IV. “Man is the measure of all things,” – Protagoras.
It is not closed systems that lead to totalitarian praxis; it is rather totalitarian praxis that engenders closed systems. The human ability to measure the world ab-solutely – that is to say, without subordination to any legal rule or moral goal, in complete abstraction from the experiential content of the measurement, of its application – allows that fatal combination of convention and hypothesis – the Weberian exakte Kalkulation – that leads to totalitarian stagnation and paralysis. (We shall tackle this degeneration of Weber’s conception of Zweck-rationalitat [purposive rationality] shortly.) The combination of convention and hypothesis is unique in the history of humanity and the history of social theory. It can be traced, as we have seen, to the extrapolation of Euclidean mathematical axioms to social relations operated first by Thomas Hobbes at the very beginning of the whirlwind rise of the capitalist bourgeoisie in Europe. The convention of logico-mathematics, in its absolute con-ventionality – because of its irresistible “meeting of the minds” that, in reality, requires no explicit agreement because it is a tautology – is entirely democratic in that it is accessible to, and can be utilized by, every human being. – So much so that, as we also pointed out, it was used by Hobbes’s Renaissance contemporaries, Mercier and Grotius, as admonishments to absolutist monarchs that even their earthly and divine powers were subject to it; indeed, God himself could not avoid the truth of logico-mathematical deduction.
Yet, if this logico-mathematical tool can be applied to real objects, to the human social and natural environment, then we find that the application of this convention to our life-world turns into a hypothesis that can make our operari in this world predictable and therefore repeatable almost indefinitely – to such an extent that this hypothesis is no longer a reflection of a reality that stands independent of, and even opposed to, our perceptions, but one that in fact, through our very actions (Latin, facere, to do, to act), is a reified product of our intentions and actions. The hypothesis becomes therefore a project on the world, a “framing” of reality, a reification of our objectification.
The seemingly democratic universality of logico-mathematical conventions, when combined with the purposive project of the hypothesis turns into a dramatically powerful, fearsome thoughtless technique that can lead to serious and potentially seriously harmful consequences for individuals and societies alike. Apply with care, the warning should sound. Yet, this is not the case where bourgeois economic analysis is concerned. Here, the hypothesis implicit in the bourgeois project is indeed to reify human social relations of production as if they were the outcome of a clash between human free-dom understood as unlimited possessive individualism where the wants and needs of individuals are constrained and bounded only by the conflicting egoistic needs and wants of other atomic individuals on one side and by the physical limits imposed by the natural environment – by the scarcity of natural resources – on the other side. It is thus that bourgeois theory opposes human freedom understood as egoistic free-dom to the necessity of the Other, understood as the constraints of nature and society. Hence, freedom is seen not in its political dimension, as the opposite of coercion, and therefore as “reconcilable”, but rather in a reified physical sense as eternally ineluctable necessity. In other words, not only is society interpreted as an obstacle to human volition, but nature itself is transfigured into an enemy of individual acquisitiveness and possession – as if the environment were not an extension of human being but rather its greatest opponent, - a realm to be conquered, an enemy to be defeated, a foe to be vanquished.
When we examine the salient features of equilibrium analysis as a hypothesis, then as a project, we notice that the only interactions it considers are the exchanges of goods between individuals in a purely formal manner because only relative prices are concerned, and therefore the exchanges are seen in their purity, without production of the goods, as pure exchanges per se, as pure relations between individuals inter se. Because equilibrium analysis as a system of simultaneous equations can fix only the relative ratios of exchange of already produced goods already owned by its atomic egoistic agents – which is why they are called “endowments” -, it excludes axiomatically both the material interest that the market agents compete over, and then also leaves out the material process of production that leads to the procurement of this interest, and therefore is an essential part of that interest – for these two reasons, its confinement to exchange per se (leaving out the nature of the interest) and individual relations inter se (leaving out the material process of production), equilibrium analysis becomes totalitarian in that it excludes all material metabolism or change in social relations of production as well as of exchange, and consequently excludes all transformation of the economic system and all freedom on the part of human beings to shape new forms of social interaction, new “economic systems”. There is no change in the ex-change examined by equilibrium analysis!
Equilibrium analysis is a “closed system” also and perhaps above all in this specific sense: by abstracting from the metabolic process of production, from the complex interaction of human needs between human beings (going beyond exchange per se) and its metabolization through their interaction with the environment (going beyond human relations inter se), equilibrium analysis reifies the social relations of production into insubstantial formal exchanges that have no material basis whatsoever, that exclude our interaction with the environment, with the nature of which humans are a part. This is the extreme subjectivism – indeed, a solipsism! – akin to the Protagorean stance whereby “man is the [egoistic] measure of all things” which isolates humans as selfish dominators and abusers of their environment, of their life-world - of both nature and its human component, society. (In Fichtean terms, this is the annihilation of nature [cf. Jacobi’s letter to Fichte where the word was used first].) As Adorno put it,
Nature, with which men have had to struggle in history, is disdainfully pushed aside… Thus, history becomes transformed into a second nature, as blind, closed, and fateful as any vegetable life…If this is ignored, if the world is treated as a pure manifestation of the pure essence of man, freedom becomes lost in the exclusively human character of history. Freedom develops only through the resistance of the existent; if freedom is posited as absolute and the human spirit is raised to a governing principle, that principle itself falls prey to the merely existent. (T. Adorno, Prisms, p.68)
It is “the transformation of history into a second nature” that induces the misconception of freedom as the opposite of necessity rather than coercion. Hence, there are several reasons why orthodox economics prefers the Schemata (formal modeling) of equilibrium analysis to the market process of Austrian economics or even macroeconomic approaches such as Keynesianism, let alone the more radical theories of Marxian critique . The first and foremost is that formal analysis, by concentrating on relative prices and therefore exchange over production, hides the real political antagonism of capitalist social relations of production, between dead labour (wages) and living labour. The second is that the mathematical equivalence of market prices with individual preferences (or utility) creates the impression of precision and predictability, and therefore of “objectivity”, which in turn reflects the ostensible political “neutrality” of the Schemata, their faithful impartial reflection of “social reality” and, above all, the adherence of the “market system” to a convergence of interests (a “spontaneous order”) between its participants that maximizes their individual and collective wealth and ensures both commutative and distributive justice. Ultimately, the third reason, by ensuring the just consensus of market agents, these Schemata supposedly also guarantee the endurance of the rule of law and of democratic institutions – the automatic and axiomatic rules of the self-regulating market - precisely so long as these do not disturb or interfere with the operation of the market mechanism and ultimately upset “market equilibrium”. Thus, the equilibrium is not just economic – in terms of wealth – but is also political in terms of maintaining justice and preserving freedom. This osmotic homologation of the Political and the Economic is behind the original designation of economic theory as Political Economy.
The conditions of equilibrium, of economic society understood as a totality, as a whole, are so antithetical to the egoistic interests of the particular agents that an exogenous Guarantor must be excogitated - not to reconcile these interests, which is logically impossible, but rather to enforce them dictatorially! There can be no real convergence of interests in equilibrium: consequently, its totality is a “closed totality” in which the whole – the equilibrium – is a pure set of simultaneous mathematical equations and for that reason alone it cannot reconcile the interests of its component particulars or individual agents, except forcefully, through an external intervention, through compulsion. But this dictatorial enforcement must also penetrate every aspect of social reproduction because, as we showed earlier, the Dictator or Sovereign or deus absconditus or deus mortalis or auctioneer enforcing the rules must ensure, first, that he is fully informed about both the endowments possessed by the individual agents as well as their utility schedules or preferences; second, that there is no collusion between agents to obtain momentary inter-equilibrium advantages (perfect competition); and third, that the egoistic agents actually proceed with the exchanges at the relative prices determined by the closed system at the end of the tatonnement or “groping” process to determine the final relative prices of exchanged goods.
But in reality, in the historical sphere of human social relations, any legitimate and harmonious totality can be realized not through totalitarian dictatorship, but rather if and only if it comprehends (contains and understands) and fulfils (satisfies and quells) the needs of the particulars or individuals it represents. To invoke Adorno once more,
If, as Hegel argues, the whole is what is true, then it is so only if the force of the whole is absorbed into the knowledge of the particular…[S]ocieties based on domination have in fact always crystallized into closed totalities which allow no freedom for anything individual; totality is their logical form, (ibid., p.61).
Closed systems “allow no freedom for anything individual” in the sense that they preclude and expunge any and all human spontaneity and innovation. But above all, closed systems do not provide a means of reconciling the initially divergent interests of its individual agents precisely these egoistic interests are axiomatically irreconcilable and do not allow for any specific human inter-est (inter homines esse), for any commonality of being among humans. Indeed, it is the axiomatic exclusion of innovation that prevents any escape from the false prison of possessive individualism intrinsic to equilibrium analysis in economics. As we demonstrated earlier, equilibrium analysis is totalitarian also in the sense that only exchanges of existing goods are considered; consequently, there is no logical room for the production of new goods which would transform the very nature of the social relations between the market agents in a qualitative sense.
The absence of dynamic change or development, of transformation and transcrescence, of metabolism – this absence requires that the sole sign of “movement” in equilibrium analysis as a closed system, as a Statik, as an unchanging static system, can be attributed only to a constant “circular flow” – a Schumpeterian “Kreislauf” – that preserves the Statik equilibrium of the system whilst at the same time allowing for its steady-state “renewal”. Nonetheless, the circularity of this flow ensures that it remains a Statik lacking any Dynamik – as Schumpeter proved conclusively. We would go further and replace Schumpeter’s term “Dynamik” with metabolism because the term “dynamic” was later used or abused by the likes of Harrod (Toward A Dynamic Economics) and Robinson (The Accumulation of Capital) with the application of dis-equilibrium analysis applied to “long-term” factors in contrast to John Hicks’s adaptation of short-term disequilibrium in Value and Capital. Of course, it was this explicit devastating critique of Walrasian equilibrium that provided the stimulus for Schumpeter’s entire “theory of economic development” or Ent-wicklung (trans-crescence) with its cognate concepts of Dynamik as against Statik, of creative destruction and innovation. The same can be said of the attempts by the rest of the Austrian School to introduce market process as a type of inter-temporal equilibrium that seeks to remove the asphyxiating totalitarianism intrinsic to closed-system economic analysis. The fact that the Austrian School was ultimately reluctant to dispense with the notion of equilibrium altogether, as we shall see, points to an inability intrinsic to its theoretical conception of economic activity.