Saturday, 10 October 2020

THE THREE ‘ELEMENTS’ – Euclid, Hobbes, Walras and the Framing of the Society of Capital.

 

THE THREE ‘ELEMENTS’ – Euclid, Hobbes, Walras and the Framing of the Society of Capital.

 

We are trying to answer the question, asked in Kantian vein, “How is capitalist society possible?” We know that capitalism is a specific historical form of social relations of production. But what is this form, and how can it be compatible with the reproduction of a society? After all, as we are amply demonstrating here, the bourgeois self-understanding of capitalist industry is incompatible with the survival of any form of society, first, because the theory behind it, although quite purposeful strategically, is tautological and therefore meaningless, and second because where a meaningful practical implementation of this theory is allowed – as in the theory and practice of a “self-regulating market” – it leads inevitably to the destruction of any society. And this despite the fact that the bourgeoisie maintains that its theory of capitalism is indeed an “economic science” applicable to all human interactions and societies! Clearly, there cannot be any Automatik in the process of reproduction of capitalist society: not only does a “market” not exist as a “self-regulating mechanism”, but it may be said also that a market can exist only as a regulated institution.

 

The cardinal quasi-Euclidean axiom of the absolute atomicity or in-dividuality and self-seeking self-interest of human beings as the basis of any exchange of goods between them is the most indispensable postulate of all bourgeois economic theories. Thomas Hobbes translated Euclid’s Elements of Geometry and then went on to write his own Elements of Law and Politics. So it stands to reason that in order to erect his political theory, Hobbes should start from the Euclidean axioms that each human being represents a “point” or “body” or “unit” entirely unconnected to other human “points” or “bodies” or “units” and is entirely self-interested or, mechanically put, has its own utility or “appetitus” or “conatus” – which Hobbes calls “Power”. From these utilitarian individualist axioms he deduces that the original, most “natural” state of human beings, the “state of nature” or status naturae, is a state of civil war (bellum civium) or “the war of all against all” (bellum omnium contra omnes). This “clash of wills” or appetites, this “war of all against all”, can lead logically only to a deterministic mechanical equilibrium in which there is no “room for manoeuvre for the individual freedom of the will” (Schumpeter in Ch.7 of the Theorie) because each individual will is bound by the wills and boundless appetites of other wills, or else to the assured self-destruction of human beings. This is Hobbes’s scientific hypothesis interpolated between the mechanical physics of Galileo and Newton and theorized in Euclidean terms soon to be imitated in Spinoza’s more geometrico:

 

Hobbes enjoyed a belated but influential encounter (in about 1628 if Aubrey is correct) with the geometry of Euclid; an encounter which not only led him to a sometimes disastrously misguided practice of the skill, but much more importantly drew his attention to the use of definitions in rigorous argument. In Leviathan he was to call geometry 'the only science that it hath pleased God hitherto to bestow on mankind' (IV. 12; see also V. 7). Be that as it may, geometry was, and remained until the middle of the nineteenth century, the paradigm for deductive probity. (JCA Gaskin, Introduction to Leviathan, p.xv.)

 

In its turn, following Hobbes’s, Newton’s terminology in physics is unmistakably political: body, action, reaction, momentum, force, work, energy. This is how Hobbes managed for the rising capitalist bourgeoisie an epistemological feat that has not been equaled since he wrote: - he managed, that is, to combine the positivist scientific hypothesis of Galileo-Newtonian mechanics with the jusnaturalist political convention of innate rational human rights, and thereby to erect bourgeois political practice on effectual scientific grounds. Hobbes begins with the positivist scientific hypothesis of the “universal conflict” between human beings taken as wholly egoistic atomic individuals, and from there he develops “rationally” - with the “rationality” of the “laws” of mechanics - the jusnaturalist political convention (common-wealth) that will make social life possible based on the “natural rights” of these conflicting individuals. ((Cf. This insuperable twining of political convention and scientific hypothesis in Hobbes is superbly enucleated in A. Pacchi, Convenzione e Ipotesi. The parallel Hobbesian combination of positivist authoritarianism and jusnaturalist contractualism is masterfully unjumbled by N. Bobbio in Da Hobbes a Marx.)

 

The central feature of capitalism is that the bourgeoisie has tried as far as is humanly possible without tearing asunder the very fabric of human society to reduce this society to the state of absolute possessive utilitarian individualism. That is why all accounts of bourgeois economic theory must start with the axiomatic postulate of this possessive utilitarian individualism. Hobbes did not neglect to include in the “possessive” part the ability of individuals to buy or sell their own “power”, meaning both their physical possessions and their labour-power, in exchange for physical possessions. In the Leviathan, he describes “the value or worth or price of a man” as “so much as would be given for the use of his power”. Clearly, Hobbes had already an embryonic notion of what Marx would theorize later as “labour-power”, the commodified form of living labour in capitalist industry.

 

Like Euclid and Hobbes, Leon Walras wrote his own “Elements” – the Elements of Theoretical Economics. What subtends and denominates, what homogenizes the political theory of Hobbes and the economic analysis of Walras is the intention to reduce human history to a mechanistic science based on empirical observations  or “facts” of (a) interactions between atomized egoistic individuals from which (b) physical logico-mathematical rules or “laws” – political and economic - can be scientifically induced and mathematically deduced. What Walras added to Hobbesian political theory to erect his own economic theory was the further condition that these interactions or exchanges be confined to rare goods whereby demand equals limited supply.

 

The whole of pure economics rests with Walras on the two

conditions that every economic unit wants to maximize utility and

that demand for every good equals supply. All his theorems follow

from these two assumptions. Edgeworth, Barone, and others may

have supplemented his work; Pareto and others may have gone

beyond it in individual points: the significance of his work is not

thereby touched. Whoever knows the origin and the workings of

the exact natural sciences knows also that their great achievements

are, in method and essence, of the same kind as Walras'. To find

exact forms for the phenomena whose interdependence is given us

by experience, to reduce these forms to, and derive them from, each

other: this is what the physicists do, and this is what Walras did.

(Schumpeter, TGE 79)

 

Samuel Bowles sees only the second part of this Hobbesian-Walrasian project, the reification of social relations to physical “laws”, but regrettably leaves out the first part, the reduction of human beings to atomic egoistic individuals:

 

Leon Walras (in Elements, 1954), in laying out the precepts of the then-young neoclassical paradigm, sharply distinguished his contributions from the social economics of the classical founders of the discipline and from his contemporaries in the German historical school and Marxian political economy. He sought a ‘pure science’ of economics as ‘a relationship among things,’ not ‘people.’ The flourishing of theoretical work during the century following him did much to realize this objective. Significantly, political economy dropped the adjective, becoming simply economics. Thus, the neoclassical paradigm at its zenith borrowed its metaphors from the physical sciences, particularly physics: the exchange of goods is more like a heat exchange than an exchange of greetings. (S. Bowles et al., The Politics and Economics Power, p.2)

 

The central thesis of equilibrium analysis is that it is possible for individuals to exchange their initial endowments in a manner that maximizes their welfare. But just as for Euclid’s infinitesimally small points it was impossible to form a geometric line, and for Hobbes atomically egoistic individuals could never agree to a social contract, so for Walras the irreconcilability of (a) the atomicity, and (b) the intransigent self-interest of his economic agents, makes the co-ordination of the exchanges between them conceptually intractable. If equilibrium prices are the rates of exchange of individual supply and demand of their endowments that maximize the welfare of each individual, the question then goes entirely unanswered of how such individuals can co-ordinate their exchanges to achieve this optimal equilibrium – optimal in terms of commutative justice. Furthermore, given that these individuals exchange “endowments” whose social origin is not known, it is impossible to address the question of distributive justice either!

 

For such co-ordination to obtain, then, we need to set out the pre-conditions for this equilibrium to occur. We need to specify what is meant by “welfare” or “wealth”, and therefore what human needs correspond to the demand and supply of the exchanged endowments or goods. By confining the scope of economic analysis to the theoretical existence of equilibrium and therefore to the possibility of the co-ordination of economic exchange and the maximization of individual welfare, orthodox bourgeois economic analysis entirely evades the most vital questions of its presumed analysis. The subtitle to Walras’s Elements reads, “or The Theory of Social Wealth”. But unlike Adam Smith’s magnum opus, Walras’s work addresses neither the “nature” nor the “causes” of “wealth”, let alone of “social wealth”! It assumes by postulating axiomatically what it needs to explain, to theorize: – the nature or social objectivity of “wealth”, hence the existence of money as a store of value and means of payment rather than just a means of exchange; the possibility of a self-regulating market to exchange endowments by atomistic egoistic agents; the acquisition of initial “endowments” by these agents; and the production of further “social wealth” by these agents. In fact, the only “social wealth” outcome of equilibrium theory axioms is the exact opposite of it - that is, the annihilation if not the impossibility of any kind of economic co-ordination or indeed of any kind of market or wealth, let alone of any society!

 

Bourgeois economic analysis postulates that economic activity is motivated by the search on the part of isolated individuals for the maximization of personal utility. Economic activity is restricted to the simple exchange of existing endowments possessed by these individuals. And the exchange itself is confined to endowments or goods that are rare (Walras’s rarete’) or scarce, given that abundant goods cannot be said to be “in demand”, and therefore hold no exchange value. Prices are thus for bourgeois economic analysis simple ratios of exchange of endowments between individuals: they are only semaphoric signals of intentions to exchange and logically exclude time. For Neoclassical economic analysis, prices are therefore relative prices that do not require the demand for money as a separate store of value and means of payment mediating these exchanges. For this analysis, value, attributed to utility, is purely subjective and has no socially objective political reality, and therefore value cannot exist as – be socially objectified by – a separate social institution such as money.

 

The only Objective Value allowed by Neoclassical economic analysis is the social objectivity of the clash of wills, the conflict between completely atomistic and selfish market agents – individuals - which leads to the objective “market” determination of “relative prices” as the resultants of individual utilitarian preferences . The Subjective Values of atomic selfish individuals are made objective only through the medium of relative prices, only in and through the act of exchanging individual goods, their pre-existing endowments. (Cf. C. Menger, Principles of Economics. Menger’s On the Origins of Money is devoted entirely to money as a simple “means of exchange”.) For Neoclassical analysis there is no Objective Value in the sense of a socially objective shared reality – an interest as an inter-subjective political reality, an inter homines esse. By contrast, because for Classical Political Economy value can exist only as socially objective value (quantified living labour) and not as subjective utilitarian estimation (Neoclassical utility theory of value), this objective value – the labor embodied in produced goods – is a result of the social relations of production and power that obtain between both individuals and classes of individuals (workers, capitalists, entrepreneurs, landlords) who determine both the nature of supply and demand and the prices of goods as a distribution of labor value among economic agents. Consequently, this Objective Value can assume an independent social institutional existence in the form of money because it is not limited to the direct exchange of goods between atomic individuals.

 

The axiomatic assumptions that turn all prices into relative prices, into exchange ratios between goods, make the notion of Value wholly metaphysical. If the prices of goods can be determined only after all possible exchanges are settled, then the question of what determines these final equilibrium prices – be it utility, labor or marginal utility – is wholly immaterial because prices are calculated ex post facto, after the event! Walras’s mathematical intellect was clearly not conceptually refined enough to penetrate what ought to have been an evident truth: he glibly re-iterates the importance of utility and the further refinement of marginal utility (which he attributes to his father) – and fails to notice that prices as marginal utility do not remove the metaphysical objection (vedi, Elements, pars. 155 to 160). His objection to Smith’s Labor Theory of Value that goods are exchanged that do not involve labor does not overcome the fact that the aggregate value of all goods could be any “substance” at all, including utility! Both Hobbes and Walras view utility as an absolute essential notion – as a substance. Hobbes and Walras operate still in an essentialist Newtonian world like Classical Political Economy. Yet, Walras’s mathematical techniques, which merely connect prices in a purely “relative” manner, in terms of the final equilibrium ratios of marginal utilities, ensure that these ratios or prices denote only formal numerical or algebraic relations with no reference whatsoever to the real objective social content of the “wealth” that they were presumed to theorize or explain! Walras’s attempt at a “Theory of Social Wealth” would be laughable if it had not been so glorified by the collective idiocy or madness of orthodox bourgeois “economic science”!

 

Both Hobbes and Walras, from vastly different historical and political positions – Hobbes was a monarchist and Walras a self-defined socialist –, still operate within the universalist ambit of the humanistic renaissance world view of a mechanistic mathesis whereby human reason progressively reveals the Divine Plan contained in the “Great Book” of Creation - which is at the very origin of Western natural philosophy or science at the inception of capitalist industry in north-western Europe. This is a Newtonian “closed world” that seeks to discover a clavis universalis, a universal key or code that can unlock all the mysteries of the universe in a manner akin to the Divinity. (See, A. Koyre, From the Closed World to the Open Universe and P. Rossi’s studies, among them I Filosofi e le Macchine. I have covered this ground in my “Descartes’s World”.) Indeed, despite his diatribes with Descartes, it was Hobbes’s Cartesian universalist mechanicism that opened him in his late years to the ridicule of the new breed of English scientific empiricists whose naked and brazen, value-free (wertfrei) experimentalism could no longer be restrained by the doctrinal strictures of the humanist era to which Hobbes squarely belonged. The onset of capitalist industry required the primacy of “doing” over “knowing” in the sense that the subjection of pre-industrial society to the all-conquering Promethean powers of capitalist enterprise could no longer suffer the inhibitions and shibboleths of existing absolutist monarchic feudal and ecclesiastical rule.

 

In this perspective, centuries later, the Walrasian equilibrium schema reveals a novel aspect to the application to society of logico-mathematical and scientific schemata. While still clinging to the catholic observance of universal values, the Walrasian method formalizes the Neoclassical development of a microeconomic project or “frame” (the German word Entwurf captures the unity of the two concepts – project and frame) that reifies existing social relations of production and social power and that will enable the “exact calculation” of profit and accumulation of capital that the new bourgeois order had imposed on European society. Hannah Arendt captured most perceptively this essential historical truth:

 

It is the same conformism, the assumption that men behave and {p42} do not act with respect to each other, that lies at the root of the modern science of economics, whose birth coincided with the rise of society and which, together with its chief technical tool, statistics, became the social science par excellence. Economics—until the modern age a not too important part of ethics and politics and based on the assumption that men act with respect to their economic activities as they act in every other respect—could achieve a scientific character only when men had become social beings and unanimously followed certain patterns of behavior, so that those who did not keep the rules could be considered to be asocial or abnormal. (H. Arendt, The Human Condition, pp. 41-2)

 

Arendt neglects to observe that, rather than “men…unanimously following certain patterns of behaviour”, it was the capitalist bourgeoisie that imposed these “patterns of behaviour” on the rest of late feudal society. Bourgeois economic science congealed and crystallized analytically at a microeconomic level these “patterns of behaviour” into strict logico-mathematical schemata – a project or Entwurf – that appropriately “framed” human social action so that it could be strictly commanded, directed, predicted and calculated. Hence, the sole purpose of bourgeois economic analysis – Classical and Neoclassical, through “the Law of Value” - since the onset of the capitalist agrarian and industrial revolutions is not to theorize the social political reality of economic production and exchange, but instead to establish a microeconomic formal mathematical relation – a schema, a “model”, an Entwurf  - between all social exchanges so that this formal system of exchanges has a unique solution for all transactions (what in mathematics is called the “existence” of a function connecting numerically dependent and independent variables).

 

The most important thing is, first, to find the existence of functional relations

and, second, to know as many properties of these functions as possible. One can, then,

establish algebraic expressions even if their numerical magnitudes cannot be found."

"Uber die mathematische Methode/' p. 37. Quite apart from any numerical magnitudes,

the mathematical method, according to Schumpeter, is "just the appropriate

instrument" of exposition because the use of "systems of simultaneous equations for

the representation of economic interrelationships affords a comprehension [Überblick]

of them that cannot otherwise be attained with the same clarity." (J. Schumpeter, Epochen,

p. 110, quoted in Schumpeters Econ. Meth. in F. Machlup, The Methodology of Economics.)

 

 

By steadfastly refusing and failing to confront the question of value as a shared objective social interest, of what determines prices not as relative ratios of exchange between individual goods and individual agents but as social relations objectified by those goods, orthodox economic analysis fails to theorize how individuals came to possess their initial endowments and how this initial wealth can be accumulated, how capital can “grow”, by means of the production of goods for sale – in other words, (a) how and why present capitalist society originated and became what it is today, and (b) what dynamic internal to capitalist industry can lead to the accumulation of capital or indeed, less accurately described, to economic growth and development. Finally, as a direct corollary, Neoclassical analysis quite simply cannot account for the existence of money as a store of value and as a means of payment rather than as a simple means of exchange!

 

The reason for this abject failure is that bourgeois economic theory again steadfastly refuses to enquire and inquire, first, into the social and political antagonism intrinsic to the process of capitalist production or valorization where living labour is reduced to labour power through its “exchange” with dead labour by means of money-wages, as well as, second, into the process of consumption or realization of value where the needs of “consumers” – otherwise known as demand - to be satisfied by capitalist supply are conditioned by the capitalist need to limit that supply to needs or demand that bind and tie workers to the process of production, to the necessity to sell their living activity as labour power quantified in terms of money-wages exchangeable for dead labour. Far from being an immutable aspect of “human nature”, then, the capitalist economy is the historical product of social conflict and antagonism where the social relations of production also condition and interpenetrate the relations of consumption.

 

Capitalism involves essentially the accumulation of capital by means of profit, which is the monetary form of the excess value realized from the sale of goods. As we shall see, value is the ability of dead labour or produced goods to command living labour. There are two stages to the social validation of this command: the first is the process of valorization which is the process of production of goods; the second is the moment of realization where produced goods must be sold to eventual purchasers. The necessary time and ownership gaps between production (valorization) and sale (realization) mean that money in its form as capital (money-capital) must intervene to mediate these processes as (i) a store of value, and (ii) a means of exchange, for the precise reason that both capitalists and workers act as formally (legally) free agents whose mutual competition is socially regulated by broad legal and institutional rules.

 

Because equilibrium analysis entirely leaves out objective value from the semaphoric transactions that it describes, its “prices” can only be relative prices, that is, simple exchange ratios between goods exchanged. Because the entire scope of equilibrium analysis is to maximize the utility of its agents, there is absolutely no logical or real room in it for the accumulation of value as command over living labour, which is the essential purpose of capital. And because exchange and prices are purely semaphoric, and therefore there is no ownership transition from production to sale of goods, there is no room either for money as a store of value and as a means of payment. In capitalist industry, the realization of value is separate in time from its valorization, so the exchange of goods between these two temporally separate phases of the circulation of capital requires the demand for money, for a separate store of value for the accumulation of value, and means of payment for the transactional change of ownership between sellers and purchasers.

 

Both Adam Smith’s providential Invisible Hand and Walras’s totalitarian “auctioneer” were required to resolve the conceptual antinomy between the impossibility of market co-ordination due to the atomistic self-seeking nature of market agents, on one hand, and the necessity of markets to clear (of demand and supply to coincide) for the market economy to maximize individual self-interest. It is the unity of opposites: equilibrium analysis requires that economic agents are in perfect competition (hence, complete decentralization of decisions) and at the same time have access to the same information (hence, total centralization of decision) so that all markets clear with equilibrium prices. Thus, the axiomatic requirements are perfect competition (decentralized decision-making) and perfect co-ordination (centralized information)! For markets to clear, agents must have access to the same information (total centralization of utility schedules), whilst complete decentralization is required to ensure perfect competitive pricing leading to maximized welfare. But complete decentralization of decision-making is inconsistent with total centralization of information. The participants of equilibrium are decision-making agents in the Smithian case (hence the need for a providential divine hand) and totally passive recipients of information in the Walrasian case (whence the need for an independent sovereign and totalitarian auctioneer). Similarly, perfect competition must lead to absolute monopoly to be true to its name - because perfect competition must eliminate itself if it is to be “perfectly” competitive, whilst total monopoly must result in its own elimination for it to be worthy of the name “monopoly”, because the very concept of “monopoly” implies the presence of its opposite - competition.

 

Thus, equilibrium theories from Smith to Walras become akin to “a snake eating its tail” in Nietzsche’s phrase:  we have complete decentralization of economic activity in Smith, which requires the providential spontaneity of the Invisible Hand, similar to Hayek’s “spontaneous order”, and equally total centralization in Walras’s auctioneer, which involves the mathematical automatism of simultaneous equations. As Loasby has very perceptively pointed out (in Equilibrium and Evolution), the “complete decentralization” of economic decisions that is implicit in Hobbesian political theory and then in Walrasian equilibrium economic analysis makes the co-ordination of economic decisions “a matter of life and death”. Fittingly, it was the English translator of Euclid’s Elements, Thomas Hobbes, who first devised this worldview. In this worldview, there is no space for common human interests (inter esse, common being): the syllogistic conclusion is that “freedom” can be defined and exist not as a common human goal but only as “free-dom”, that is to say, as an equilibrium of opposing, conflicting and irreconcilable individual wills. This equilibrium, the equilibrium of Greek stasis or civil war (bellum civium), can be settled by political convention (autocratic, democratic or elitarian) only because the atomized human individuals postulated in Hobbes’s theory know that the only outcome of such static equilibrium, of this stasis, will be the war of all against all (bellum omnium contra omnes) that will lead fatally (fate here turns into death) to the extinction of society and humanity.

 

This is indeed another factor that makes the Hobbesian-Walrasian schema or blueprint axiomatic for the analysis of capitalism. But this interdependence of human economic action is still subordinated to the axiomatic primacy of individual self-interest; consequently, it cannot form part of equilibrium analysis except as a Hobbesian ultima ratio or dira necessitas ob metum mortis, dire necessity in fear of death, as we explained above. The way out of this equilibrium apory or stasis is provided by the ultima ratio, the absolutely indispensable need for and right to self-preservation (here need becomes right), which leads these atomic self-interested individuals to reach freely a political con-vention, an agreement or “social contract” that can avert mutually assured destruction – by voluntarily alienating their initial “freedom”. The absolute self-interest of atomically decentralized individual market agents can be preserved only if they agree – “as a matter of life and death” (Loasby above) - to centralized co-ordination (Walras’s totalitarian auctioneer, Hobbes’s “Sovereign”).

 

Here the positive empirical evidence of a society that the bourgeoisie has reduced coercively to little more than a moral jungle from which all notion of “natural law” has been expunged meets with and satisfies the jusnaturalist (natural-law) requirement that individuals must agree freely and rationally to a political regime that will protect them from civil war. Hobbes acknowledges that what coerces individuals to accept this bourgeois political regime based on “the laws of the marketplace” is the metus mortis, the fear of death at the hands of any other individual. And given that each individual is axiomatically defined as being “equal” in the ability to harm another in the state of nature, then it follows axiomatically that each individual decides freely (by political convention, otherwise known as “social contract”) and rationally (by scientific hypothesis, following the definition of in-dividuals in conflict) to erect a “common wealth” or State or status civilis that will protect them from certain death. Here the contractus unionis (the paradoxical community of interest of agents to preserve their self-interests) instantly turns into a contractus subjectionis (the alienation of the self-interest to the Sovereign or auctioneer).

 

Even in its “free-dom” - indeed, as Weber has shown, especially in its “free-dom” – human action and leadership will obey that “conditioning” constituted by the dira necessitas (the dire necessity), the extrema ratio of self-preservation. The ultimate foundation of mechanical rationality both for the Hobbesian political system and for its Walrasian neoclassical progeny in equilibrium theory is quite simply self-preservation, the “dire necessity” of surviving in the state of nature where homo homini lupus, man is a wolf to man. Free-dom consists not in acting irrationally but in acting rationally: in short, that decision is “free” that is taken rationally, by respecting the “precise relationship” between subjectively intended ideal goals and the objective con-ditions, the available means, for the implementation of those goals starting from the axiomatic postulate of the irreconcilable self-interests of individual human beings.

 

Make no mistake: the Hobbesian-Walrasian mechanical science we mean here is not an “objective science”, - for as Nietzsche demonstrated, there is and there can be no such “thing”! The science we intend here is a political practice based on the inflexible application of axiomatic rules to human society by a historically specific social class – the capitalist bourgeoisie. The bourgeoisie would be blind deaf and mute without this inflexible science, which is why it has erected the most fabled monuments to it. This science consists for the bourgeoisie in placing political decisions in a precise relationship to the existing relations of power in society – its institutions - that it has imposed to its own advantage so as to be able to reproduce them according to its own axiomatic postulates or schemata. And then, of course, in presenting these political decisions as “that peculiar jumble of conditioning and freedom, which economic life shows us”, which is how Schumpeter defines “economic science”.

 

The question now is: what is this “precise relationship…. of conditioning and freedom”, and how can it escape its evident apories and become effectual? It simply will not do, it entirely misses the point, to conclude that Schumpeter has failed in his attempt “to integrate theory and history” and to reconcile freedom and necessity (this is Moura’s claim in his homonymous essay based on Lawson’s epistemology): - because the crucial point, the key to the enigma, is to understand this “precise relationship [of the free creative work of the individual] to objective conditions”: that is the task and also the limit of science. Our aim here is to discover the conceptual requirements for the practical implementation of the axiomatic postulates of Neoclassical equilibrium analysis on which the very idea of a bourgeois civil society and of its economic system are founded. This “mechanism” is capable of being embodied by an “institutional framework” (apparatus, dispositif, Entwurf)  in which decisions are made within the limits and boundaries set by the axiomatic schema of the bourgeois system of social power so as “to put it in motion” or “energize” (the literal meaning of dynamis in Greek) it. In other words, the subjective, historical “force” or “source of energy” of the bourgeois social system must be placed in a “precise relationship” to the “objective conditions” or boundaries or strictures that are necessary for the expanded reproduction of human society in a capitalist form. Schumpeter’s aim is to find out the reason why capitalist society cannot stand still – why capitalism is essentially a Dynamik “and neither is nor can be Statik”.

 

This reason cannot be solely the result of experience because human experience could lead to uncertain outcomes. Instead, whilst it cannot be contrary to empirical experience, this reason has to be deduced from the very conceptual framework of a capitalist economy acquiring its own dynamic, from its axiomatic postulates “coming into being” or ec-sisting. Schumpeter’s economic science must be, as he styles it, a histoire raisonnee – a reunion or marriage by force of will (Ent-scheidung, de-cision as “un-divorcing”) of the equilibrium and history that are utterly irreconcilable in theory (herein lies their conceptual Scheidung, divorce, scission, dis-cord, anti-nomy). Economic science is the rationalization/realization of a specific capitalist project (Schema, Entwurf) of political command over society – realizable only if rational, calculable, measurable, because the im-measurable is ir-rational and therefore ir-realizable. The axiomatic postulates - the “reasoning” schema of this “history”, the logical basis for its “scientific hypothesis” - are formalized in Neoclassical political economy, of which Walrasian equilibrium theory is the most “perfect” expression.

 

Now, a “dynamic equilibrium” is impossible, a contradiction in terms, if by equilibrium we intend a measurable state, because then any position of equilibrium is inescapable. It is possible to understand how an economy can reach equilibrium, but it is unimaginable that it can ever move out of equilibrium without the intervention of “external or exogenous factors”. As Schumpeter put it: “An equilibrium can only exist at all… [as] a static one. A dynamic equilibrium is a contradiction in terms.” Thus, the ec-sistence of equilibrium cannot be at all a pure mathematical concept if it is to have a practical political application. The requirements for the “pure” mathematical “existence” of economic equilibrium are entirely different from those of its real, practical application or ec-sistence. And this is so not just from the standpoint of practical experience itself, but indeed also and above all from the very conceptual requirements or implications of the ec-sistence of a concept. On one side, we have the formal conceptual elements of a concept; but on the other we have also the conceptual implications of its coming-into-being, of the ec-sistence of the concept, of its extrinsication or embodiment or realization from ideal concept, from project or Schema or Entwurf to conceptual reality! The two sets of conceptual requirements are simply not the same. Yet, it is absolutely evident that the practical requirements for the ec-sistence of a concept are just as much a part of its conceptual being as are the purely formal logical requirements of its internal consistency! Whereas the formal axiomatic definition of a concept can only be self-referential and “closed”, and therefore “totalitarian” or “tautological” (cf. Hayek, Demsetz, Loasby, Langlois), the conceptual requirements for the ec-sistence of the concept turn it into an “open” concept because its practical implementation is subject to the minimal intuitive requirements of empirical experience and observation. At that point, the concept may be said to form a “scientific hypothesis” and it may be said to be “scientific”.

 

To be clear, orthodox bourgeois economic theory has developed a series of schemata, of formal mathematical models, that in and of themselves – as mathematical schemata – are entirely meaningless – and yet still serve a purpose in the sense that they can be used as tools that regulate (Latin, regola, rule; whence ruler, tool to measure and law-maker) real social relations of production that involve real social conflict and antagonism. These schemata or analytical tools serve the purpose of classifying conceptually the strategic role of agents, in a project or “frame” (Entwurf) vital to the expanded reproduction of capitalist industry and society, and of bringing these categories in anatomical and measurable relation to one another.

 

We could think of no better way to conclude this discussion – which is leading clearly to the vital link between the strategic “close” or “closure” (Ab-schluss) of orthodox economic theory, the accumulation of capital, and the theory and practice of a totalitarian state – than to re-cite Hannah Arendt’s devastating summary of Hobbes’s unsurpassed theorization of the conceptual and practical requisites for the institution of such a state. Once more, although our treatment of Hobbes’s political theory is perhaps more systematic than Arendt’s, we simply could not resist drawing on her disarmingly evocative prose and quote in full what is truly one of the most moving and inspiring passages in her entire work which stands as a lasting indictment not only of the capitalist bourgeoisie but also of its venal intellectual apologists, among whom we count first and foremost professional economists:

 

It is significant that modern believers in power are in complete accord

with the philosophy of the only great thinker who ever attempted to derive

public good from private interest and who, for the sake of private good,

conceived and outlined a Commonwealth whose basis and ultimate end is

accumulation of power. Hobbes, indeed, is the only great philosopher to

whom the bourgeoisie can rightly and exclusively lay claim, even if his principles

were not recognized by the bourgeois class for a long time. Hobbes's

Leviathan exposed the only political theory according to which the state

is based not on some kind of constituting law—whether divine law, the law

of nature, or the law of social contract—which determines the rights and

wrongs of the individual's interest with respect to public affairs, but on the

individual interests themselves, so that "the private interest is the same with

the publique."

There is hardly a single bourgeois moral standard which has not been anticipated

by the unequaled magnificence of Hobbes's logic. He gives an

almost complete picture, not of Man but of the bourgeois man, an analysis

which in three hundred years has neither been outdated nor excelled. "Reason

... is nothing but Reckoning"; "a free Subject, a free Will . . .

[are] words . . . without meaning; that is to say, Absurd." A being without

reason, without the capacity for truth, and without free will—that is,

without the capacity for responsibility—man is essentially a function of

society and judged therefore according to his "value or worth ... his

price; that is to say so much as would be given for the use of his power."

This price is constantly evaluated and re-evaluated by society, the "esteem of

others," depending upon the law of supply and demand.

Power, according to Hobbes, is the accumulated control that permits the

individual to fix prices and regulate supply and demand in such a way that

they contribute to his own advantage. The individual will consider his advantage

in complete isolation, from the point of view of an absolute minority,

so to speak; he will then realize that he can pursue and achieve his

interest only with the help of some kind of majority. Therefore, if man is

actually driven by nothing but his individual interests, desire for power must

be the fundamental passion of man. It regulates the relations between individual

and society, and all other ambitions as well, for riches, knowledge,

and honor follow from it.

140 IMPERIALISM

Hobbes points out that in the struggle for power, as in their native capacities

for power, all men are equal; for the equality of men is based on the

fact that each has by nature enough power to kill another. Weakness can be

compensated for by guile. Their equality as potential murderers places all

men in the same insecurity, from which arises the need for a state. The

raison d'etre of the state is the need for some security of the individual, who

feels himself menaced by all his fellow-men.

[146….Hobbes was the true, though never fully recognized, philosopher of the

bourgeoisie because he realized that acquisition of wealth conceived as a

never-ending process can be guaranteed only by the seizure of political power,

for the accumulating process must sooner or later force open all existing

territorial limits. He foresaw that a society which had entered the path of

never-ending acquisition had to engineer a dynamic political organization

capable of a corresponding never-ending process of power generation….

For a Commonwealth based on the accumulated and monopolized power

of all its individual members necessarily leaves each person powerless, deprived

of his natural and human capacities. It leaves him degraded into a

cog in the power-accumulating machine, free to console himself with sublime

thoughts about the ultimate destiny of this machine, which itself is

constructed in such a way that it can devour the globe simply by following

its own inherent law.

(H. Arendt, “Imperialism”, Vol.1 of The Origins of Totalitarianism, pp.140-1.)

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