Classical economics centers on man's mechanical response to inflexible economic laws. The concepts of William Stanley Jevons (English 1835-82, value determined by ultility), Karl Menger (Austrian 1840-1921, marginal utlilty) and Leon Walras (French 1834-1910 managed currency) represented breakthroughs in the development of economic theory, in rejecting cost-of-production theories of value and in acknowledging the significance of consumer's equilibrium at the point where the marginal utilities of all commodities purchased are proportional to their price. These innovative concepts has been described by some economists as purely analytical and ideologically neutral and congruous with any political system. Yet the replacement of the labor theory of value by a subjective value theory can be precipitated primarily by ideological motivations. John A. Hobson (English 1858-1940, Imperialism) extended the marginalism inherent to the subjective value theory to production theory. Alfred Marshall (English 1842-1924, costs, value and distribution theories, marginal utility) brought to a close within mainstream economics, the conflict between the utility and cost theories of value, by visualizing cost of production (the supply curve) and utility theories (the demand curve) as component parts, each comparable to one blade of a pair of scissors. This Marshallian synthesis quickly gained the stature of orthodoxy and formed the foundation of neoclassical economics. Economists like to think their theory as being scientific and value-free, with a veneer of objectivity justified by rigorous and complex mathematics that is at the heart of modern neoclassical economic orthodoxy. They hold a teleological vision of steady and continuous progress towards superior theory. Yet the anti-working class prejudices of Jevons, Walras and Menger are obvious. Joan Robinson (English 1903-83, imperfect competition) observed that "economics itself (that is the subject as it is taught in universities and evening classes and pronounced upon in leading articles) has always been partly a vehicle for the ruling ideology of each period as well as partly a method of scientific investigation." Those who agree with Robinson are clearly more willing to admit the historical specificity of economic theory. However, to some, the unfolding of mainstream economic theory is merely new apology replacing old apology which has become inoperative. It is like driving a car looking at the rearview mirror. The issue of the obsolescence of economic theories and policies focuses on identifying agents with the power to make these economic theories and policies inoperative and to precipitate intellectual crises that lead to the formulation and adoption of new theories. Since the Asian crisis, new mini theories have been advanced by econmists every three months to catch up with events, each reflecting the institutional bias of its sponsor. Since capitalism is based on a social contradiction among classes, the the agency of change lies either in capital or the working class. Yet systems have been collpasing much too rapidly for this view to have validity. The development of economic theory, since the dawn of capitalism, has been a process by which new policies based on theories designed to justify capitalist society replace those which have been rendered obsolete in the dynamics of class struggle. While capital, confronted by crisis, regroups and restructures, its theoreticians are hard at work developing new theories and strategic initiatives to guide this process. If the working class is to defeat these efforts, mere ideological critique is insufficient. It is imperative to fathom the strategic nature of the innovations in theory. Once the strategies, goals and vulnerabilities of the opponent are understood, we are less likely to be sidetracked by trite academic debates and the task of defeating that opponent becomes considerably less cumbersome. E. K. Hunt argues that "With the growth of the corporation as the principal form of industrialization and the growing industrial concentration.....there was an important change in both the nature of the accumulation of industrial capital and the role of the industrial capitalist.....Increasingly, corporate managers were hired to direct and oversee industrial enterprises.....[and] profits and interest came to be a result of passive ownership." Consequently, Hunt contends that capitalists "needed a theory that sanctioned their ownership and proclaimed the virtues of an exchange economy." Modern advanced economics does not use traditional categories because the division of national income among workers, landowners, and capital owners is not a central issue for economists today. The division of income is not to specific classes of people, but to the resources owned by people. This is another attempt to defuse the concept of class struggle. In the latest textbooks, the term capitalism is not even used. One cannot fight something that is no longer identifiable. Yet the division of resource has major and radical implications for economic policy. The taxing of wages and capital returns has a much different economic impact than taxing land rent, albeit the impact is hot debated technically. Henry George (American 1839-97 land economics - geoism) focused on the policy of using land rent for public revenue. Its seems to me, a user of economic theory, that economics needs a unifying theory. As to Jim observation that business and banks (often find the more "liberal" versions of neoclassicism more useful), iy is interesting to note that Krugman was the first economist to provide an overview of the Asian financial crises that began in Thailand on July 2, 1997 to Citibank that it was no mere passing shower. Henry C. K. Liu Jim Devine wrote: > Rod Hay writes: >And although I said that there was truth content in > neoclassical economics. It is not all true (or I wouldn't be here). It is > also useful. A good part of what passes for economics is politics dressed up > in economic jargon. It pushes the economic agenda of a particular group. > Imagine the surprise if a banker denounced monetarism....< > > I'm sure that some bankers denounce monetarism, since some of them had > liquidity problems in 1982 due to Volcker's nominally monetarist policies. > And, in practice, Greenspan denounces monetarism (though obviously not in > words). His policies are very activist -- fine-tuning, in fact -- and focus > on interest rates (rather than monetary aggregates) as operating and > intermediate targets. He's an anti-monetarist, though he's very conservative > (an erstwhile follower of Ayn Rand). I would guess he's also not a > neoclassical in the sense of Phil Mirowski's definition. Thus, though I > reject their perspectives, I think it's a mistake to get too involved in > trashing the monetarists and even the neoclassicals. What's important is to > criticize the powers that be. And presenting a coherent and meaningful > alternative to the neoclassicals is the best criticism. > > Critiquing monetarism in the 1990s is like critiquing a fad that has > passed. Of course, it's a matter of the definition of monetarism, but my > impression is that most of monetarism has been folded into the school called > "the New Keynesians" (a bit like Blair's New Labor?) or into its competition, > "the New Classicals." > > While neoclassical economics in effect apologizes for capitalism by > presenting an idealized (cleaned-up) vision of it as the scientific Truth, > it's not simply a special-interest ideology. It's also a product of academia, > complete with a full-blown Mandarin mentality. Whereas the Chinese Emperor's > bureaucrats rose to the top by taking examinations which emphasized > calligraphy and other matters irrelevant to preservation of the Empire, > neoclassicals succeed by presenting extremely abstract and formal > models that are often totally irrelevant to business. Though sometimes > business groups will bring in Chicago School types to give speeches in > defense of the free market, they find Chicago-school ideas useless when it > comes to business operations and government policy. (They often find the more > "liberal" versions of neoclassicism more useful.) > > What's scary is that the IMF pushes this Chicago ideology. But of course, > they're doing it to people who don't have the power to resist. > > (I hope that I have not misrepresented the Mandarins. If so, I apologize > ahead of time.) > > Jim Devine [EMAIL PROTECTED] & > http://clawww.lmu.edu/Faculty/JDevine/jdevine.html
