A concept is
‘aporetic’ (Gr., a-poros, “does not breathe”, without pores) when its meaning
e-vokes (calls forth) other concepts or relations without which it would have
no meaning whatsoever, without which it would remain meaning-less. Apory
applies to abstract concepts taken in their abstraction or ‘ideal-ity’, that
is, without reference to concrete reality. In its ‘un-related’ meaning, the
concept “collapses into itself”, it im-plodes and loses all meaning it
possessed originally before we began to strip it of its ‘re-lations’ or
‘attributes’. In its ‘isola-tion’, in its ‘singularity’ or in-dividuality or
‘noumenality’ (being a thing-in-itself), the concept loses all meaning and
“cries out” for the ‘re-lations’ or ‘attributes’ that give it a ‘con-text’ and,
with that, a “meaning”.
Once we seek
“to ground” aporetic concepts, to ‘tie them up’ with other concepts with which,
because of their aporetic character, they need ‘to re-late’, concepts that they
‘e-voke’ to acquire a meaning – once we seek to tie them up to ‘cor-responding’
concepts, then we start to describe a ‘con-text’, a ‘real-ity’ (a ‘material’
existence) that unfolds in space and in time, that is both material and
historical, so that the concept, in these new re-lations (Fr.,‘rapports’)
becomes ‘dia-chronic’ as opposed to ‘syn-chronic’. In other words, the concept
acquires a spatio-temporal and historical “breadth” and “depth” – it acquires
“materiality” thanks to its new ‘op-posite’ that it did not possess earlier.
But at that
precise moment, when the concept ‘ex-its’ (‘goes out of’) its aporetic status
and, in its ‘re-lation’ to the concepts it ‘e-vokes’, acquires “dia-chronicity”
or “historicity” – at that precise instant, the concept becomes “anti-nomic”,
that is to say it in-fringes (‘breaks’) or ‘contra-dicts’ its initial ‘meaning’
in that its ‘telos’ or ‘in-tention’ within that ‘history’ is to develop, to
un-fold and grow or ‘e-volve’, into its very op-posite or “ob-ject” (Ger., ‘Gegen-stand’, “standing against”), an
“ob-ject” that “stands against” or “op-poses” the concept because it is the
very ‘ob-ject’ or “ob-jective”, the aim or ‘telos’, of the original concept.
Now, a
con-cept that en-genders or im-plies conceptually its ‘op-posite’ as a
practical-historical ‘ob-jective’ in its “dia-chronic” or historical moment becomes an “anti-nomy” because it contra-dicts or
violates or an-hihilates its own original “meaning”, leading to the ‘op-posite’
out-come or result. Its “ob-jective” is to “tra-duce” (exchange and betray) and
ob-literate its original meaning and end up (re-sult) as its ‘op-posite’.
‘In-dividuals’
(indivisibles) can be defined only by reference to an entity with respect to
which they are ‘in-dividuals’. What de-fines/de-limits their ‘in-dividuality’
must be an entity or reality that stands op-posed to ‘(atomic) in-dividuality’.
– Because an ‘in-dividual’ taken in its ‘a-tomicity’ or ‘isolation’ or
‘windowlessness’ or ‘monadism’ can bear no relation (by de-finition) to any
other entity whatsoever. In that case, even the notions of “endowments” or
“self-interest” or “competition” or “exchange” or “utility” can have any
meaning whatsoever. This is the “apory” of the concept which, as soon as it is given
any “content” or “meaning” whatsoever in relation to its “attributes”
(self-interest, endowments, utility) will trans-mute the very concept of
“in-dividual” into something else – namely a concept that con-tains those
‘relations’ and therefore is no longer an “in-dividual”!
And once the
“in-dividual” comes to acquire those ‘relations’ (correspondences), it
immediately stands in relation to “other
in-dividuals” with their own attributes. But now we no longer have separate
‘in-dividuals’! What we have is a “group” of in-dividuals so that their
“in-dividuality” must be defined in terms of “the group” – that is, their
‘separateness’ is com-prehensible only in relation to “the group”. If they are
“in-dividuals” it is not only because of their “in-dividuality” or “a-tomicity”
but rather because they wish to ‘relate’ to the other “in-dividuals” in a
certain, definite, part-icular
manner. And that manner is that they wish “to exchange” their “endowments” with
those other “in-dividuals”, but only in a “self-interested” manner so that “the
exchange” is “selfish” in that it is meant “to maximize” their “endowments” as much as possible from “the exchange”.
So now we have
two further assumptions: we have “ownership” of the “endowments” and we have
“rules of exchange”. “Ownership” implies “private rights” and “endowments” also
imply “inheritance or bestowal rights”. But these “rights” stand in relation to
“exchange” so that “exchange” itself must be de-fined. But “exchange” can take
place only once all the combined “utilities” of the other “individuals” are
known, so that the “exchange” occurs “simultaneously” and “timelessly”, that is
without any “active pursuit” from the ‘individuals’. There is a ‘semaphoric’
relation between them so that “the market” and “competition” do not denote any
“space” or “activity” or “inter-action” be-tween the ‘in-dividuals’. The
exchange is timeless and ‘semaphoric’ – it is a simple “equi-valence” that has
no “content” or “meaning” in a “diachronic” sense.
The ‘apory’ of
the equilibrium ‘entities’ and ‘id-entities’ means that we are in the classic
Wittgensteinian “language game” with its “inexorable laws” – the laws of
mathematical identities.
Of course,
once these ‘aporetic’ concepts or “id-entities” are so much as “imagined” in
relation with one another, those ‘relations’ become “anti-nomic” so that
“endowment” leads to “inheritance/acquisition”, “acquisition” leads to
“property rights”, “property rights” lead to “enforcement” and hence to
“society”, “individual” to “society”, “pure competition” (apory) to “monopoly”
(antinomy), “selfish freedom” (apory) becomes “right” (antinomy) becomes
“coercion”, “exchange” (apory) to “commensurability” and therefore to “value”
(antinomy) and “communion”/expropriation/antagonism.
“Prices”, in
particular, lose all meaning because a “price” is something over which a
“purchaser” has a “choice” (to buy or not to buy). But no such choice exists in
equilibrium analysis because the “price” is only a “relative, numeraire
exchange ratio between endowments” that is fixed simultaneously with the
exchange and over which, therefore “the purchaser” and “seller” have no choice!
Consequently, there is no content or meaning to the concepts of “buyer” and
“seller”. “Prices” and “markets” vanish in thin air. THAT IS ‘APORY’!
FORM AND SUBSTANCE – Theory vs. History
– Equilibrium vs. Market Process
Indeed, 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”.
Relation of
“equilibrium” to “reality” – content of the presumed “theory”.
Perhaps the
fallacy stems from Hayek’s mistaking capitalist (market) institutions as
“objective”/reified practices of human groups from which “laws” or at least a
“spontaneous order” (Boettke et al, “Context of Context”) 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, (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 ‘PRParadigm’, the way out is the Hayek-Schump one,‘to
processualise’ the central questions of economic theory, to make them
“evolutionary”.]
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 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 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, 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, 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 point is argued superbly by Karl Popper in Conjectures and Refutations.)
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 of “Kreislauf” and “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 impermeable to any effort to locate
“causality” in the notion of “equilibrium” and “co-ordination”.