Tuesday, 6 October 2015

Between Form and Substance – The Epistemological Status of Economic Theory (Part Two of Equilibrium and Social Reality)

Apologies to all friends for the long delay in writing. These are some more of my notes on "Equilibrium and Social Reality" with a preface meant as a reply to the valuable comment by "Dan" to our last post. Note that "The Philosophy of the Flesh" can be found either on this blog or on scribd.com. Cheers.

 

The question of the unity of theory and practice and that of the status of concepts or of our construction of social reality (what bourgeois academics understand as 'the sociology of knowledge') are really one and the same. Our understanding of how social reality is constructed is the most fundamental first step to our transformation of that reality. This is not a matter for science in the sense of an objective theory of social reality. There is no possibility of encountering the 'false consciousness' of scientistic Marxism. The interpretation and transformation of social reality is and must be a participatory democratic process, one that involves the interests of all members of human society. For as we have sought to demonstrate throughout our work, not only is there no social science independently of human needs, but there can be no science at all - because even what ẃe call 'physical' science is indeed not at all an 'objective' view of the world but it is instead precisely what 'view' or 'theory' imply, that is, a historically specific 'stance' toward human reality. All science represents a partial crystallised interpretation of human needs and action: all science is effectively praxis; every theory is a strategy. Marx's Eleventh Thesis on Feuerbach therefore is incorrect to the degree that all philosophical interpretations of the world in reality were strategies for changing it. What differed before Marx – and to this extent his thesis is correct - is that philosophers were not necessarily or overtly conscious of effectively transforming the world through their theories rather than just interpreting it. This active side of theory - that is, theory seen as praxis - really only starts with the Italian Renaissance and runs from Cusanus, Machiavelli and Vico to Nietzsche and Marx.

The temptation of every theoretician is to freeze and crystallise reality, to render it 'objective' and thus to reify it, to turn it into an immutable 'thing in itself' impervious to human action. This is what we must avoid. But again we must avoid it not for the sake of an abstract principle to preserve the 'openness' of theory against 'closed' schemata - because then we must still specify in what sense a theory is ‘open’ as opposed to 'closed'. Once again, the difference between a 'closed' and an 'open' theory cannot be formal, because then we would reify the 'openness' of the 'open' theory, reducing it thus to a 'crystallised' abstraction. This is the crucial flaw in Lukacs’s own attempt to historicise social reality through the concept of “class consciousness” or rather “conscious being” (Bewusst-Sein).

The openness of a theory depends on the degree or extent - never an absolute one - to which it invokes the decision-making activity of human beings. Only decisions that preserve the volitional element of decision-making can be said to be 'open' or free. On the contrary, decisions that seek to hide or negate the volitional element of human action necessarily have the effect of reifying human reality. In this context, the bourgeois philosophy par excellence, Protestantism, is founded ultimately on the notion of predestination - from Luther through Hobbes to Schopenhauer. For the bourgeoisie, success (the accumulation of capital) is its own justification and goal.

Throughout our studies we have sought to expose the manifold strategies employed by the capitalist bourgeoisie to present social reality as a crystallised, objectively-given and therefore reified and immutable ‘thing’ whereby the established order is certified as a scientific necessity or destiny. To avoid and eschew this fate, we have sought to outline, especially in our The Philosophy of the Flesh, a theory of social reality and action that is immanentistic in that it avoids the twin errors of idealism and materialism, both of which end up in the inescapable transcendentalism of Western metaphysics. As we saw in the previous section on “Apories”, “the union of opposites” theorised by Cusanus early in the Renaissance is not a reality: rather, it describes the process whereby aporetic concepts inevitably end up positing their “op-posites”, resulting thereby in what Lukacs (referring to Kant) called “the antinomies of bourgeois thought” (see the central essay on “Reification” in History and Class Consciousness).

One such process of reification that we have sought to expose concerns the concept of equilibrium that is central to all bourgeois economics.

 

Relation of “equilibrium” to “reality” – content of the presumed “theory”.

 

 

Debreu says that “there is no intellectual life in equilibrium” (Loasby ‘E&E’).

Thus, equilibrium analysis, with its “sphere of exchange” and “simultaneous equi-valence” becomes a tautological “closed system” where the “axiomatic assumptions” contain the solution to the “mathematical relations between the entities postulated”.

 

Hayek’s own attempt to historicise or processualise equilibrium mistakes capitalist (market) institutions for “objective”/reified practices of human groups from which “laws” or at least a “spontaneous order” can be “distilled”:-

 

This paper traces out the development of Hayek’s focus on the epistemic foundations of the complex co-ordination in an advanced market economy and shows that his critique of classical and market socialism led to a refined, subtle approach to understanding spontaneous order.  Furthermore, it is precisely Hayek’s focus on the role of institutions in creating the conditions for the utilization and transference of knowledge through the price system that continues to shape the progressive research programs in economic science and public policy analysis that is his legacy, ((Boettke et al, “Context of Context”, Abstract, my emphases).

 

The main “law” for Hayek of course is that “the price mechanism or system” is the only one consistent with “methodological individualism” which posits “metaphysical” notions such as “utility” and “market”, “competition” and “prices”, in such a fashion that they can be “ordered” into a “game” whose “rules” seem then to be “scientific” but in fact are only logical and self-referential – they constitute a “closed system” that is internally consistent but does not explain the reality that lies outside of its axiomatic (self-referential) assumptions! This is the fate of “human nature” theories that turn historical realities into eternal immutable (‘metaphysical’) “truths” (in fact, axiomatic identities or “tautologies”) devoid of all practical content – which is what reveals them as apories and antinomies.

 

[1] “Since equilibrium is a relationship between actions, and since the actions of one person must necessarily take place successively in time, it is obvious that the passage of time is essential to give the concept of equilibrium any meaning.  This deserves mention, since many economists appear to have been unable to find a place for time in equilibrium analysis and consequently have suggested that equilibrium must be conceived as timeless” (Hayek 1937).

 

 

[For Alchian &Demsetz in ‘Property Right Paradigm’, the way out is the Hayek-Schump one, ‘to processualise’ the central questions of economic theory.]

 

The same sentiments are endorsed by Coase in his review of “the New Institutional Economics”:

 

“This disregard for what happens concretely in the real world is strengthened by the way economists think of their subject. In my youth, a very popular definition of economics was that provided by Lionel Robbins ( 1935 p. 15 ) in his book An Essay on the Nature and Significance of Economic Science: "Economics is the science which studies human behaviour as a relationship between ends and scarce means that have alternative uses." It is the study of human behavior as a relationship. These days economists are more likely to refer to their subject as "the science of human choice" or they talk about "an economic approach." This is not a recent development. John Maynard Keynes said that the "Theory of Economics ... is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps the possessor to draw correct conclusions" (introduction in H. D. Henderson, 1922 p. v). Joan Robinson (1933 p. 1 ) says in the introduction to her book The Economics of Imperfect Competition that it "is presented to the analytical economist as a box of tools." What this comes down to is that economists think of themselves as having a box of tools but no subject matter. It reminds me of two lines from a modern poet (I forget the poem and the poet but the lines are indeed memorable): I see the bridle and the bit all right. But where's the bloody horse? I have expressed the same thought by saying that we study the circulation of the blood without a body.” (my emphases)

 

The reference to “the circulation of the blood without a body” is a clear endorsement of Schumpeter’s Kreislauf/Entwicklung distinction in the ‘Theory’ and of the dog’s anatomy/evolution in Business Cycles. And yet, for reasons we will outline later, the theoretical analysis of “the NIE” is closer to Hayek’s than to Schumpeter’s because it does not challenge the validity of equilibrium analysis at all, it simply shifts the analysis of price co-ordination from the “simultaneous/synchronic equations” of Walrasian equilibrium analysis to the “spontaneous order” of Hayek’s long-run equilibrium. By contrast, Schump’s ‘Theory’ certainly did challenge equilibrium analysis, despite his avowals of faith in its “heuristic” value, not just for Hayek’s reasons and for its a-historical ‘Statik’ approach, and not only for its “metaphysical” belief in “utility” (and its presumed “maximization”) as the “substance” of exchange and market prices.

 

Because above all, the most original feature that sets Schumpeter apart from all other economic thinkers of the last century is his notion of the “dis-continuity” or “dis-equivalence” (not to be confused with ‘dis-equilibrium’!) that clearly brings back into play prepotently the power relationships and antagonism intrinsic to the capitalist economy and therewith its necessarily critical instability and cyclicality. This aspect – entirely neglected by the “institutional epigones” - will be explored and developed in the chapter on Schumpeter. Similarly, the Nietzschean premises of Schumpeter’s and Weber’s theories have been totally and culpably ignored by the myrmidons of the NIE for reasons that coincide, as we shall see, with the most pressing political-hegemonic needs of social capital, whether intentionally or no.

 

Schumpeter’s formidable intuition of the fundamental ir-reconcilability of the concept of “equilibrium” as belonging to “the sphere of exchange and equi-valence”, his vision of the Krisis (the rupture, the antagonism intrinsic to capitalist social relations of production) has been ‘flattened’ into the notion of ‘dis-equilibrium’ that still exists within the uni-verse of “exchange” and therefore of “equilibrium” and is interpreted by the ‘institutionalist evolutionary epigones’ as “the continuous adaptation and development and innovation” of the capitalist economy.

 

In other words, according to the epigones, the capitalist economy is never in “equilibrium” because it is intrinsically “developing” and “innovative” and therefore “growing” and “evolving” – hence, the “body” that Coase was looking for! Ecce homo! But this inter-pretation of Schumpeter grossly mis-construes his meaning because by ‘Entwicklung’ and ‘Innovation’ he meant something much more radical and fundamental than “growth” or “development” or “evolution”: he meant to encompass the profoundly “political” and “antagonistic” and “conflictual” essence of capitalism, - one that is in a different dimension from and ir-reducible to the sphere of exchange and neoclassical equilibrium.

 

Coase’s animadversions echo those of the German Historical School which, not by chance, has been invoked by Williamson as among the ‘precursors’ of “the New Institutional Economics”. Indeed, we may describe the NIE as a go-between, tempering the extremes of the “historical-institutional” approach to political economy of the GHS and the American Institutional School, on one side, and the formalistic-mathematical ambitions of the neoclassical tradition (equilibrium analysis and Austrian School) on the other. [Note “economic sociology” efforts from Hodgson and Swedberg.]

 

Boettke et al agree (‘Context’) with regard to Hayek:

 

As Hayek’s technical work in economics evolved, he became increasingly aware of both the power of, and the limitations of equilibrium theorizing.  At first it was the absence of time within the equilibrium construct that caused problems for Hayek’s theorizing on intertemporal  co-ordination of plans within a capital structure.[1]  In studying the derivation in value of the various inputs with relation to the value of the output produced, Hayek became aware of the dangers equilibrium theorizing poses by distorting the essential economic problem that the equilibrium propositions were supposed to enlighten. Hayek was acutely aware, on the other hand, of how the heterodox traditions, of the German historical school and the American institutional school, led to an atheoretical orientation of fact collection.  Somewhere between arid formalism and descriptive fact collection was the appropriate domain of theoretical social science.” (pp8-9) 

 

Boettke clearly fails to see that there is no “somewhere between” because both approaches suffer from incurable ‘reifications’ that also make them irreconcilable: the ‘theory’ and the ‘fact collection’ move in qualitatively different dimensions because the ‘theory’ reifies the ‘facts’ and the ‘fact collection’ can be ‘theorised’ only to the degree that its ‘facts’ are reified or “reduced/traduced” to formal categories. (See our discussion of Long’s “fallacy of misplaced concreteness” whereby he confuses the content of “language games” [such as the regular behaviour of market exchange] with the abstract logico-mathematical rules of the game. In seeking to reconcile “the Pure Logic of Choice” with its real referential content, Mises and Long forget the “inexorability” of the rules [!]) which obliterates the “choice” that is the essence of the “action axiom”! Mises “reads” ex post the validity of his a priori theory into behaviour consistent with it. And see also our similar critique of Lawson’s ‘theoretical/ontic/ distinction in sections 4 and 5 below.)

 

Hayek instead seeks to validate the theory empirically ex ante by attributing “regularities” to the behaviour of human market ‘agents’ [homines agentes] that have an “observable tendency to equilibrium” [or co-ordination]. But in his case also, the reaching of “equilibrium” introduces the “equi-valent exchange” that eliminates the rationale for exchange! Once “equilibrium co-ordination” is achieved, the economy simply stagnates and lapses into Misesian “non-action”.

 

This is the irreconcilable conflict that only a “histoire raisonnee” in the manner of Marx and as described by Schumpeter (initially opposed to it as “unscientific”, in the ‘Theorie’ and in ‘HEA’, but finally more condescending in ‘BC’ and ‘CD&S’) can seek to overcome.

 

It is Hayek’s ambiguity and the subsequent mis-conceptions that it engendered that is carried over into the NIE and gives rise to Williamson’s “fallacy of composition”, whereby he pretends “to distil” economic theoretical relations from historical “institutional” analysis through a “compositive” or “descriptive”, block-by-block method. [Quote Williamson, ‘The NIE’.] We know that this was the bane of the GHS – because no amount of “descriptive” studies, no matter how ‘detailed’, will ever amount to a theory of economic activity/reality. In this regard, of course, the critique of the GHS by the Austrian School (from Menger to Bohm-Bawerk and Mises) was entirely right. A proper economic theory must not fall into the “mathematical formalism” of general equilibrium or the “logical formalism” of ‘praxeology’, but must avoid also the ‘descriptive’, ‘pictorial’, ‘data-collecting’ empiricism of historiography or, indeed, of management and business studies. No amount of “historical, factual or ‘institutional’” evidence will ever yield a ‘theory’ – which is an abstract rule that connects the evidence in a causal relation.

 

This “irreconcilability” (“never the twain shall meet”) of ‘theory’ and ‘history’ is a recurrent problem, an Ariadne’s thread, in our entire critique of equilibrium analysis that will lead us out of the labyrinth of bourgeois reification. Because “the sphere of exchange” is a “sphere of equi-valence”, “a final state of rest” or of “non-action” (Mises) or a “Kreislauf” and a “Statik” (Schumpeter), not only does it defeat every attempt to introduce “time” in it [cf. Boettke et al.’s futile attempt to postulate an ‘ex ante’ and ‘ex post’ equilibrium], but a fortiori it is also impervious to any effort to locate “causality” in the notion of “equilibrium” and “co-ordination”.





Western thought, from metaphysics to science, must end, must "close", must "com-plete", "satis-fy", "ful-fil", "ex-haust" itself with the conceptualisation of totality, of the "Ab-solute". The Ab-solute is what is not "conditioned" by anything else, what is causa sui (its own cause), both in the sphere of logico-mathematics and science (Leibiniz's intuitus originarius that does not admit of "predicates" and therefore is entirely "self-evident") and in the sphere of human praxis (Kant's "autonomous" Practical Reason guided by the Will, which is the union of the posse [I can] with the nosse [I know] in the velle [I will]). The Will is the ultimate ex-pression of "freedom" - it is "the freedom of freedom", "the power of the freedom of the Subject that "knows itself". Of course, whatever is "self-evident" does not allow of ex-planation in that the definiens is in the definiendum and vice versa. The Ab-solute is therefore "ab-solved" from the "need" to explain itself - just as the prince is "ab-solved" (a legibus solutus) from the laws because he is "above" the law.

 

The error that the Classical and Marxian Economics committed was to presume that its "subject-matter" (its sub-iectum), its "quidditas" is actually a Sub-stance, a homogeneous qualitas occulta - and it presumes as much because it starts from the phenomenology of capitalist social relations of production which are "co-ordinated and measured" by money. Every classical economist from Smith to Marx started from the fact that every "thing" that is exchanged in the market has a "price" and that therefore all "things" on the market must have a homogeneous "Value" - and that this "Value" must be the "subject-matter" of a "science of Economics"! This essentialism is precisely what distinguishes Classical from Neo-classical economic theory, as we are about to illustrate through Weber and Schumpeter.

 

Weber’s central failure was not that he mistook “scientificity” for “science”, for its corresponding “practical conduct” – which mostly he did not! Weber’s failure was rather that his insistence on “categorizing” his “scientific pursuit” with the introduction of the “ideal types” distracted him from the fundamental question of how the Rationalisierung is possible! This failure led him to reify, to hypostatize the historical object of his studies into the “scientific categories or forms” or "the ideal types" that he presumed to adopt for that study – ignoring thereby Nietzsche’s famous warning against “systematizers”! Essentially, Weber mis-interpreted(!) Nietzsche’s Umwertung (trans-valuation of all values) to mean that “all values are interpretations of reality”, and that therefore it is possible for the “scientific observer” of a given historical reality to select a hermeneutic code of interpretation (the ideal types) linking rationally the means available to its “actors” with the “pro-jected ends” that they may envisage. Yet, as Nietzsche would have promptly reminded Weber, this framework of analysis (Entwurf), this “phenomenalism and relativism” starts from the pre-supposition that such a “rational code” of interpretation is both possible and applicable – which Nietzsche would vehemently deny on the ground that it is the very possibility and applicability of this “rational code” itself to a given historical reality – its effectuality - that needs to be interpreted and explained as the mathesis universalis (Leibniz), as the rationalization of the world that is based on human needs, on the “system of needs and wants”! In Nietzsche’s own words,

 

“It is our needs that interpret the world; our instincts and their impulses for and against,” (Aphorism 481, Wille zur Macht).

 

Weber’s Neo-Kantian hypostatization not only of his sociology but above all of “the scientific fields of knowledge” to which he sought to apply it – from economics, to law, to music – is induced fatefully from this inability to com-prehend Nietzsche’s Umwertung, his thoroughgoing De-struktion (Heidegger) of Western metaphysics and science and the related critique of Western Kultur and Zivilisation. It should come as no surprise, then, that it remains suspended, as we noted earlier, between the Dezisionismus of “charisma” derived from the individualist relativism and the Neo-Kantian formalism of the “ideal types” necessitated by Weber’s need to ground this hermeneutic relativism on logico-mathematical – hence, “rational and systematic”, “scientific” - bases. What Weber fails to com-prehend above all else is precisely the historical character of “the metaphysical foundations of logico-mathematical rationality” whose political origins Nietzsche had made all but evident.

 

A brilliant illustration of these points is provided by Norberto Bobbio who, in reviewing Kelsen’s attack on Weber’s theory of the State and sociology of law in ‘Max Weber e Hans Kelsen’ (p.72), concedes that Weber’s Neo-Kantian or Simmelian ‘formalism’ enticed him to his detriment into the Kelsenian ‘Norms’, but that at the same time Weber’s “positivism” was premised on the fact that capitalism represents a historically specific intensification of this ‘positivization’of the juridical norm, in line with its exasperation of the Rationalisierung (p.77) – which is theoretically a far more consistent and Nietzschean position for Weber to take. Commenting on Kelsen’s requirement that ‘co-action’ be added to the definition of ‘legal norm’ (the famous Grundnorm) so as to equiparate the concepts of ‘Right’ with ‘Law’ and therefore also with that of ‘State’, Bobbio goes on to reason (at p.71) that Weber’s notion of ‘apparatus’ (bureaucracy) must be added to Kelsen’s ‘co-action’ for this equiparation of Right, Law and State to have any historical effectuality! Bobbio then comes uncannily close (at p.76) to the central thesis of this study on the meaning of Rationalisierung, which we have enucleated in our Nietzschebuch (and will illustrate more incisively in Parts Two and Three of our study on Weber). In a nutshell, Bobbio perceives without actually comprehending that the notion of Right or Law or the State requires the existence of appropriate "institutions" that "en-force" these abstract concepts. The question that needs to be answered is how political enforcement can "crystallize" or "congeal" into abstract concepts and how abstract concepts "dis-solve" themselves into political institutions. This is what Nietzsche attempted and others including Marx did not.

Separately, by discussing Kelsen’s claim that his jurisprudence is intended to apply both to capitalist and to socialist States, Bobbio helps us highlight the link that we are about to trace in the following sections, dealing with the claim on the part of Neoclassical Theory to apply equally to both capitalist and socialist ‘economies’, between Neo-Kantism and Neoclassical Economics!

 

It cannot be doubted seriously that Marx was aware of the impossibility of reducing objectively, physically, heterogeneous labor to a homogeneous substance. Indeed, Marx counted this, the discovery of the Doppelcharakter of the “commodity” labor power (its being at once living labor that “valorizes” capital and “labor power” that is exchanged on the market), as perhaps his greatest achievement. It is just as certain, as Colletti has noted, that for Marx value was a “social hieroglyph” that, like God or the soul, has no material existence and yet is “objective” in that it conditions and guides human action. But, and here is the crux, this theory of value is inconsistent with the notion of market competition. One of two things:- either “market competition” is regarded by Marx as an autonomous and spontaneous sphere of activity not enforced politically by one class against another, in which case it is an aporetic concept because “competition” invariably ends up “destroying competition” (!); or else “market competition” is a sphere of activity that is “politically enforced”, in which case, eo ipso, there can be no competition as a reality a se stante (that can stand on its own). Yet Marx worked precisely on the grim assumption of the Law of Value, that capitalist society reproduces itself through the operation of the self-regulating market, especially its “pessimistic” feature – competition (the dira necessitas). Consequently, he had to persevere with his inconsistent theoretical framework because to have done otherwise, to have accepted that value is an entirely political category and that the capitalist economy is operated by concrete and identifiable social institutions would have meant for him to be lowered once again into “the kingdom of shadows”, into the shadowy world of the Political which he despised and spurned because he identified it mistakenly with the public sphere of liberalism founded on the “optimistic” features of the market (commutative and distributive justice).

 

(Of course, Marx falls into this “scientistic trap” in Das Kapital, but generally not in the Grundrisse which are therefore much to be preferred as the exposition of Marx’s overall theory of capitalism. Incredibly, in “Natural Law and Revolution”, now in Theory and Practice, Habermas argues that it was Marx’s finding of “the theft of labor time” in the “pure exchange” categories of bourgeois law that “discredit[ed] so enduringly for Marxism both the idea of legality and the intention of Natural Law as such that ever since the link between Natural Law and revolution has been dissolved”! Habermas, who is almost entirely innocent of economic theoretical training, cannot see that indeed it is that “side” of Marx’s theory and of Socialism that believes in the fable of “the theft of labor time” that then must necessarily believe, vi rerum [by force of things!], in the “legitimacy” of legal categories – first among them, the belief that the worker owns “the fruits of his labour”, whereas in reality no such “ownership” is traceable or indeed evident. This misconception draws Habermas’s analysis back into the orbit of Arendt’s “liberalist and jusnaturalist” rendition of the historical reality of “revolutions”! Habermas manages therewith to undo the valid critique of Arendt’s On Revolution that he had expounded in his essay Die Geschichte von den zwei Revolutionen. See also discussion of these themes in Part Three of our Weberbuch.)

 

We should note further how the German Historical School and other early opponents of Neoclassical Theory objected to it on the ground that “utility” is a “homogeneous” entity whereas in fact the “motivations” behind “economic action” are quite evidently “heterogeneous” (see Schumpeter’s account of this in the last chapter of his Economic Doctrines).One of the constant objections to capitalist enterprise is precisely this – that it “reduces” all aspects of human social interaction to the “homogeneous” pursuit of “profit”. Clearly, what these ‘critics’ fail to do is to confront the central question that we are addressing here – that is, how such a reduction of the heterogeneity of human activity to “homogeneous” and “rationally calculable enterprise” or “profit” is at all possible! Here again Weber makes the colossal Neo-Kantian mistake of assuming that there is a specific “form” of human “knowledge” or “action” that is singularly “economic” – just as he conceded to Kelsen that there is a specific dimension of human social activity that is “legal”! Weber simply mistakes what are mere and highly contingent “institutions” of human groupings – the “economy” and “value”, the “law”, “the State” and “power” – for hypostatic and ineluctable “forms” of human knowledge that a social scientist or “observer” can analyze in their epistemological specificity and “autonomy” from other “disciplines”! The fact that a great mind such as Weber’s never even posed itself the question as to how and why “utility” could be adduced as the “ectoplasm”, the “metaphysical quidditas” that could constitute the “subject-matter” of the Economics bears witness to the ability of the social production of “exchange value” and its politically-enforced transmutation into money, then money capital, and then profit, to mystify human social relations – as Marx took pains to emphasize.





Western thought, from metaphysics to science, must end, must "close", must "com-plete", "satis-fy", "ful-fil", "ex-haust" itself with the conceptualisation of totality, of the "Ab-solute". The Ab-solute is what is not "conditioned" by anything else, what is causa sui (its own cause), both in the sphere of logico-mathematics and science (Leibiniz's intuitus originarius that does not admit of "predicates" and therefore is entirely "self-evident") and in the sphere of human praxis (Kant's "autonomous" Practical Reason guided by the Will, which is the union of the posse [I can] with the nosse [I know] in the velle [I will]). The Will is the ultimate ex-pression of "freedom" - it is "the freedom of freedom", "the power of the freedom of the Subject that "knows itself". Of course, whatever is "self-evident" does not allow of ex-planation in that the definiens is in the definiendum and vice versa. The Ab-solute is therefore "ab-solved" from the "need" to explain itself - just as the prince is "ab-solved" (a legibus solutus) from the laws because he is "above" the law.

 

The error that the Classical and Marxian Economics committed was to presume that their "subject-matter" (its sub-iectum), its "quidditas" is actually a Sub-stance, a homogeneous qualitas occulta - and it presumes as much because it starts from the phenomenology of capitalist social relations of production which are "co-ordinated and measured" by money. Every classical economist from Smith to Marx started from the fact that every "thing" that is exchanged in the market has a "price" and that therefore all "things" on the market must have a homogeneous "Value" - and that this "Value" must be the "subject-matter" of a "science of Economics"! This essentialism is precisely what distinguishes Classical from Neo-classical economic theory, as we are about to illustrate through Weber and Schumpeter.

 

Weber’s central failure was not that he mistook “scientificity” for “science”, for its corresponding “practical conduct” – which mostly he did not! Weber’s failure was rather that his insistence on “categorizing” his “scientific pursuit” with the introduction of the “ideal types” distracted him from the fundamental question of how the Rationalisierung is possible! This failure led him to reify, to hypostatize the historical object of his studies into the “scientific categories or forms” or "the ideal types" that he presumed to adopt for that study – ignoring thereby Nietzsche’s famous warning against “systematizers”! Essentially, Weber mis-interpreted(!) Nietzsche’s Umwertung (trans-valuation of all values) to mean that “all values are interpretations of reality”, and that therefore it is possible for the “scientific observer” of a given historical reality to select a hermeneutic code of interpretation (the ideal types) linking rationally the means available to its “actors” with the “pro-jected ends” that they may envisage. Yet, as Nietzsche would have promptly reminded Weber, this framework of analysis (Entwurf), this “phenomenalism and relativism” starts from the pre-supposition that such a “rational code” of interpretation is both possible and applicable – which Nietzsche would vehemently deny on the ground that it is the very possibility and applicability of this “rational code” itself to a given historical reality – its effectuality - that needs to be interpreted and explained as the mathesis universalis (Leibniz), as the rationalization of the world that is based on human needs, on the “system of needs and wants”! In Nietzsche’s own words,

 

“It is our needs that interpret the world; our instincts and their impulses for and against,” (Aphorism 481, Wille zur Macht).

 

Weber’s Neo-Kantian hypostatization not only of his sociology but above all of “the scientific fields of knowledge” to which he sought to apply it – from economics, to law, to music – is induced fatefully from this inability to com-prehend Nietzsche’s Umwertung, his thoroughgoing De-struktion (Heidegger) of Western metaphysics and science and the related critique of Western Kultur and Zivilisation. It should come as no surprise, then, that it remains suspended, as we noted earlier, between the Dezisionismus of “charisma” derived from the individualist relativism and the Neo-Kantian formalism of the “ideal types” necessitated by Weber’s need to ground this hermeneutic relativism on logico-mathematical – hence, “rational and systematic”, “scientific” - bases. What Weber fails to com-prehend above all else is precisely the historical character of “the metaphysical foundations of logico-mathematical rationality” whose political origins Nietzsche had made all but evident.

 

A brilliant illustration of these points is provided by Norberto Bobbio who, in reviewing Kelsen’s attack on Weber’s theory of the State and sociology of law in ‘Max Weber e Hans Kelsen’ (p.72), concedes that Weber’s Neo-Kantian or Simmelian ‘formalism’ enticed him to his detriment into the Kelsenian ‘Norms’, but that at the same time Weber’s “positivism” was premised on the fact that capitalism represents a historically specific intensification of this ‘positivization’of the juridical norm, in line with its exasperation of the Rationalisierung (p.77) – which is theoretically a far more consistent and Nietzschean position for Weber to take. Commenting on Kelsen’s requirement that ‘co-action’ be added to the definition of ‘legal norm’ (the famous Grundnorm) so as to equiparate the concepts of ‘Right’ with ‘Law’ and therefore also with that of ‘State’, Bobbio goes on to reason (at p.71) that Weber’s notion of ‘apparatus’ (bureaucracy) must be added to Kelsen’s ‘co-action’ for this equiparation of Right, Law and State to have any historical effectuality! Bobbio then comes uncannily close (at p.76) to the central thesis of this study on the meaning of Rationalisierung, which we have enucleated in our Nietzschebuch (and will illustrate more incisively in Parts Two and Three of our study on Weber). In a nutshell, Bobbio perceives without actually comprehending that the notion of Right or Law or the State requires the existence of appropriate "institutions" that "en-force" these abstract concepts. The question that needs to be answered is how political enforcement can "crystallize" or "congeal" into abstract concepts and how abstract concepts "dis-solve" themselves into political institutions. This is what Nietzsche attempted and others including Marx did not.

Separately, by discussing Kelsen’s claim that his jurisprudence is intended to apply both to capitalist and to socialist States, Bobbio helps us highlight the link that we are about to trace in the following sections, dealing with the claim on the part of Neoclassical Theory to apply equally to both capitalist and socialist ‘economies’, between Neo-Kantism and Neoclassical Economics!

 

It cannot be doubted seriously that Marx was aware of the impossibility of reducing objectively, physically, heterogeneous labor to a homogeneous substance. Indeed, Marx counted this, the discovery of the Doppelcharakter of the “commodity” labor power (its being at once living labor that “valorizes” capital and “labor power” that is exchanged on the market), as perhaps his greatest achievement. It is just as certain, as Colletti has noted, that for Marx value was a “social hieroglyph” that, like God or the soul, has no material existence and yet is “objective” in that it conditions and guides human action. But, and here is the crux, this theory of value is inconsistent with the notion of market competition. One of two things:- either “market competition” is regarded by Marx as an autonomous and spontaneous sphere of activity not enforced politically by one class against another, in which case it is an aporetic concept because “competition” invariably ends up “destroying competition” (!); or else “market competition” is a sphere of activity that is “politically enforced”, in which case, eo ipso, there can be no competition as a reality a se stante (that can stand on its own). Yet Marx worked precisely on the grim assumption of the Law of Value, that capitalist society reproduces itself through the operation of the self-regulating market, especially its “pessimistic” feature – competition (the dira necessitas). Consequently, he had to persevere with his inconsistent theoretical framework because to have done otherwise, to have accepted that value is an entirely political category and that the capitalist economy is operated by concrete and identifiable social institutions would have meant for him to be lowered once again into “the kingdom of shadows”, into the shadowy world of the Political which he despised and spurned because he identified it mistakenly with the public sphere of liberalism founded on the “optimistic” features of the market (commutative and distributive justice).

 

(Of course, Marx falls into this “scientistic trap” in Das Kapital, but generally not in the Grundrisse which are therefore much to be preferred as the exposition of Marx’s overall theory of capitalism. Incredibly, in “Natural Law and Revolution”, now in Theory and Practice, Habermas argues that it was Marx’s finding of “the theft of labor time” in the “pure exchange” categories of bourgeois law that “discredit[ed] so enduringly for Marxism both the idea of legality and the intention of Natural Law as such that ever since the link between Natural Law and revolution has been dissolved”! Habermas, who is almost entirely innocent of economic theoretical training, cannot see that indeed it is that “side” of Marx’s theory and of Socialism that believes in the fable of “the theft of labor time” that then must necessarily believe, vi rerum [by force of things!], in the “legitimacy” of legal categories – first among them, the belief that the worker owns “the fruits of his labour”, whereas in reality no such “ownership” is traceable or indeed evident. This misconception draws Habermas’s analysis back into the orbit of Arendt’s “liberalist and jusnaturalist” rendition of the historical reality of “revolutions”! Habermas manages therewith to undo the valid critique of Arendt’s On Revolution that he had expounded in his essay Die Geschichte von den zwei Revolutionen. See also discussion of these themes in Part Three of our Weberbuch.)

 

 
 


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