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The Reconstruction of Political Economy as a Science


John Medaille

on 18 August 2018

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Transcript of The Reconstruction of Political Economy as a Science

Reconstructing "Economics" as the Science of Political Economy
Why "Reconstruct"?
If it Ain't Broke,
Don't fix it?
90% of all economists
missed the coming of the
current problems..
And the last one...
...and the one
before that
...and the one before that
...and the one
before that
The lack of predictive ability
leads to the suspicion of a
lack of descriptive accuracy
You cannot predict the course
of a system which you
cannot accurately describe
If you cannot accurately describe,
you cannot reliably prescribe
Economists have difficulty agreeing on description, prescription, and predictions for the economy
The theory describes a system that tends towards "equilibrium" when left alone
If the market is not "self-regulating," we need to find some other principle of order
To the extent that government performs this role, we need a principle to distinguish beneficial interventions from harmful interventions
"Political" Economy?
If the fact/value distinction does not hold up, neither can the positive/normative
"Economics" and Science
Modern economics predicated on two distinctions:
Both distinctions are can be brought into question
There are no "naked" facts, only details
"Facts" are those details we select because we think they are useful in constructing a theory
Compare to map-making. Every map leaves out more details than it includes
Which details will be counted as "facts" will depend on the purpose of the map
A topological map will have one set of details, a road map another, and a political map a third
Everything else is "irrelevant detail"
In the same way, theorists select the details that they believe are relevant.
But this selection process is itself
"Facts" do not create theories; theories create the facts
We compare theories by noting how many details each covers and how many each must leave out
Fact/Value Distinction
"Positive" & "Normative"
"Positive": deals with "what is" (facts)
Every science is both positive and normative
Every science "normed" to two sources of truth: internal and external
Internal truth: its own proper subject matter and methodology (positive)
External truth: subject to the judgment of the higher sciences (normative)
Example: biology is subject to chemistry, chemistry to physics, and physics to mathematics
When a science refuses to be subject to higher sciences, it becomes an ideology, or rather a set of waring ideologies
Without submission to the higher sciences, there is no way to judge between the waring factions
Economics has tended to usurp the role of the higher sciences
It makes statements about human actions and society that properly belong to psychology, sociology, philosophy, etc.
It is not surprising that economics, as a profession, has dissolved into a set of waring factions
Humane Science
The proper division is not "normative/positive," but physical/humane
Political economy is the science that deals with those human relationships necessary for the provisioning of society
The physical sciences terminate in physics; the humane sciences terminate in some view of the human person and society
The humance sciences terminate in psychology, sociology, and philosophy
Without finding its proper place in the scientific hierarchy, political economy cannot escape ideology
The first task is to define "political economy" so as to locate it within the sciences
The Basic Questions
"The allocation of scarce among alternative uses"
Allocations are an engineering or political question
Emphasizes "scarcity" but the goal is to produce a relative abundance
The role of the economist in allocations is simply to measure the distortion of prices by economic rents, subsidies, monopolies, etc.
Second definition: deals with the production, distribution, and consumption of goods and services
An improvement, but gives no hint of the reasons
Political Economy
PE deals with social provisioning, or how societies provide for their material reproduction
Implies three basic questions
The Three Questions
1. What to produce?
2. How to produce
3. To whom should we
distribute the output?
Determined by dominant values of society
Some requirements are natural, but the forms are always cultural
Determined by level of technology and human abilities
The means of assigning tasks is largely cultural
Some tasks assigned by education, but who gets the education is a social decision
Output must be divided so that enough workers survive to the next season
Further, enough must be distributed so that at least some can reproduce
Beyond that, the answers are discretionary
Sources for the Answers
1. Tradition
2. Command
3. Market
The past guides the present
Little change, and less freedom
All questions are answered, but in advance with little option for growth and change
A central authority provides all the answers
Planners may be seeking their own interests and their values may be at odds with the rest of society
Nevertheless, there have been many successful societies with a high degree of planning
The forces of supply & demand dictate the answers
Each individual responds to price signals to maximize utility
In this way, a spontaneous order is created.
The Myth of the Market
Markets are not "natural" but a socially created phenomenon
The are best at dealing with small changes to an already existing economic order
But they cannot generate this order
They depend on rules of behavior and customs
They depend on property rights and methods for enforcing rules and customs.
Without the proper context, markets are inefficient & chaotic, as the 2008 meltdown indicates
The absolute assumption of "self-interest" would destroy the very basis upon which the market depends
Nevertheless, markets provide indispensable signaling and an increased degree of freedom
While the market cannot answer ANY social/economic question...
The Family and Economic Order
Economic order requires fully socialized participants
These participants are "produced" and socialized within the family
But the family, like any enterprise, has its own capital costs (home, etc.);
It has its own repair costs (sickness) and its own depreciation costs (old-age)
The whole point of economic activity is to support the family; everything else is secondary
We may judge the success of any system by the strength of the family
Economics begins and ends with exchange
What Happened to the Family?
The Economic Stork
Workers magically arrive into the economy, but require no economic explanation for their presence
Families, and especially mothers, have no place in the theory
Growth is from positive capital/labor ratio
Best to discourage them by taxation
PUI's and TUI's
All human activity is either paid work
PUI=Partially Useful Individual
Spend some time doing paid work
TUI=Totally Useless Individual
Do not do paid work, hence all their activity is "leisure"
Motherhood: not paid
This way of speaking--and thinking--has become embedded in the language:
There are two "economies": Exchange (paid work) and Use (home work)
Exchange and Use
We work to get money to buy meat and potatoes (exchange)
We take them home and cook dinner (use)
The whole point of the exchange economy is use, but economics takes no notice of use
Migration of mothers from the use economy to the exchange economy=growth of GDP
Political economy begins and ends with the family
In the last 40 years, the family has disappeared as an economic entity and become a part-time hobby
But it has never worked that way!
Not "politics" but the "polis": our life in community
The 18th and 19th centuries knew nothing of 'economics'; only 'political economy'
Some felt the connection with politics made the discipline "unscientific"
W. S. Jevons: If we could just enough statistics, we'd be just like physics!
In 1891, the science was split into 'politics' and 'economics'
'Economics' would deal with the "real" world while politics would deal with...
Well, who gave a damn what it dealt with; it was just 'philosophy' and hence not "real" science
But every economic system is inscribed within and dependent upon a network of laws, property rights, and social expectations
It is impossible to understand--or even describe--any economic system apart from its political environment
In the same way, no political system can be understood apart from its economic base.
Further, regulation became an "exogenous" factor. The "self-regulating" economy wasn't self-regulating, but there was no principle of regulation
"Laissez-faire was planned; planning was not"
--Karl Polanyi
Regulation became an ad hoc reaction (over-reaction?) to specific market failures and abuses
In attempting to become a "real" science, economics ceased to be a science at all, and became a series of warring ideologies.
In place of a unified science, there was now two crippled disciplines, each incapable of fully describing events within their domains because in reality, there was just one domain with two aspects
But if political economy is a science, what kind of science is it?
We must recover four ideas:
The Human Person
To nurture the person (within the family) is to grow the economy
As an isolated "individual," Self-interest makes sense
But as a member of a family, a community, and a nation it is problematic
"Self-Respect" vs. "Self-Interest"
The person: drag on growth or the source of growth?
Since Malthus, persons seen as an impediment to growth
The person as the source of all economic values
We seem to have entered a period of "pre-war" instability
"Do you work?"
Or is it?
New workers are a drag on growth
or leisure
But was this real growth?
Everything else is discretionary
These come from
These come from
NO answers are available without reference to the market
production costs (education).
its own maintenance (subsistence),
"Normative": deals with "what ought to be" (values)
E.G., Astrology
Hence motherhood is a leisure activity
Mothers are TUIs
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