Tuesday, 13 October 2020

‘THE HOLY TRINITY’, or The Euclidean Hobbes-Smith-Walras Paradigm of Orthodox Economics

 

Orthodox Economics does not just obfuscate, it truly obliterates the social reality of Value in the theoretical explanation of the social relations of production by providing a logico-mathematical Schema of simultaneous equations to determine the relative prices of endowment goods exchanged by atomistic self-interested individuals to maximize their individual utilities. This Walrasian Schema is founded on Euclidean axiomatic principles that lead inexorably (with the inexorability of tauto-logical thinking) to the political project (framework or Entwurf) of the capitalist bourgeoisie to transform human society into the society of capital (note the objective genitive – society has been captured by capital). This is the scientific paradigm of the bourgeoisie as a social class: to frame social relations of production in such a way that they may be measured and predicted so as to perpetuate the existing order of capitalist class society through the accumulation of capital or value. By leaving out value as a social reality of political coercion allowing “the exact calculation” (Max Weber) of value, this bourgeois paradigm must necessarily leave out the effectual reality of value in the form of money, and therefore of capital in the form of money (money-capital).

 

As we demonstrated earlier, like all Schemata, Walrasian equilibrium analysis is tautological, and therefore meaningless. But that does not at all mean that it is without political purpose, because the practical implications of measuring human living activity and social relations of production can be given institutional force, can become co-action – compelled and compulsive politico-economic reality. Gunnar Myrdal missed this all-important distinction – ironically in his masterly opus on “The Political Significance of Economic Theory” – by insisting on the meaninglessness of equilibrium analysis and failing to detect its obvious political significance!

 

An illustrious illustration – one truly with little lustre – of this incomprehension of the strategic uses of logico-mathematical schemata in social life is afforded by the work of Tony Lawson – a philosopher of economics. I got to know Tony Lawson very well at Cambridge and I can asseverate that he is the most lovable fellow in this and many other galaxies. But that does not mean that he does not tangle himself in colossal bloopers when the intellectual game gets a little complex. Let us quote first a passage from one of his critiques of equilibrium analysis in its entirety:

 

If all parties agree that Adam Smith set (and contributed to answering)

one of the fundamental questions of economics—namely, how social order

emerges in the absence of central or any intentional design, and,

indeed, with individuals pursuing largely independent goals—it is clear

that the inheritors of Smith’s project are not economic equilibrium theorists

concerned with formalistic modeling. Rather, it is those working in

THE STATE OF EQUILIBRIUM ANALYSIS IN MODERN ECONOMICS 443

the traditions of Marx, Keynes, Hayek, and others who make the explaining

of the actually existing social order the priority.

The project of formalistic modeling can be misinterpreted as one concerned

with explaining the actual social order only if the atomistic presuppositions

of the former go unrecognized, or their irrelevance remains

unappreciated. Once we turn to social ontology, to theorizing the nature

of social reality, the impotence of the equilibrium notion becomes apparent.

The real question, Smith’s question in modern terms, is how

social reproduction of complex, internally related, dynamic, social structures

occurs in an open world of individuals seeking their own ends. (T. Lawson, The (Confused) State of Equilibrium Analysis in Modern Economics, pp.442- 443)

 

Now, let us examine the first part of Lawson’s contention:

 

If all parties agree that Adam Smith set (and contributed to answering)

one of the fundamental questions of economics—namely, how social order

emerges in the absence of central or any intentional design, and,

indeed, with individuals pursuing largely independent goals—it is clear

that the inheritors of Smith’s project are not economic equilibrium theorists

concerned with formalistic modeling. Rather, it is those working in

THE STATE OF EQUILIBRIUM ANALYSIS IN MODERN ECONOMICS 443

the traditions of Marx, Keynes, Hayek, and others who make the explaining

of the actually existing social order the priority….

The real question, Smith’s question in modern terms, is how

social reproduction of complex, internally related, dynamic, social structures

occurs in an open world of individuals seeking their own ends.

 

Lawson’s inability to deal with these matters is almost alarming. The fact of the matter – the inalterably evident truth – is that it is quite absolutely utterly inconfutably incontrovertibly obvious that there is no possible way in this world – because logic itself excludes it! – that “social order [can] emerge in the absence of central or any intentional design”! There is no way known in this or the next or the other world “how social reproduction of complex, internally related, dynamic, social structures

occurs in an open world of individuals seeking their own ends”! And that is not because I say so, but because logic dictates it! Not only! Adam Smith himself – the great man himself – did not believe it! And that is why he had to invoke… “the Invisible Hand”! Lawson is infinitely wrong - to the nth degree! And here is Hannah Arendt – someone who professionally knew little about economic theory – stating what should have been the bleeding obvious to Lawson just from his very summation of the issue at hand! Here is Arendt:

 

Classical economics assumed that man, in so

far as he is an active being, acts exclusively from self-interest and is driven by

only one desire, the desire for acquisition. Adam Smith's introduction of an

"invisible hand to promote an end which was no part of [anybody's] intention"

proves that even this minimum of action with its uniform motivation still contains

too much unpredictable initiative for the establishment of a science.

(The Human Condition, at fn.35)

 

And this is exactly why it is quite ironic, if not pre-posterous (back to front), for Lawson to make his major claim in the next paragraph that,

 

“[t]he project of formalistic modeling can be misinterpreted as one concerned

with explaining the actual social order only if the atomistic presuppositions of

the former go unrecognized, or their irrelevance remains unappreciated.”

 

In other words (rephrasing Lawson’s truly and absurdly awkward Daguerrotype-style statement typical of “types” who are trying to be too clever by half), if we recognize the atomism and the irrelevance of formalistic modeling, then it will become clear that it does not and cannot explain “the actual social order”. Lawson’s complete incomprehension of the bourgeois economic paradigm here is simply colossal. “On the contrary!” we impetrate – and imprecate. It is precisely because “the project of formalistic modeling” is founded on “atomistic presuppositions” that it can claim to have any “relevance to explaining the actual [capitalist!] social order”! – It is because this (capitalist) ‘social order’ is actually founded precisely on “atomistic institutions” (from which those “atomistic presuppositions” are derived) that “mainstream economics” can hope to have any “relevance” at all – and so analyze and incorporate those “atomistic presuppositions” in its “formalistic modeling”.

 

Lawson is looking for a phantasmagoric “social reality”, independent of and ethically preferable to capitalist reality, that quite simply does not exist! Indeed, if, like Lawson, we frame “the real question” (“Smith’s question”), “one of the fundamental questions of economics—namely, how social order emerges in the absence of central or any intentional design” - in terms of  “individuals pursuing largely independent goals”, then we are accepting the very “atomistic presuppositions” and “irrelevance” to “social reality” on the part of “mainstream economics” that Lawson laments and deplores! If we assume the ‘Trennung’ (the forced ‘separation’ of “social labour” into “individual labours”), then it matters not which approach we take, the ‘theoretic’ or the ‘ontic’: they will both mis-conceive the very origin of capitalist “social reality” and keep going on forever with Lawson’s mystifying profundities about “theorizing the nature of social reality” and “illuminating social reality”. The purpose of bourgeois orthodox economics is a thousand times not (!) to understand “social reality” as it ought to be: the purpose of orthodox economics is to lay down the axiomatic rules for how social reality must be (!) for the capitalist bourgeoisie to be able to perpetuate its domination of society! It is not the Kantian Sein (objective reality) or Sollen (German, Ought, the moral law) that the bourgeoisie seeks; what the bourgeoisie seeks is instead the Nietzschean Mussen (German, Must, a commandment) – the way social reality must be for the bourgeoisie to rule over society.

 

Because the amiable Lawson – and this is one of the traits that make him so enviably lovable – is so keen to pursue his ideal of a “relevant” economic theory based on “ontic” (historically factual) evidence with the clear goal of improving social life, he wholly neglects the central reality that Neoclassical theory is functional to the social reality – capitalist industry - that evokes it: It does not explain, but it calculates; it does not understand, but it measures; it does not justify, but it regulates its ‘regularities’ and rationalizes its ‘irregularities’:– in sum, it orders the warped social reality of capitalism to enshrine it as “scientific” and to re-present it (Vor-stellen, [Schopenhauer, Mach]) as “social reality”, as “social order” and, like Lawson, as “social ontology”. (See Loasby’s “Equilibrium & Evolution” for the essential role of equilibrium analysis in providing a “paradigm” [we would say ‘language game’] of analysis – and his attempt to improve it beyond general and Nash equilibrium.)

To borrow from Wittgenstein, it is of no use to change spectacles (economic theories) if all we achieve is to turn a warped reality into an equally unreal idealistic “social ontology”, that is, an eternal or meta-physical or noumenal social reality (a Kantian Sollen) as Lawson advocates!

 

This is precisely the great achievement of Karl Marx – to demonstrate how the earthly paradise that bourgeois political economy pretended to theorize was a hell on earth in reality. Here is Arendt again:

 

[I]t was not Karl Marx but the liberal economists themselves who had to introduce the “communistic fiction”, that is, that there is [p44] one interest of society as a whole which with "an invisible hand" guides the behavior of men and produces the harmony of their conflicting interests.36 The difference between Marx and his forerunners was only that he took the reality of conflict, as it presented itself in the society of his time, as seriously as the hypothetical fiction of harmony; he was right in concluding that the "socialization of man" would produce automatically a harmony of all interests, and was only more courageous than his liberal teachers when he proposed to establish in reality the "communistic fiction" underlying all economic theories.…(H. Arendt, The Human Condition, pp.43-4)

 

Because the ‘theory’ encompasses the sphere of exchange, then its axioms and formal identities become - yes, meaningless logical tautologies - but effectual like mathematical “language games”!

The difference between exchange and production is what eludes Lawson utterly. But this, rather than a mythical ethical “social reality”, is the antagonistic “ground” of economic reality.

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