Three trends in economics and economic ideas
Anil Mitra, Copyright © March 6, 2009
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The three trends are Substance theory—a term borrowed from metaphysics, and Ideology and Eclecticism
The term is from metaphysics and not economics as such. Niceties regarding nature of metaphysics are not of particular interest in this discussion and we may take metaphysics to be the study of things—being, the world—as they are. In the modern era, informed by empiricism, Kantianism, positivism, critical theory, and science—especially quantum theory—we are inclined to think that knowledge of things as they are may be impossible
The impossibility versus possibility of metaphysics is not directly relevant here because we are interested in one of its negative aspects—the appeal to substance theory. In metaphysics, one version of substance theory is that there is one or more uniform and unchanging substance or substances from which come all things and change
Substance theory has its ‘advantages’ but there is debate in metaphysics whether it is tenable. Even if there are substances we may be against substance theory because we may prefer to not specify those substances and instead allow any actual substances to emerge from investigation—from study and reflection upon the world. If there are substances, and if we can know of them, the case will be strengthened by this ‘non-substance theory’ approach
Substance theory encourages the thought that we can know the substances in advance of study
What is of interest here may be called the habit of substance thinking, i.e. the idea that we can know that the essence of studies such as economics, politics, ethics and so on in advance of study or that we can know in advance—a priori—that there is an essence or that there are essences
The habit of substance thinking pervades much human endeavor including economics
In The Wealth of Nations, Adam Smith, 1723-1790, a pioneer of economic theory, argued that there is no ‘invisible hand’ that guides economic system but instead it is the mesh and interaction of individuals, each pursuing their self-interest, that promotes the good of society more than pursuit of the good of society. Adam Smith’s thinking was clearly a kind of free market thinking
Economic historians record that nineteenth century Britain came closest to the free market than any other nation at any time… and the outcome was serious abuse. A simple factor in the case is that self-interest may become selfish interest which are not at all the same conceptual thing even if they were to have the same result. However, the unrestrained market showed that self and selfish interest are not at all the same conceptual thing. Since 19th century Britain, the invisible hand has been augmented in varies ways one of which is government intervention and regulation of capitalist economies. Today, when we argue for the free market we forget the lessons of the past—what we are really arguing is a concern with the right kinds and amounts of intervention and regulation; when we argue that we are a free market we forget the system of regulation and intervention
Another way of intervention is the Marxist-Communist centralized and centrally regulated economy which as we now know has failed due to the various modes of inadequacy of overall planning and the neglect of market forces and motivations
Today, the old communist regimes move toward aspects of the free market as they struggle with the burden of their tradition. Those nations that have been able to rid their economies of the bridle of their past are the ones that are most successful
Capitalist and centralized economies move toward some mix of the free market and intervention and regulation
The discussion of the previous section is an argument for eclecticism. However, eclecticism should be satisfactorily understood. It is not the picking of approaches off a shelf and mixing them together. There are guiding principles; however such principles are not absolute—to regard them as such would be an example of the habit of substance thinking; the choice and mix of approach will be a mix of approaches in light of principle and the immediate need; but immediate and long term, local and global need require some adaptive balance; and we cannot regard the various approaches and problems to be fixed for we may learn and as we learn and encounter new problems—at the edge of efficiency lies capacity and at the edge of capacity lies global limits to sustenance and environmental concerns and so on and on—we need new approaches or implementations of approaches and we may need new concepts
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