Saturday, 12 March 2016

Mach and Robbins: Economical Science and Scientific Economics

How can a Wittgensteinian language-game be fitted to human reality? Conversely put, how can human reality be made to fit into a  Procrustean language-game such as "economic science"? The idealist "separation" (Plato's chorismos denounced by Nicholas of Cusa) of Subject and Object - starting from Berkeley through to Mach and then the Wittgenstein of the Tractatus - is the fateful precursor of Neoclassical Economics. The genealogy of this forma mentis is illustrated in and exemplified by Lionel Robbins's epistemological mise en scene of economics as "the science of choice". Yet far from being scientific, the Robbinsian definition of the economic problem rapidly degenerates into logical formalism, into yet another language-game far removed from the reality of human pro-duction. Any economics worthy of the name must become a "critique of political economy", that is to say, it must acknowledge its political essence, and then seek to overcome the real antagonism of its object of study - the capitalist economy and the society of capital. Cheers.




Even the wildest dream is a fact as much as

any other. If our dreams were more regular, more connected,

more stable, they would also have more practical

importance for us. In our waking hours the relations of

the elements to one another are immensely amplified in

comparison with what they were in our dreams. (p.11)

The ego is not

sharply marked off, its limits are very indefinite and

arbitrarily displaceable. Only by failing to observe this

fact, and by unconsciously narrowing those limits, while

at the same time we enlarge them, arise, in the conflict

of points of view, the metaphysical difficulties met with

in this connexion. (p.13) (Mach, “Antimetaphysik” in The Analysis of Sensations)



Mach’s theory of sensations is pure Schopenhauer. It contains therefore an implicit and stinging critique of Kantian metaphysics. To be sure, already the Kantian “thing in itself” had removed the relation between Subject and Object to one of mere “transcendence”, to the realm of “idealism” – however “critical” Kant intended these to be. And yet Kant’s notion of “intuition”, although it made human objective reality “unknowable”, still retained that indissoluble material link between human thought and “its” object – between fact and concept, between Object and Subject. The Kantian universe is still Galileo-Newtonian in the sense that it is something that can be com-prehended and en-compassed by human beings through the faculty of Reason by means of which the universe acquires an “order” and a “reason” that can be “uni-versally” recognized by all human beings – that can lead to a convergence or con-sensus over ultimate human goals and values. It is not that dreams are neglected because they have less “practical importance to us as scientists!” than waking reality: rather, it is because they have less importance “for the business of scientists!” The con-nection – empirical! – between the rise of capitalism and that of science is undeniable.



For us, therefore, the world does not consist of

mysterious entities, which by their interaction with

another, equally mysterious entity, the ego, produce

sensations, which alone are accessible. For us, colors,

sounds, spaces, times, . . are provisionally the ultimate

30 THE ANALYSIS OF SENSATIONS

Elements [sensations], whose given connexion it is our business to

investigate. 1



Such empirical formalism simply obliterates the role of human goals in the pursuit of science, the search for a shared reality of human values.

With Mach and then Wittgenstein, Kantian rationalism gives way to pure empiricist positivism. There is no “substance” behind concepts; there are no “things” behind facts; there is no “reality” behind sensations. The task of science is merely to con-nect these sensations or facts by means of hypotheses whose guiding principle must be that of “economy”.



But anyone who takes his stand as I

do on the economic function of science, according to which nothing is

important except what can be observed or is a datum for us, and

everything hypothetical, metaphysical and superfluous, is to be

eliminated, must reach the same conclusion. (fn1 at pp.27-8)



But what is a “datum”? Mach is deceived by the “given-ness” of facts as data, which are not “given” at all but “found” in the sense of “searched for” by the scientist, in-vestigated like “vestigia” (tracks), hunted for. The tragedy of positivism is to forget the “activity” (auctor, auctoritas), the exercise of decision and power behind the data or facts (from facere, human action) that are “found” or ascertained. Certainly, anything “superfluous” can be neglected – because it is “superfluous”. But what is superfluous relates to a particular line of research – and then we must ask, “Who decides what to research?” Similarly, the hypothetical cannot be abandoned – because all science starts with “hypotheses”. And the drives, the human needs that lead to hypotheses can reflect meta-physical goals. What, then, can be “the economic function of science”?



Robbins:



But when time and the means for achieving ends

are limited and capable of alternative application,

then behaviour necessarily assumes the form of choice.

Every act which involves time and scarce means for

the achievement of one end involves the relinquishment

of their use for the achievement of another. It

14 SIGNIFICANCE OF ECONOMIC SCIENCE OH.

has an economic aspect.1



But economic science cannot prescribe what particular choice an individual must make “scientifically” for it to be “economic”, because from an individual’s point of view the “choice” cannot be dictated by considerations other than the “choice” itself. Given a “choice”, its implementation is a matter for engineering, not for “economics”. Clearly then, economics intervenes only when individual choices are in conflict (scarcity) with the choices of other individuals (Hayek on Walrasian equilibrium). There must be the possibility of “exchange” of “goods”. But this presumes the prior existence of “goods” as individual pro-ducts – hence, the division of social labour into “individual labours” – and then the prior existence of property rights.



There is a tautology of choice here in that choice is reduced to science, and an oxymoron in the sense that “choice” cannot be scientific and “science” is “objective”, that is, it is independent of “choice”. This applies to societies as well – because it is impossible to determine what the “scientific” way of maximizing choices is without first knowing what these “choices” have “in common” – their “interest”, perhaps a “market mechanism” to reach “equilibrium” (Hobbes’s paradox – how can self-interested individuals agree to form a society or set up a market?)



Choice necessarily involves “scarcity” – that is why a “choice” must be made. But this “choice” is not “economic” because there are no parameters by which the “choice” can be graded apart from, outside of, the “choice” itself! If I specify what my parameters for my “choice” are…. then I do not have a “choice”! My choice becomes a mere “calculus”. Both logic and mathematics are just calculi that do not involve “choice”. Choice is ineluctably “political”, it involves many “individuals”. But then economics must become “political economy” and can never be a “science of choice”.



Economics is the science which studies human behaviour

as a relationship between ends and scarce

means which have alternative uses.1

1 Cp. Menger, Orundsätze der Vólkswirtschaftslehre, lte aufl·, pp. 51-70;

Mises, Die Gemeinwirtschaft, pp. 98 seq.; Fetter, Economic Principles, ch. i.;

Strigl, Die ò'lconomischen Katagorien und die Organisation der Wirtschaft,

passim; Mayer, op. cit. (Robbins, p.15)



By rejecting the “classificatory” definition of economics, which refers to “material welfare”, Robbins espouses the “analytical” formalism of Mach and Wittgenstein (p.16). But by so doing he completely dis-embodies economics, divorcing it even from its most fundamental political element – one that even Menger could not ignore: - the exchange of goods (p.16-7).

One may realise completely the implications

for oneself of a decision to spend money in this way

rather than in that way. But it is not so easy to trace

the effects of this decision on the whole complex

of "scarcity relationships"—on wages, on profits, on

prices, on rates of capitalisation, and the organisation

of production. On the contrary, the utmost effort of

abstract thought is required to devise generalisations

which enable us to grasp them. For this reason

economic analysis has most utility in the exchange

economy. It is unnecessary in the isolated economy.

It is debarred from any but the simplest generalisations

by the very raison d'etre of a communist society. (Robbins cites Mises’s Gemeinwirtschaft, p.18)



[I]t is clear that the phenomena

of the exchange economy itself can only be explained

by going behind such relationships and invoking the

operation of those laws of choice which are best seen

when contemplating the behaviour of the isolated

individual.2(p19)



For it is not

the materiality of even material means of gratification

which gives them their status as economic goods;

it is their relation to valuations. It is their form

rather than their substance which is significant. The

"Materialist" conception of economics therefore misrepresents

the science as we know it. (p.20)



Economics is not concerned at

all with any ends as such. It is concerned with ends

in so far as they affect the disposition of means. It

takes the ends as given in scales of relative valuation,

and enquires what consequences follow in regard to

certain aspects of behaviour. (P.29)



It is obvious that this ends-means definition of economics can stand its ground if it breaches the condition of universality that Robbins seeks to ascribe to it: if it is empirically and positivistically confined to the effects of human behavior under specific conditions of exchange – but not to the totality of exchanges - then economics becomes pure engineering or “technique” as Robbins calls it in this chapter on “Ends and Means”. But if it seeks to extend to all combinations of ends and means, then it is clear that “economic science” must also be able to prescribe the ends that are “economic” or “affordable” – which contradicts his categorical exclusion of “ends” from economic analysis earlier in the chapter: Robbins is then forced to amend his definition to include not just the choice of scarce means with regard to known or given ends, but rather also the choice of combinations of all ends and means:



[Th]e problem

of technique arises when there is one end and a

multiplicity of means, the problem of economy when

both the ends and the means are multiple.1(p.31)



In fact, the problem arises when the ends are “given”, not when there is only one end! If the ends being pursued by agents are known or “given” (as in Walrasian equilibrium where utility schedules are common knowledge), then the economic problem does not exist and the “solution” is pure engineering – “technical”. But where the ends are not discernible, then the problem becomes at once political and economic – it becomes political economy, never “economic science”!



Robbins is confusing a technical problem – the choice of appropriate means to given ends - with the essentially political nature of “economics”: the social relations behind capitalist production. This is why, from the piecemeal viewpoint of exchange transactions only, where it remains a “technical” tool, his definition of economic science misses out on the essential political characteristic of capitalism – the accumulation of social power as value, as command over living labour by means of its “exchange” with dead labour. It is the impossibility of this “exchange” that inspired Marx’s critique. Thus, “value” in economics – what lies behind market “prices” and is embodied in “money” – is an entity that cannot have a “scientific” or technical meaning, but one that is intrinsically political. His failure to understand this vital point is why Robbins entirely misunderstands the function of money, leaving out entirely its role as a “store of value” in a capitalist economy:



Money-making in the normal sense of the term is

merely the intermediate stage between a sale and a

purchase. The procuring of a flow of money from the

sale of one's services or the hiring out of one's property

is not an end per se. The money is clearly a means to

ultimate purchase. It is sought, not for itself, but for

the things on which it may be spent—whether these

be the constituents of real income now or of real

income in the future. Money-making in this sense

means securing the means for the achievement of all

those ends which are capable of achievement by the

aid of purchasable commodities. Money as such is

obviously merely a means—a medium of exchange,

an instrument of calculation. For society, from the

static point of view, the presence of more or less money

is irrelevant. For the individual it is relevant only

in so far as it serves his ultimate objectives. Only the

miser, the psychological monstrosity, desires an infinite

accumulation of money. (P.30)



Money is much more than just a means of exchange and a unit of account – “a means of calculation” as Robbins clumsily puts it. Money is above all a store of value: it is the necessary expression of political relations pertaining to the exchange of living with dead labour (pro-ducts or goods or commodities). And the aim of capitalism is precisely “the infinite accumulation of money” as the embodiment of political power through the “exchange” of dead labour with dead labour! The miser Robbins has in mind – “the psychological monstrosity” – intends precisely to reach the Nirvana that is “the satisfaction of all needs” through the renunciation (Schopenhauer’s Entsagung) of present consumption! This is the crucial point behind the theory of capital in both Menger and then Bohm-Bawerk.

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