Economics as Worldly Philosophy

In what I believe to have been the first year (c. 1969) that Robert Heilbroner ran his graduate seminar in political economy, he was clearly wrestling with his own ideas on methodology and, in particular, Friedman’s (1953) essay on ‘The Methodology of Positive Economics’. Heilbroner argued that the essential problem with Friedman’s rejection of the importance of the realism of assumptions was that it denied any historical dimension to economic theory.

In his contributions to different fields of economics, Professor Robert L. Heilbroner has advanced many arguments, but the one which made the most lasting impression on me is his call to exploit the capabilities of economics for the study of large-scale historical change. His advice as a teacher was unambiguous: one should not seek guidance from neo-classical economics, since it is ahistorical. The great worldly philosophers of the not too distant past are the proper guides to follow. This calls for a return to an older tradition of grand visions of historical evolution.

At the height of a national debate over automation almost three decades ago, Robert Heilbroner (1962) reviewed some 200 years of debate over the economic and social impact of industrial technology. With his usual ability to identify the most important questions. Heilbroner found in this literature little examination of what he termed their ‘historical aspect’ and stressed the need to investigate ‘whether there is visible a progressive change in the employment-granting possibilities of successive stages of technical advance’ (ibid., p. 23). Heilbroner defined these stages as shifts in the pattern of economic development, from agriculture to manufacturing and from the latter to services; he was particularly concerned about the implications of labour-saving technological advances in the service sectors of a service economy (1966, pp. 11–15).

What is the economic impact of federal budget deficits on the US economy? There is no doubt that this is the most widely debated economic issue of our time. Controversy rages all around us — within academic forums, in the press, and even as part of the daily fare of radio call-in shows. The 1988 Presidential campaign elevated the issue to a place of unique prestige: fearing Walter Mondale’s 1984 fate, both candidates studiously avoided substantive discussion, even as their brows furrowed rigorously at any mention of the topic.

Heilbroner has argued that capitalism’s success has relied, despite the objections of many businessmen, on increasing state intervention. In this century, the government has taken on greater responsibility for aggregate demand management; regulation for purposes ranging from safety and environment to curtailment of oligopoly; and industrial policy. This perspective seems to conflict with the conventional wisdom that growth comes from freeing markets, as evidenced both by the success of the Four Tigers in East Asia and by the better growth record in the US and the UK than in European countries suffering from Eurosclerosis (legislation and customs that inhibit economic flexibility), much less the miserable experience of the Soviets.

Robert Heilbroner, in his essay ‘Behind the Veil of Economics’¹ takes up a fundamental issue — individual motivation and its relation to economic agency. In particular, he explores the psychological underpinnings of exchange behaviour, seeking to understand both how such behaviour contributes to economic order, and how it may be problematic from the standpoint of the ordinary precepts of self-identity and motivation. If one considers, in general terms, what its subject matter requires of economic theory, this hardly seems an unusual inquiry. In the actual practice of economists, however, it is. For the issue has, for the most part, either been ignored, or sidestepped through a priori assumptions. The value of Heilbroner’s work in this, as in other instances, lies both in his insistence on the existence of a problem for economics, and in his willingness to draw on other disciplines, when the existing resources of economics prove deficient.

Understanding Marx is seldom an easy task, especially when one considers his views on justice. Although he never Wrote a treatise on justice, he Wrote enough about the topic to generate a lively controversy among Marx scholars.¹ One apparently paradoxical aspect of his thought will be considered here; namely, its affinities to both the natural right and the relativist traditions of justice, traditions which have been in constant opposition to one another. The natural right tradition is based on the premise that principles of justice can be discovered through an examination of the natural attributes of human beings;of human nature in abstraction from the behaviour-shaping properties of historically given social, cultural, economic, and political institutions. In its most rigorous form it holds that there is only one true concept of justice and that it is valid for all times and places. The relativist, on the other hand, denies the possibility that a single, eternal concept of justice can be derived from knowledge of human nature as such. A concept of justice is valid if it is the posit of recognized authorities or if it reflects culturally specific values. A thoroughgoing relativist, therefore, believes it is impossible to find an objective, universal; transcultural, and transhistorical criterion by which to compare, evaluate or rank the normative validity of different concepts of justice.

In his ‘Notes on Wagner’ Marx describes the commodity as the ‘characteristic form’ of the product in contemporary society. This description of the commodity, taken together with Marx’s claim that ‘the determinate character of social man must be the starting point’ (Marx, 1975, p. 189), suggests that Capital begins with reference to capitalism (with the determinate character of capitalist social man) by beginning with the analysis of the commodity. This interpretation of the beginning of Capital, even though suggested by Marx himself, seems, on the face of it, untenable. Because the commodity form is not unique to capitalism, it does not seem possible that an analysis of this form could disclose the determinate character of capitalism.

Beginning with Adam Smith, historians of economic thought have had high regard for Quesnay and the Physiocrats. The same, however, cannot be said of their economic model — the Tableau Economique. Well known is Eugen Duhring’s opinion that the Tableau is a mathematical fantasy comparable to squaring the circle.¹ More recently, Paul Samuelson has equated the Tableau to ‘mystification and abracadabara’.²

Neo-classical economists pay implicit tribute to Adam Smith by their continuing adherence to his view of the labour market. ‘Of the many ideas of Adam Smith that have stood the test of time,’ writes Albert Rees (1975, p. 336), ‘few have weathered better or are still more relevant than the idea of compensating wage differentials’, Yet Smith’s theory that a competitive labour market rewards workers for skills that are costly to acquire and for the disamenities associated with their work has stubbornly defied empirical verification. One explanation for this resistance to empirical tests, the efficiency wage theory, holds that the moral hazard involved in eliciting labour effort imposes a distorting layer of rents on the structure of pay.

Karl Marx went on record as ruling out any role for the market in a socialist economy. ‘Within the cooperative society based on common ownership of the means of production’, he wrote, ‘the producers do not exchange their products’ (Marx, 1938’ p. 8). Marx’s collaborator, Frederick Engels, stated their position even more bluntly: ‘The seizure of the means of production by society puts an end to commodity production … [and at that point the market is to be] replaced by conscious organization on a planned basis’ (Engels, 1939, p. 309). Clearly, neither Marx nor Engels saw any role for markets in a socialist society.

For most economists, at least in the US, economics is a science, at once technical and mathematical, abstract yet empirical — although ‘empirical’ has a very special meaning. Empirical studies are conducted in armchairs, with computers and data banks; no empirical investigator, say of production, ever has to visit a factory or construction site. And no serious economist ever has to think about history or the changing meaning of the activities under investigation, any more than the physicist or chemist has to worry about the history of the atoms or molecules being studied. This may be economics, but it is not worldly philosophy.