewpoint of “economic science” – which, as we have demonstrated, is an absurdity – but from a materialist and immanentist standpoint which is conscious of its political foundations without, in its turn, reducing the Political to its humanist and phenomenological – that is to say, to its transcendentalist distortion. Because Schumpeter shares the atomicism or methodological individualism of Neoclassical Political Economy which seeks to determine “welfare” purely in terms of “individual contributions”, then it is obvious that he must cling desperately to the equilibrium model to maintain theoretical – what he calls “scientific” – consistency for his “economic analysis”. Schumpeter fails to see, however, that the very fact that we have an “option” as to whether we choose the atomistic or the organicist framework of politico-economic analysis can mean only one thing: - and that is that the “choice” of theoretical frame-work can only be ethico-political and never “scientific” in an absolute or “objective” sense!
This is a point that Max Weber perceived and examined far more acutely and assiduously than Schumpeter ever did. But Weber committed the mistake of believing that once a “goal” (Zweck) was selected according to a “value” (Wert), then the “means” of achieving that goal (Zweck-rationalitat) could be prescribed and determined “scientifically”. This then became the basis of “the science of choice” that Hayek and Robbins theorized for Political Economy. What none of these theoreticians perceived is that the very selection of the “means for achieving a goal” is also an ethico-political question – and this is a realization that quite clearly undermines the entire notion of “scientific rationality”. The end does not justify the means. (Cf. Leo Strauss’s biting critique of Weber in Natural Right and History.)

The aim of the above elucidation is simply to illustrate the absurdity on the part of Schumpeter of adopting the “methodological individualism” of the Austrian School – that is, the approach whereby all social concepts must be derived from individual actions in pursuit of subjective individual interests – in the context of his proposed dynamisch analysis of capitalist economic Entwicklung. The untenability – the absurdity – of this theoretical position becomes starkly evident once Schumpeter endeavours to shift (and this is a mark of his intellectual honesty) his analytical frame-work from the Statik to the Dynamik. Let us see how.


In the previous sections we established what is the main thrust of our thesis to this point, namely, that Schumpeter is quite aware of the conceptual inconsistency of the “distinct processes” of Statik and Dynamik, but he must continue with his theory of Entwicklung as if they could be combined, as if they were “distinct processes” of a single “mechanism or process of economic change”(Veranderungsmechanismus) – because otherwise, without the assistance of Statik analysis, he could not present the Dynamik as a “pure economic theory of economic change” as a consequence of the “indeterminateness of pricing”. As the following extract shows, despite being aware that the logico-mathematical framework of equilibrium analysis is wholly inapplicable to his Dynamik, from beginning to end Schumpeter always held fast to the “centrality of the problem of equilibrium…. as the foundation to the claim of economics to be a science”, for the almost exclusive reason that it is the only means of lending “exactitude” to economic analysis:


Fast möchte ich sagen, dass die konkreten Resultate für meinen Zweck von nur sekundärer Bedeutung sind. Jedenfalls strebe ich, wie gesagt, nicht systematische Vollständigkeit an. Kur eine verhältnismäßig kleine Zahl von grundlegenden Sätzen soll vorgeführt werden. Im Zentrum steht das Gleichgewichtsproblem, dessen Bedeutung vom Standpunkte praktischer Anwendungen der Theorie nur gering, das aber fundamental für die Wissenschaft ist. In Deutschland ist ihm nicht hinlängliche Beachtung geschenkt worden und es ist von Wichtigkeit hervorzuheben, daß es die Basis unseres exakten Systemes ist. Die Tausch-, Preis-und Geldtheorie und deren wichtigste Anwendung, die exakte Verteilungstheorie, basieren darauf und ihnen ist der größte Teil der folgenden Ausführungen gewidmet. Diese Dinge bilden jenen Teil der Nationalökonomie, der für exakte Behandlung reif und dem eine solche bisher zuteil geworden ist.
Meine Darstellung beruht auf der fundamentalen Scheidung zwischen „Statik" und „Dynamik" der Volkswirtschaft, ein Punkt, dessen Bedeutung nicht genug betont werden kann. Die Methoden der reinen Ökonomie reichen vorläufig nur für die erstere aus, und nur für die erstere gelten ihre wichtigsten Resultate. Die „Dynamik" ist in jeder Beziehung etwas von der „Statik" völlig verschiedenes, methodisch ebenso wie inhaltlich. Gewiß ist jene Scheidung nicht neu. (Das Wesen, Vorwort.)


The methods of pure economics, claims Schumpeter, apply most fully and yield their best and most important results only for Statik analysis; they are separate in “nature and content” from those of Dynamik analysis. Nevertheless, he does not see the necessity of discarding the “pure laws of economics” on what would be the very valid and incontrovertible ground that if such “laws” are in conflict with the theoretical necessity for any valid economic theory to be able to comprehend “economic change”, then those “pure laws of economics” must be completely spurious! Instead, Schumpeter is quite happy to go along with the pretence that Statik and Dynamik can co-exist.


We will examine closely the methodological and ultimately political reasons – or prejudices, if you like – behind Schumpeter’s atavistic attachment to Walrasian equilibrium in a later section. Yet we may claim to have demonstrated already why in reality economics can be said to be “scientific” only to the extent that it acknowledges its ethico-political origins – because otherwise it degenerates into the logico-mathematical tautology of Walrasian equilibrium or else, in the case in which the ethico-political element becomes absolute and millenarian, into a prophetic teleology or, to be more precise, either into a conceptual hypostasis or else into an eschatology. To repeat: despite the fact that Schumpeter clearly perceives by this stage of his analysis the untenable status of the conceptual elements he has adopted – most importantly, the conceptual inconsistency of Statik and Dynamik -, he is nevertheless unwilling to jettison the deterministic framework of neoclassical equilibrium theory. Conversely put, despite his staunch reluctance to acknowledge his departure from the “scientific” logico-mathematical mechanical paradigm of Neoclassical and Walrasian equilibrium analysis, what Schumpeter has clearly introduced with his Dynamik is precisely this ethico-political dimension in economic theory that effectively transforms (to invert Lenin’s most incorrect dictum) economics into a specific concentrate of politics. But we ought to point out at this juncture that by “politics” we do not mean a wholly “ideological” or purely “ethical” sphere. Economics is a concentrate of politics only if by “economics” we mean “the theory” of social relations of production. But the actual real relations of production are “political” also in a “physio-logical”, and not just an ideo-logical, sense.


The crucial point that was absolutely essential to Schumpeter’s reasoning behind the need for a Dynamik to correct the unreality of the Statik was that the latter artificially separated “the economic system” as a collection of atomistic individuals co-ordinated externally like inert bodies under the laws of mechanics from other spheres of social life. Therefore, the Statik treated the economic system as an independent “totality”, as a “closed system”, with its own mechanical or “scientific” logico-mathematical operation. Paradoxically, by seeking to demonstrate that the sphere of “pure economic theory” can also produce endogenously “innovations” that have far-reaching consequences for other spheres of social life – principally science and technology -, Schumpeter was already pointing to the fact that this “separation” of “the social process” was entirely artificial and that, as he himself comprehensively put it, “the social process is really one indivisible whole”.


Yet in this formulation lay hidden a fallacy that Schumpeter most certainly committed. What Schumpeter meant to do with the Dynamik was to theorize an “economic system” that could mutate “from within”, through the “innovative” decisions and actions of true “economic agents”. Yet we have shown that his theory of economic development refers to economic agents as atomistic individuals operating within an “economic system” that is seen as a “totality”, that is, without reference to the physical environment with which this presumed “system” or “totality” must metabolize and therefore cannot remain as a “closed system” or “totality”! Quite evidently, Schumpeter neglected this essential fact – though admittedly a difficult one to theorize - in his transition from Statik to Dynamik: to the extent that the members of a living organic community can influence or mutate its metabolic interaction with its physical environment, to that extent the decisions and actions of the members of such a living organism cannot be theorized as “individual decisions and actions” that can be “measured” by any “scientific” or “objective” absolute standard as if such a living organism could be analyzed or theorized as a “closed system” or in its “totality”.



Schumpeter’s Dynamik, as we have shown, can be theorised only in an organicist framework and not in an atomistic one – because there can be no “Dynamik”, no mutation or evolution, no meta-morphosis, in an economic system whose “science” can determine only “relative values” between its “individual” components. Evolution in the Schumpeterian sense of Entwicklung can be understood and have meaning only from the standpoint of a living organic community for the simple reason that the mutation of the economic system can be judged as such – as a “mutation”, as a “meta-morphosis” – only with regard to a pro-ductive frame of reference – only as “meta-bolism” – and not as a “system” or a “totality” whose internal values and prices can be determined objectively (in an absolute “scientific” sense) - not as “stasis”, as is the case for equilibrium theory and indeed also for Classical Political Economy. The organic community can be trans-formed “from within” by its economic agents, but this trans-formation can be com-prehended only with regard to pro-duction, that is, only with regard to how this living organism metabolizes with its physical environment of which it is an unseverable and indissoluble part.


This is a realisation of the highest importance for social theory and for our critique of bourgeois economic theory, - and the reason why we are insisting on this point to lengths that may seem extreme to some. In the specific case concerning Schumpeter’s Theory of Economic Development, this point is absolutely vital because it constitutes the central and fatal plank of our critique of his entire theoretical framework. What we are saying here is that economic relations cannot be regarded as pure relations of “exchange between individuals” – whether this be exchange of goods, of plans, or of ideas -, but are and must be theorised as social relations of pro-duction. They must include the immanently physio-logical reality of human living activity.


What this means is that what is most important in social life is not so much how “the product” is distributed between individuals and classes. By far more important instead is precisely what is produced and how it is produced! Human reality must be theorised by taking into account not merely the “inter-personal” or psychological relations between individuals or classes, but above all by considering how human beings satisfy and produce their needs by interacting metabolically with their environment. The question of “physis”, (what Heidegger called “the question of the thing” – die Frage nach dem Ding) is vital to a truly revolutionary praxis because the critique of capitalism must invest more than just the “unequal distribution of the product”: it must be concerned above all with what the product is and how it is produced!


Once again, this is so because human being taken phylogenetically cannot be “separated” from its physical environment. Human praxis must not be “reified” into “subjective” concepts that hypostatise it into hieroglyphic “values”: it must be regarded as “living activity”. Without the essential “metabolic interaction” of human beings not just with one another but with their physical environment economic relations would boil down to mere exchange, to mere inter-personal relations that concern psychology and ethics rather than the production and satisfaction of human needs. We would be bound to the sphere of the Kantian Sollen (‘Ought’) which is antinomically separated from the sphere of the Sein (‘Is’) precisely because human being is regarded contemplatively, philosophisch - transcendentally rather than immanently. This is the interpretative key to our immanentist approach to social theory and praxis as against the transcendentalism of bourgeois economic theory.


(Lucio Colletti, in Ideologia e Societa’ at p.17, remarks on how Marx’s ability to combine economic facts and theory in one indissolubly unified inquiry – something that attracted Schumpeter’s greatest admiration – was due precisely to this strict connection in Marxian economic theory between the interpersonal human side and the relation of human beings as a species to their physical environment, in such a way that economics is never seen as a question of mere “exchange” but is indeed treated as a theorisation of the satisfaction of physiological human needs in which “pro-duction” – not “exchange”! – is the most important aspect. Bourgeois economic theory, Classical and Neoclassical, must do away with the sphere of production for the simple reason that “economics” is seen as a “neutral science”, one in which the only possible “facts” that can interfere with its “laws” are “political” and can affect only the “distribution of goods”, not “the making of pro-ducts”. And that is why, as Schumpeter genially observes [in Capitalism, Socialism and Democracy] orthodox economic theory can abstract from “economic facts” and concentrate on “pure economic laws”! The process of production, therefore, is seen as “technology” – that is, as a “neutral scientific process”, and not as the very embodiment of political antagonism over the production and satisfaction of human needs. Our next section will be devoted entirely to these theoretical matters that arise from this realisation – the endogeneity of the methods of production to “the capitalist economic system” – that provoked Schumpeter’s shift from Statik to Dynamik.)


As we are about to demonstrate, Schumpeter’s conception of the Innovationsprozess as the “transformation mechanism” of the capitalist economy is entirely one-sided because, for one, it attributes the transformation of the capitalist economy to the “innovative” or “creatively destructive” initiative and Individualitat – the “Spirit”! – of the Enterpreneur and leaves to one side the political antagonism that induces capitalist innovation and is contained by and in it! And for another because once we accept that capitalism amounts to a process of “creative destruction” due to the “innovative or creative individuality” of entrepreneurs, then there is simply no way how this oppressive economic system can ever be destroyed - “creatively” or not! – and be replaced with a superior system of production and satisfaction of human needs.



Within these premises, because Schumpeter treats the organic community as a totality that can evolve endogenously but then fails to consider its metabolic change, he ends up with a framework of economic analysis in which there is conflict between the individual components of the economic system but there can be no “resolution” or “supersession” of this conflict. There is a pendulum in and out of equilibrium, but no dialectical spiral! In Schumpeter’s Entwurf, there is conflict and opposition between the individual members of the organic community – and this conflict “drives” the economic system out of its “stasis” and on to a new equilibrium. But there is no supersession of this pendular movement between the “static poles” of equilibrium and evolution, competition and adaptation, Statik and Dynamik, innovation and conservation, entrepreneur and capitalist, profit and interest. The conflict is never capable of resolution, it can never be overcome because “economic activity” is defined as an ineluctable “psychological” conflict pitting atomistic individual against atomistic individual and oscillating between the polar opposites. Clearly, here it is not “the facts” that inform the theory but the theory that jams the facts into the straitjackets of antithetical concepts. And therefore Schumpeter’s “economic system” or “social process” can never be examined as a living organic community; it can never escape the “gravitational centre” of static equilibrium which then sets the “asymptotic limits” of the theoretical analysis. Equilibrium becomes a negative utopia that can never be allowed to be reached on pain of bringing society to a complete standstill, to total paralysis, to stasis; and yet it is a necessary “tool of analysis” for the ideological transfiguration of the bestial reality of capitalist exploitation into an “empyrean” of “pure competition” and “welfare maximisation” or “Pareto optimality”.

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