August 3, 2007

One thing that connects Marxist and neoliberal economics…

Filed under: Economics, Marx — duncan @ 8:09 pm

…is that both see economic phenomena as moving towards a state of final stability. In Marxism, of course, the various crises of economic epochs are carrying us to a utopian state in which goods are justly distributed. But neoliberalism has its own dialectic, in the transformations of price, supply and demand that pave the way to general equilibrium.

According to my textbook: “When price differences are eliminated quickly, we say the market is a ‘perfect’ market… When price differences persist, markets are said to be ‘imperfect’.” (Harvey & Jowsey, p. 31-32). The inverted commas can’t disguise the ethical and political judgements behind these terms. A perfect market is not just one kind of market among many; it is the telos of all markets. As Aristotle would say, it is the exemplary market from which we can learn the essence of the market as such. And this telos of all markets is the market that itself carries a telos: the equilibrium state in which the market clears and all price fluctuations come to an end.

Of course economists know there are forces working against a perfect market’s equilibrium, just as there are forces working toward it. “Buyers and sellers neither have perfect knowledge nor act solely on the basis of price.” (p. 32). But market teleology gives these movements away from equilibrium a very different status from those toward it. The properties of a perfect market are a market’s essential properties; the properties of an imperfect market are deviations from that essence. Market imperfections are accidents or contingencies: they are not part of the law of the market; and they therefore have no place in our analysis of a market’s fundamental nature.

“What if there were, lodged within the heart of the law itself, a law of impurity or a principle of contamination? And suppose the condition for the possibility of the law were the a priori of a counter-law, an axiom of impossibility that would confound its sense, order and reason?” (Jacques Derrida, The Law of Genre, collected in Acts of Literature, p. 225). What if a market’s essence were in fact unthinkable except through the imperfections that are excluded from its overt definition? What if there were no such thing as a perfect market – not just in practice, but in principle?

Economics is not blind to the flaws in its approach. ‘Market failure’ is the reality of the market; and economists are vigilant in assimilating to their discipline the inevitable deviations from its basic theoretical matrix. Nevertheless, so long as these are treated as deviations – so long as the essentialist teleology of market perfection guides economists’ analyses – economics will have difficulty in taking full measure of what Derrida would call the law of imperfection. Economics’ teleology is pre-analytical; it is pre-empirical. It is the ideological commitment that makes much of economics, at least since Walras, and probably since much earlier, possible.

To deconstruct economics is not to reject economics; just as Derrida’s deconstructions of Western philosophy do not amount to a rejection of philosophy. Deconstruction involves, rather, a ‘change of aspect’. It involves, one might say, an act of creative destruction, which encourages theoretical innovation. By meticulously following a text’s arguments, while systematically shifting the emphases that guide these arguments, much that appears self-evident may become less so. If disequilibrium is given comparable status to equilibrium, what are the consequences for economics?

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