Consumption
goods, which before were the
product
of an accidental concurrence of the circumstances of their
origin,
become products of human will, within the limits set by
natural
laws, as soon as men have recognized these circumstances
and
have achieved control of them. The quantities of consumption
goods
at human disposal are limited only by the extent of human
knowledge
of the causal connections between things, and by the
extent
of human control over these things. Increasing understanding
of
the causal connections between things and human welfare,
and
increasing control of the less proximate conditions responsible
for
human welfare, have led mankind, therefore, from a state of
barbarism
and the deepest misery to its present stage of civilization
and
well-being, and have changed vast regions inhabited by a
few
miserable, excessively poor, men into densely populated civilized
countries.
Nothing is more certain than that the
degree of
economic progress of mankind will still,
in future epochs, be commensurate
with the degree of progress of human
knowledge. (Principles, pp.73-4)
The normal function of organisms is conditioned by the
function of their parts (organs), and these in turn are conditioned by the
combination of the parts to form a higher unit, or by the normal function of
the other organs.-A similar observation about social phenomena.-Organisms
exhibit a purposefulness of their parts in respect to the function of the whole
unit, a purposefulness which is not the result of human calculation,
however.-Analogous observation about social phenomena.-The idea of an
anatomical-physiological orientation of research in the realm of the social
sciences results as a methodological consequence of these analogies between
social structures and natural organisms. [C. Menger, Investigations p.129 ]
Here then is the limpid contradiction in Menger’s
exposition of “the principles of economics”: for, given that his point of
departure is “methodological individualism”, he must on one hand attribute the
division of social labour to the wholly independent actions of “individuals”,
and at the same time, on the other hand, attribute the same division of social
labour to “the degree of progress of human knowledge” – not “individual knowledge”, but “human knowledge”, that is, knowledge that belongs to humanity as a species, not to individual
labourers and proprietors!
Thus, on one hand, Menger must attribute economic
progress to the mechanical operation
of a market economy based on the conflicting competitive needs of separate and
independent producers with their individual
labours, that is, an economy with “a
purposefulness which is not the result of human calculation”, whilst at the
same time the real interdependence of these producers necessarily becomes
manifest to them when a “crisis” is brought about presumably by the very fact
that “the market mechanism” – that is, the politically-enforced separation of
social labour into individual labours - has failed to ensure the co-ordination
of social labour and thus exposed the
fiction of individual labours and private property!
When
the economy of a people is highly developed, the various
complementary
goods are generally in the hands of different persons.
The
producers of each individual article usually carry on
their
business in a mechanical way, while the producers of the
complementary
goods realize just as little that the goods-character
of
the things they produce or manufacture depends on the existence
of
other goods that are not in their possession. The error that
goods
of higher order possess goods-character by themselves, and
without
regard to the availability of complementary goods, arises
most
easily in countries where, owing to active commerce and a
highly
developed economy, almost every product comes into existence
under
the tacit, and as a rule quite unconscious, supposition
of
the producer that other persons, linked to him by trade, will
provide
the complementary goods at the right time. Only when
this
tacit assumption is disappointed by such a change of conditions
that
the laws governing goods make their operation manifestly
apparent,
are the usual mechanical business transactions
interrupted,
and only then does public attention turn to these manifestations
and
to their underlying causes. P.63
The “underlying causes” of a crisis can be only that
“the market mechanism” is really a fiction that, once it is mistaken for
reality, leads to the breakdown of the social fabric and must be “corrected” by
political intervention – by the State, that is to say by that “human
calculation” that Menger had hastily excluded as an explanation for the
institution and operation of “the market” which, therefore, can no longer be
said to be a self-regulating “mechanism”. (Cf. the seminal study by K. Polanyi,
The Great Transformation. It should
be noted here that Menger, like all political economy, including the
“socialist”, mistakes capitalist crises as a “malfunctioning” of the market
mechanism and wholly neglects their essential centrality to the operation of
capitalist exploitation or to capitalism as a social system itself – cf. for
instance, Schumpeter’s work as a corrective.)
Capitalist crises demolish the “quite unconscious
supposition” and the “tacit assumption” of individual producers that their
activities are not politically interdependent. Yet Menger’s methodological
individualism prevents him even now from seeing the necessarily political
operation of “the market mechanism” founded on private property. On the
contrary, his insistence in this regard must lead him to the unfounded
supposition of an organic evolutionary element – “a purposefulness independent of human calculation” - in the rise
of the capitalist market economy:
There exists a certain similarity between natural organisms
and a series of structures of social life, both in respect to their function
and to their origin. In natural organisms we can observe a complexity almost
incalculable in detail, and especially a great variety of their parts (single
organs). All this variety, however, is helpful in the preservation,
development, and the propagation of the organisms as units. Each part of them
has its specific function in respect to this result. [Investigations, p.129 ]
Here, “the individual” is not seen as the result of a specific historical phase of
human society, but rather as the point of
departure of all human history, a point to which all human societies must converge
“organically” or “physio-logically” – by which in reality Menger can only mean
“teleo-logically”. Yet, it is just as plausible that in this “organic
evolution” it is the individual that is the product of the species as the other
way round! Menger’s “empirico-realistic” economic science thus degenerates into
an article of mere and pure faith. More specifically, the more empirical study
of concrete historical human societies is completely subordinated to the
synchronic schema of abstract and formal mechanical relations between human
“individuals” understood as social atoms (an oxymoron). (This was the entire
foundation of the Methodenstreit initiated
by Menger between the nascent Austrian School of Economics and the established German
Historical Schools, Old and Young. Whereas the German Historical Schools could
see the danger of mathematical models becoming wholly devoid of historical
content, the Austrian School denounced the mere empiricism of Historismus. Of course, the riposte to
this specious opposition of “fact” and “theory” is that the search for “facts”
necessarily involves a prior “theory”. F. Braudel offers an interesting
discussion of the tensions involved between history as “inquiry” and as “theory”
in Histoire et Sciences Sociales.)
This inadmissible leap of faith from concrete human
being to abstract “in-dividuals”, from social labour (or concrete labour) to
individual labours (or abstract labour), from use values to exchange values,
from human interdependence to “property” is a fallacy common to all bourgeois
political economy and one that Marx forcefully exposed at the very beginning of
his Grundrisse:
Individuals
producing in Society—hence socially determined individual production—is, of course,
the point of departure. The individual and isolated hunter and fisherman, with
whom Smith and Ricardo begin, belongs among the unimaginative conceits of the
eighteenth-century Robinsonades, [1] which in no way express merely a reaction
against over-sophistication and a return to a misunderstood natural life, as
cultural historians imagine. As little as Rousseau's contrat social,
which brings naturally independent, autonomous subjects into relation and
connection by contract, rests on such naturalism. This is the semblance, the
merely aesthetic semblance, of the Robinsonades, great and small. It is,
rather, the anticipation of 'civil society', in preparation since the sixteenth
century and making giant strides towards maturity in the eighteenth. In this society
of free competition, the individual appears detached from the natural bonds
etc. which in earlier historical periods make him the accessory of a definite
and limited human conglomerate. Smith and Ricardo still stand with both feet on
the shoulders of the eighteenth-century prophets, in whose imaginations this
eighteenth-century individual—the product on one side of the
dissolution of the feudal forms of society, on the other side of the new forces
of production developed since the sixteenth century—appears as an ideal, whose
existence they project into the past. Not as a historic result but as history's
point of departure. As the Natural Individual appropriate to their notion of
human nature, not arising historically, but posited by nature. This
illusion has been common to each new epoch to this day. Steuart [2] avoided
this simple-mindedness because as an aristocrat and in antithesis to the
eighteenth century, he had in some respects a more historical footing.
The
more deeply we go back into history, the more does the individual, and hence
also the producing individual, appear as dependent, as belonging to a greater
whole: in a still quite natural way in the family and in the family expanded
into the clan [Stamm]; then later in the various forms of communal
society arising out of the antitheses and fusions of the clan. Only in the
eighteenth century, in 'civil society', do the various forms of social
connectedness confront the individual as a mere means towards his private
Grundrisse-intro
http://www.marxists.org/archive/marx/works/1857-gru/g1.htm
(1 of 18) [23/08/2000 17:00:27]
purposes, as external necessity. But
the epoch which produces this standpoint, that of the isolated individual, is
also precisely that of the hitherto most developed social (from this
standpoint, general) relations. The human being is in the most literal sense a Xwon
politixon not merely a gregarious animal, but an animal which can
individuate itself only in the midst of society.
Production by an isolated individual
outside society—a rare exception which may well occur when a civilized person
in whom the social forces are already dynamically present is cast by accident
into the wilderness—is as much of an absurdity as is the development of
language without individuals living together and talking to each other….
Whenever we speak of production, then, what is meant
is always production at a definite stage of social development—production by
social individuals. It might seem, therefore, that in order to talk about
production at all we must either pursue the process of historic development
through its different phases, or declare beforehand that we are dealing with a
specific historic epoch such as e.g. modern bourgeois production, which is
indeed our particular theme.
The insurmountable difficulty with Menger’s theory of
value is that it cannot establish a rational historical link between human
needs and the determination of prices through the market mechanism because no
nexus can be established between human needs and the establishment of private
property. For there to be market exchange, two kinds of links need to be
established: one is a nexus between the needs of individual human beings (a
human inter esse), which allows for
exchange, and, concomitant with that, both the need to erect individual private
property rights over “goods” to be exchanged by individuals (the raison d’etre of property) and the quantitative extent or limits of these
property rights. In the absence of these links, Menger’s theory of value cannot
achieve what he meant it to achieve, that is, precisely such an
empirico-realistic link between economic value or market prices, on one hand,
and human needs on the other. In the absence of a theory linking needs to
values, Menger’s theory of value is condemned to remain either a vacuous
teleology (the market mechanism works because it is the culmination of a
natural and organic or physiological “evolution” of human needs and society),
or else a pure formal mathematical relation (what Hayek appropriately called
“the pure logic of choice”) between metaphysical entities such as “utility”,
subtending the concept of “marginal utility”, and market prices being the point
of equivalence of individual marginal utilities.
Menger’s theory of value, in fact, having failed to
establish the necessary historical link between human needs and the erection of
property rights, then fails the next test of explaining the existence of the
market mechanism. For, if human needs are intersubjective,
and therefore homogeneous, then there
is no need for a market mechanism to ensure the co-operation or “exchange” necessary
for a market to exist: the fiction of the market is superfluous.
Consistently with this difficulty, in a desperate
attempt to obviate the need to explain the inexplicable, Menger bases his
theory of value on two notions. One is that of “subjective value”, which is
measured as the marginal utility of all “goods”, whether “economic” or
“non-economic”, that is, whether exchangeable or not. And the other is that of
“objective value” which is the rate of exchange established through the market
mechanism at the point – the “price” – where the market utilities of atomic
individuals for each economic good become equal as a result of conflicting and
competitive haggling by individuals. (This theory of exchange value is wholly
adopted by Bohm-Bawerk in The Positive
Theory of Capital.)
But clearly here, what Menger (and later Bohm-Bawerk)
call “objective value” is not “objective” at all! For, if human needs are heterogeneous and therefore incomparable, then a market mechanism
cannot even exist because there are no homogeneous needs or “utilities” over
which the exchange of “goods” is possible! Furthermore, by definition, the
conflicting interests of individuals exchanging their goods in the market
assumes that these self-interested individuals can agree on the rules of market
exchange – which is contrary to the axiomatic assumption of their being purely “self-interested”
individuals.
Once again, Menger’s theory of value is not founded on
a rational historical or scientific link between market prices and human needs
and then again between human needs and property rights over “goods” for
exchange or “economic goods”. The “value” of Menger and Bohm-Bawerk remains
always “subjective” and entirely “formal”; it is, in Wittgensteinian parlance,
a “language game”, that is, an empty mathematical equivalence (that of marginal
utilities) between atomic individuals with heterogeneous needs or requirements.
The market prices that Menger claims fix the values of goods exchanged in the
market are in fact yielded by the mathematical assumptions implicit in the definition
of a “market”. In other words, the “solution” to the problem of market exchange
– equilibrium prices – is no real solution because it is implicit in the
formulation of the problem! A “problem” that contains its solution in its
formulation is not a “problem” at all: it is a purely mathematical “exercise”
or equivalence whose terms are mere “ciphers” wholly devoid of any real
content, of any real “objective value”. A mathematical problem is not a real
problem because a real solution to a problem must not be implicit in the
definition of the problem: a mathematical problem is, as it were, a “false
prison”, a language game whose “solution” is a pure identity. (On the original
meaning of “problem” as “enigma” in Greek language and philosophy, see G.
Colli, La Nascita della Filosofia. On
Wittgenstein’s language games, cf. D. Pears, The False Prison. Incidentally, the analysis of the ontological
status of language games and mathematical identities proffers the answer to the
problem of solipsism: it is impossible for the world to be a product of “my
self” because the very concept of “self” requires the existence of “other
selves”. See on this point generally M. Merleau-Ponty’s insightful explorations
in The Phenomenology of Perception.))
Like all bourgeois theories of economic activity, of
human production, Menger’s is torn between empty mathematical formalism (where
value remains metaphysically subjective), and teleological evolutionism (based
on physis or “nature”; cf. in similar
vein, the constitutional theories of Edmund Burke and the Savigny School of Law
as well as, ultimately, Hayek’s account of socio-economic development in Law, Liberty and Legislation.)
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