Two letters to The Economist about Donald Harris and what they reveal about ideology

 

Spaghetti economics: Shootout at Harvard Square

There were two letters about the poorly written (not the English, always impeccable, contrasting to my spaghetti English, which is always slightly off, like the Westerns) piece that The Economist had on Donald Harris. One by Robert Blecker, Steve Fazzari and Peter Ho, setting the record straight on the breadth and depth of Harris' contributions to economics. On this, they echo what the Post said about Harris' policy advice in his native Jamaica. The subtitle of the Post piece said: "An unconventional economist at Stanford, Donald J. Harris pushed strikingly nonideological economic solutions to the nation of his birth." Harris was (and still is, from what I can assume) a reasonable man, both as a scholar concerned with knowledge, and as a policy advisor. Nonideological being the key word.

The other one, that I reproduce in full, is by Professor Avinash Dixit, who says:

"You say that Mr Harris 'proposed that firms must choose from a 'book of blueprints', which need different capital goods' in his book published in 1978. Alas, that had been proposed more thoroughly and rigorously in 1953 in a brilliant paper by Edmond Malinvaud, for which he should have won a Nobel prize. And Robert Dorfman, Paul Samuelson, and yes, Robert Solow, whom you cite as author of the aggregate capital-growth model, covered it more comprehensively in a book from 1958. Perhaps the mathematics of all this were beyond the capacity of the so-called Marxists of Cambridge."

This, and The Economist piece itself, confirms the high degree of confusion about the meaning of the capital debates. The problem is not so much the lack of mathematical savvy of the Cambridge, UK, economists, Marxists or otherwise, but the lack of understanding of theory, by some very serious and important mainstream economists, and mainstream magazines (they do think they are a newspaper too, btw).

The Economist piece, commits the mistake that I suggested (see my old post on the Capital Controversies here) was typical of most incorrect views on the debates between the two Cambridges, and suggests, essentially, that it was an aggregation problem, and that:

"Mr Harris did not move on. In his 1978 book he developed a model of growth without an aggregate capital stock. Rather than the smooth 'production function' of Solow, in which the rate of saving and population growth determines capital per worker, Mr Harris instead proposed that firms must choose from a 'book of blueprints', which need different capital goods. Capitalists will compete to ensure the rate of profit is consistent across different industries, picking a blueprint based on the level of wages and profits in the economy."

That's why Dixit suggests that the choice of technique models in Malinvaud, and in Dorfman, Samuelson and Solow, using disaggregated notions of capital would avoid the circularity of the aggregative model. It is always the case that firms will choose, given distribution, the technique that minimizes costs. Of course, that's not the issue. The problem is that one cannot obtain a measure of capital that is independent of distribution, and hence, the idea that supply and demand in factor markets can determine the remuneration of capital and labor cannot stand. The classical concern with distributive conflict, both of Marx, but also of bourgeois economists, as he called them, Smith and Ricardo, becomes relevant again [meaning, if I need to clarify, the notion of conflict in the distribution arena was held both by critics of capitalism, and defenders of what Smith referred to as commercial societies].

Disaggregation does little to solve the problem. First, as noted by Garegnani, long ago, the abandonment of the notion of aggregate capital, and the notion of factors of production, came together with the view that means of production got their own rate of return, but also with the disappearance of the notion that the forces of competition lead to a normal and uniform rate of profit. The traditional long run method of economics, that was the theoretical foundation of the discipline, was abandoned. Further, it is still the case that, even with a disaggregated set of means of production, in the the aggregate, savings must be equalized to investment, and some process for that has to be used. That is why some notion of the quantity of capital was necessary for the mainstream [in recent times, mainstream economists and policy makers have started talking of the natural rate of interest again, a notion that had vanished more or less, and about very simplistic negative relations between investment and interest rates, w/o even knowing the logical problems associated with that, reinforcing problematic views about distribution].

In other words, forget the notion that firms actually face a book of blueprints, and that they can substitute and change the structure of production with relative ease, according to changes in relative prices, and that somehow that, by affecting the relative supply and demand for capital (many capital goods) and labor, would determine distribution, since that is obviously highly improbable in reality. Choices are more limited, and substitution irrelevant, at best. The Cambridge, UK, economists (and not only the Marxists; most were some kind of Post Keynesian, as The Economist notes) and Harris knew better. Distribution is determined by the relative bargaining power of workers and capitalists.

Samuelson knew enough, math and theory, to know when he was wrong. Mr. Dixit thinks his mathematical knowledge puts him above the rabble [the so-called Marxists of Cambridge, and Mr. Harris]. But what his letter [and the piece by The Economist] actually shows is lack of engagement with the theoretical argument, and, in contrast with Mr. Harris, an incredible amount of ideological bias. After all, the idea that distribution is according to effort, and that markets produce optimal outcomes is at play. It shouldn't be. He raised Malinvaud, I counter with Smith, which knew way less math than he does, for sure, but whose book is still worth reading.

The Chutzpah of The Economics Profession

New discussion paper by Marion Fourcade, Etienne Ollion, and Yann Algan

From the abstract

In this essay, we investigate the dominant position of economics within the network of the social sciences in the United States. We begin by documenting the relative insularity of economics, using bibliometric data. Next we analyze the tight management of the field from the top down, which gives economics its characteristic hierarchical structure. Economists also distinguish themselves from other social scientists through their much better material situation (many teach in business schools, have external consulting activities), their more individualist worldviews, and in the confidence they have in their discipline’s ability to fix the world’s problems. Taken together, these traits constitute what we call the superiority of economists, where economists’ objective supremacy is intimately linked with their subjective sense of authority and entitlement. While this superiority has certainly fueled economists’ practical involvement and their considerable influence over the economy, it has also exposed them more to conflicts of interests, political critique, even derision.

Read rest here.

And for an excellent piece on the imperialism of mainstream economics in the social sciences, see this paper by Ben Fine (subscription required).

Two Cents on Birner's 'The Cambridge Controversies in Capital Theory'

I just finished perusing Jack Birner's "The Cambridge Controversies in Capital Theory" (see here). My brief take is that although the author provides a thorough and lucid analysis & exposé of the debates, I certainly do not agree with his assumption that the issues involved primarily dealt with a fundamental difference over research programmatic technique & methodology, with ideology being merely secondary, if not superfluous. This is quite untrue; ideology was at the very core! For more on this, I recommend G.C. Harcourt's "Some Cambridge Controversies in The Theory of Capital" (see here) and Andrés Lazzarini's "Revisiting the Cambridge Capital Theory Controversies: A Historical and Analytical Study" (see here).

Do ideas matter?

By James K Galbraith

First, a preliminary. It is my position, pace the public-choice school and the Marxists, that policy ideas are an independent ideological force.

Some economists, and more political scientists, disbelieve this. Many doubt there exists any role whatever for intellectual persuasion in politics, whether deductive, inductive, or "purely rhetorical." Models, characterized by their attention to the self-interest of bureaucrats and legislators, have been advanced in volume to explain the imperatives of political decision making. If these models are wholly right, then special interests govern all, the scope for discretion and hence persuasion in politics is negligible, and the study of the rhetoric of such discussion can be of only iconological interest.

To be sure, special interests are important. Ulterior motives are endemic in politics. And not all of the scholarly cynicism is misinformed. Council of Economic Advisers Chairman Murray Weidenbaum, when asked directly what weight of influence, on a scale of one to ten, economists had enjoyed in drafting the original tax program of the administration, replied, "Zero."

But special interests do not exhaust the interesting phenomena of politics. There is the opposing view of Keynes on ideas: "the world is ruled by little else." In my experience, ideas and interests interact; neither fully dictates any outcome. Interests are never absent from the discussion and often prevail. But there was always a sense that there was discretion, there were choices, and that the interests occasionally could be outsmarted by ingenuity in rhetoric, including as part of rhetoric various tricks of policy design.

Excerpt from "The grammar of political economy," in The consequences of economic rhetoric, edited by A. Klamer, D. McCloskey, and R. M. Solow.

Ideology, Sociology of Knowledge, and the Historic Moment of Production

By Dr. Victor E. Kappeler

In the 1920s, the concept of ideology passed through another transformation in its quest for meaning. Karl Mannheim (1893-1947), a Hungarian-born sociologist, took on the project of developing a “sociology of knowledge.” He directly engaged the subject of ideology as articulated by Marx in hopes of developing an objective, yet interpretative, social science approach to the study of ideas. In his quest to understand “the social and activist roots of thinking” (1936: 4), he hoped to develop a theory of ideology that would guide political action and practice. He resituated de Tracy’s “science of ideas” from the domain of the natural sciences to that of sociology. As an advocate of the social science approach to understanding, he advanced a structuralist view of ideology. He theorized a distinction between “particular” and “total” ideologies. Under this framework, particular ideologies were characterized by distortion and fabrications—the intentional misrepresentation of ideas by individuals. Total ideology was thought of as the whole structure of the mind, a product of the social-historical epoch of a class or group derived from material conditions. Mannheim’s total ideology sought to engulf not only ideas and their origin but also analytic methods into the concept of ideology. In this scheme the scientist’s science and the Marxist critique of ideology were considered products of the epoch.

Mannheim’s schema of distinctions, however, became intellectually problematic because it eroded into an extreme relativism. If all ideologies were created from the same historical and social forces and all forms of analyzing ideology are subject to these same forces, then how can one make an analytic judgment? Evaluation becomes impossible. A side affect of this relativist way of thinking about ideology was the eradication of the aspect of domination made explicit in the Marxist critique of ideology. While Mannheim developed yet another duality to address the relativism issue, it was never satisfactorily resolved.

The following points can summarize the brief history of the meaning of ideology:

• Ideology was initially thought of as the scientific study of ideas. It was thought that ideas could be subjected to the same forms of analysis that predominated in the natural sciences.

• While ideology had political consequences it did not initially carry negative connotations until it was used as a label to silence political critics.

• Ideology had an oppositional character because it stood as an alternative philosophy of understanding and way of explaining social and historical change.

• Ideology took on its critical connotation when it was used as a term of opposition to develop a theory rather than a philosophy of historical change.

• Selective reading of critical theory obscured ideology’s dialectical nature, overemphasized its materialistic basis, and focused on the concept as an intentional distort of reality.

• Reformulation of ideology under the “sociology of knowledge” crystallized its distortion aspect and attempted to engulf the critical theory as an unexceptional case. The domination feature of ideology illuminated by critical theory was replaced by a privileged disciplinary view of the concept. Ideology masqueraded as a self-critical and apolitical “science of ideas.”

The negative connotation of ideology is used to characterize thoughts and positions that oppose prevailing views. The negative use of the term implies that ideology is something less than factual or scientific—an intentionally created illusion based on distortion. Contemporary construction of ideology implies that there is some alternative basis from which we can speak; some factual world distinct from the interplay of the material and mental. Yet, the presentation of selected facts, the differential weight given to some facts, and the values generated from what we perceive facts all flow from highly selective choices about how we see and represent reality— in other words from ideology. Regardless of our values, when most people speak they are speaking from and sustaining a particular ideological order. 

Originally posted here.