Schumpeter and Robinson: Static Equilibrium as Newtonian Formal Schema and Dynamic Disequilibrium as Einsteinian Relativity
There is
however one thing of fundamental importance for the methodology of economics which he [Marx] actually achieved.
Economists always have either themselves done work in economic history or else
used the historical work of others. But the facts of economic history were
assigned to a separate compartment. They entered theory, if at all, merely in
the role of illustrations, or possibly of verifications of results. They mixed with it only mechanically. Now Marx’s mixture is a chemical one; that is to say, he introduced them into the very
argument that produces the results. He was the first economist of top rank to
see and to teach systematically how economic theory may be turned into
historical analysis and how the historical narrative may be turned into histoire raisonnee. (J. Schumpeter, Capitalism,
Socialism and Democracy, p.44)
The aim of bourgeois economic theory is
to establish itself as science. Its overriding objective is therefore to
eliminate social conflict from the analysis of capitalist social relations of
production. The aim is to present economic theory as simple engineering whereby
the maximization of “wealth” – taken as an entity universally agreed upon by social
agents – can be exactly calculated from the given technologies of production available
at a given time. In this perspective, the opposite of freedom – the choice
involved in the production and distribution of “wealth” or “the product” – is the
“necessity” posed by the factors of production, that is, the labour force, the means
of production (“capital”) and the level of technological progress. Hence, bourgeois
economic theory seeks to expurgate the element of conflict and of coercion that
is in reality inseparable from the process of production: it seeks to exclude
the Political whereby the real opposite of freedom is indeed political coercion
and not scientific and technical necessity!
This is the precise reason why, as
Schumpeter rightly notes, economists have never been able to integrate
historical change in their attempted theorization of economic reality: they
have never been able to relinquish the Statik modelling of the capitalist
economy as an equilibrium and to account for the evident fact that all
economies, not just the capitalist, exhibit a perspicuous Dynamik, that is to
say, they change not purely in terms of “quantitative growth” but also and
above all else in terms of “qualitative transformation”, precisely as the social
conflict and antagonism implicit in economic relations evolves and develops
according to the relative social power of the social agents involved in
production. It is this “trans-crescence”, this political metamorphosis of
economic activity that makes it impervious to all bourgeois “modelling”, and
specifically to all modelling that seek to account for historical changes, for
the transformation, metamorphosis or transcrescence – for the Dynamik – implicit
in social relations of production.
The manner in which bourgeois economic
theory seeks to reify social relations of production is as predictable as it is
easy to summarize. Firstly, (a) economic behaviour is reduced from the
Political, with all the complexity of historical conflict removed, to the
Individual where a mythical “self-interested atomized individual” emerges as
the paragon of unchanging and immutable “human nature”. Secondly, (b) the means
of production are exogenous to social relations because they are technically
given as a function of the scientific progress of a society which is entirely
independent of the social relations of production. Third, (c) the techniques of
production and the products themselves are the result of the combination of the
two factors just mentioned, namely, (b) the exogenously given technical
progress (production function) and (a) the independent decisions of the
atomized individuals (demand). In other words, the what, when and how a product
is produced is determined not by social conflict but by the autonomous choices
of equally powerful individuals and by the existing scientifically given level
of technological progress and availability of means of production.
Schumpeter has got it the other way round:
it is not the case that Marx “turned economic theory into historical analysis”
but rather that he turned a thorough understanding of history into – Schumpeter
is wrong again -, not economic theory but rather “the critique of
political economy”. The difference is crucial. Whereas bourgeois economic
theory begins with the robinsonnade – with a logico-formal reduction of
human action to “immutable human nature”, that is to say, to a set of
behaviours and interests or needs that are individual and inalterable -, Marx
starts his critique of political economy by first alerting us to this
very fact, to the bourgeois hypostatization of human living activity, and then
by reminding us that human economic behaviour is inevitably social and
therefore political rather than individual! Put differently,
bourgeois economic theory presents a false polar choice between freedom and
necessity by relegating human social relations of production or, if you like,
“economic activity”, to the realm of physical and natural or biological and
physiological limits, whereas Marx holds firmly to the reality that economic
behaviour lies within the political poles of freedom and coercion!
The nomothetic mechanicism of
bourgeois economic theory – its logico-formal reification and reduction of
human social relations to the conduct of atomic individuals motivated only by
self-interest together with the presumed “political neutrality” of
technological and scientific progress – makes it incompatible with the idiographic
character of the Political which is firmly and indissolubly rooted in the
social relations canvassed by human history. Bourgeois economic theory seeks
first and foremost to reduce human social relations of production that are ineluctably
political, and therefore historical, into rigid “natural laws”
that are unalterable and permanent throughout human history. That
is why the endlessly repeated attempts by bourgeois economists to supplement
their often mendacious and invariably ill-conceived “theoretical models” with
“historical illustrations” always and irreparably fall victim to the charge of
reductionism and hypostatization of human relations – precisely that clumsy “mechanical
amalgam” of theory and history that Schumpeter contrasts with the “chemical
bond” of the Marxian analysis.
Not that indeed, for Schumpeter, Marx or
anyone else could ever offer a “unified” reasoned history: Marx’s
mixture of theory and history may have been “chemical” rather than
“mechanical”, but Marx’s claim to have reconciled theory and practice rightly remains
for Schumpeter a vacuous “prophetic” and deeply “unscientific” boast. Indeed,
the originality of Schumpeter’s approach to methodology in
economics rests almost entirely on his un-dialectical rationalist-empiricist
insistence on the irreconcilability of theoretical schema and political
practice due to the utter inevitability of human conflict. [S.s Weber quote
in Theorie] Only by insisting on this irreconcilability of formal theory
(Schema) and historical content, of nomothetic and idiographic
approaches, is it possible to do justice to their separate polar indispensability
for the bourgeois ideology and capitalist practice of
“economics”. For Schumpeter, economic theory must remain necessarily “heuristic”
because its unavoidable limit is the imposition of (Weberian) “ideal types” on
social reality for the purpose of developing adequate liberal policies
for the administration of social economic activity and capitalist strategies
in the domination of the working class.
Herein lies the remarkable similarity
between the economic philosophy of Schumpeter, which is strictly neo-Kantian,
and that of Joan Robinson, which is superficially British empiricist, that is
our focus in this study. Neither Robinson nor her mentor Keynes could ever
aspire to the depth of learning and thought to which Schumpeter could lay
claim. Despite her undoubted intellectual qualities, Robinson always remained
the David to Schumpeter’s majestic Goliath! – As we are about to see.
Just like social theory for Weber,
Schumpeter interprets economic theory as a project for social action in
which the interests of the theoretician are inextricably intertwined with the
theory he advances. For him as for Joan Robinson, “economics is a box of
tools” that is utilized in the course of “social practice”. (Robinson’s Mao
epigram to FandN) It is no accident that both theoreticians adopted the
exact same instrumentalist phrase to describe the scientific essence of
economics – Schumpeter in History of Economic Analysis, and Robinson in The
Economics of Imperfect Competition.
The central difference between the
economic philosophies of Schumpeter and Robinson lies precisely in this: - that
the Austrian School’s epigone recognized and acknowledged the bourgeois Will to
Power behind his own theoretical perspective, whereas the English Keynesian always
deluded herself that her constructions could consciously be turned into value-neutral
tools of analysis so long as agreement could be reached between capital and
workers in terms of the distribution of the social product. Robinson
believed in objective science, like Popper and Keynes; Schumpeter only knew
irreconcilable conflict, like Nietzsche and Weber. Whereas for Robinson this
“box of tools” could be applied neutrally and fairly in social practice, for
Schumpeter the “tools” always took the shape and form of the Will of those who
wield them! (There is a profound echo here of Schopenhauer’s definition of the
human Body – a tool – as “the objectification of the Will”!) That is the
precise reason why for Schumpeter, contra Robinson’s naïve belief in the
possibility of social-scientific impartiality, the ruling class, the capitalist
bourgeoisie, must insist on a theoretical framework that hypostatizes the
present state of affairs as “natural and eternal”, whilst the antagonistic
viewpoint of the working class must promote the supersession, the overcoming
and abolition, of the established order. It is because the historical
past and present are antagonistic that the point of view of the working
class must start from the praxis of history instead of the timeless formalism
of nature. (This, if nothing else, is the great merit of Marx’s notion of
praxis and of Lukacs’s demolition of “the antinomies of bourgeois thought”. See
also L.Colletti’s Ideologia e Societa’.) Whereas Schumpeter saw the
inevitable triumph of socialism as the result of this irresoluble antagonism,
Robinson could still believe in the reasoned consensual adoption of
Keynesian policies in a managed economy.
In ‘Statik’
classical and neoclassical economic theory, the capitalist economy is seen as
founded entirely on the operation of the “self-regulating market”. It is “the
market” which, by assuming the formal equality of all economic agents, ensures
the orderly, “balanced”, “equilibrium” (also in German, Gleichwichtigkeit – ‘equal-weight’) of the economy by allowing the
equi-valence of producers’ supply with consumers’ demand at certain rates of
exchange (prices) for individual goods exchanged. In this institutional
universe, “growth” is seen as a quantitative phenomenon reliant on the
horizontal expansion (Wachstum) of
the market. The factors of “growth” are seen as “external data” or
“disturbances” (Storungen) that could
jolt the economy out of its “equilibrium” but only temporarily, only “in the
short term”. Above all, scientific-technological processes are interpreted as
“exogenous” factors, as independent and autonomous “progress” extraneous to the
functioning of the capitalist economy and therefore outside the purview of
“economic analysis”. (Cf. Robinson on “value” in intro to AoC)
This is in large
part what allowed the “homologation” of the Economic (scientific-technological Zivilisation reflected in the productive
process and its “division of labour”) with the Political (the equitable
allocation of value and social resources through the self-regulating market).
This “homologation” was the foundation of the “neutrality” of the State of
To its credit,
Classical Political Economy stressed the “quantitative” importance of
“wealth-creation” by focusing on the subordination of the market to the process
of production and distribution of objective (yet ultimately
metaphysical/essentialist) “value” in the classical “labour theory of value”.
But the Neoclassical Revolution shifted
the focus of “economic inquiry” even further away from the sphere of production
by substituting “objective value” with the “subjective” exchange of
“endowments” through the “market mechanism” that alone, “by definition”
(tautologously, in Hayek’s definitive analysis) ensured the optimal allocation
of these “endowment/resources” according to (metaphysical) “marginal utility”. (Robinson,
EP, first two chapters.)
Schumpeter’s
theoretical greatness lies perhaps in breaking definitively with this liberal synthesis of classical and
neoclassical “Political Economy”. For him, no such “reconciliation” between
economic value and politically neutral claims to it is possible because, as he
rightly notes, both Classical and Neoclassical Political Economy failed to
confront the ‘Entwicklungs-problem’: they never tackled the reality of the
“trans-formation” of the methods of production – their ‘trans-crescence’ - both
in an “organizational” and in a “technological” sense. It is this “incessant
change” which is the differentia specifica of the capitalist economy
that determines the irreconcilability of economic theory and politico-economic
praxis. And theory and practice are irreconcilable precisely because capitalism
is an economic system based on the conflict of individual and class interests,
because capitalism is a society in permanent crisis.
Two levels of scientific
analysis are present in Schumpeter’s theory, then: an analytical or anatomical
level where the “schema” or “skeleton” or the “organs” of the economic system
are studied in their static
functional relation to one another; and a sociological-historical or politico-physiological
level at which the capitalist economic system is seen “in flesh and blood” as a
dynamic or metabolic organism propelled by internal and antagonistic forces
already axiomatically implicit in the
theoretical schema of static equilibrium but now examined in their explicit
practical ex-pression or extrinsication or manifestation, as in innovation,
monopoly and bureaucracy. This “institutional
framework”, as Schumpeter calls it, is the practical historical ex-pression
or manifestation of the tendencies implicit in the axiomatic definitions
of the equilibrium schema. Schumpeter’s Statik is the empyrean of
bourgeois “economic science” – the indispensable Schema or categorical
framework that provides the strategic anchor for the ideological
rationalization of bourgeois coercion. The Kreislauf, the “circular flow”,
anchors the equilibrium, the commutative and distributive justice of the
bourgeois rationalization of the capitalist economy. For Schumpeter, the
capitalist Dynamik always tends to gravitate around a position of equilibrium.
Equilibrium is the “gravitational centre” (Gravitationszentrum) of the
capitalist mode of production as it seeks to renew the “stability/staticity”,
the equivalence of values (economic and ethical) that it needs for the purposes
of preserving its legitimacy. Equilibrium represents the "universality" of capitalist values: the Newtonian Universal Law of Gravity. By contrast, the Ent-wicklung - development through innovation, creative destruction - represent the "relativity" of the capitalist order, its state of constant crisis. Not only is the Kreislauf (circular flow) of the capitalist economy self-regulating and
self-perpetuating – in this regard, it is entirely similar to Marx’s “simple
reproduction” -, but indeed it even removes any notion of Dynamik, of social
and technical change as symptoms of conflict and antagonism and as the real
source of trans-crescence of the capitalist economy. There is no “time”,
logical or historical in the Kreislauf: there are no “decisions”. In
Schumpeter’s perfect choice of terminology, there is no Ent-wicklung
(transformational decision), no “development”.
(I have argued in a separate study that von Mises’s own concept of “praxeology”
involves precisely this “practico-logical” requirement of the apparently
“static” notions of equilibrium theory. This emphasis on the “procedural”
aspects or moments of neo-classical equilibrium and marginal utility theory – against
the more “static” side stressed by the “Aristotelian” Menger and Walras – is
what provoked Schumpeter’s “evolutionary” theory in the first place.)
Schumpeter’s notion of equilibrium as Kreislauf is indeed more consistent with
Joan Robinson’s own concept of “tranquility” in The Accumulation of Capital
– which is instructively adopted and adapted from Marsilius of Padua’s Defensor Pacis, a mediaeval theory of
human society based on its metaphorical representation as an organism –
one that is either “healthy” or “unhealthy”. (Cf. Schumpeter’s dog analogy in Business
Cycles.) Marsilius of Padua spoke of “tranquilitas”in
his Defensor Pacis, meaning a period of social peace and prosperity (see
O. von Gierke, The Political Theory of
the Middle Age.) Interestingly, both Antiquity and the Middle Ages lacked
the notion of “revolution”, which is a modern European concept originating in
the 17th century (see H. Arendt, On
Revolution). Antiquity knew only of “metabole”,
meaning social change, of “stasis”,
meaning civil war, and of “homo-noia”,
meaning harmony or agreement, and “corruptio”,
obviously meaning corruption, that is, degeneration from a perfect state (a perfectione ad defectum, from
perfection to defect). (On all this, see S. Mazzarino’s invaluable and
irreplaceable Il Pensiero Storico
Classico.)
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