February 20, 2008

Normative Economics

Filed under: Economics, Philosophy, Unreadable — duncan @ 9:13 pm

[Take careful note of the ‘unreadable’ tag above.]

All economics is normative. In the first place, for all the obvious reasons. Human beings are weak, and human knowledge is partial. We are always inclined to mould the facts to fit our preoccupations, prejudices, and desires. To the extent that abstract thought abstracts from numinous reality, this moulding process is the stuff of thought itself. So even the most objective analysis is guided, to some extent, by values, loathings, needs. (And, as Hilary Putnam reminds us, truth is also a value.) Plus, deception is an intrinsic feature of our crooked human timber: it’s in the grain. Since the claim of objectivity is a one of the most powerful rhetorical tropes available, it will often be made precisely when the issues at stake are most doubtful, the ideas advanced most tendentious.

So far so blah. But there are more specific ways in which economics cannot escape the shadow of normativity. What claims economics has to scientific status mostly come from its treatment of human problems in quantitative terms. “’I can calculate the motions of the heavens, but not the madness of men,” Newton said, after losing a fortune in the South Sea bubble. Since Cournot – or since Cournot’s methods spread – economics has prided itself on using the differential calculus (which Newton used to unlock the secrets of motion) to describe the motion of our souls. (Note to self: I really must read Mirowski). Economics hoped to make society Newtonian. Or, perhaps better, Liebnizian. (Note to self: I must read more Liebniz. Permit me a moment of frenzied despair – so much to read; so much to understand… I’m better now). What is the rational self-interested individual, if not the monad; and what is the self-regulating market, if not the divine force that binds these monads together, ensuring synchronicity, and guaranteeing, in the face of countless horrors, that all is for the best in the best of all possible worlds? Why, I wonder, was this vision associated with the calculus from the start?

Economics aspires to be a quantitative science. [I just went out for the evening. Now I’m back, and have lost my train of thought…] This is easy enough when economics deals with actual quantities – so many cars, so many houses, so many bankruptcies, so many deaths. But when economics’ objects are not already quantified, it has to quantify them. Economics needs a mechanism of homogenisation, by means of which the inordinate world can be placed on a single numbered scale. This mechanism will be what economics calls a measure of value.

One purpose of money is this homogenisation of value. In this sense – in the sense that economics presupposes the reduction of value to a single scale – economics already sees the world through money’s eyes. But economics does not take money’s valuations as they stand. Economics enquires into the mechanisms by means of which prices are established – and also, more importantly, into exchange rates, interest rates, inflation, and all the other features of money that prevent it from functioning as economics wishes it could – as a transparent, homogenous medium for the measurement of value. Economics does not believe what money says. Yet economics can only distance itself from monetary valuation by comparing it to another set of valuations, which must be understood as fulfilling the very function economics wishes money could. [Yuch. I’ll try to clarify this horrible paragraph in my next post.]

Let’s say that there are two ‘normative’ principles at work here. One we could call the principle, or paradigm, of quantification, or homogenisation. This would correspond to the general ‘perspective’ that capitalist economics adopts towards the world. The second normative principle would be the perspective economics adopts within that perspective: the question of which particular method of quantification economics selects as the basis for analysis. So – for instance – economics acknowledges that prices can’t be used as the basis for comparison of values across space and time (because of inflation, exchange rates, etc. etc.). Economics therefore instead decides to analyse value in terms of purchasing power. Now the question becomes – power to purchase what? It could always be claimed (and will be claimed, because it’ll be true) that the value of the good selected as the base unit for comparison has itself changed over space and time – a change that of course would not show up in economics’ measurements of value, if those measurements take the value of this good as given. In selecting its unit of homogenisation and quantification, therefore, economics is always already making a value judgement. It is saying ‘I value this; I will not let it be degraded; I will not let it lose its lustre; my ardour for it will not fade’. Economics is saying – I have chosen this as the solid base of value, the thing in itself, the centre around which the flux revolves. I have chosen this as the meaning or source of value.

[Marx’s labour theory of value, incidentally, is the selection of labour as this base unit (it’s more than that; but that’s an important feature). Marx, philosophically knowledgeable and brilliant guy that he is, understands exactly what this means. Here’s one of the most important sentences in ‘Capital’: “Labour is the substance, and the immanent measure of value, but it has no value itself.” (my emph. Vol I, p. 677) I suggest that anyone with time on their hands compare this passage with Wittgenstein’s discussion of the metre rule in Paris – which, Wittgenstein says, has no length. The same principle is at work: the origin of measurement cannot be measured; it constitutes the system, and therefore is not part of it. This claim needs to be rejected. There isn’t much that carries over from the early to the late Wittgenstein, but this idea of a symbol that makes our discourse possible, and for that very reason cannot be part of our discourse – this idea persists. Anyway.]

On what basis does economics make this judgement? It makes it based on motives and criteria that precede and constitute economics. Economics’ objectivity – to the large extent that this objectivity is based on the discipline’s ability to quantify the apparently unquantifiable – is always dependent on an ethical judgement that cannot be justified from within the system of economics.

Christ, that’s the most incoherent blog post anyone has ever written. I’ll try to fix things later. Till then take care.

[NB: Reading the post back, I should have made it clearer what I’m trying to do here (though its probably obvious): recapitulate Derrida. In my next post, I think I’m going to take a leisurely jog through ‘Structure, Sign and Play in the Discourse of the Human Sciences’. Everything, or almost everything, I’m trying to do above can be found in that essay. My aim is to apply Derrida’s argument to the human science of economics – a human science that has so far magnificently resisted any engagement at all with modern philosophy – a ‘science’ still built, in fact, on the shakiest of nineteenth century foundations: utilitarianism. I also plan to formulate some criticisms of Derrida’s approach. But all that can wait.]

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