Dear All, 


As I've been brought into this discussion, perhaps an elaboration of my position is needed. Geoff writes: “On page xv of his book John explained that his volume tries to show: "why the neoclassical perspective, resting on a utility theory of value, became increasingly prominent, then dominant, in the nineteenth century. The argument rests on the underlying economic change undergone by capitalist society during the period". Not only does this extract highlight the concept of utility, but it also shows that John's argument is more deep and subtle than Randy suggests.”

 

I'm not sure that the above reference indicates greater subtlety or depth than that offered by Randy (well, Randy is rarely subtle!), but I don't want to be misunderstood. The UTOV was selected for a couple of reasons. The main reason was that, following Adam Smith, we have two choices to follow in theorizing about a commodity-producing economy--that is, capitalism as we call it. Use value and exchange value. Smith, Ricardo, James Steuart, Petty, et al. chose exchange value. This represents the "classical political economy" approach--correctly so in my estimation. To counter this approach, the "neoclassicals" went the utility route, which they identified--incorrectly--with use value. (As an aside, I think Veblen was wrong to label such economists as NEOclassical. He should have labelled them ANTIclassical.) Jean Baptiste Say, the "father" of neoclassicism starts his Treatise by attacking Smith and the labor theory of value. The attack on the LTOV and emphasis on exchange value continues and culminates in the work of Jevons, Walras, Menger, and, in the next generation, Marshall, Clark, et al. We're off to the races. My position is that there's no better authority in all this than Walras, a notable chap who is sometimes labelled a socialist. Ha! He's no more a socialist than my departed mother. All one has to do is read the first chapter of his Elements. He begins with an examination of "economics" that can be seen as favorable to institutionalists. Society is there, history is there, culture is there, etc. He then proceeds to whittle his definition down to what he terms "pure" economics. And this is utility maximization, equilibrium, etc. but--MORE NOTABLY--the preeminence of a competitive, free exchange, profit-seeking structure. That is, capitalism, though in an idealized, hypothetical form. And this is what matters. 

 

Classical theory began as an attempt to understand capitalism--and, yes, I accept the "ism." Capitalism is not of a feudal, nor a slave, nor a primitive communist organization. (Speaking of which, these were still hanging around when capitalism was a new-fangled order, and there were those who wanted to revert to such an arrangement--the Diggers during the English civil war.) Early "economists" (as this grouping was something new as well) sought understanding; by the time of Ricardo, such understanding became criticism. We can see the beginning of such criticism in Smith. And then we get the onslaught--Sismondi, St. Simon, Proudhon, and, in particular, Owen. (On all this, see Claeys, Machinery, Money, and the Millennium.) The reaction, and that's what it was, was directed toward the saving of capitalism from its critics. If one reads the proto-neoclassical writers from Say through the post-Ricardian period, one will find overt statements to this effect. If you want quotes, see my book referenced. (And don't get me started on John Stuart Mill!) To "save" capitalism, one needed an alternate theory to that posed by the Classicals. This was based on a UTOV (in the main), but that was merely a theoretical subterfuge. The whole campaign was to move the dominant discourse away from the Classical perspective (which, of course, by the late 19th C had become dominated by a fellow named Marx, who was essentially ignored, though Marshall took a couple of potshots at the old geezer.) But, in this anti-classical discourse, one could not ignore, bypass, whatever, the nature of the commodity--a use value produced for exchange. So, should use value or exchange value dominate? We're back to Smith. For anti-classicals, it's use value, transformed into a generalized UTOV, courtesy of Jevons, Walras, Pareto, et. al (but based on their anti-classical predecessors). But, why dominance in the last third of the 19th C?  This is the period of oligopolization when corporate forms of organization were able to "sabotage" (a la Veblen) the production of use values (in the classical sense). It's also the period when the theory of competition, equilibrium, optimality, etc. was formalized and became increasingly the standard. NOTE WELL: neoclassical theory becomes dominant by erecting a hypothetical economic order just as the real economic order displays characteristics that are the very opposite of the theory supposedly explaining it. Neoclassicism is political and is associated with the defense of capitalism. It has been so since its inception (Say, et al.), and remains so throughout its history. Its main function is to conceal the very nature of a capitalist social order. I'm in fundamental agreement with Randy, though I probably wouldn't have expressed my position so candidly: they're all S.O.B.s! (As a P.S., we’re all political. Ideology or political orientation can’t be eliminated from our theoretical arguments. We’re only human in this regard. Myrdal spoke to this in his The Political Element in the Development of Economic Theory. Heck, this even influences workers in the natural sciences. The various debates on Darwin should be enough to convince, but even physics is not immune.)

 

Now, if someone wants to take up the issue of Lange, et al., I'll be happy to oblige. Just one thing: in his 1930's article, Lange argued--essentially against Mises--that a socialist order could maintain itself IF it replicated the competitive pricing arrangements of a (hypothetical) capitalist order. This, when capitalism was not only non-competitive, but doing quite badly, and the Soviet Union was actually doing pretty well. So, what, for Lange, et al., did/does socialism mean? 

 

Sorry to take up so much space,

 



John F. Henry
Levy Economics Institute of Bard College

 
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