Economics, Power and Culture

Conventional economics is preoccupied with the sphere of exchange to the neglect of the sphere of production; this is tantamount to preoccupation with economic epiphenomena to the neglect of the underlying phenomenal structure. This exchange emphasis is largely responsible for the current crisis in economic thought in that it renders conventional economics incapable of responding to the comprehensive impasse of democratic industrial society.

Conventional economic analysis is inadequate to the challenges posed by ecological economics. It is not denied that conventional economics contains much that is necessary and important to ecology. The contention is only that conventional economic analysis cannot foot the whole bill and must therefore be supplemented with an economics of a different scope and method. The concern is, in short, the adjustment at the margin of the allocation of the human capital resources of the economics profession.

This chapter provides an institutionalist analysis and diagnosis of the current crisis of orthodox economics. We shall, first, characterize the predominant opinion in economics — the neoclassical synthesis. Next, we examine the anomalies which are currently vexing orthodox opinion and their sufficiency to provoke a period of crisis and extraordinary science. In the final section, we diagnose the source of the anomalies of the neoclassical synthesis.

The purpose of this chapter is to assess the bases of legitimacy of corporate power which are found in the literature of political economy. These bases are found generally to be inadequate to the task, and the paper argues that nothing short of a reformation of our theory of humanity and human progress would prove adequate. This latter argument is contained in a final section which attempts to give an explicit overview of the obsolescence of our value orientation.

Liberalism is facing a severe crisis. Crisis indicates an impending change of direction and orientation. In addition, the term is commonly inferred to indicate that the change is to be dramatic and caused by the ineffectiveness of the prior direction or orientation in providing for some set of felt needs. In both systems for ordering society and systems for ordering thought, crisis has meaning as a situation in which the prevailing institutions and world views fail to meet some critical set of needs and suffer a decline in authority and ability to provide cohesion. The modern classic concerning crisis in thought systems is Kuhn (1970). Ward (1972) and Stanfield (1974a) have applied Kuhn’s discussion to economics. Wallace (1972) has suggested a generalization of the paradigmatic change model. The abundant literature on crises in social systems is reminiscent of the Marxist literature on an institutional configuration becoming a fetter on further progress.

This chapter is concerned with institutional change in market capitalist society. The history of this social order is one of persistent crises. These appear in myriad guises and levels such as aggregate stabilization crises, environmental and resource crises, crises of demographic adjustment, urban crises, and the crises faced by laborers, business enterprises, or local communities faced with economic obsolescence. Institutional change has largely consisted of reactive response to one or another such crises.

This chapter examines the principles that radical institutionalists consider to be the foundation for effective thinking on economic policy. Most prominent in this regard is instrumental value theory and the contradictory relation of invidiousness to instrumental effectiveness. Another prominent theme is the generally favorable response of radical institutionalists to the twentieth-century tendency toward increasing collective and state action to control the economic process. An interwoven theme is the necessity of fully understanding the implications of this collective movement so that the control in question can be made more democratic and more instrumentally effective.

The initial response to the crisis of the corporate-welfare state is nativistic: ‘Give us that old time religion.’ In almost every democratic industrial society, retrenchment has become the primary motive of social economic policy. In the name of nineteenth-century economic wisdom, the inter-war and postwar commitment to human development, collective goals, and social justice is being abandoned. In this chapter I examine the current institutional crisis in an attempt to show that it is rooted in the holdover of an outmoded ideology and culture that has as its concomitant result a profound ideological lacuna. The implication is that it is not the last half-century’s social economic goals that should be abandoned but rather the nineteenth-century folkways and folklore that frustrate their achievement and advocate their abandonment.

This chapter examines a part of the relationship between institutionalism and Marxism. Particular attention is given to Ayres (1946), Galbraith (1967), and Baran and Sweezy (1966). The procedure of the chapter is to review Ayres’ analysis of the underconsumption tendency of capitalism and demonstrate its remarkable similarity to the analysis of Baran and Sweezy. Then it is argued that Galbraith’s analysis identifies the capitalist solution to this problem and that this analysis is important to contemporary Marxism. Finally, it is argued that Galbraith’s analysis is itself incomplete without something like the Marxist theory of alienation.

The argument here is that the Marxist and institutionalist traditions are similar in many respects, notably that both are inherently radical in their approaches to the economic system. There is an ongoing need to assay the similarities and differences between these two vital intellectual traditions. The phrase ‘inherently radical’ is used advisedly. It is argued in what follows that the two intellectual traditions are inherently radical owing to the character of their respective philosophical and methodological orientations.

The reason for considering the ‘practical and political implications of different views on value theory’ is to further economic progress broadly speaking by furthering economic knowledge. Ultimately, better economic policy and practice awaits better economic theory, method, and philosophy. Such progress revolves around the radical notion of demystification, so I will focus on value theory in relation to that task.

This chapter seeks to draw attention to the psychocultural consequences of the systemic late capitalist response to economic crises and to the need for a research agenda to delineate and evaluate these consequences. The work of Veblen and recent American neo-Marxists is suggested as the basis for a start toward developing this research agenda. I use the term neo-Marxism loosely to encompass a variety of scholars who share a common point of departure in Marx’s social theory, but insist that Marx’s categories do not capture the essential tendencies of existing capitalism and socialism (Brown, 1988, p. 9).