Friday, November 21, 2014

Humans And Other Animals

Figure 1: Chapuchin Monkeys, Our Cousins

What do we think about generalizations, validated partly with experiments with non-human animals, for economics?

Nicholas Georgescu-Roegen is an economist widely admired by heterodox economists. He quit the American Economic Association in response to their flagship publication, the American Economic Review, publishing articles on, if I recall correctly, pigeons. Researchers were trying to demonstrate that properly trained pigeons had downward-sloping demand curves. I gather they wanted to show income effects and substitution effects, as well, with these laboratory experiments.

On the other hand, are we not supportive of behavioral economists undermining utility theory? I am thinking of controlled experiments that demonstrate people do not conform to the axioms of preference theory. And some of these experiments, as illustrated in the YouTube video linked above, extend beyond humans.

I have a suggestion to resolve such a tension. One might want to treat investigations of humans as a naturalistic enterprise. If so, one would not want to impose an a priori boundary on the different constituents of minds. Whether some species of animals has some sense of self, expectations of the future, primitive languages, or what not should be found by empirical investigation. On the other hand, activities that depend on the existence of social institutions cannot be expected to be found in animals not embedded in any society. And demand curves, if they were to exist, would only arise in specific market institutions.

  • Philip Mirowski (1994). The realms of the Natural, in Natural Images in Economic Thought (ed. by P. Mirowski), Cambridge University Press.

Thursday, November 06, 2014

Income Distribution And A Simple Labor Theory Of Value

I have a new paper available on the Social Science Research Network:

Title: Income Distribution And A Simple Labor Theory Of Value: Empirical Results From Comprehensive International Data

Abstract: This paper presents the results of an empirical exploration, with data from countries worldwide, of Sraffian, Marxian, and classical political economy. Income distribution, as associated with systems of prices of production, fails to describe many economies. Economies in most countries or regions lie near their wage-rate of profits frontier, when the frontier is drawn with a numeraire in proportions of observed final demands. Labor values predict market prices better than prices of production do. Labor values also predict market prices better than they predict prices of production. In short, a simple labor theory of value is a surprisingly accurate price theory for economies around the world.

Saturday, November 01, 2014

For Conflating Neoliberalism And Neoclassical Economics

Neoliberalism is a political project to remake the world into an unrealizable utopia. Neoclassical economics is a supposedly scientific effort to explain the world by its deviations from an unrealizable utopia. And they are both about how the world deviates from that utopia. This post is about this resemblance, not the differences, between neoliberalism and neoclassical economics.

This utopia consists of a society organized around markets1. These markets require government to define property rights and enforce contract law. But, in the utopia, they are not to be embedded in a broader institutional setting that prevents their supposedly free adjustment. Examples of government-imposed inference with such self-regulation include minimum wages, rent control, laws against price-gouging, usury laws, subsidies for farmers to limit the size of harvests so as to maintain their income, payments to the able-bodied unemployed2, and so on. Polanyi's claim is that such so-called interventions are bound to arise. The ideal which those enacting such laws were reacting against is unachievable, anyways. In the ideal, land, labor, and capital are treated as if they are only commodities. But land is the natural setting in which the economy takes place, and labor and capital involve social relations that cannot be reduced only to market relationships.

Both neoliberals and neoclassical economists often recognize their utopia must be constructed3, that it, will not emerge naturally, in some sense. The solution for problems with markets is said to be to construct more markets. I think about the tragedy of the commons, the theory of externalities4, 5, and the emphasis in neoclassical welfare theory on Pareto optimality. A paradigmatic policy recommendation, for both neoliberals and neoclassical economics, is the establishment of markets for pollution permits.

  1. I have been reading Block and Somers (2014), and I read Polanyi (1944) more than a decade ago.
  2. Block and Somers approvingly cite revisionist history from Mark Blaug in the 1960s that challenged centuries-long interpretations of English Poor Laws, especially the Speedhamland system. I know Blaug through his (multi-edition) history of economics and his misrepresentations of Sraffians and the Cambridge Capital Controversy. So I was glad to see a cite where he seems to be correct.
  3. This emphasis on the need for government to construct markets, to my mind, is a distinctive difference between classical liberals and sophisticated neoliberals.
  4. Some mainstream economists defend themselves from critics by asserting that the critics attack a strawperson. Economists do not believe, they say, that markets are perfect. And they'll ask why are the critics not aware of the frequent teaching about externalities. This objection seems to me to be beside the point if neoclassical economists react, as many do, the existence of an externality by calling for policy for internalizing the externality (or, at least, imitating the result of such policies).
  5. If one accepted neoclassical economics as a positive science, how could one call for any policy conclusion without an explicit statement of normative values at some low level of abstration?
  • Fred Block and Margaret R. Somers (2014). The Power of Market Fundamentalism: Karl Polanyi's CritiqueHarvard University Press.
  • Karl Polanyi (1944). The Great Transformation: The Political and Economic Origins of Our Time.