The Evolution of the Property Relation

Understanding Paradigms, Debates, and Prospects

A. Davis

• Editorial: Palgrave Macmillan
• Año: 2015
• ISBN:
  9781137346568
• Categoría: Economía
• Categoría: Econometría

Evolution of the Property Relation defines an approach to economics which is centered around the concept of property and explores the historical evolution of the relationship of the individual, private property, and the state, and the distinctive changes wrought by the emergence of the market.

Part I

Chapter One

The Property Relation

Introduction

Property has been a trope in the formulation of ideal social arrangements since the compilation of the Old Testament (Nelson 2010). It has served as a rationale for revolution in Locke’s writings, and a defense of the status quo in Burke. The norms associated with property, responsibility and independence, have been alternately celebrated (Pocock 1975) and reviled, when understood differently as acquisitiveness and accumulation, in the work of Rousseau and Proudhon. The ownership of property has been the justification for representation in government, and for the separation of powers (Nedelsky 1990). The foundation of political and economic arrangements, government and market, has been based on concepts related to property. The objective of this project is to trace these meanings of property historically for a better understanding of their conceptual foundations, institutional manifestations, and normative dimensions. Ultimately, this long-term analysis of property provides a contribution to the methodology of historical institutional economics, including the history of political and economic institutions as well as the associated systems of meaning. By expanding the field of study to include debates, the most astute defenses and critiques become part of the object of study, deepening understanding of institutional specificity and ongoing changes. Such a complete consideration of property as paradigm is necessary to undertake systematic critique and consideration of alternatives.

History of Political Economy

The Revolutionary Tradition

Certainly the revolutionary tradition is honored in Western political economic thought. The Revolution of 1688 in England is acclaimed in economic literature as defending property rights and establishing the principle of taxation with representation. This “bargain” between property holders and the monarch provided the institutional basis for economic growth celebrated in the West (North and Weingast 1989; Davis 2008; Pincus and Robinson 2010; Acemoglu and Robinson 2012). The right to challenge an existing government based on violation of natural property rights is defended by Locke, and helped to legitimate the American Revolution (Wood 1992).

The centrality of property has been based on both values and instrumental efficacy. For example, Smith based protection of property on the moral judgments of an “impartial spectator” (Haakonssen 2003). Further, the efficacy of protection of property rights for economic growth has been a key legitimating factor in economic institutions, and has been a foundation for economic models and policy recommendations, as well. That is, there are implicit norms of fairness and growth embedded in these foundational concepts (Greif 2006; Heilbroner 1996a, 334–335).

Property and Governance

While the notion of revolution has a distinguished history, the concept of property has also included a sense of ideal social arrangements. Once recognized by formal institutions, property rights assure proper incentives for economic growth and representation in government (North and Weingast 1989). To the extent that property embodies “freedom,” there is no need for further revolution (Berlin 1969). That is, there is an implication of the “end of history” (Fukuyama 1992; Wolin 1995, 1) as governance based upon property rights has achieved the proper institutional balance between growth and distribution.

On the other hand, there has been a long-standing critique of property as based upon exclusion, and making the essentials of life contingent upon employment in for-profit firms. In this context, property represents exploitation and becomes a rallying cry for “mounting the barricades” and demanding equality and redistribution. That is, the revolutions of 1688, 1776, and 1789 were “bourgeois” revolutions, and further revolution is necessary to end exploitation and to achieve genuine human “emancipation.”

These opposite notions, property as achieving the ideal form of governance and property as requiring ongoing critique, are both long standing in Western philosophical, political, and economic thought. The former relinquishes the focus on institutional change, but may also inadvertently forego the notion of self-directed participatory government. The focus on individual private property is subject to a fallacy of individualization, with no conceptual category to frame collective decision making. The assertion of the superiority of property rights and self-regulating markets may focus solely on growth as the criterion for ideal economic arrangements, and may forsake the expressive and participative dimensions of self-government. Collective agency may be sacrificed to achieve individual rationality and stability. On the other hand, continuing critique risks uncertainty and unrest.

Critique

The desirability of ongoing critique as part of the practice of social science is not widely accepted. The notion that ideas help to shape political and socioeconomic arrangements is observed in the development of constitutions. The related possibility exists that these political and socioeconomic arrangements also help to shape ideas. The unsettling implication of these related notions is that ideas are embedded in history and not necessarily universally “true.” For scientific disciplines and academic theorists, these notions are potentially threatening and may often be excluded from proper scientific inquiry and the conduct of “normal science.” Further, the proponents of such ideas may become personally suspect and excluded from collaborative peer networks (Weintraub 2007; Lee 2009).

Yet there exist fields of knowledge which explore these very notions of the interaction of ideas and institutions, such as “intellectual history” (Pocock 1975; Israel 2010; Gordon 2011), and proponents with long and distinguished careers, such as Robert L. Heilbroner, although not often within mainstream economics. Even natural science, the citadel of production of truth, is subject to “revolutions” in ways of understanding the natural world (Kuhn 1970). This notion of “paradigm change” in natural science has understandably been the subject of a large and contentious literature itself (Wray 2010).

In the social sciences, the notion of the relation of ideas to political and socioeconomic arrangements is even more vexing. The theorist is embedded in the system and the period of history which is being analyzed and may be subject to influence or bias on that basis (Heilbroner 1990b; 1996b, 47). The related notions that socioeconomic arrangements and ideas may be subject to mutual influence seem to set up a “hall of mirrors” from which there can be no escape (Meister 1990). Schumpeter (1950, 46–47), discussing Marx’s method of relating politics and economics, admires the synthesis, but also finds it too all-encompassing and overly deterministic.

There are several strategies to address these perplexing problems of epistemology in the social sciences. First is induction from universal axioms. Arguably, economics as a science has developed a set of axioms that is presumably universal and beyond question (Maki 2009). Such a process constituted a “narrowing” of the professional economics discipline relative to eighteenth-century “political economy” (Poovey 2008, 275–283). The exploration of these axioms is conducted in the context of mathematical models that are derived from them, constituting a closed system. The second strategy is methodological. There is currently underway a comprehensive reexamination of the proper methodology for the conduct of economic research (Boumans and Davis 2010). Such approaches as new institutional economics, game theory, behavioral economics, simulation (agent-based modeling), and networks are only among the most recent innovations. There is also a growing heterodoxy that proposes alternative approaches, methods, and assumptions (Symposium 2011). A third strategy is to be explicitly critical and reflexive, and to allow for the possibility of the mutual influence of ideas and political and socioeconomic arrangements (Hoff and Stiglitz 2010). Adopting such an attitude would enable one to consider more fully the institutional changes in global political economy that may be currently in process. In this context, cross-cultural and historical methods may be particularly appropriate to elucidate implicit assumptions and to illuminate long-term institutional changes. One could study the relationships between the economy and economic ideas in particular historical periods, as a form of critique (Mirowski 1989; Meister 1990; Bernstein 2001; Milonakis and Fine 2009).

For economists, the prospect of uncertainty of the subject of study, the boundary and methods, and the outcomes is daunting. Yet if both the global economy and the discipline of economics are truly in flux, it may be because this is a period of significant, if not “revolutionary,” structural change. Clinging to conventional patterns of thought which are no longer relevant or useful is less reasonable than addressing the nature and possibilities of institutional innovations, and the related challenges to the formulation of the science of economics (Hands 2001).

Perhaps the notion of optimal design of human institutions is Utopian fantasy, or Enlightenment hubris, rather than an appropriate goal of the social sciences (Wolin 1995, 11–12). Yet the economics profession would subscribe to that objective with respect to the economy and to economic policies. The presumed perfectibility of human institutions more generally as an outcome of democratic political processes and reflexive social sciences still beckons, nonetheless, in contrast to open-ended path-dependent evolution of diverse political, economic, and cultural institutions (Hodgson 2001b; Acemoglu and Robinson 2012, 105–113).

Orthodoxy and Critique: Review of the Literature

Orthodoxy

In contrast to the various critiques of economics epistemology, there is a clear definition for orthodoxy, or the “Received View” (McCloskey 1985, 5–11; Hands, 2001, 34–37, 53–60, 70–82; Boumans and Davis 2010, 9–30). The model of mainstream neoclassical economics is based on presumably universal axioms of individual maximization of utility constrained by resource scarcity. Such a conceptualization of economics omits the need for a history of economic thought or economic history. The market is assumed to be a separate institution with its own unique determinants. The assumption of equilibrium and stability omits the need for a dynamic analysis. Concepts such as utility and perfect competition both explain and legitimate the market system. The notion of agency is personified in the representative individual, whose objective function is exogenous, known, and predictable. This representative individual, homo economicus, makes rational decisions in pursuit of more pleasure, based on individual consumption and leisure. Privileged figures are the theorists, who know the system as a whole, and the property owners, whose exchange and investment decisions create the growth by which the system is justified, and who require “incentives” to induce the preferred policy choices.

Heterodoxy

One response to increasing internal and external challenges has been a growing heterodoxy in economics. Epistemological critique can be based upon several foundations, as follows:

Positive vs. Normative Economics

According to recent commentators (DeMartino 2000, 76–90; Steinmetz 2005; Marglin 2008, 174–184; Davis 2011, 215–216), the distinction made between positive and normative economics is not valid. That is, the so-called positive description of the system is based on the assumption that “more is better,” and that the increased opportunities for consumption lead to greater happiness and consumer welfare. The conceptualization of the atomistic individual as a bundle of preferences rather than capabilities then circumscribes the nature of the policy alternatives considered.

Institutional Drift

The notions of path dependence and institutional drift make formal predictions difficult and policy recommendations frustrating (Hodgson 2001b; Streeck and Thelen 2005; Acemoglu and Robinson 2012). The attempt to replicate successful economic models often seeks to adopt institutions that have developed in other contexts. Without an analysis of each cultural setting, economic era, and institutional history, this attempt at institutional transfer may be prone to pitfalls.

Ontology

According to Lawson, the nature of the social system cannot be captured by deductive formalist economic models:

Social reality, then, is a relational totality in motion [which] . . . involves meaning, and values . . . Social reality, in other words, is of a nature that is significantly at variance with the closed systems of isolated atoms that would guarantee the conditions of mathematical deductive modeling.” (Lawson 2009, 765)

The model of the self-interested, atomistic, and mobile individual may have served well in the transition from feudalism to capitalism. The same set of assumptions may be less functional in an increasingly global, networked economy, operating at the limits of ecology.

The Position of the Theorist

The theorist has “privileged universal knowledge,” understanding the behavior of agents who are automatically following price signals in their own self-interest (Sen 1977; Rothschild 2001, 124–125, 137, 141). The “blindness” of agents with respect to the “invisible hand” reveals a certain contempt on the part of the theorist (Rothschild 2001, 123–124, 136–143). According to Rothschild’s discussion of Smith, the theorist has a privileged position with respect to social science. As part of the Enlightenment project, the responsibility of the theorist is to explain, predict, and control the behavior of other people, for the sake of social progress, on behalf of some authority, such as the nation-state (Marglin 2008, 173–175, 184–194). The theorist thus approaches other people as instruments to attain an end, such as “the wealth of nations.” This position affects the role of the theorist, her self-understanding, and her relationships with others. The theorists then tend to see other people as objects, and to conceptualize their activities and choices in an instrumental fashion. The intentions, feelings, and self-consciousness of other people are often omitted from these models, as a result (Lawson 2003; Davis 2011).

Sociology of Scientific Knowledge

One project currently underway is the treatment of economics as a scientific paradigm (Boumans and Davis 2010), and the analysis of economics itself with the methods of political economy. Internal factors, such as new scientific insights and methods, as well as external factors, including financial crises and international competition, are considered as potential challenges to the existing paradigm. Still, even according to Kuhn’s analysis (1970), the substitution of a paradigm is made, not based on counterevidence or external factors, but based on the availability of an alternative. Here, the widespread conventional wisdom of the “collapse of communism” leaves the market and the postwar mixed economy, as “the only alternatives,” at least in Western discourse. Consideration of emergent models is nonetheless appropriate for development of new avenues for research and for public discussion, both within the West and in the larger global context.

The “Modern Fact”

Economics as a “science” is both descriptive and prescriptive, a distinct role that is worthy of institutional and historical analysis (Meister 1990, 30, 44–46, 84, 241; Searle 2005, 2010). According to the work of Mary Poovey (1998), Adam Smith was the first social scientist to conceive of the economy as a complete system. The description of the market and the “invisible hand” was also a normative prescription for behavior (see also Marglin 2008, 3, 142, 174–179). Smith’s work was a projection of the implications for individual behavior before the market economy was actually fully in place, which then helped to guide and coordinate individual behavior toward the development of such a system. The power of the conceptualization was its prescription, even if it wasn’t formally “true” at the time. In this context, the economist is a “man of the system” (DeMartino 2011, 9–10), who must believe in the economy she describes. This necessity of faith is what Foley (2006) calls the “theology” of economics.

Market as a Dominant Institution

Some institutional economists, in the tradition of Polanyi (1944) and Marx (1967), focus particular attention on the evolution and dynamics of the market as a dominant institution.

Methodology: “Property” as a Foundational Paradigm in Western Political Economy

The approach suggested here is to consider the concept of “property” as central to the paradigm of mainstream economics, rather than the assumption of...

Índice

• Cover
• Title
• Part I
• Part II
• Part III
• Notes
• Bibliography
• Author Index