Short German summary at the bottom of the post (work in progress) / Kurze deutsche Zusammenfassung am Ende des Posts (noch in Arbeit)
I have started a series of posts entitled Neoliberal Economics and Its Rival, part 1, part 2 and part 3. The sequel is available only in German because it is based on a nine part series in English by Bill Mitchell. So my English readers are not left in the lurch. Also, I might rewrite the series to include my own English summary.
The present post traces the intellectual journey that was to bring me to the point where I felt it is important to understand neoliberal economics and its Marxian and (Post-)Keynesian rivals better than I had before.
In the title I refer to a singular rival, rather than rivals. This is because I feel that it is legitimate for my purposes to merge Marx's and Keynes's reasoning into one and the same argument against classical economics. For Marx was basically a Keynesian avant la lettre in
- criticising Say's Law — the very base of classic economics on which neoliberal economics is squarely built — and
- suggesting the new concept of effective demand to be the culprit responsible for involuntary employment, a phenomenon which the classics thought did not exist.
While Marx had preempted Keynes' dismantlement of the classics very much in Keynesian terms — if not in Keynesian phraseology, let alone in the spirit of Keynes's accommodating attitude toward capitalism — the rest of Marxism can be safely ignored in this context.
For more see
Turning to my main point, the economist with a bad conscience — well, that is I.
I wasted my youth as a dogmatic leftist and became instantly a Wirtschaftsliberaler when forced to study neoliberal economics at university. While previously having censored my economic reading to avoid "bourgeois economics", I was fascinated by it once required to look at it closely. By Wirtschaftsliberaler I mean a person who may not be a liberal (in the European sense of the word) except for idealising capitalism and free markets.
Isn't it interesting that I did not care much for liberalism because I was a Wirtschaftsliberaler. That is to say: I thought that the capitalist economy was a social model that would take care of itself. So, if only we ensured we had free markets everything else would fall into places. This attitude would eventually spell the end of my (libertarian leaning) liberalism, towards which I had drawn nearer in the years between 2007 and 2012. By that period, largely under the influence if Hayek, I had felt so taken by libertarian leaning liberalism that I began to study it very seriously, delving deeply into issues beyond economics such as history, law, anthropology. The upshot was that I discovered serious flaws in the liberal ideology. At some point, confronted with anarcho-capitalist radicals I found myself compelled to look for answers to the question why I was not an anarchist. Soon I realised that politics and the state actually played a pivotal, extensive, and indispensable role in making liberty feasible.
That was the time when I finally cracked my Hayekian dogmatism. For I began to understand that the spontaneous order of capitalism was embedded in another spontaneous order — that of the state and politics. The latter being just as much a discovery procedure as the former, only that politics and the state will always be the foundation of economic activity, even in a free society.
This insight does not make me an enemy of capitalism and free markets.
To the contrary, I feel I have become more realistic in my perceptions of them.
The point of becoming an implicit Keynesian was reached, when it occurred to me that to maximise the tremendous benefits of capitalism, we must take responsibility for it, guiding it around the pitfalls that it cannot evade of its own accord.
A free society is one in which everyone has the right to participate in the political processes. Hence it is a society with an exceptionally large potential for mass dissension, which includes both daily and more extraordinary episodes of economic activity. People have different interests and goals. They need to compromise and find solutions to balance their differences in reasonable ways. While capitalism with its free markets is a powerful and welcome helper of mankind, it is not a system capable of resolving the multifarious dissension that is natural to a genuinely free society.
Capitalism can go wrong. And we need to compete politically for ways in which we may thwart or repair its dysfunction and derailment. This is true for the "small matters" of everyday economic life that abounds with issues demanding political resolution, such as organising a farmer's market in a village.
And it is also true for large issues such as those relating to the balance or imbalance of the interests of capital and labour which capitalism endows with rival ambitions in certain important respects. But we can save our friend "capitalism" if we take political responsibility to target a reasonable reconciliation of interests.
For more see
The Economy and Its Markets Are Naturally Political
One might say, it was as a political scientist that I got round to discard my former belief in capitalism as an ideal social order.
I had to overturn the Hayek inside me before I could appreciate that the economic system of capitalism was incapable of guaranteeing a desirable society.
To the extent that I had become a dogmatic libertarian leaning liberal, I was bewitched by Hayek's theory of spontaneous order. According to this idea, there are some rules out there. If we happen to chance on them and conform ourselves to them, we can otherwise act any which way we like and the result will be a spontaneous order that produces benign and optimal results, economically and socially.
Of course, Hayek has overlooked the essence of freedom. That people are free to seek out their own goals and solutions, creating thereby a spontaneous order of conflict and dissension. It is the challenge, burden and great prospect of liberty that people need to cope with and overcome the stress of rivalry that is natural to the system of freedom. For that purpose they cannot rely on a mechanism that kicks in automatically if only a number of rules are adhered to, producing ideal outcomes without fail. In order to get to a desirable society man must invest much discretion, run experiments that may fail, expose himself to trial and error, develop visions and carry them though amidst though competition from those striving for different aspirations.
I want to understand what went wrong in my intellectual development.
I once told my History teacher that it was easy to write after the event about the terrible wrongs of the Third Reich and its Nazis. The real challenge, I insisted, was to write an essay in which you explained how you may have become a Nazi yourself in Germany in the 1920s and 1930s. That would be an appropriately demanding way of learning from the past and building resistance from heartfelt inspection against similar dangers in our own time.
I think the main fault in my thinking ensued from acceptance of the dogma that a free economy — the subject matter of economics — is a spontaneous order whose natural spin-off is a desirable social order.
What does this have to do with "Neoliberal Economics and its Rivals"?
Classic as well as neoliberal economics, which basically adopts the essence of classic economics, construe their view of the economy as a mechanism whose proper functioning produces both desirable economic as well as ideal social outcomes.
Central to this presumption is the
- concept of equilibrium, and the further assumption that
- economy and society are isomorphic, notably, that by letting the economy operate according to the rules that are appropriate to it, ipso facto a society of first best nature — of maximum wealth, peace, fairness, and freedom — is created.
These two aspects ensure that classical economics and neoliberal economics are indistinguishable.
The latter is chock-full of ad hoc excuses to rescue its basic economic philosophy from innumerable proves that it does not correspond with reality. Awkwardly, notwithstanding the absurdity of its defences, neoliberal economics succeeds in surviving and, in deed, dominating modern policies and the minds even of the broader population.
The reason why is related to my intellectual biography. No less than their precursor, modern variants of classical economics somehow manage to inculcate the notion into those millions of economics students graduating every year that an equilibrium economy (producing a corresponding society) is possible, good, and desirable, and that our efforts should be directed toward rescuing as much of this paragon as possible and always strive to come as close as possible to its complete implementation. Let me call this the fallacy of unwarranted promise (FUP).
While the classical economists believed they lived in the presence of such an ideal socio-economic reality, contemporary neoliberals find themselves frequently in a position to defend what they consider a feasible vision against sinful men who subvert the rules on which a free market economy depends for its smooth functioning. However, they succeed in asserting their view as the dominant paradigm.
There are two explicit expositions of the classical and the neoliberal conception of an economy.
The neoliberal model of an economy is spelled out in General Equilibrium Theory (Arrow-Debreu), a highly formalised mathematical theory.
As for my bad conscience, for a long time I used to say to myself that if only I had enough time to study the Arrow-Debreu model I would be able to prove the cogency of my believe in capitalism and free markets as an ideal arrangement.
Ironically, when I got round to looking at General Equilibrium Theory (GET) more closely, one thing stood out like sore thumb: if anything, the model establishes clearly that the real economy does not even remotely correspond to the equilibrium economy modelled in GET.
To get to a complete, mathematically correct equilibrium outcome, Arrow-Debreu had to throw out just about every assumption that would create a link to the real economy, employing instead bizarre premises such as the absence of space, time, uncertainty and competitive processes.
Neoliberal economics has stuck to this pattern: realism be damned, main thing: the maths is right and looks impressive. Modern economics is very much a theological exercise in vanity by academics, whose results are eagerly recycled by demagogues and politicians to herd millions of people into the directions preferred by their most potent clients.
General Equilibrium Theory is immunised against rejection as a paradigm for policy by the fallacy of unwarranted promise (FUB), whose inculcation is the chief purpose of economics. And so it continues to dominate economic modelling today. Due to its highly technical nature, it is harder to demonstrate to the layman the irrelevance of GET for understanding, let alone governing, modern economies. So, it is not the ideal candidate for debunking the whole edifice of neoliberal economics.
But there is another reason why returning to classical economics is the best way to show that we are being misled and sent astray by modern neoliberal economics.
The fundamental notion of the economy inherent in both, the GET and less formal variants of neoliberal economics, is identical with the classical model. Only, the latter is less formalised, more accessible, and it is also being more straightforward, more confident in advertising its assumptions compared to the sophistry, ad hocery and waffle offered by modern mainstream economics.
GET and modern neoliberal economic thinking absorb the echo of the classics. GETers and modern neoliberals mean and believe the same things, when it comes to fundamental presumptions about how the economy works and why — in their form of conceptualisation — it deserves to be our ideal and guiding star.
Had I studied the Classics properly, early in my economic education, I might have discovered that their view of an economy is untenable, and that the Wirtschaftsliberalismus that I was going to internalise as my guide for the next 30 years was seriously flawed.
I had uncritically relied on authorities rather than using my own head and intellectual experience to vet the basics of economics, leaving me with a bad conscience that would make itself felt every once in a while.
Conclusion: Study the model that the classical economists had drawn up to comprehend the economy and you know what modern neoliberals really think about the economy, and what is doubtful about their point of view.
Deutsche Zusammenfassung:
Ich habe vor, demnächst eine Serie von Posts über das Urmodell des neoliberalen Wirtschaftsverständnisses zu vollenden. Drei Teile gibt es schon: hier, hier und hier. Dieses Urmodell ist nichts anderes als die Theorie der ökonomischen Klassik, die nach Adam Smith entsteht und sich von dessen politischer Ökonomie durch ein radikal mechanistisches Bild der Wirtschaft unterscheidet.
Es ist wichtig, sich mit der klassischen Theorie vertraut zu machen, weil sie über die Jahrhunderte hinweg das Grundgerüst des vorherrschenden ökonomischen Denkens im Westen geblieben ist.
Das moderne Wirtschaftsdenken ist klassisch, altmodisch und überholt
Spätere Varianten der klassischen Ökonomik leben bis in die heutige Zeit vom „Trugschluss des falschen Versprechens“ – ich nenne es oben im englischen Teil the fallacy of unwarranted promise (FUB). Das heißt, diese späteren Spielarten sind theoretisch durchaus nicht schlüssig, jedenfalls nicht in dem Sinne, dass die von ihnen vorgelegten Modelle die reale Wirtschaft in akzeptabler Weise abbilden. Der Realitätsverlust, den diese Modelle erleiden, bewegt sich nicht mehr im Bereich des Hinnehmbaren: in ihnen wird u. a. von Raum, Zeit, Unsicherheit, Unwissen und echten Wettbewerbsprozessen abgesehen. Infolgedessen halten sie empirischen Überprüfungen nicht stand.
Es bleiben zwei Ausweichstrategien für den modernen Aufguss der klassischen Theorie: das ständige Verschieben der Torpfosten, also die Einführung immer neuer willkürlicher Zusatzannahmen (Schutzbehauptungen) im Bemühen, die Theorie einigermaßen stimmig erscheinen zu lassen. Doch selbst diese Vorgehensweise ist streng genommen unwirksam ohne die zweite Strategie. Diese besteht darin, Annahmen (größtenteils) stillschweigend zu übernehmen, die seit der ökonomischen Klassik dazu dienen, freie Märkte und den Kapitalismus zu idealisieren.
Hier kommt nun FUB voll zum Tragen: Jedes Jahr wird Millionen von Wirtschaftsstudenten eingetrichtert, dass eine Gleichgewichtswirtschaft machbar, gutartig und wünschenswert sei. Außerdem bringe das wirtschaftliche Agieren in einer Gleichgewichtswirtschaft angeblich ipso facto eine ideale Gesellschaft hervor. Aus FUB folgt, dass unsere Bemühungen darauf gerichtet sein sollten, dieses vorbildliche Wirtschaftsmodell so umfassend als möglich zu schützen und zu erhalten und uns so weit als möglich seiner vollständigen Umsetzung zu nähern.
Die Kunst der ökonomischen Rhetorik besteht darin, uns davon zu überzeugen, abstrakte Ideale, die in Wahrheit weder schlüssig noch realisierbar sind, als Leitbilder des wirtschaftswissenschaftlichen Denkens sowie der Wirtschafts- und der Gesellschaftspolitik anzunehmen.
Schlechtes Gewissen
Den Ökonomen in mir hat immer wieder mal ein schlechtes Gewissen geplagt. Er spürte, dass er jemandem auf den Leim gegangen sein mochte, sich vielleicht selbst betrügt. Aber er ging dem Verdacht nicht konsequent nach. Heute weiß ich, dass ich mich von FUB habe täuschen lassen und, dass ich mich als Wirtschaftsliberaler im Grunde nur einem Glauben angeschlossen habe, statt mich auf dem Boden einer soliden Wissenschaft zu bewegen, wie es mir trügerischerweise schien.
Ursprung und Kern eines Glaubens: die ökonomische Klassik
Die klassischen Ökonomen waren fest davon überzeugt, dass ihr Denken die Wirtschaft, die sie umgab, wahrhaftig abbildete. Anders als die heutigen Ökonomen, die sich mit theoretisch-formalem Pomp und sophistischem Lavieren ständig drohender Entlarvung zu entwinden suchen, besaßen die Klassiker noch das Selbstbewusstsein und den Mut, die tiefer innerer Überzeugung entspringen. Sie sprachen ihre Annahmen klar aus und gaben ihnen eine leicht nachvollziehbare Form.
Wie vor Jahr und Tag verdankt auch heute noch das große Ganze dessen, was man als freie Wirtschaft bezeichnet, seinen logischen Zusammenhalt dem klassischen Glaubensbekenntnis.
Allein, dass heutige Wirtschaftswissenschaftler diesen Glaubenskanon häufig nur noch andeuten, gewissermaßen wie eine Stimmgabel anschlagen und für sich klingen lassen. Denn sie kennen den Ursprung dieser Doktrin nicht und sind nicht imstande, das in ihr entworfene Gesamtbild in lückenloser Authentizität – mit all seinen Brüchen und Unstimmigkeiten – aufzuspannen. Oder sie schweigen davon, weil sie ein schlechtes Gewissen plagt, das sie daran erinnert, wie wenig stichhaltig die Theorie der freien Wirtschaft in Wirklichkeit ist. Wohlgemerkt muss das nicht heißen, dass die besten Annäherungen an eine Nicht-Planwirtschaft schon deshalb als verwerflich abzulehnen sind, weil ihre theoretischen Rechtfertigungen in die Irre gehen.
Wir müssen uns aber darüber im Klaren sein, dass das, was die Idealisierungen der freien Wirtschaft salonfähig macht, nicht ein schlagender wissenschaftlicher Beweis ist, sondern eine verführerische Atmosphäre, ein uns auf Zuspruch einstimmendes Hintergrundrauschen, in dem die Stimmen der Klassiker zusammenklingen, um uns dem Bild einer Wirtschaft gewogen zu machen, die real und ideal zugleich sein soll.
Ohne Einsicht in die Schwächen der freien Wirtschaft – keine solide Theorie des Kapitalismus
Bevor Keynes in den 1930er Jahren mit seiner antiklassischen Wirtschaftslehre in Erscheinung getreten ist, fehlte eine konsequente Theorie der gemischten (nicht idealisierten) Wirtschaftsformen, zu welchen jede freie Wirtschaft zählt. Die Idealisierung der freien Wirtschaft – weiterhin das Grundmodell der Ökonomie und der Wirtschaftspolitik – hat nur eine zusammenhängende Rechtfertigung: das Wirtschaftsbild der klassischen Ökonomen.
Schlussfolgerung: Wer das Wirtschaftsmodell der Klassiker versteht, gewinnt damit automatisch Einsicht darüber, wie Neoliberale heutzutage tatsächlich über die Wirtschaft denken – was ihnen oft selbst nur unvollkommen bewusst ist, weil sie sich der irrigen Annahmen und Fehlschlüsse der von ihnen unterstützten Lehre nicht bewusst sind. Nur wenn wir zurückkehren zu der originären Theorie der klassischen Ökonomen sind wir imstande zu würdigen, was wertvoll und was fragwürdig an deren Weltbild ist und welche Erbschaft es uns in den Schriften der zeitgenössischen Wirtschaftslehre und in den Sachzügen der modernen Wirtschaftspolitik hinterlässt.
