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A Note on the Concept of Vulgar Economics

The concept of vulgar economics, developed by Karl Marx, is often cited, but seldom properly used or understood. In the preface to the second German edition to Capital Marx said that:
"[The] period, from 1820 to 1830, was notable in England for scientific activity in the domain of Political Economy. It was the time as well of the vulgarising and extending of Ricardo’s theory, as of the contest of that theory with the old school."
It is important to note that Marx clearly knew that "the theory of Ricardo already serves, in exceptional cases, as a weapon of attack upon bourgeois economy," in particular, because Ricardo was the first to show conclusively the necessary oposition between wages and profits, and the conflictive nature of the capitalist system. The problem with post-Ricardian economics was that it could not claim to be scientific and at the same time argue that the capitalist system was harmonious. For him:
"Men who still claimed some scientific standing and aspired to be something more than mere sophists and sycophants of the ruling classes tried to harmonise the Political Economy of capital with the claims, no longer to be ignored, of the proletariat. Hence a shallow syncretism of which John Stuart Mill is the best representative. It is a declaration of bankruptcy by bourgeois economy."
So vulgar economics was the dominant, or common, view of Political Economy after Ricardo, which was fundamentally apologetic and dismissed the Ricardian conflictive view of capitalist economies.

Also, it is important to note that, although critical of bourgeois economics (Quesnay, Smith, Ricardo), Marx knew his theory built on their analysis. He says:
"As early as 1871, N. Sieber, Professor of Political Economy in the University of Kiev, in his work 'David Ricardo’s Theory of Value and of Capital,' referred to my theory of value, of money and of capital, as in its fundamentals a necessary sequel to the teaching of Smith and Ricardo. That which astonishes the Western European in the reading of this excellent work, is the author’s consistent and firm grasp of the purely theoretical position."
So the excellent work of Professor Sieber correctly grasps Marx's theoretical position, according to Marx, and says that it is "a necessary sequel to the teaching of Smith and Ricardo." I'll leave for another post the discussion of the current state of economics, and in what sense one can talk of a return of vulgar economics.

Comments

  1. Interestingly, Michael Hudson argues that neoclassical economics (the most vulgar of all) was created/popularised in response to Karl Marx, as it offered a frictionless ideal of capitalism for those who feared revolution.

    Strange how his existence may have created a sort of self fulfilling prophecy.

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  2. Only Austrians really have an understanding of Marx within the pioneers of marginalism. Krishna Bharadwaj shows how Marshall actually develops the parts of Stuart Mill that were a departure from Ricardo. In that sense, is this vulgarized Ricardian school that sets the stage for marginalism.

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  3. Well, if we understand by vulgar economics what Marx understood, as explained in the quote above (i.e. "sophists and sycophants of the ruling classes" (...) "of which John Stuart Mill is the best representative"), one should not have too many difficulties finding contemporary examples...

    A propos of your reference to Austrians: I recently learned [*] that Austrians talk about Gross Output (GDP + Intermediate consumption) as a measure of economic activity. I was wondering, do you know of any direct source of these statistics (without having to go through supply-use/input-output calculations)?

    [*] http://socialdemocracy21stcentury.blogspot.com/2012/01/austrian-substitutes-for-gdp-they-are.html

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  4. I would suggest that sophist and sycophants, like Bastiat are just that. Vulgar meant the dominant, the common thing, which is exactly the 'shallow syncretism' of Stuart Mill. Note that Mill departed on Ricardo, on several points. First, he accepted Nassau Senior notion that profits were the remuneration of abstinence, giving profits (a residual for Ricardo) and independent role in the determination of equilibrium prices (logically incorrect, by the way). Second, he accepted the Wage Fund theory, by which real wages were not exogenous, but determined by supply and demand instead. Hence, without being yet marginalist, Mill had moved significantly in that direction.

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  5. I confess my ignorance about that topic on Austrian economics.

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    Replies
    1. No problem.

      This is indeed a rather esoteric subject, even among Austrians (rather predictably, given their notorious reluctance to deal with data).

      Delete
  6. It's also worth taking a look at the final section of Theories of Surplus Value which contains Marx's most extended discussion and definition of vulgar political economy. Here what distinguishes vulgar economists is their treatment of rent, profits, and wages not as distributive categories, but rather as streams on income with their respective 'factors of production' as their sources. For Marx, such vulgarity reaches its pinnacle with the concept of 'interest bearing capital.' Any discussion of a natural rate of interest (J.S. Mill or otherwise) should then be seen as a prime instance of vulgarity.

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  7. The book that Bill recommend is here
    http://www.marxists.org/archive/marx/works/1863/theories-surplus-value/

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  8. Bill's point is a good one, because it links the return of vulgar economics (in the sense of harmonious distribution) with Say's law. The revenge of vulgar economics in the 70's coincided with the return of Say's law in the form of natural rates. Interestingly, it coincided also with the beginnings of endogenous growth theory which restored the role of savings in long run growth (having been absent in Solow's model). And of course all of this was at the same time as the revenge of the rentier. That's a lot of coincidences.

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