Historical Materialism 20.

3 (2012) 38

brill.com/hima

Economics and Political Economy Today: Introduction to the Symposium on Fine and Milonakis
Sam Ashman
University of Johannesburg pdf5@uj.ac.za

Abstract Economics has long been the dismal science. The crisis in classical political economy at the end of the nineteenth century produced radically difffering intellectual responses: Marxs reconstitution of value theory on the basis of his dialectical method, the marginalists development of subjective value theory, and the historical schools advocacy of inductive and historical reasoning. It is against this background that economics was established as a discrete academic discipline, consciously modelling itself on maths and physics and developing its focus on theorising exchange. This entailed extraordinary reductionism, with humans regarded as rational, self-interested actors, and class, society, history and the social being excised from economic analysis. On the basis of this narrowing of its concerns, particularly from the 1980s onwards, economics has sought to expand its sphere of influence through a form of imperialism which seeks to apply mainstream economic approaches to other social sciences and sees economics as the universal grammar of social science. The implications of this shift are discussed in Ben Fine and Dimitris Milonakiss two volumes, where they analyse the fate of the social, the political and the historical in economic thought, and assess the future for an inter-disciplinary critique of economic reason. Keywords economics, political economy, history of economic thought

Economics has been the dismal science since at least as early as 1849 when Thomas Carlyle labelled it as such. This was initially as a description of Malthuss arguments about population growth (which later would become known as the dismal theorem) and then it was repeated in his essay, Occasional Discourse on the Negro Question.1 Carlyle argued that slavery ought to be re-introduced in the West Indies to regulate the labour market. Economics was dismal because it located everything in supply and demand while, for Carlyle, compulsion and slavery were much brighter and preferable. Marx famously distinguished between classical and vulgar economy, the diffference between
1.Carlyle 1849.
Koninklijke Brill NV, Leiden, 2012 DOI: 10.1163/1569206X-12341263

S. Ashman / Historical Materialism 20.3 (2012) 38

the disinterested inquirer and the hired prize-fighter. But, for Marx, the emergence of vulgar economy was not simply an exercise in apologetics, it was a response to the intellectual problems posed by classical political economy itself, and in particular Ricardos conception of value.2 Vulgar economy refused to go behind surface phenomena (and so provided an apology for capital). Today the academic discipline of economics is a deeply entrenched pseudo-science whose most glaring recent failure has been its inability to predict, analyse or respond to the global crisis. Mainstream economics remains impervious to criticism, arrogant about its achievements, aggressive and imperious in addressing the concerns of other disciplines on its own reductionist and narrow terms, and secure in its institutional power. Churchill thought history to be a subject written by the victors, but in economics it is written by the vanquished with the history of economic thought (HET), and economic methodology, the concerns of the remaining heterodox (postKeynesian, Austrian Institutionalist, and Marxist) economists, and those in other disciplinary locations. This dominance is reproduced in the training of PhD students, in hiring, in promotion, and in publishing.3 However strong the critiques of the mainstream may be, these alternatives are ignored, with the Cambridge capital controversy of the 1960s the only true debate in the sense that the mainstream on this occasion engaged substantively with its critics. So, plus a change, plus cest la mme chose. Although there has been change over time, and although bourgeois individualism clearly predates marginalism, the degeneration of economics is deeply rooted in the marginalist revolution of the 1870s.4 The crisis of the Ricardian school and the classical politicaleconomy tradition produced profoundly diffferent intellectual responses: Marxs reconstitution of value theory on the basis of his dialectical method; the marginalists refinement of subjective value theory through the reinvention of the concept of marginal utility (which, through Carl Menger, would also give rise to the Austrian school of economics); and the German historical schools rejection of marginalism and advocacy of an inductive and historical method, which would later produce evolutionary or institutional economics and whose most celebrated representatives are Weber and Schumpeter. Marginalisms three key theorists, William Stanley Jevons, Carl Menger and Lon Walras whose ideas remain at the core of neoclassical thinking saw the basis of the new science of economics as lying in the theory of exchange. For Walras, the theory of exchange is based on the proportionality of prices to intensities of last wants satisfied (i.e. to final degrees of utility). Things obtain
2.The lengthiest discussion of which is contained in Marx 1863. See also King 1979. 3.Fullbrook (ed.) 2003; Lee 2007. 4.For a diffferent account, see Hodgson 2011.

S. Ashman / Historical Materialism 20.3 (2012) 38

their value in exchange from scarcity, so scarcity and choice become the chief subject matters in economics: the process of exchange and the determination of prices under hypothetical conditions of free competition. And, as value in exchange is a magnitude that is measurable, for Walras the theory of value in exchange is a branch of mathematics.5 The new approach meant the abandonment of classical political economys macro-dynamic view of the economy and its concern with growth and distribution, and its replacement with static-equilibrium analysis and the desire to model economics on maths and physics.6 As part of this shift, the new science of economics was to be separated from the arts and applied sciences and from ethics and the moral sciences. The Methodenstreit, or battle of methods, which took place between Menger and Gustav Schmoller in the early 1880s, highlighted the diffferences between marginalism and the German historical school as they fought over deductive and inductive reasoning, theory versus narrative, and universality and specificity, though with the German school vulnerable to the charge that it lacked theory. But while mainstream economics consolidated on marginalist principles in the 1930s under the definition provided by Robbins, as the study of scarcity and the science of choice, economics the discipline remained diverse prior to WWII, with, in addition to the Historical School, Old Institutionalism strong in the United States, and later Keynesianism and (Classical) Development Economics protected spheres for a time. It was not until the formalist revolution of the 1950s onwards that the discipline was mathematised intensively and being an economist defined by the adherence to certain techniques and technical apparatus.7 This complex journey and its outcomes are the subject of Ben Fine and Dimitris Milonakiss two books, the first of which won the Gunnar Myrdal Prize and the second the Isaac and Tamara Deutscher Memorial Prize.8 They are particularly welcome for those involved in teaching HET and political economy, whatever the disciplinary location. The books are presented as a staging post in what is a continuing programme of work with a third volume promised on method and theory in the evolution of the study of economic history.9 But the subject matter is of broader interest than simply that of the specialist, tied as it is to the evolution of the social sciences as a whole. Fine and Milonakiss overall argument is in many ways quite simple: that the passage
5.Milonakis and Fine 2009, p. 95. 6.Lou 1997. 7.Blaug 2003. 8.Fine and Milonakis 2009; Milonakis and Fine 2009. See also Fine and Milonakis 2011. 9.See the Preface to Fine and Milonakis 2009.

S. Ashman / Historical Materialism 20.3 (2012) 38

from classical political economy (and its concern with the capitalist economy in toto) to mainstream economics, and the emergence of discrete academic disciplines, entailed a triple reductionism that individualises, de-socialises and de-historicises economic analysis. And that, secondly, it is on the basis of this narrowing of approach and the focus on formal, technical and mathematical analysis that has come the enlargement of the scope of economists interests.10 So we have the reduction to the individual as the basic unit of analysis with the economy the aggregate of individuals, and with individuals conceived in a particular way (as rational, self-interested, utility-maximisers); we have the reduction of the economic to the market, and to market relations understood without any social basis, and within an equilibrium framework; and we have an ahistoric reductionism the market as universal, divorced from history. Classes, institutions and history are excised from analysis, the concern of other disciplines. Economics imperialism a term and phenomenon dating back at least as far as 1933 emerged with a vengeance from the 1950s onwards in Gary Beckers economic approach which applies neoclassical technique to other areas of social life but treating these as if they were markets and all behaviour as reducible to economic rationality, e.g. the family, crime, human capital.11 But Fine and Milonakis argue that more typical of economics imperialism than Becker are the strands which have emerged from the 1980s onwards that prefer to interpret the social as a response to the imperfect workings of markets, as in the new institutional economics, or the new economic history, or the new economic geography. This approach has widened the scope of economics imperialism and its incursion into other disciplines. For the advocates of economics imperialism there is only one social science... scarcity, cost, preferences, opportunities, etc. are truly universal in application.... Thus economics does really constitute the universal grammar of social science.12 For others, the core principles of economics, rationality and equilibrium, may serve to unify social science within the foreseeable future.13 Recent variants include freakonomics though Fine and Milonakis emphasise how this populist economics imperialism difffers from other strands and neuroeconomics, which claims to link economic behaviour with neural mechanisms. Fine and Milonakiss goal is to illuminate the parlous state of economics today through analysing the trajectory of the social and the historical element in economic thought and the consequences for economics of, firstly, its abandonment, and then, secondly, its re-introduction on a narrow and empty
10.Interestingly, as recognised by Coase 1978. 11. Becker 1976. 12.Fine and Milonakis 2009, p. 14. 13.Ibid.

S. Ashman / Historical Materialism 20.3 (2012) 38

basis.14 The volumes cover a huge amount of ground, and include Weber, Schumpeter, the Austrian school, and the German and British historical schools, in addition to those thinkers more usually covered by HET. With subject matter ranging this widely, the contributors to the symposium have much from which to choose their focus. Most deal with the issues raised in the first volume (from classical political economy to the formalist revolution) rather than the second (economics imperialism from Becker onwards). Steve Fleetwood, John King and David McNally broadly agree with the central arguments presented across the two volumes and focus their discussion more on points of emphasis and interpretation, whereas Roger Backhouse raises more substantial disagreements over HET. Fine and Milonakiss stated aim is to provide an alternative approach based on class, capital, and value theory, and the two volumes contain an outstanding chapter on Smith, Ricardo and Marx and a further excellent discussion of the historical logic of economics imperialism.15 But value theory has a somewhat undulating presence across the two volumes as whole with little mention in the second volume except for the Conclusion. The discussion of Marxs methodology is compressed into particular parts of the volumes with the efffect that at times it appears as if the methodological options before us are limited to inductive versus deductive reasoning, though Fine and Milonakis clarify their views in the reply to this symposium.16 So what follows is wide-ranging in both subject matter and implications. The future of political economy is less explored by the contributors, and appeals to broad-church pluralism, however correct, only make sense within the context of the intolerance of the discipline of economics itself, and, of course, much divides the Marxist, Austrian Institutionalist and post-Keynesian alternatives to the mainstream. But the key challenge for the future remains in the development of the interdisciplinary and systemic study of capitalism.

References
Becker, Gary S. 1976, The Economic Approach to Human Behaviour, Chicago: Chicago University Press. Blaug, Mark 2003, The Formalist Revolution of the 1950s, Journal of the History of Economic Thought, 25, 2: 14556.

14.There are other accounts of this sorry story, or at least of its constituent parts. For example, see Clarke 1982; Davis 2003; Fullbrook (ed.) 2003; Hodgson 2001; Tabb 1999. 15.In Milonakis and Fine 2009 and Fine and Milonakis 2009 respectively. 16.See Callinicos 2011.

S. Ashman / Historical Materialism 20.3 (2012) 38

Callinicos, Alex 2011, Book Review: From Political Economy to Economics, Science and Society, 75, 2: 2679. Carlyle, Thomas 1849, Occasional Discourse on the Negro Question, available at: <http://en. wikisource.org/wiki/Occasional_Discourse_on_the_Negro_Question>. Clarke, Simon 1982, Marx, Marginalism and Modern Sociology: From Adam Smith to Max Weber, Basingstoke: Palgrave Macmillan. Coase, Ronald H. 1978, Economics and Contiguous Disciplines, Journal of Legal Studies, 7, 2: 20111. Davis, John B. 2003, The Theory of the Individual in Economics: Identity and Value, London: Routledge. Fine, Ben and Dimitris Milonakis 2009, From Economics Imperialism to Freakonomics: The Shifting Boundaries between Economics and Other Social Sciences, London: Routledge. 2011, Useless but True: Economic Crisis and the Peculiarities of Economic Science, Historical Materialism, 19, 2: 331. Fullbrook, Edward (ed.) 2003, The Crisis in Economics: The Post-Autistic Economics Movement. The First 600 Days, London: Routledge. Hodgson, Geofff 2001, How Economics Forgot History: The Problem of Historical Specificity in Social Science, London: Routledge. 2011, Sickonomics: Diagnoses and Remedies, Review of Social Economy, 69, 3: 35776. King, John E. 1979, Marx as an Historian of Economic Thought, History of Political Economy, 11, 3: 38294. Lee, Fred 2007, The Research Assessment Exercise, the State and the Dominance of Mainstream Economics in British Universities, Cambridge Journal of Economics, 31, 2: 30925. Lou, Francisco 1997, Turbulence in Economics: An Evolutionary Appraisal of Cycles and Complexity in Historical Processes, Cheltenham: Edward Elgar. Marx, Karl 1863, Theories of Surplus-Value, available at: <http://www.marxists.org/archive/marx/ works/1863/theories-surplus-value/>. Milonakis, Dimitris and Ben Fine 2009, From Political Economy to Economics: Method, the Social and the Historical in the Evolution of Economic Theory, London: Routledge. Tabb, William K. 1999, Reconstructing Political Economy: The Great Divide in Economic Thought, London: Routledge.