Saturday, March 30, 2013

The Worldly PhilosophersThe Worldly Philosophers by Robert L. Heilbroner
My rating: 4 of 5 stars

As Seen in the Sub-Blurbs

This is step two in a project to acquire a modest foundation in political and economic philosophy before some more focused reading in both areas.

The first step was Thelma Lavine’s “From Socrates to Sartre: The Philosophic Quest”:

Both books summarise the lives and philosophy of key philosophers in language that is easy to understand.

While I intend to read some other generalist philosophy books as well, I recommend both books for readers who just want an overview or a foundation for further reading similar to what I’m undertaking.

"A World Full of Lobsters"

Thomas Carlyle once described economics as a “dismal science”.

It was dismal, because it found “the secret of the universe in supply and demand” and reduced the duty of government to “letting man alone” (i.e., “laissez-faire” capitalism).

Heilbroner’s publishers requested him to name his project and book “The Great Economists”.

Fearful that this might sound to the general reader like “The Most Dismal Scientists”, he approached the project from a more philosophical point of view, so as to help understand alternative visions for the economy within society rather than the internal operation of the economy at a mechanical or purely political level.

You could argue that words like “worldly” and “philosopher” might be of little appeal to the average student of the dismal science.

However, the name of the book reveals a literary and pedagogical approach that is designed to maximize interest in the subject matter.

Indeed, Heilbroner managed to escape the dismal preconceptions about his subject matter so much so that a student once asked a bookseller if they had an economics book called “A World Full of Lobsters”.


Dialectical Narration

Heilbroner succeeds in his task by writing lucidly.

He doesn’t just describe, he creates a narrative with drive and excitement.

His view of economic history is directional, even if it does not necessarily embrace the inevitable progress envisaged by the Enlightenment philosophers and scientists.

Secondly, he unfolds the narrative through the use of a dialectical opposition between the successive economists in the chain.

While Marx might have advocated dialectical materialism, Heilbroner is a dialectical story-teller.

There is conflict, then resolution, then a new conflict occurs, followed by a new resolution.

A Metaphor for the Study of Capitalism

In the rest of this review, I want to summarise the main concepts and explain what I got out of the book.

I have never formally studied economics for any extended period of time. Although I originally wanted to be a chemical engineer, I am terrified by any book that contains mathematical formulae.

While I used to understand them intuitively, now they seem like some form of dark arts.

It is my solemn duty to shelter you from these dark arts and the misery that could befall you if you come across them.

Therefore, I have decided to use a metaphor in my explanation of Capitalism, and the metaphor will be that of “Caterpillarism”, a term which is not yet in Wikipaedia.

Please bear with me and pay attention.


The Players

Heilbroner focuses largely on the following economists: Adam Smith, Malthus, Ricardo, Robert Owen, Saint-Simon, Fourier, Mill, Marx, Edgeworth (no, I hadn’t either), Von Thunen (didn’t he make the rockets in “Gravity’s Rainbow”?), Walras (wasn’t the Walras Paul?), Bastiat (I thought he was an 80’s graffiti artist), Henry George, Hobson, Marshall (holler for an economist), Thorstein Veblen, Keynes (the guy they named Keynesianism after),  Schumpeter (I’m not sure if it rhymes with trumpeter, I don’t know anybody who’s ever pronounced it), and Adolphe Lowe.

Now if I was wedded to the list technique, I would probably just end my review, and you would conclude that I must know what I’m talking about, look at my star rating and decide that you will (will never ever) read this book because I did.

But I am not the sort of Good Reader who is content with lists. In fact, by and large, I despise them.

I think there are 19 dismalists in that list, which is far too many.

So I’m going to put them on two teams, one team consisting only of Karl Marx, and the other captained by Adam Smith, but including everybody else.

I’m not saying that Smith was better than the rest, just that he was the first, plus he broke the back of economics and the others have really just refined it or improved it by degree.

Why Caterpillarism?

So now these two teams have to explain Caterpillarism.

Why Caterpillarism? Well, I’ll tell you.

Caterpillarism really only started [ages ago/ in the 1760’s/ in 1848/ before the war (but which war?)/ last century/ in Year 8 at High School] and it is still changing.

Just when somebody thinks they can explain it, it undergoes some crisis or breakdown that changes the rules so much that it doesn't even seem to be the same game anymore.

So the metaphor I want to use is of two teams of dismal scientists examining a life form which they know only to be a Caterpillar.

You could imagine that this life form might live and die as a Caterpillar, but gradually we learn that Caterpillars can transmorph into a Butterfly or a Moth.


Team Smith

In reality, I made Smith a captain, because he’s the one who first believed that the Caterpillar was a juvenile Butterfly.

In his eyes, it’s a beautiful thing, it’s capable of progress, change, growth and improvement, it works, and it doesn't need anybody from outside to make it work or tweak it.

In fact, it works best when nobody tweaks it at all. It’s self-regulating. The invisible hand of the market is working away behind the scenes, yes, invisibly, just like God is supposed to.

Despite the fact that it is made up of numerous opposing forces, the Caterpillar finds an equilibrium on its own.

The Caterpillar needs opposing forces, just like humans need opposing thumbs. We couldn’t work, if we didn't have them.

Even in times of crisis, the Caterpillar reaches an outcome that was meant to be. OK, some people might suffer, but they were intended to suffer, for the good of the overall system.

Shit happens in this system, but that’s like saying that football players occasionally do a hamstring.

You play the game, you assume the risk of injury.


Team Marx

No prizes for guessing that Marx believed the Caterpillar would turn into a Moth.

Apart from the competition between merchants, the opposing forces represented class interests, the Caterpillarist and the Working Class.

The interests of the two classes are diametrically opposed. One class does not win, unless another loses.

It’s a sport, and nobody has come along to see a scoreless draw.

Marx didn’t violently disagree with Smith’s understanding of the mechanics of the Caterpillar.

He primarily disagreed with what would happen in the future.

He believed that Caterpillarism was headed inevitably toward disequilibrium, and one day the Working Class would revolt and overturn Caterpillarism in favour of Communism.

Not only did he believe a Revolution would happen, he believed that it was dictated by the concept of Dialectical Materialism. It was inevitable, and the duty of Communists around the world was to facilitate the Revolution.


The Composition of the Ball

Now that we have two Teams, we need to define what sport they are playing. What is in contention?

All good sports require a ball (or something a bit like a ball). [Sorry, I refuse to accept that anything that involves peddling or paddling is a sport.]

As it turns out, the dispute is about the ball. Not what you do with the ball, but the composition of the ball.

The ball is the product of Caterpillarism, the goods that are made, bought and sold.

Every time a ball is made and sold, a goal is scored.

Who gets the credit for scoring the goal? And in what proportion? What is the relative value of a “goal assist”?

The measure of the value of the ball is its price. How much is it sold for? How was the price determined and who ultimately gets a share of the price?

Team Smith believes that the price includes the cost of land, materials, and labor (the effort of the Workers who actually make the ball and distribute it around the park), plus a margin for the Caterpillarist’s profit.

Team Smith believes that the Caterpillarist is entitled to negotiate and pin down its costs of input, and therefore it is solely entitled to whatever profit it can generate by playing the game or scoring a goal.

The fact that these other contributions were required does not entitle the contributors to a profit share.

The profit is the reward for, or return on, the use of the Caterpillarist’s capital.

Team Marx believes that the profit is not strictly speaking the product of the Caterpillarist’s capital, it’s the product of the Workers’ labor (the “labor theory of value”).

To the extent that the Caterpillarist has any capital, it reflects the profit previously made from other Workers’ labor.

Thus, in Team Marx’ eyes, the Caterpillarist is nothing without labor.

Caterpillarists should not be entitled to expropriate the profit from the Workers’ labor.

The purpose, then, of a Revolution is to end the disequilibrium and terminate the misappropriation of the fruit of the Workers’ labor.

If you want to read more about why this was so important to Marx philosophically, see my review of Marx' "Economic and Philosophic Manuscripts":


Half Time Score

In the late nineteenth century and the early twentieth century, the Caterpillarists might have thought they were winning, but the world got pretty close to Revolution everywhere, not just in Russia.

Ironically, what avoided World Revolution was a rule change that allowed the Referee to influence the play.

Rather than allow the Caterpillarists to thrash the Workers by a margin that would depress everyone, the Referee in the form of Social Democratic Governments legislated to achieve a level playing field.

Minimum wages were set. Working conditions were protected by law. Workers suffered less misery. They got a little more comfortable and lost their revolutionary fervor.

They still didn’t get a share of the profits. They just got paid a better wage, usually whether or not the Caterpillarist generated a profit. So the risk-taking Caterpillarist could go down the gurgler, while the Workers still got paid (although they might lose their jobs).

The Second Half

We’re still playing the second half of the game, and there is no end in sight.

Team Smith and the Caterpillarists still believe that some form of equilibrium has been and will be achieved, albeit with the intervention of the Referee against the wishes of the laissez-faire Caterpillarists.

Even if a Revolution has been avoided, the outcome is not the self-regulating equilibrium the Caterpillarists were seeking.

Team Marx appears to have been irreparably damaged by the failure of attempts to do without Caterpillarists in Communist economies and the complacency of the Workers who are doing alright.

These rule changes have forced a reconsideration of the strategies of each Team.

Some on Team Smith (e.g., Schumpeter) believed that Caterpillarism could not survive in such an adversary manner and that profits would eventually erode to such a level that Caterpillarists would effectively receive only a salary for managing their capital.

Thus, the differential between capital and labor would diminish and potentially manifest itself in a distinction only between Workers and Management.

Ultimately, even this difference would be reflected primarily in the relative level of remuneration.

Late in the second half, the players were confronted by new rule changes.

After a period of relative post-Communist stability, Caterpillarism was rocked by Inflation, Recession, Depression, and the Global Financial Crisis.

Once again, the Referee intervened to make sure the game continued.

The Referee supported the Caterpillarists with cash and credit, so that they in turn could pay wages and salaries to the Workers and Management.

Nobody quite knows at what cost this support will come.

The important thing is that the Referee mitigated the misery of the Workers and Management.


State Caterpillarism

At the same time that some on Team Smith have suggested that profits might diminish over the course of Caterpillarism, China has apparently mastered the art of profit generation, only not in the name of Caterpillarism, but in the name of Communism.

The surplus value created by its Workers is being aggregated by the State or State-owned Enterprises.

Not only is it funding domestic growth, it’s also propping up first world economies and their governments’ deficits.

Thus, China, in a reversal of the dynamic of Colonialism, is actually capitalizing on investment opportunities in the West to create greater domestic wealth, while making itself an indispensable source of economic stability in the West.

What emerges from this is a principle that profit itself is not intrinsically bad, at least if it is generated in the name of the State, which is presumably representative of the Workers’ interests.

In other words, public profit good, private profit bad.

Team Work

It seems to me that these disputes about profits are effectively arguments about the relative entitlement to profit as between labor and capital.

It’s amazing that an issue that, technically, is within the realm of Cost Accounting has become a philosophical and political issue that has dominated economics and government for almost 260 years.

For the Marx Team, at least, its importance derives from the fact that it dictates the relationship of Workers with the product of their labor (alienation), as well as the quality of their life (subjugation to Caterpillarists).

However, you have to wonder why the alienation should be any different in the case of State Caterpillarism.

Does it matter who appropriates the profit? Does it matter who subjugates the Worker? As long as the State purports to represent the whole of society, it’s OK?

Somehow, I can’t see Workers making such a fine philosophical distinction.

What seems to be missing is a greater role for Worker Profit Sharing, whereby the Workers share in the surplus value that they have created within the framework of a joint venture.

Philosophically, this recognises that it is their labor that generated a proportionate part of the profit, while giving them greater financial security.

Retirement Incomes

There is another justification for profit that has become more important as the average lifetime of the public has increased.

Assuming that Workers still retire from active, full-time work, it will be necessary for them to fund some, if not all, of their retirement income for the rest of their lives.

Thus, remuneration should not just be about funding a subsistence lifestyle while you are working.

It must also fund post-retirement incomes.

If the Worker is not to bear some or all of the burden of their incomes, the burden would fall back on pensions funded by the State.

Ultimately, someone (Workers or State) would still have to generate sufficient funds to fund these pensions.

Thus, the question seems to be not whether profits need to be generated, but who is entitled to them.


The Vision Thing

Heilbroner laments the fact that these types of economists and philosophers seem to have exited the field of economics in favour of dismal mathematical and mechanical economists.

Nobody is trying to extend the dialectical narrative into the future. Nobody is telling the story anymore. It’s just happening around us, and we’re reacting. We’re walking backwards into the future, with little, if any, hope of affecting the outcome.

In a way, the game hasn't finished yet, but nobody is trying to predict the outcome, Butterfly or Moth.

And if you don't try to predict the outcome, how can you hope to influence it?

Perhaps, this passive state of affairs is a product of Social Democratic governments that intervene in Caterpillarism.

Perhaps, we won’t end up with a Butterfly or a Moth, but some hybrid that we haven’t conceived of and won’t be able to define until it is upon us.

Perhaps, then, Caterpillarism will continue to shape us, instead of us shaping it.

If so, who knows whether we will turn into Butterflies or Moths?

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