Economics: An Anti-Text PDF
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ECONOMICS: AN ANTI-TEXT Economics: An Anti-Text Edited by Francis Green Department of Politics and Economics, Kingston Polytechnic and Petter Nore Division of Economics, Thames Polytechnic M ©Sam Aaronovitch, Bettina Berch, Monika Beutel, Ben Fine, Andrew Glyn, Francis Green, Laurence Harris, Sue Himmelweit, Rhys Jenkins, Simon Mohun, Petter Nore, Bob Sutcliffe 1977 All rights reserved. No part of this publication may be reproduced or transmitted, in any form or by any means, without permission. First edition 1977 Reprinted 1978, 1979 Published 1977 by THE MACMILLAN PRESS LTD London and Basingstoke Associated companies in Delhi Dublin Hong Kong Johannesburg Lagos Melbourne New York Singapore and Tokyo ISBN 978-0-333-21202-8 ISBN 978-1-349-15751-8 (eBook) DOI 10.1007/978-1-349-15751-8 This book is sold subject to the standard conditions of the Net Book Agreement. The paperback edition of this book is sold subject to the condition that it shall not, by way of trade or otherwise, be lent, re-sold, hired out, or otherwise circula ted without the publisher's prior consent in any form of binding or cover other than that in which it is published and without a similar condition including this condition being imposed on the subsequent purchaser. Contents List of Contributors vii Introduction ix PART 1 ECONOMIC METHODS AND ASSUMPTIONS 1 The Myth of Objectivity in Positive Economics 3 FRANCIS GREEN 2 The Individual as Basic Unit of Analysis 21 SUE HIMMELWEIT 3 Class in Contemporary Britain 36 MONIKA BEUTEL PART2 MICROECONOMICS 4 Consumer Sovereignty 57 SIMON MOHUN 5 The Firm and Concentration 76 SAM AARONOVITCH 6 Wages and Labour 89 BETTINA BERCH PART3 MACROECONOMICS 7 The Concept and Origin of Profit 105 BEN FINE 8 The Balance of Payments and the International 117 Economic System LAURENCE HARRIS vi Contents 9 Underdevelopment 132 RHYS JENKINS 10 Inflation 148 ANDREWGLYN PART4 ECONOMIC THEORY AND THE STATE 11 Keynesianism and the Stabilisation of 163 Capitalist Economies BOB SUTCLIFFE 12 The State 182 PETTER NORE Notes and References 207 List of Contributors FRANCIS GREEN teaches Economics at Kingston Polytechnic. SUE HIMMELWEIT teaches Economics at Birkbeck College, London. MoNIKA BEUTEL teaches Sociology at Hatfield Polytechnic. SIMON MoHUN teaches Economics at Queen Mary College, London. SAM AARONOVITCH teaches Economics at South Bank Polytechnic. BETTINA BERCH teaches Economics at Williams College, Massachusetts. BEN FINE teaches Economics at Birkbeck College, London. RHvs JENKINS teaches Economics at the University of East Anglia. ANDREW GL YN teaches Economics at Corpus Christi College, Oxford. LAURENCE HARRIS teaches Economics at Birkbeck College, London. Boa SUTCLIFFE teaches Economics at Kingston Polytechnic. PETTER NoRE teaches Economics at Thames Polytechnic. Introduction This book is mainly written for students who come to economics in the expectation of gaining an understanding of how economic society func tions, and who have become disillusioned with the subject. They see that many of the fundamental questions about economic society are either dismissed or else cannot be handled by the so -called 'neoclassical/ neo-Keynesian synthesis' that totally dominates the teaching of econo mics. It also addresses itself to teachers of standard economics courses who, while being aware of the mounting criticisms against the orthodox within the profession, nevertheless have had no coherent point-by-point critique to recommend to students. Criticism of the subject, while never absent, has been increasing over the last decade or so; indeed it has spread so virulently that at times it might have surprised the economist that orthodox economics still manages to survive. This is no simple malaise as the attack appears to come from several quarters. On the logical plane, the neoclassical theory has had to cope with criticisms of its concept of capital from the Cambridge 'post Keynesians';1 * a retreat was forced to the less useful, because more general and complex, domain of general-equilibrium theory. More im portantly, however, economic science has proved incapable of dealing with the most pressing practical economic issues of present-day cap italism, in particular the combination of high inflation and high un employment, symptoms of the crisis through which capitalism is pass ing in the mid -1970s. Among the various responses which economists have made, an implicit retreat can be detected as a common thread, namely that economics has become wedded to politics (they are rather 'living in sin'); economics as the isolated discipline-the science of re source allocation -has had to be politely ignored as analysts are forced *For notes, see pp. 207-15. x Introduction to consider the political presence of workers and unions and the increas ing importance of the capitalist state. Other attacks, perhaps less urgent, have come from a variety of sources associated with the discovery of ecology -economists have been called on to reconsider such questions as whether there are any natural limits to the expansion of the eco nomy ,2 or whether economies of scale are really all that important.3 But the crisis in economics has expressed itself most clearly in the revival of interest in what is loosely called 'radical' economics. The failure of conventional economics has led to the renewed development of Marxist political economy, both in the United Kingdom and else where. More and more institutions of higher learning are finding them selves with courses in Marxist economics at all levels, usually as an optional subject among many. However, the effect of this has been partly to channel the criticism into reasonably safe streams, leaving the main courses in economic theory relatively untouched. Thus, despite the turmoil amongst fully fledged economists, the student is forever taught the same conventional theory; and the analysis of the criticisms must usually be kept to a minimum simply because they are confusing. This book is offered as an aid to understanding the correct criticisms that have to be made of the orthodoxy, and by so doing hopes to stimu late interest in taking an alternative approach in the understanding of the capitalist economy. (We do not wish to deny the relevance of 'gut feelings' in the consideration of a theory; but criticism based on faulty groundwork is quite common in our subject, and tends to be counter productive; we have clearly attempted to avoid it in compiling this book.) It is intended therefore to be read not primarily as a textbook in its own right but as a subversive companion to any of the normal textbooks that are used in mainstream economics courses; it is thus an intervention at the centre of undergraduate economics teaching. The levels of the chapters have been designed where possible to be easily understandable by a first-year undergraduate. (There are inevitably a few points -notably in Chapter 4 -where the concept being criticised, for example 'Pareto optimality', might in some cases not be met with until the second year of the standard economics degree.) At the same time the book may be used by the student of economics at any stage of his studies. Indeed its appeal should not be limited to the current gener ation of undergraduates, and will, we hope, extend to anyone with an interest in the subject. While the various contributions have received some critical discus sion from all the contributors collectively, each chapter remains finally Introduction xi the particular contributor's own work. There are therefore clearly some views expressed iil some chapters which are not held unanimously. Nevertheless, the coherence of the book derives from the fact that all criticisms are made from a Marxist perspective. This means that it is necessary in each case to distinguish Marxist from bourgeois criticisms of the orthodoxy. But it also raises the problem of making criticisms of mainstream economics, from a Marxist perspective, without using Marxist categories of analysis. We have felt that it was best to avoid us ing the latter as far as possible in the interests of being intelligible to the reader who has never encountered Marx. Nevertheless, in some cases it has proved necessary to develop an explicitly Marxist criticism. The an alysis developed in the last two parts of Chapter 4 serves therefore as a reference point for other parts of the book. In referring to our object of criticisms, several names were possible: 'mainstream', 'orthodox', 'conventional' and 'bourgeois' economics are some. More often than not, the term used is 'orthodox economics', in preference in particular to the more aggressive 'bourgeois' economics. The latter term has the advantage of being consistent with a conclusion of the book, that orthodoxy is an aspect of bourgeois idealogy. It has the drawbacks that, on the one hand, using the term in the course of each chapter anticipates its conclusion, and, on the other hand, that it is a term not too familiar with and possibly objectionable to an Anglo Saxon readership. The result is a compromise: the possible terms are used interchangeably, and the only distinction we would wish to pre serve is that between orthodox economics and non -orthodox economics which is nevertheless within the bourgeois framework. The book is structured in four parts, and designed broadly to match any of the usual textbooks. Part 1 concerns issues in economic science. Opening with a critique of the notion of 'positive' economics, it pro ceeds in Chapter 2 with a critique of the fundamental concept of the atomistic individual in economics, complemented in Chapter 3 by a re assertion of the central empirical importance of class. Part 2 (Chapters 4 to 6) covers issues which normally arise under the specifically microeconomics section of the standard course; while Part 3 (Chapters 7 to 10) concerns macroeconomic questions. We make this distinction only because that is normally what is done, but the line of demarcation is nowadays becoming increasingly blurred. A few words are particularly necessary about Chapters 6 and 7, both concerned with distribution. The difference is that Chapter 6 is chiefly concerned to criticise the neoclassical theory of wage differentials; while Chapter 7,
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