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A Defence Of King’s
Argument(s) For Pluralism
J. E. King
(La Trobe University, Australia)
© Copyright 2004 J. E.
King
Paul Davidson’s critique of my ‘Three Arguments for Pluralism in
Economics’1 raises a host of important questions. To reply to them
all would require a very long article. In the interest of conciseness, I
shall restrict myself to twelve points of disagreement between us2.
1. ‘Keynes’s “General Theory” is the sole correct alternative to
neoclassical economics’ (Davidson 2004, p. 1). This prompts three questions. Is
it unambiguous? Is it correct in all essential details? Is it complete? I
would answer ‘No’ to all three. There are Old, New and Post Keynesian
interpretations of the ‘General Theory’, and those who call themselves Post
Keynesians themselves disagree on many issues concerning it (see King 2002;
Davidson 2003-4, King 2004b). ‘Paul Davidson’s interpretation of Keynes’s
“General Theory” is the sole correct alternative to neoclassical economics’
is a less ambiguous, but also less acceptable, statement. One reason for
rejecting it is that the “General Theory” itself contains elements that many
Post Keynesians find unacceptable (Marshallian
microeconomics, marginal productivity theory, neoclassical capital theory, to
name the three most prominent examples; Paul would dispute the presence of
the third). Finally, the “General Theory” is demonstrably not complete, since
it neglects long-period issues and open economy problems, not to mention any
systematic discussion of macroeconomic policy dilemmas. ‘An extremely valuable
source for alternatives to neoclassical economics’, to be sure, but ‘the sole
correct alternative’? I think not.
2. ‘All reality is complicated. But that is not a sufficient defense for pluralism’ (Davidson 2004, p. 2). Paul
follows this statement with a physical example: gravitation affects the tides
in a complicated way, but this does not require plural explanations for the
observed tidal phenomena. This is a most unexpected assertion of the unity of
the natural and social sciences – an entirely legitimate (if controversial)
position, but one which is surprising when it comes from someone like Paul
who has spent the last quarter-century arguing that economic phenomena are non-ergodic.
As he explains in his latest book, ‘The ergodic
axiom asserts that the future can always be statistically reliably calculated
from past and present market data’ (Davidson 2002, p. 43). There are good
reasons, which Paul himself has identified, for doubting that this is
possible in the economic world, where human beings have to make decisions in
circumstances of fundamental uncertainty. But the ergodic
axiom is true where the data are
geophysical in origin; thus Paul’s example misses the point. Metaphors aside,
the problem of the completeness of the “General Theory” remains. Part of the
complexity of the economic world is due to the multiplicity of problems that
require solution, and another part is due to the fact that these problems
often change – sometimes very rapidly – over time. On both counts it is
improbable that a book published 68 years ago contains all the answers.
3. ‘If one wishes to analyze (explain, discuss) feudalism, or the economies
of biblical times, one must add additional restrictive axioms to Keynes’s
general theory to obtain a special case theory of feudalism, or of biblical
economics [economies?], etc.’ (Davidson 2004, p. 2). This is an astonishing
claim. One might wish that Keynes had been more consistently clear in stating
it, but it is undeniably true that his “General Theory” is about a capitalist
economy, and therefore necessarily about a monetary economy. Money has
special properties, which entail that a monetary economy cannot be analysed
in terms of a theoretical framework appropriate to the analysis of a barter
economy. To cite Paul again: ‘Keynes denied that money was simply an “extra
complication” on the operation of a barter economic system’. Like Davidson,
he would therefore have been a strong critic of the neoclassical so-called
‘monetary approach’ to the balance of payments, since it ‘analyses the
operation of a real or barter economy in which (a) money has no real role to
play and (b) liquidity considerations are irrelevant’ (Davidson 2002, pp.
150, 153). Exactly. So what conceivable ‘additional restrictive axioms’ could
extend a theory of ‘employment, interest and money’ to an economy in which
there is no wage-labour and thus no employment, and also no money, and
therefore no interest? Why would anyone wish to perform such an exercise? Is
there a shred of evidence that Keynes did? It is clearly true that some form
of ‘common general theory’ will ‘underlay [sic] all these specific cases of historical economies’ (Davidson
2004, p. 2). Neither I nor Geoff Hodgson, whom Paul also criticizes, would
deny this. Such a ‘common general theory’ would have to say something about
the conditions of reproduction (economic, social, ideological), and would
probably draw on Marx and Weber to do so (see Hodgson 2001, part IV). It would have very little to do with
Keynes. The ‘general’ in Keynes’s “General Theory” refers to its ability to
account for involuntary unemployment, which ‘classical’ (pre-1936)
macroeconomics could not do. Note that unemployment presupposes employment,
which presupposes wage-labour, which presupposes capitalism. Keynes does make
this (reasonably) clear. His book
was, after all, about ‘the economic society in which we actually live’
(Keynes 1936, p. 3). It was not about the economic society in which some of
his ancestors used to live, in past centuries or previous millennia.
4. ‘Hodgson, as well as King and many others, have confused the concept of a
general theory with that of Debreu’s concept of general equilibrium as the mother of
all economic theory!’ (Davidson 2004, p. 2). I cannot see any justification
for this charge, either in my short article or in Hodgson’s long book. I have
many criticisms of Hodgson (King 2003), but on this point we agree: some
statements can be made that apply to all economies, at all stages of human
development. They have nothing to do with Debreu,
or Keynes, but relate to the fundamental conditions for economic, social and
ideological reproduction (see 3. above). They are important, but extremely
limited in their range, and most definitely do not constitute a ‘sole correct
alternative to neoclassical economics’.
5. ‘Keynes’s general theory analysis is an axiomatic based approach that
required fewer restrictive axioms than any other economic theory’ (Davidson
2004, p. 2; stress removed). Again, this is an astonishing proposition. It
may be true that the “General Theory” can be
formulated (more precisely, reformulated) axiomatically. There might be some
merit in doing so, though there would also be costs (most obviously, a
dramatic decline in readability and rhetorical impact). But Keynes never did
this, and nor, up to the present day, has Paul Davidson or anyone else. Once
it had been done, it might then be possible to evaluate Paul’s claim that
Keynes requires fewer axioms than anyone else. This itself, however, is not
an unambiguous statement. Fewer axioms to do what, precisely? In reference to
what sort of economy? In what sort of economic theory? On my reading, Keynes
was a Marshallian in matters of microeconomics. The
problems that he tried to solve were thus different from – and more
interesting than – those of Walras, and to rejoice
in his (supposed) ability to solve them with fewer axioms is a bit like
praising a pear tree for having fewer branches per ton of fruit than an apple
tree has.3
6. In addition to his view of ‘economics as a mathematical (axiom-oriented)
logical analysis’, Keynes also ‘had a pragmatic vision of a physical real
world process in mind’ (Davidson 2004, p. 2). True. I rather suspect that in
2004 Keynes would line up with the scientific realists (and perhaps even with
their Critical Realist fraction) in opposing the postmodernists, who deny our
ability to understand ‘physical real process(es)’,
and sometimes appear to deny the existence of such processes in the first
place. But it is difficult to comprehend the connection between this
‘pragmatic’ (practical? policy-oriented?) approach and the supposed axiomatic
basis of the “General Theory”. Which axioms would be necessary, and
sufficient, to justify each version of the ‘Keynes Plan’ that Skidelsky documents in such detail in volume 3 of his
Keynes biography? What axioms would be necessary, and sufficient, to justify
Keynes’s support for the across-the-board 10% money wage cut imposed in
Australia by the Arbitration Commission during the Great Depression? (Keynes
1932). And so on, almost ad infinitum.
7. ‘Bourbaki did not accept Keynes’s search for the
“maximum” general theory’ (Davidson 2004, p. 3). Quite possibly true. I had not realised that this composite
French mathematical genius4 had made any comment on Keynes’s
“General Theory”, or any other economic issue, and would be very interested
in pursuing the appropriate references. More generally, I find Paul’s
discussion of Bourbakism very difficult to follow,
and its relevance to pluralism in economics is not immediately apparent.
8. ‘It is this Bourbakian view that, I believe, the
proponents of “pluralism” are protesting against – even though they do not
know it’ (Davidson 2004, p. 3). Not true. Speaking for myself, I’m protesting
against the pretensions of any school of economics, mainstream or heterodox,
to have discovered the truth, the whole truth and nothing but the truth,
since I do not believe that such claims are correct. That is to say, I’m
protesting against unsystematic and non-axiomatic neoclassicals
like Milton Friedman, in addition to the few remaining unreconstructed Walrasians, if the latter really are/were Bourbakian. I am also protesting against heterodox
economists who make similar bold claims. In olden times many Sraffians seemed to me to fall into this category, which
is why I was so pleased to see Heinz Kurz and Neri Salvadori coming out in
support of pluralism. Today, the culprits are usually sectarian Marxists –
and now also, alas, Paul Davidson.
9. ‘Formalism can be consistent with “open models”’ (Davidson 2004, p. 3).
True. Babylonian thinkers would probably agree with this. After all, Richard
Feynman, whose work on scientific methodology inspired Sheila Dow to promote
the Babylonian mode of thought among Post Keynesians, was a theoretical
physicist by trade. But formalism can also be consistent with closed models,
used dogmatically5. This is what I, and other pluralists, object
to.
10. ‘I believe that Hodgson’s view of what is good economics is a matter [of]
style, politics and taste on Hodgson’s part’ (Davidson 2004, p. 4). Hodgson
can answer for himself, as can Chick and Dow, against whom this accusation is
also made. Unlike Roy Weintraub (and Paul
Davidson?) I am not at all sympathetic to postmodernism, and I deny that
‘style, politics and taste’ should play the dominant role in economic theory
or economic methodology6. Judgement
is certainly involved, as Keynes himself recognised in a famous passage: ‘….
the master-economist must possess
a rare combination of gifts. He
must reach a high standard in several different directions and must combine
talents7 not often found together. He must be mathematician,
historian, statesman, philosopher – in some degree. He must understand
symbols and speak in words. He must
contemplate the particular in terms of the general, and touch abstract and
concrete in the same flight of thought. No part of man’s nature or his
institutions must lie entirely outside his regard. He must be purposeful and
disinterested in a simultaneous mood, as aloof and incorruptible as an artist,
yet sometimes as near the earth as a politician’ (Keynes 1933, p. 141).
‘Style’ and ‘taste’ may be part of this, but only part.
11. ‘But how can we assure [ensure?] that different models are not logically
inconsistent unless we have a benchmark “general” model with a minimum number
of well-specified axioms that acts as the foundation of all other models?’
(Davidson 2004, p. 4). Fine, at some level(s) of generality. (Aristotelian
logic might constitute such a model, at a very high level of generality indeed).
But such a ‘general’ model is almost inevitably going to be highly abstract,
perhaps to the extent of being almost empty of implications when it comes to
specific questions concerning the macroeconomics of advanced capitalism, for
example. (Again, see 3. above).
12. ‘I believe that encouraging pluralism in economics without a common
general theory foundation merely encourages heterodox economists to erect a
modern Tower of Babel, thereby making it easier for Mainstream economists to
ignore the resulting incomprehensible babel coming
from this heterodox structure’ (Davidson 2004, p. 5). This proposition seems
to imply that we should permit the mainstream to set the agenda for heterodox
economics, and thus to define its structure and content8. Suppose
that we were, nevertheless, to accept it. What would our ‘common general
theory’ be? At one extreme it might be Paul Davidson’s interpretation of
Keynes’s “General Theory”, line by line. At the other extreme, we could
settle for something very much weaker, and therefore very much more capable
of attracting support: rejection of Say’s Law, as understood by Keynes, and
therefore a recognition that aggregate output and employment are more likely
to be demand-constrained than supply-constrained. Perhaps we should take as
our ‘common general theory’ something in between, like Tony Thirlwall’s ‘six central messages of Keynes’s vision’.
Output and employment are determined in the product market, not the labour
market; involuntary unemployment exists; an increase in savings does not
generate an equivalent increase in investment; a monetary economy is
fundamentally different from a barter economy; the Quantity Theory holds only
under full employment, with a constant velocity of circulation, while
cost-push forces cause inflation well before this point is reached;
capitalist economies are driven by the animal spirits of entrepreneurs, which
determine investment decisions (Thirlwall 1993, pp.
335-7, cited in King 2002, pp. 5-6). Presumably we can then continue to
disagree on everything else. Should we embrace Marshallian
microfoundations, or some other sort? Is the quest
for microfoundations itself a methodological
mistake? Are we to endorse fixed exchange rates, like Paul Davidson, or
floating rates, like Thomas Palley and Randall
Wray? What is the correct position on the Wray-Mosler-Mitchell-Watts
‘employer of last resort’ proposal to combat unemployment? At what point, precisely, does vigorous
debate on questions like these degenerate into Babel? Keynes’s “General
Theory” was surely ‘never intended to
be a theory of everything’, to cite Terry Eagleton
only slightly out of context9. It is not ‘some form of cosmic
philosophy along the lines of Rosicrucianism’ (Eagleton 1996, p. 111), and it does not offer an answer –
still less the guaranteed-correct-only-possibly-answer – for all the world’s
problems, 58 years after the death of its author.
Notes
1. Davidson
2004; King 2004a. (My article was first published in Journal of Australian Political Economy, an excellent eclectic
journal which will interest many northern hemisphere readers of Post-Autistic Economics Review (details
from Frank Stilwell at the University of Sydney: franks@econ.usyd.edu.au)).
2. I do not
attempt to answer the accusation that I have misrepresented Paul’s views in
this matter (Davidson 2004, p. 1), as I do not understand the grounds for his
complaint. I shall of course be happy to make amends if I have done so.
3. This
assumes that Marshallian economics can be
formulated axiomatically, without contradiction, which Sraffians
– and Walrasians – might deny.
4. The Bourbaki project was begun in the 1930s by a group of
seven mathematicians who as ‘an elaborate joke….gave themselves the name of
an obscure nineteenth-century French general, Nicolas Bourbaki,
and agreed to operate as a secret club or society’ (Weintraub
2002, pp. 104-5).
5.
Incidentally, I can’t make any sense of the sentence that straddles pp. 3-4
of Paul’s article (‘In my vie … predictable future’). Perhaps a word or words
are missing?
6. Economic
policy, of course, is another matter altogether, since this by definition
does involve politics.
7. I am
grateful to Frank Stilwell for his advice on this question; he is not
implicated in the outcome.
8. I owe
this important point to Therese Jefferson.
9. I have
already stolen this phrase for the title of another paper, this time on
Marxism (Jefferson and King 2001).
References
Davidson, P.
2002. Financial Markets, Money and the
Real World, Cheltenham, UK and Northampton, MA, USA: Elgar.
Davidson, P.
2003-4. ‘Setting the record straight on A
history of Post Keynesian economics’, Journal
of Post Keynesian Economics 26(2), Winter, pp. 245-272.
Davidson, P.
2004. ‘A response to King’s argument for pluralism’, Post-Autistic Economics Review, issue No. 24, 15 March 2004,
article 1, http://www.btinternet.com/~pae_news/review/issue24.htm.
Eagleton, T. 1996. The Illusions of
Postmodernism. Oxford: Blackwell.
Hodgson, G.
2001. How Economics Forgot History: The
Problem of Historical Specificity in Social Science. London: Routledge.
Jefferson,
T. and King, J. E. 2001. ‘“Never intended to be a theory of everything”:
domestic labor in neoclassical and Marxian
economics’, Feminist Economics
7(3), November, pp. 71-101.
Keynes, J.
M. 1932. ‘The report of the Australian experts’, in The Collected Writings of John Maynard Keynes, Volume 21, London:
Macmillan and Cambridge University Press for the Royal Economic Society, pp. 94-100.
Keynes, J.
M. 1933. Essays in Biography.
London: Rupert Hart-Davis, 1951.
Keynes, J.
M. 1936. The General Theory of
Employment, Interest and Money. London: Macmillan.
King, J. E.
2002. A History of Post Keynesian
Economics Since 1936. Cheltenham, UK and Northampton, MA, USA: Elgar.
King, J. E.
2003. Review of Hodgson (2001), Australian
Economic History Review 43(1), March, pp. 103-5.
King, J. E.
2004a. ‘Three arguments for pluralism in economics’, Post-Autistic Economics Review, issue no. 23, 5 January 2004,
article 2, http://www.btinternet.com/~pae_news/review/issue23.htm.
King, J. E.
2004b. ‘Unwarping the record: a reply to Paul
Davidson’, La Trobe University, mimeo.
Thirlwall, A. P. 1993. ‘The renaissance of Keynesian economics’, Banca Nazionale del Lavoro Quarterly Review 186, September, pp. 327-37.
Weintraub, E, R. 2002. How Economics
Became a Mathematical Science. Durham, NC: Duke
University Press.
j.king@latrobe.edu.au
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SUGGESTED CITATION:
J. E. King, “A Defence Of King’s Argument(s) For
Pluralism ”, post-autistic
economics review, issue no. 25, 18 May 2004, pp. 16-20, http://www.paecon.net/PAEReview/issue25/King25.htm
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