What is the unified theory of capitalism about? It is a positive economic theory that seeks to explain the functioning of the capitalist system. It is unified in the sense that it seeks unity of knowledge, rather than fragmentary and inconsistent knowledge. It assumes that the capitalist system is constituted by two qualitatively different types of societies, the First World and the Third World countries . Thus, the unified theory of capitalism pursues to explain each group of countries taken separatelyâthrough partial theoriesâand then the system taken as a whole through a unified theory .
It is unified theory in another important sense. It seeks to integrate the ecological system and the capitalist system into a single economic process. It assumes that the production of goods is constraint by the laws of nature. The production of goods is not an isolated system. Hence, the unified theory seeks to explain the economic growth process , which is seen as evolutionary, with quantitative and qualitative outcomesânot as a mechanical process, with quantitative outcomes only.
The unified theory intends to be a scientific economic theory. Therefore, it seeks to give epistemological justification to its findings. Science is epistemology . The composite epistemology âwhich combines two epistemologies, the abstract process and falsificationismâis utilized for that purpose. The composite epistemology deals with the logic of scientific knowledge in hyper-complex realities, such as the social world. According to this logic, scientific knowledge requires a scientific theory as abstract representation of the real social world, which, by construction, is falsifiable or testable.
The economic process is therefore the abstract representation of the social economic activity, which refers to the production of goods and its distribution among social groups in human societies. What are the ultimate factors that explain the observed production and distribution outcomes in human societies? This is the scope of economics.
The principles of the composite epistemology are too general to be operated; hence, practical and operational rules for scientific research need to be derived from the composite epistemology . This is given by the alphaâbeta method , which constitutes the practical rules to construct testable scientific theories so that they can be either accepted or rejected in economics and the social sciences . One of these rules says that economic theories are falsifiable through the use of models, which, by assuming a particular social context under which people interact, constitute a more operational representation of the economic process and are then falsifiable.
The unified theory assumes that the economic process under capitalism is separable into three models: static (for the short run), dynamic (for the long run), and evolutionary (for the very long run). The unified theory ensures that the findings in each model are consistent with each other. Hence, the theory is unified, leading to unity of knowledge, in this analytical sense as wellâone world, one explanation.
Therefore, theoretical models of the unified theory have been constructed to represent the capitalist system and then submitted to empirical refutation, following the rules of the alphaâbeta method . The results have shown that the empirical predictions of the models are consistent with the available data. Therefore, on epistemological grounds, the unified theory has been accepted as a valid theory of the capitalist system; that is, the abstract world that the unified theory has constructed is a good approximation of the real world capitalism.
In particular, the evolutionary model of the unified theory is able to explain the fundamental fact of capitalism: the outcome of the economic growth process includes a continuous rise in the income levels of capitalist countries , but accompanied by qualitative changesâhigher degrees of income inequality and continuous degradation of the bio-physical environmentâ, the consequences of which are social maladies .
Considering social order as a public good , increasing income inequality is a social malady for it is conductive to stronger social conflicts and thus to significant social disorder conditions. Environment degradation also constitutes a social malady. Depletion , pollution , and climate change leads to a more hazardous human life and to more intense social conflicts and social disorder within the current generation; moreover, the wellbeing of future generations and the very survival of the human species are also put at high risk.
The income effect of economic growth on the quality of society is positive, but the social maladies effect is negative. What is then the net effect of economic growth upon social wellbeing?
According to the evolutionary model, in the first stages of economic growth the positive effect dominates, but in later stages the negative effect will. As the economic growth process is repeated, the environment problems of pollution and depletion become more acute, and one of themâwhichever comes firstâwill set the limits to growth. At some period, the economic growth process will collapse and switch to another type of process. Economic growth is thus unsustainable. Moreover, economic growth ultimately puts the very survival of human species not only at risk, but the higher the growth rate, the sooner the collapse period will occur.
What are the ultimate factors explaining the fact that the economic growth under capitalism is accompanied by social maladies ? Democracy is one of the fundamental institutions of capitalism . Why do social maladies persist under democracy? This is certainly a paradox.
According to the evolutionary model, the power structure is the ultimate factor explaining this outcome. The power structure includes two components: the initial inequality in the individual endowments of economics and social assets and the fundamental institutions of capitalism , markets and electoral democracy . Markets imply the rule of voluntary exchange of goods. Electoral democracy in turn imply the rule that governments must be elected by voting. The implication is that electoral democracy is a mechanism by which the political power of the people (the workers) granted by democracy is transferred to the political elite who is able to capture the state by buying votes and for its own benefit.
Given these institutions, the initial inequality in asset distribution leads to the existence of economic and political elites , and then to a concentrated power structure , for these elites exercise their power through the institutions of market and electoral democracy . Thus, the power elites have incentive to promote economic growth , for they are the main beneficiaries, not only in their income shares but in maintaining their privileged position in society. Furthermore, economic growth with social maladies will be reproduced period after period as long as the power structure remains unchanged. Democratic capitalism is not a self-regulating system regarding social maladies . The paradox is thus solved.
Finally, the evolutionary model takes as criterion of social wellbeing the category of quality of society, which combines income levels and social maladies . Along the economic growth process , the quality of society will depict a particular trajectory, which has an inverse-U shape: At the initial stages of economic growth, the positive effect of rising income levels upon quality of society dominates, but ultimately the negative effect of social maladies will become dominant, which ultimately leads to the collapse of the economic growth process.
This empirical prediction is consistent with the available facts of the world society since the 1950s. Given that the capitalist system is predominant in the world society, the predictions of the model can be extended to the latter. Indeed, quality of society measured by the variable healthy life expectancy (life expectancy corrected by disease days lost) have started to decline around 2010. Pollution is already among the top ten killers in the world.
Earth scientists have shown that the planet has already entered into a new age, replacing the Holocene age , which is called the Anthropocene age , for it originates on human activities. âHuman activitiesâ can be defined more precisely as the economic growth process . Therefore, this scientific finding is also consistent with the predictions of the evolutionary model of the unified theory.
What are the choices that human society has in the Anthropocene age ? Science-based policies have been derived from the unified theory. Given the side effects of economic growth, the current pro-growth policies must be dethroned; hence, the only choice left is to enthrone public policies that seek the improvement of the quality of society instead. However, these new public policies are against the interests of the current power elites . Therefore, the new public policies require the dethroning of the current power structure âthe ultimate factor in the economic growth process âwith which capitalism operates.
Taking into account that the capitalist system is becoming the dominant form of social organization in the world society, these conclusions of the unified theory can be extended to the world society as well. The world society should follow public policies that promote the improvement in the quality of society instead of the current pro-growth policies, which have become universal.
In sum, the empirical predictions of evolutionary model of the unified theory have been proven to be consistent with available facts. Then, on epistemological grounds, the unified theory has been accepted as a valid theory that explains the real capitalist system. However, in accord with the composite epistemology , this acceptance can only be provisional, until new data are produced, superior economic theory is invented, or superior epistemology is created. On epistemological grounds, it can also be said that the unified theory is superior to standard economic theories, in the sense that the unified theory is able to explain the facts that the other economic theories can, but it explains facts that the others cannot. Economic growth with social maladies is one of these facts.
Book Content
The unified theory of capitalism has recently been presented as a new scientific endeavor in economics in several books. The present book is a kind of new volume of the series. It presen...