nep-hpe New Economics Papers
on History and Philosophy of Economics
Issue of 2014‒01‒10
nine papers chosen by
Erik Thomson
University of Manitoba

  1. The Road to Market Serfdom: Why Economics is Not a Science and How to Fix it. By Freeman, Alan
  2. John Bates Clark’s Conception of Capital By McCain, Roger
  3. Say’s Law: A Rigorous Restatement By Kakarot-Handtke, Egmont
  4. Genes, security, tolerance and happiness By Ronald Inglehart; Svetlana Borinskaya; Anna Cotter; Jaanus Harro; Ronald C. Inglehart; Eduard Ponarin; Christian Welzel
  5. Reinventing the Kantean Peace: The Emerging Mass Basis of Global Security By Ronald Inglehart; Christian Welzel
  6. Culture, Labour, and Resources: Principles of a Practical Alternative Growth Path By Freeman, Alan
  7. “OLD TESTAMENT” MORALITY AND THE “TRADITIONAL” FAMILY By Konstantin Yanovskiy; Sergey Shulgin
  8. Entrepreneurship, Innovation and the Good Life: Reflections on Edmund Phelps’ Mass Flourishing By Henrekson, Magnus
  9. De Walras à Vanek. Coopération et politique By Alain Alcouffe; Marius Chevallier; J. Prades

  1. By: Freeman, Alan
    Abstract: This paper was presented to the May 2013 conference of the Postglobalization Initiative in Moscow, and deals with the function of economics in the modern world order. It seeks to explain why, as a profession (notwithstanding individual exceptions) economics failed to predict the crisis that opened in 2007; why it then failed to foresee its length and depth; and why it proposes no solutions that could bring it to an end. The paper challenges economics’ most fundamental claim, that it conducts itself as a science, arguing that it instead behaves as a religious system for making and justifying political decisions whose core belief is market perfection: the notion that the combination of private property in production with universal commodification is not only optimal, but cannot fail. The paper proposes a radical new conception of the ethical duty of economists as resisting untruth, which it can do by conducting itself as a pluralist science. To this end, the paper introduces a distinction between two functions of knowledge: its exoteric function through which society arranges to control nature, and its esoteric function which organises, within a rational structure, systems of law, ethics, morality, and their relations to each other. In science, the exoteric predominates over the esoteric. In religion, the reverse is the case. This explains the real function of economics, which is a disguised normative system rooted in the primary principle of market perfection. Its prescriptions are derived not by the normal scientific method of testing a variety of theories against the evidence, but by the elevation of this supposition into an unchallengeable dogma. It operates as a monotheoretic body of knowledge in which, at any given time and facing any given problem, only one unique answer is offered, denying the users of economics the basic democratic and scientific right to choose between a variety of answers on the basis of their own independent assessment of both the evidence and the presuppositions of the theories from which the prospective answers are deduced. The primary mechanism of its religious function lie therefore in its methods of theoretical selection: it permits the promulgation and indeed, development, only of those theories which yield predictions consistent with the dogma of market perfection. It is constructed to suppress any body of theory which leads to conclusions inconsistent with the assumption of market perfection, most notably those, such as the theories of Marx and Keynes, which demonstrate that the market system is self-contradictory – that is to say, that it acts so as to undermine the basis for its own existence. The more likely it is that a given theory may lead to such conclusions, the more thoroughly it is suppressed. In consequence, those theories that escape the suppressive net of economics are precisely those in which the present social order is presented as not merely optimal but natural, inevitable and eternal. Interference with this market then becomes a crime against nature. All private benefits of the property-owners become the result of natural forces: they are rich because nature intended them to be. Take their riches from them, and things can only get worse. Poverty, destitution, famine: these are sad but inevitable consequences of nature. Any policy designed to offset or overcome them is misguided. Nature, in a word, has been enthroned as a God, by excluding humans from Nature. I employ the term market serfdom to characterise such a system, because it removes choice from the field. Human agency is itself designated a crime against nature. Hayek and his followers, the paper, have erred in making an issue of the claim that ‘serfdom’ comes from interfering with the market: Actually they propose that they only course open to humanity is to submit to the market. His is the freedom of the slave who accepts his destiny. We have no choice but what the market ordains. Economics, as we now know it, is the theoretically perfected manifestation of this doctrine, just as late mediaeval Catholicism was the perfected manifestation of the doctrine of submission to the established aristocratic and monarchic order. The paper then analyzes the two principal mechanisms by which the profession of economics has arrived at this point: selection for conformity and institutional delegitimation, and briefly outlines how ‘assertive pluralism’ could, if applied systematically, restore the study of political economy to the status of a science. Slides, and a video of the presentation and discussion, will be made available through the link to this paper at an
    Keywords: Value, Price, Money, Labour, Marx, MELT, Okishio, TSSI, temporalism, rate of profit
    JEL: B1 B4 B5
    Date: 2013–05–01
  2. By: McCain, Roger (School of Economics LeBow College of Business Drexel University)
    Abstract: This paper revisits the economic theory of John Bates Clark, with specific reference to his concept of capital, which seems very little remembered. For Clark, capital is to be distinguished from capital goods and is a resource that is at once immaterial and, in routine circumstances, permanent. Drawing on the original definition of holism in the writings of General the Right Honorable Jan Christiaan Smuts, it is argued that Clark’s conception is holist rather than (as in the case of other concepts of capital and most other economic theory) reductionist. That is, for Clark capital is an emergent property of a market equilibrium in or near equilibrium. This poses questions as to whether the concept can be extended to other economic forms, such as central planning, or indeed can be applicable to a capitalist economy constantly in the process of self-transformative flux.
    Keywords: Capital; general equilibrium; holism; reductionism
    JEL: B13
    Date: 2013–12–01
  3. By: Kakarot-Handtke, Egmont
    Abstract: Say’s Law has passed through various conceptual frameworks. As the next logical step, this paper provides a rigorous restatement in structural axiomatic terms. The main reason is that previous attempts have been methodologically unsatisfactory. Standard economics rests on behavioral assumptions that are expressed as axioms. Axioms are indispensable to build up a theory that epitomizes formal and material consistency. The crucial flaw of the standard approach is that human behavior does not lend itself to axiomatization. Small wonder that the accustomed attempt to explain how the economy works met with scant success. This battered also the discussion about Say’s Law.
    Keywords: new framework of concepts; structure-centric; axiom set; consumption economy; Profit Law; simulation; market clearing; budget balancing
    JEL: B59 C63 E10
    Date: 2013–12–28
  4. By: Ronald Inglehart (Higher School of Economics); Svetlana Borinskaya (Institute of General Genetics, Moscow, Russia); Anna Cotter (University of Michigan); Jaanus Harro (Department of Psychology, University of Tartu, Estonian Centre of Behavioral and Health Sciences); Ronald C. Inglehart (University of Michigan); Eduard Ponarin (Higher School of Economics); Christian Welzel (Center for the Study of Democracy, Leuphana University, Scharnhorststr.)
    Abstract: This paper discusses correlations between certain genetic characterestics of the human populations and their aggregate levels of tolerance and happiness. We argue that a major cause of the systematic clustering of genetic characteristics may be climatic conditions linked with relatively high or low levels of parasite. This may lead certain populations to develop gene pools linked with different levels of avoidance of strangers, which helped shape different cultures, both of which eventually helped shape economic development. Still more recently, this combination of distinctive cultural and economic and perhaps genetic factors has led some societies to more readily adopt gender equality and high levels of social tolerance, than others. More tolerant societies tend to be happier because they create a more relaxed environment conducive to happiness.
    Keywords: genetic research, World Values Survey, happiness, tolerance.
    JEL: E11
    Date: 2013
  5. By: Ronald Inglehart (Higher School of Economics); Christian Welzel (Center for the Study of Democracy, Leuphana University, Scharnhorststr.)
    Abstract: This article demonstrates that inter-state peace is underpinned by an increasingly solid mass basis: representative survey data from around the world evidence a massive decline in people’s willingness to sacrifice their lives in war. To explain this finding, we test and confirm Welzel’s Evolutionary Emancipation Theory (EET). When improving existential conditions in a society turn most people’s lives from a source of threats to suffer into a source of opportunities to thrive, people adopt ‘emancipative values’: to allow themselves and others to take advantage of life’s widened opportunities, people increasingly support and tolerate universal freedoms. This emancipatory trend is most significant in a field in which the fixation of traditional survival norms on high fertility erected the strongest resistance against emancipation: reproductive freedoms. As a direct consequence of the emancipatory trend, people’s willingness to sacrifice their own and other people’s lives in war has dramatically declined. Hence, the emancipatory trend is a pacifist force that makes it increasingly difficult for government—especially in democracies—to find public support for waging wars
    Keywords: Evolutionary Emancipation Theory, World Values Survey, war and peace
    JEL: E11
    Date: 2013
  6. By: Freeman, Alan
    Abstract: This paper was due to be presented to the 2013 conference of the World Association for Political Economy, in Florianopolis, Brasil. In the event, the author was unable to attend. The paper summarises the main conclusions of ten years of research into the Creative Industries in London and the UK, culminating in a report for the English-based research foundation NESTA. The author was responsible for this research. I try to draw out the policy conclusions for economic and human development addressing three fundamental structural problems: (1) In what technologies should a modernising, developmental strategy focus? (2) What is the relation between economic and human development and how can the latter be assured by the course of the first? (3) What technological and social choices will make it possible both to expand economic activity and to reduce the consumption of resources, with all the attendant risks that beset modern development strategies including dependency on resource exploitation and the sustainability of the chosen growth path With few notable exceptions, social theory has failed to grasp the significance of the Creative Industries, consigning to a backwater a development which offers answers to the economic crisis, the social problems of a deeply unequal world, and to resource depletion and rape. Culture has become a ‘non-economic’ opposite to political economy; neither economists nor cultural theorists grasp the theoretical instruments needed to understand that culture is in fact the most economically important human activity, once the economy is grasped, in a rounded way, to include the whole of social reproduction. The principal obstacle to theoretical and practical advance is the inheritance, both material and spiritual, of a fading epoch dominated by mechanisation. The primary course of present-day accumulation is to reduce labour to a simple mechanical form, and then replace humans by machines. The primary drive of culture is the opposite. The creative industries show that the present course of economic development is bumping up against absolute limits. This is because the resource that they require to grow is non-mechanical labour, which cannot be replaced by machinery. The normal mechanism of accumulation – the acquisition of material and hence excludable ‘things’ no longer works. They also illustrate a fundamental limit in the structure of demand. The source of demand for cultural products is a mix of the luxury consumption of the capitalists, and the ‘moral’ or socially-defined component of the wage, both of which are primarily non-material. As the world passes material satiety and lurches into material overconsumption, even as it consigns three quarters of its population to absolute deprivation, new material sources of demand are impossible to find, and new private demand is increasingly confined to the cultural and spiritual domain, where it takes the morbid forms of lust to possess, dominate and outdo. These trends between them offer a sustainable path forward for humanity in the shape of growth in demand for labour services, which would be, in Mark Swilling’s terminology, ‘resource-decoupled’, decreasing the consumption of resources whilst growing the use and emancipatory nature of human labour. The paper will address the fundamental obstacles to realising this , including those created by a mode of production so far unable to transition from investing in things to invest in humans. This poses an especial challenge for policy, since the growth of the creative industry sector manifests itself in a new and vibrant commercial sector, yet depends on long-term investment in both in the artistic and cultural formation of performers and producers, and in the general cultural level of society, including careful attention to the changed role of urban spaces and the interaction between cultural activity and new technology. This paper is based on a lecture given to the Chinese Academy of Social Sciences in November 2012. It builds on a substantial and scientifically well-grounded body of international research, which is now beginning to receive some serious attention in policy circles, by drawing out the above vital conclusions, and demonstrating their scientific validity. JEL codes: O10; N0; Z1
    Keywords: Crisis; Development; Growth; Inequality; State; Culture; Environment; Technology; Creativity; investment’ BRICS; Crisis; Development; Growth; Inequality; State; Culture; Environment; Technology; Creativity; investment’ BRICS
    JEL: N0 O10 Z1
    Date: 2013–04–02
  7. By: Konstantin Yanovskiy (Gaidar Institute for Economic Policy); Sergey Shulgin (Russian Presidential Academy of National Economy and Public Administration)
    Abstract: In this paper we consider questions of morality as a factor impacting trust in society, as an important element of the “soft” infrastructure. Morality is the institution which, if it is maintained in an appropriate condition, is capable of significantly raising the efficacy level of the basal institutions, including the institution of private property. Morality is often gestured toward in political and research discussions, for instance, for purposes of eliminating or establishing artificial borders and constraints upon freedom of discussion. Morality raises the level of trust among market agents, both among those directly acquainted with each other and among those who have never met each other before but hold the same moral views in common. Besides, morality lowers the costs of constructing and implementation of formal institutions which protect private property, as well as institutions friendly to the market. The Government’s pushing out the institution of the family and societal morality is largely bound up with the common mechanism for transferring individual responsibility to society, and the responsibility of society to the Government. The Government is interested in maximum resource use and maximal control. Bringing Government controls to a maximum possible level runs counter to the existence of any limitations, among which morality is the most powerful and most stable one. The foundation of the “liberation” of the individual from responsibility and from morality hails from the stimuli spawned by the institution of universal suffrage.
    Keywords: soft infrastructure, universal moral values, to support private property, to deter redistribution; moral arguments vs. economic efficiency.
    JEL: B41 B52 J12 K36 H56 Z12
    Date: 2013
  8. By: Henrekson, Magnus (Research Institute of Industrial Economics (IFN))
    Abstract: Edmund Phelps, the 2006 Nobel Laureate in Economics, has written a thought-provoking and ambitious book: Mass Flourishing: How Grassroots Innovation Created Jobs, Challenge, and Change (Princeton University Press, 2013). The book is laudable for its emphasis on innovation, for its discussion of what constitutes a good life, and Phelps’ realization that true life satisfaction cannot be achieved through a mindless quest for money and the goods it can buy. But the overly glossy characterization of the period before WW II as opposed to the post-1980 period, the niggardly evaluation of the European economies, and the lack of empirical indicators actually showing that the rate of innovation has dropped are significant weaknesses. These objections are especially regrettable given the importance of the book´s main message: Creative entrepreneurship is not merely the key to economic growth, but to life satisfaction as well.
    Keywords: Innovation; Entrepreneurship; Modernism; Postmodernism; Values
    JEL: L26 M14 P47 Z13
    Date: 2014–01–02
  9. By: Alain Alcouffe (LIRHE - Laboratoire Interdisciplinaire de recherche sur les Ressources Humaines et l'Emploi - CNRS : UMR5066 - Université des Sciences Sociales - Toulouse I); Marius Chevallier (GEOLAB - Laboratoire de Géographie physique et environnementale - CNRS : UMR6042 - Université Blaise Pascal - Clermont-Ferrand II - Université de Limoges - Institut Sciences de l'Homme et de la Société); J. Prades (Dynamiques Rurales - Université Toulouse le Mirail - Toulouse II - Institut National Polytechnique de Toulouse - INPT - ENSAT. Ecole Nationale Supérieure agronomique de Toulouse - ENFA. Ecole Nationale de Formation Agronomique)
    Abstract: Alors que l'idée coopérative était très présente dans les débats politiques jusqu'au début du 20ème siècle, son étude a rapidement été écartée de la science économique, malgré l'intérêt que les pionniers lui ont consacré. Ce n'est qu'au terme d'un processus de dépolitisation (ou de séparation des dimensions économiques et politiques) que l'analyse des coopératives, tour à tour focalisée sur les coopératives de consommateurs, puis d'entreprises puis de travailleurs, est redevenue une thématique présente dans la science économique. La conscience de la dimension politique de l'idée coopérative continue de se renouveler, mais en marge de la science économique.
    Keywords: coopérative, histoire des idées, politique, histoire de la pensée économique
    Date: 2013–01–02

This nep-hpe issue is ©2014 by Erik Thomson. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.