Sunday, September 30, 2012

Reproducing Civil Society

"Civil Society - an association of members as self-subsistent individuals in a universality which, because of their self-subsistence, is only abstract. Their association is brought about by their needs, by the legal system - the means to security of person and property - and by an external organization for attaining their particular and common interests." -- G. W. F. Hegel, The Philosophy of Right
" the case of the most advanced States, ...civil society has become a very complex structure and one which is resistant to the catastrophic incursions of the immediate economic element (crises, depressions, etc.). The superstructures of civil society are like the trench systems of modern warfare. ... In Russia the State was everything, civil society was primordial and gelatinous; in the West, there was a proper relation between State and civil society, and when the State trembled a sturdy structure of civil society was at once revealed. The State was only an outer ditch, behind which there stood a powerful system of fortresses and earthworks: more or less numerous from one State to the next, it goes without saying - but this precisely necessitated an accurate reconnaissance of each individual country." -- Antonio Gramsci, Prison Notebooks

There exist at least two approaches to economics:

  • One focused on the allocation of given scarce resources among alternative ends.
  • One focused on the conditions for the reproduction of society.

The first is the approach of the so-called neoclassical theory, and the second is the approach of classical political economy.

I like to write about price theory, a field in which one can formulate certain definite quantitative relationships. But the investigation of conditions that facilitate the reproduction of society can extend well outside of price theory and even of economics, as the above Gramsci quote suggests. I suggest the following are examples of components of civil society, whatever your definition: churches, labor unions, charities, civic groups, professional societies, and athletic clubs.

I am not at all sure that anybody has drawn attention in the literature to this commonality between the works of Gramsci and Sraffa: both analyzed the conditions for the reproduction of society, one concentrating on political theory and the other on price theory.

Saturday, September 22, 2012

Your Opinion Does Not Matter

Figure 1: Bottom Decile Irrelevant To Policy

Figure 2: Top Decile Much More Influential on Policy Than Median

These striking figures are from Martin Gilens (2005). Gilens looks at 1,781 questions from opinion surveys given between 1981 and 2002 and soliciting opinions on policy changes that could be implemented by some combination of the president and the Congress. He codes the question based on whether the policy change was implemented in the four years after the survey was given. As I understand it, for each question he performs a regression based on opinions and income. This allows him to analyze the consistency, for each income percentile, of opinions and policy outcome.

Gilens then looks at questions where people at different income percentiles differ in opinion by at least 8% for his scale. He finds 887 such questions for the 10th and 90th percentile, and 498 questions for the 50th and 90th percentile. As you can see, poor people at the 10th percentile have virtually no impact on policy outcomes, and middle income people at the 50th percentile have only slight impact. Empirically, the United States is a plutocracy.

  • Martin Gilens (2005). "Inequality and Democratic Responsiveness", , V. 69, N. 5: pp. 778-796.

Friday, September 14, 2012

Production Takes Time

In his book1, Piero Sraffa presented the elements of an economic theory that takes into consideration the empirical fact stated in my post title.

Suppose capitalists make decisions on what and how much to produce. They base these decisions partly on what they can expect to sell. As a consequence of these decisions, they have created a stock of capital goods, a set of interindustry flows, and a production of the surplus of commodities.

Suppose one takes the share of labor in this surplus as a datum2, at least for the purposes of a theory of value. Questions could then arise: for what set of prices would these decisions of the capitalists be justified3? For what prices would capitalists be willing to hold the produced capital goods? Sraffa provides an answer. The solution of his price equations4 are the desired prices of production.

In giving this answer, one is not claiming that these prices will prevail in an economy. The question of whether or not they will prevail is known as the realization problem5. An analysis of consumer demand enters in in addressing this problem.

I do not consider myself to be original in anything above6, other than, perhaps, in exposition. And this theory has widespread empirical application, both in the form of Leontief's Input-Output analysis and through Keynesian economics.

  1. Production of Commodities by Means of Commodities: Prelude to a Critique of Economic Theory, (1960).
  2. One could make other decisions on the givens. One might take expectations about the decisions of the monetary authority as a given. Or one could append the Cambridge equation to this model.
  3. Keynes examines a closely related issue on pages 48-50 of The General Theory of Employment, Interest, and Money. Anyway, Sraffa and Keynes's theories share, at least, a family resemblance in that decisions on quantities temporally precede the determination of prices.
  4. Since Sraffa presents a system of simultaneous equations, one cannot competently describe his theory as one of uni-directional causation.
  5. The realization problem is addressed by Keynes' theory of effective demand.
  6. See, for example, Alessandro Roncaglia's Sraffa and the Theory of Prices (1978).

Wednesday, September 12, 2012

Eigenvectors Generalized?

I have occasionally mentioned some of the mathematics that many find useful in reading Sraffa1. Here I want to raise a question. Consider the following two problem statements:

Problem 1: Given a vector space V and a linear function A mapping that vector space into itself, find a vector v in V such that the image of v under A is merely the original vector lengthened or shortened. In other words:

A(v) = λ v.

Problem 2: Given a vector space V and two linear functions, A and B, mapping that vector space into itself, find a vector v in V such that the images of v under A and B are two vectors, where one such image is the other vector lengthened or shortened.In other words:

A(v) = λ B(v).

The second problem statement is, in some sense, a generalization2 of the first. I know of lots of theory for analyzing the first problem and many application areas3 unrelated to economic models of circulating capital. I do not know of any literature on the second problem outside of mathematical economics and the analysis of joint production. Likewise, I have a name, eigenvector, for a solution to the first problem. But I have no such name for a solution to the second. Where, if anywhere, can one find literature on the second problem and other application areas motivating its application?

Maybe this is a question for math overflow.

  1. In such discussions, I usually do not worry about whether or not the mathematics on which I draw is constructive. Arguably, Sraffa insisted that his proofs be constructive. This topic should be of interest to Wittgenstein scholars.
  2. Singular values are one generalization of eigenvalues. My question relates to another generalization.
  3. Since I stated the problem so as not to be limited to finite-dimensional vector spaces, one such application area is Fourier analysis.

Saturday, September 08, 2012


  • Jacob Hacker and Nate Loewentheil, under the sponsorship of various labor unions and think tanks, have produced a political program, Prosperity Economics: Building an Economy for All.
  • Nick Rowe continues a theme - he finds price theory, including the Cambridge Capital Controversies, incomprehensible. (For what it is worth, I have a number of examples of Cambridge models which are closed by assuming utility maximization, including intertemporally.)

Tuesday, September 04, 2012

Ayn Rand: Too Stupid To Be A Philosopher

"It cannot be the case that the only universally valid norm refers solely to discourse. It is, after all, possible for someone to recognize truth-telling as a binding norm while otherwise being guided solely by 'enlightened egoism.' (This is, indeed, the way of life that was recommended by the influential if amateurish philosophizer - I cannot call her a philosopher - Ayn Rand.) But such a person can violate the spirit if not the letter of the principle of communicative action at every turn. After all, communicative action is contrasted with manipulation, and as such a person can manipulate people without violating the maxims of 'sincerity, truth-telling, and saying only what one believes to be rationally warranted.' Ayn Rand's capitalist heroes manipulated people all the time (even if she didn't consider it manipulation) via their control of capital, for example. Indeed, the person who says, 'do what I want or I'll shoot you,' need not be violating any maxim concerned solely with discourse. But it would be a mistake to use such examples as objections to Habermasian 'discourse ethics.'" -- Hilary Putnam, The Collapse of the Fact/Value Dichotomy (Harvard University Press, 2002)
See also Lars Syll and, for amusement, Will Wilkinson.