I had a enlightening exchange with an international economics professor recently about Marxist dogmas inserted into neoclassical economics. At least, her brand of them.
We had debated several times before in class to no effect. This professor has apparently never familiarized herself with or conceived of a praxeological notion of economics, absent the more orthodox neoclassical manipulation of figures and mutually independent models. So any time I contended a point, such as about measuring utility, measuring consumer or producer surplus, or using Ricardo’s law of comparative advantage as a model to be applied through the passage of time (as opposed to a deduction that merely illustrates a causal force working in favor of trade), the professor would basically demand an explanation from the ground up of my views.
When I failed to completely explain the material necessary to understand in texts such as Human Action, Man Economy and State, and Theory and History, she would dismiss whatever notion of Austrian economics she felt incapable of conceiving of. Or, we would superficially come to the same Austrian insight, only for the professor to substantially reject it in the class’ analysis without having realized such an implication was made.
Rather than go over points that most praxeologists have seen before about issues of measuring utility absent any extended measure of mere feelings (in which I was assured on one day that my professor agreed, no constants exist in human action (even though we had these timeless equations of action on the board), and later, told me that history is repeatable, in which case, there would have to be), I’ll go over some Marxist implications of our curriculum and open admissions by my professor of believing in Marxist thought.When defining why people trade, my professor stated that it’s because people’s material well being is improved, implying that value only resides in material well being. That, and higher indifference curves.
While debating over whether it’s material well being or simply an estimate of well being that drives us to trade, she said that economics is defined as how we enhance our material well being.
There are several implications of this. First, it is as if to say that economics has not progressed beyond about 1870 or so, when the classical economists focused almost exclusively on business and the satisfaction only of material wants.
Second, it is to imply that there is some discrete difference in origin between material wants and the wants aimed at by all human action. My professor can’t conceive of this implication since, of course, she’s never heard of it or understood why there would be one.
Third, given the second implication, it is to imply that material forces determine our wants. In other words, a variant of Karl Marx’s material productive forces are the determining factors of history, and not our actions as guided by our ideas.
So far, I probably haven’t surprised anyone. But here’s where things get really strange. Understanding all this, I asked my professor if this is as if to say that Marx’s material forces determine history. She said, “Yes.â€
Wanting to give her a chance to think this over, and in order to make clear that I’m talking about no Marx other than Karl, I asked if she believed that Karl Marx’s material productive forces determine history, to which she gave an even more emphatic, “Yes!â€
I suppose I should have stopped there, knowing that another tactic of Marx was to dismiss any analysis of his dogmas as unscientific (except his own) and that one could be dismissed on the basis of their class alone, which was roughly the treatment I was getting as being an Austrian.
I asked a third time just to make sure if she really believed in Marx’s material determinism a few minutes later, and she finally said, “Noâ€. I’ll have a heck of a time trying to figure out which to put on the test, though. She reiterated her explanation of consumer and producer surplus, and even illustrated it graphically. What exactly it was a measure of, I can never know.
Now, say what you want about neoclassicals-really, just take a free shot at them as supporting all kinds of illogical puzzles, measurements, and superstitions-but I never knew the charge of Marxist could have been substantiated about them.
Rob Murphy gave a talk about neoclassical economics in which he tries to explain it and refute some of its main tenets. He prefaces his definition of neoclassicalism by explaining that it’s like pornography: Nobody knows how to define it, but everyone knows it when they see it. And, that the analogy stops there.
I’d say now that the analogy works a little further. Neoclassicalism, like Marxism or pornography, is crude, vulgar, and for little minds.
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I’m in a Masters level Micro class right now and we covered a paper by Becker and Stigler where they argue that all preferences must be given and fixed. Their basic argument is that you can assume that every consumer has preferences over certain commodities like transportation or food that are defined and given and you don’t need to worry about the specific preferences that they have towards different goods.
It’s pretty well-established in neoclassism that they must hold tastes as given and constant. I think this eliminates almost all of the most interesting aspects of the Austrian theory of entrepenuership and some of their arguments regarding economic planning. If all tastes are given and constant, that means that you could write down a set of mathematical equations that could describe how the entire system interacts. The reasoning that Becker and Stigler use makes sense, but the problem is methodological. By conceding that tastes are constant and given, they will lose many arguments against the Marxists that the Austrians win.
I’m not surprised by this line of thinking — that is Marxist/Socialist “economics.” I am in a Master’s level political science program and was told by a professor that the Great Depression was caused by “overproduction.” This is of course a major fallacy for two reasons: (1) it presents the “economy” as one abstract blob or lump (what Hazlitt chastises people like Keynes for doing) and (2) “overproduction” does not occur everywhere. Markets clear. Surpluses and shortages are purely price phenomenon. The areas where there was “overproduction” were heavily subsidized by the State. Not to mention the heavily inflated money supply, price controls, etc. A lot of factors were at work.
Students in the class joined in with the professor in backing her case. However, what was absent from everyone’s comments was solid theory. One student even quoted the Communist Manifesto as “proof” that capitalism is “self-destructive”! Of course this is to be expected from a Marxian perspective which focuses on “waves” of history and class analysis.
Anytime I would bring up an approach that focused on individual action I was mocked by the class. Most of the time I was either told I was explicitly wrong or “that would only work in theory.” Welcome to modern academia, where rhetoric reigns and logic is tossed to the wayside.
Most of the time I was either told I was explicitly wrong or “that would only work in theory.”
Actually, this is exactly the leitmotiv in every economics class I have ever held – “Yeah, but that would not work in the real world” (I always wondered if people that talked like that live in an alternative of the real real world). In Mexico, the recurrent response is: Well, we are not Swiss. So free markets would not work.
You’re making some fundamental errors, especially in regards to objecting to trade not increasing material value. Here’s what you need to keep in mind at all times:
Trade only and always occurs because both parties to the exchange are materially better off. Both parties profit by the act of exchange. That’s the only reason trade ever occurs. Nobody ever voluntarily gives away that which they value more for that which they value less. They *only* give away that which they value less for that which they value more.
Even every individual choice you make is because it benefits your own material well-being. Choosing to post rather than sleep is an observed action. And at the specific moment in time any choice is made is because it benefits the actor materially more than any other possible choice which was available but was not chosen.
Thus, by definition, every act of trade creates wealth, increases material well being. That’s just as true for one who trades an apple for an orange to another as it is for one who trades a dollar today to another for the mere promise of a dollar plus interest tomorrow from another, or one who trades labor for paper “money”.
Also, by definition, every action which prevents free trade causes poverty. That includes theft, regulation, taxation, and all forms of violence.
It was Mises who observed in Human Action that people are voluntarily trading with one another or they are not voluntarily trading with one another. There is no “thrid way” possibility. This is an EITHER/OR full set of possibilities.
Also remember, all knowledge in so far as it exists is absolutely known. That’s essential Miseian Epistemology. Anyone who argues nothing is absolutely known is necessarily arguing that what they speak is meaningless gibberish to be ignored. There is only known and unknown. There is only right and wrong (correct and incorrect), and unknown. Humans obviously are not omniscient. Humans can also make mistakes. But it’s just as rational to perform a dance ritual hoping it will cause rain as it is to use a wheel to save effort pulling a load. All knowledge whatsoever eminates from EITHER/OR possibilities.
From this derive all the irrefutable absolutely known economic knowledge, from the division of labor, compartive advantage, trade, money, incentives, technological innovation, everything. Statistics, not only not being proved by statistics, has never and will never demonstrate or validate any knowledge whatsoever.
As for society, keep in mind society only exists by the voluntary cooperation of individuals. All violent action is anti-social, whether it’s rogue criminals robbing banks or democratic majorities looting the rich. Voluntary action creates peaceful society. Violent action creates a Hobbesian war of all against all to some degree, and that creates poverty, creates a state of less material well-being for the sum whole than would otherwise be the case (some small minority may be short-term materially better off, i.e. a king or a dictator, but even they too will be poorer than they otherwise would have been because of violent action at some future time).
Only by the existence of free trade competition is the absolutely best possible material deal of trade of anything capable of existing. No political interference can ever create a better deal than what individuals voluntarily choose for themselves in a free market, by definition of free trade. That’s true no matter what the market is, computers, food, healthcare, etc.
Socialism cannot compete with the high quality and cheap price of a free market even within a trillion to the trillionth power. Think about all the decision which one single person makes every day and multiply that by the population and multiply that through time. Every action which is prevented by violent political interference is causing poverty, by definition.
Regulation and violently enforced monopolies, such as through Patent and Copyright, prevent technological innovation and leave society as a whole materially poorer on a scale that can scarcely be imagined than it otherwise would be.
*As you can imagine, I’ve never lost an economic argument to anyone, whether Marxist, Austrian, Chicago School, Nobel Laureate or Grad student. And that’s primarily because the field is littered with errors that are in violation of the fundamental truth of trade.
I like my econometrics classes… we fix inherent problems with statistics by employing further statistical techniques.
Angelo, how dare you insult the good name of pornography by comparing it to neo-classical economics? Porn never hurt anyone, the same cannot be said of neo-classical economics
punter: thank you!
I was waiting for someone to say this. You’re right, that was a low blow. Patrons of pornography are writing hate mail to me as we speak.
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