Economic Philosophy by Joan Robinson
My rating: 4 of 5 stars

Smoke and Mirrors

Joan Robinson was a Keynesian economist, a Communist, a defender of the Cultural Revolution of Mao Zedong and of the ‘economic miracle’ of 1950’s North Korea - so not all that prophetically gifted. She nonetheless in one of the few economists who had something interesting to say about the implicit philosophy underlying their discipline.

Robinson had a healthy non-philosopher’s understanding of philosophy. For her, philosophy is metaphysics, and “The hallmark of a metaphysical proposition is that it is not capable of being tested.” Scientistic types are likely to complain that this makes them useless in practice or as the focus of serious inquiry.

But Robinson recognises precisely why metaphysics is so important to all science but especially to social science. “Metaphysical statements,” she says, “are a guide to conduct... and a quarry from which hypotheses can be drawn.” That is, metaphysics consists of the fundamental, largely shared, presumptions which are critical for structured discussion in any scientific discipline. Mostly these presumptions are taken for granted ‘as the way the world really is’ and ignored as ‘too obvious’ to be questioned.

Metaphysics is an implicit set of rules which are typically condensed into an ideology. Ideology, she believes, is necessary to justify an economic system - capitalist, socialist, corporatist, or any other. Ideology is also necessary to guide the consciences of those who act within an economic system. It is the invisible glue that maintains order and integrity without the need for explicit laws or constraints except at the margins of the system.

Economics, therefore, is in a sense a branch of theology. Its metaphysics creates a world that is real only because people think it so. Robinson uses the example of economic capital to make her point. The term capital is used in the formulation of many doctrines of economics. But there was, and still is, no consensus on what economic capital might be - a store of potentially productive wealth? The equipment required to manufacture and distribute goods? The organizational skills and ‘implicit knowledge’ of a workforce? An accounting residue of the difference between assets and liabilities? None or all of these?

But as she says, “Economics is not only a branch of theology.” It does affect the consciences of individuals on a large scale, and it does take place in a sort of public ritual, a liturgy of work one might say. But it also, as such liturgy, affects the welfare, suffering, and physical state of its congregations. Economics is not just an evangelical religion, it is a political activity.

“One of the great metaphysical ideas” in economics, perhaps its core, is that of ‘value’. Value “does not mean usefulness - the good that goods do us. It does not mean market prices.” Robinson quotes the late 18th century economist David Ricardo as setting the enduring conception of economic value:

“The only quality necessary to make a measure of value a perfect one is that it should itself have value, and that value should itself be invariable, in the same manner as a perfect measure of length, the measure should have length and that length should be neither liable to be increased or not diminished, or in a measure of weight that it should have weight and that such weight should be constant.”

In short, value is a convention, the only necessary component of which is a reliable scale or metric. There are any number of reliable metrics. So value in economics has no definite meaning. Rather it depends solely on the choice of metric. And metrics of value, because they are metaphysical entities, cannot be proven or disproven; they can only be accepted or rejected. “A metaphysical belief, as in the law of value, cannot be wrong.”

This belief about value has always been problematic for the discipline. Ultimately it emerges as the concept of ‘utility’, essentially the personal, proprietary metric of value for each individual. As Robinson recognizes, this is somewhat of a dead end because, “Utility is a metaphysical concept of impregnable circularity; utility is the quality in commodities which makes individuals want to buy them, and the fact that individuals want to buy these commodities shows that they have utility.”

The central concept of classical economics therefore is grounded on a political objective that is made clear in its metaphysics: the justification of laissez-faire economics. Government involvement and interference in economic activity can only inhibit and impede the use of individual metrics of value and the exercise of personal utilities. That is, government is by its very nature economically coercive and freedom-reducing.*

Precisely the same arguments are used in the 21st century by today’s neo- liberals as by the advocates of laissez-faire in the early 19th century. By the standards of metaphysics, they might not be right, but they are certainly not wrong. Interestingly, however, neo-liberals today add a small but important codicil to the historical metaphysical legacy. The metric of value, they believe, is not only entirely personal, it is also secret, even to the individuals who employ it. It is also immune from outside influence, things like advertising, public opinion, fear or irrational rumour.

Consequently, the economic metaphysics of value, although intended to defend freedom of choice, in fact eliminates freedom by its insistence on a sort of succubus or demon of economic choice which directs human activity from a mysterious place in the Freudian Id.

Philosophically, economics has recreated a Leibnizian world of isolated monads who know nothing beyond their own existence and only have the illusion of voluntary interaction with fellow-monads. In fact they are being manipulated and coordinated, as Leibniz reckoned, by God. Hence it doesn’t appear too much of a stretch to conclude that economics is very much the religion that deifies illusion as its object of worship. To the extent economics is also more than this, it is dangerous.

*It is worthy of note, although economists don’t want to advertise the fact, that the problem of the individualistic and proprietary character of utility has been solved in financial economics by the convenient mechanism of ignoring utility theory altogether. In fact financial economics contradicts classical economics by proposing that, as far as investment is concerned, there are uniform rules of rational preference that apply rigidly to all investors. Utility theory plays no part in financial economics whatsoever. Financial Economics has a very different ideological interest than laissez-faire. It’s agenda, starting with the early 20th century American Robber Barons, has been the justification of corporate consolidations as in the public interest. Freedom for financial economics means not the freedom to follow one’s preferences, but the freedom to follow the dictates of financial theory unencumbered by governmental interference. It’s a strange old world.

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