The efficiency of socialism?

A tool of capitalist hegemony? My, what harsh language! One can almost visualize GE theorists visiting smoke-filled rooms to accept bribes from their cigar-puffing benefactors. Indeed, Post-Autistic economists, after observing the word “axiomatic” in the title of my book (Aguilar, 1999), dismissed it out-of-hand, denouncing me as a bought-and-paid-for stooge of Big Business. Apparently, just that one word was enough to convince them of this about me.

But before we dismiss this talk of an epistemological approach being a “tool” of Big Business to “legitimize” their obviously anti-social behavior, let us at least see if the socialists are consistent.

Here we read that GE Theory is not a tool of capitalist hegemony, but a tool of profit-oriented market socialism, that is, publicly-owned business enterprises (e.g. Fannie, Freddie, AIG, etc.) that mimic contemporary market capitalism. And it is not a “tool” in the sense of legitimizing the socialists (presumably, their legitimacy is derived from emotional appeals of the “Gosh, there sure are a lot of poor people – darn capitalists!” variety), but a tool in the literal sense of defining a software model.

Well, which is it? Reglar thinks that GE Theory "assumes that the normal condition of society is for the state to play as little a role in economic life as possible." Yunker sees GE Theory as the basis for a central planner to "mimic contemporary market capitalism" while retaining for himself the authority to distribute the social dividend – hardly a "little role in economic life."

The primary (actually, the only) criticism that socialists have of my writing is that it lacks “substantial references.” Apparently, he whose writing is filled with the most quotations from the most august of academic journals wins. Thus, having observed that Reglar and Yunker have opposite views of GE Theory, we clearly need a tie-breaker.

Young supports Yunker’s position though, while they agree that central planning is the inevitable result of economists' acceptance of GE Theory, Young see this as a bad thing and Yunker sees it as a good thing. Nevertheless, the Review of Political Economy and the SSRN trumps an obscure conference of socialists idling on the taxpayer’s dime, drinking tea and refining their plans for world conquest. Two out of three quotes wins!

Steve Keen (2007, p. 173) has also observed that satisfying the ever-growing list of assumptions made by Debreu and his followers is “unrealistic”:

In the context of GE Theory, the conditions required for capitalism to be efficient are implausible in practice, though conceivable in theory. The former implies that the free market is always inefficient. The latter implies that a central planner can mimic how capitalism would work if it were efficient while the "profits and interest generated by the operations of publicly-owned business enterprises would be distributed to the general public as a social dividend."

In the context of GE Theory, there is no way for libertarians to get around this dilemma without being impaled on one or the other horn. Either we live with a system that can never be efficient in practice or we have an efficient system but renounce private property rights and put distribution of the "social dividend" in the hands of a central planner.

Far from being a “tool of capitalist hegemony," acceptance of GE Theory is the death of capitalism. Our only compensation is that, like a condemned prisoner who gets to choose the firing squad or the hangman, we get to choose inefficiency or tyranny. How did free-market economists respond to this dreadful choice? Milton Friedman invoked his famous “assumptions don’t matter” dictum (1953) to avoid having to admit that he could not untie the Gordian knot of GE Theory – but that is cowardice. Surely there must be a better way!

Instead of attempting to untie it, I cut the Gordian knot of GE Theory by throwing all of Walras’ and Pareto’s assumptions overboard and starting from scratch with my own set of axioms. When faced with a dilemma "in the context of GE Theory," I invented Axiomatic Economics. As Hannibal Barca said, "we will either find a way, or make one." The same goes for libertarians; we will never accept socialism.

My assumptions are three:

1) One's value scale is totally (linearly) ordered:

i) Transitive; p ≤ q and q ≤ r imply p ≤ r

ii) Reflexive; p ≤ p

iii) Anti-Symmetric; p ≤ q and q ≤ p imply p = q

iv) Total; p ≤ q or q ≤ p

2) Marginal (diminishing) utility, u(s), is such that:

i) It is independent of first-unit demand.

ii) It is negative monotonic; that is, u'(s) < 0.

iii) The integral of u(s) from zero to infinity is finite.

3) First-unit demand conforms to proportionate effect:

i) Value changes each day by a proportion (called 1+&#949;j, with j denoting
the day), of the previous day's value.

ii) In the long run, the &#949;j's may be considered random as they are not
directly related to each other nor are they uniquely a function of
value.

iii) The &#949;j's are taken from an unspecified distribution with a finite
mean and a non-zero, finite variance.


REFERENCES

Aguilar, Victor. 1999. Axiomatic Theory of Economics. Hauppauge, NY: Nova Science Publishers, Inc.

Blaug, Mark. 1997. “Ugly Currents in Modern Economics.” Policy Options. 18: 3-8

Friedman, Milton. 1953. “The Methodology of Positive Economics.” in Essays in Positive Economics. Chicago, IL: University of Chicago Press.

Keen, Steve. 2001. Debunking Economics. Annandale, NSW Australia: Pluto Press

Reglar, Steve. 2005. "The Descent of Political Economic Theory: Keynes, Keynesian economics, from bastardised Keynesianism to Neo Liberal Hegemony.” http://www.elequity.com/contego/pdfbooks/IncorporatingAmericanMinds.pdf

Young, Cristobal. 2005. “The Politics, Mathematics and Morality of Economics: A Review Essay on Robert Nelson’s Economics as Religion.” http://papers.ssrn.com/sol3/papers.cfm?abstract_id=898914

Yunker, James. 2007. “A Comprehensive Incentives Analysis of the Potential Performance of Market Socialism.” Review of Political Economy. 19 ( 1): 81-113 http://econpapers.repec.org/article/tafrevpoe/v_3A19_3Ay_3A2007_3Ai_3A1_3Ap_3A81-113.htm

 

What about the efficiency of writing shorter and more incisive Topic intros ?
Or a six sentence summary of the proposition ?
With the detail support as body copy .
I'm no Milton Friedman but I am well read and don't live in a mountain state ( ho ho ) .
But those Referees are unknown to me . Any Nobel prize winners ?

 

Ask Reiver. He is all over the internet approvingly quoting both Steve Reglar and James Yunker, apparently oblivious that they contradict each other.

 

OE I'm no economist and unfortunately I don't really understand much in your writing, in fact I barely gleaned your position on the socialism-capitalism spectrum, but this, the "good old boys club" of "trusted" academics, is what really disappointed me in my experience at University.

As that professor with the wardrobe said once, "what do they teach them at these schools!". Apparently thinking is also not one of them. I consistently find that the most popular argument against Austrian economists in particular (since I tend to agree with their ideas) is that they "don't cite many sources".

First of all, I it should be obvious that an economic camp whose Copernican theories are so subversive to mainstream (I like to say "subsidised") economics will have to quote each other or the few "experts" who agree with them.

However, my grief is that the academic world seems to have completely lost its greek legacy. Thinking is almost superfluous in the sea of ideology which requires only a steady stream of heavily preened statistical and survey data to maintain its pre-eminence in the political spotlight.

If people would just commit an ounce of energy to navigating a logical argument, they would be surprised at how many "bibliographically challenged" freshmen have a deeper understanding of economics than some of the most revered economists who enjoy multiple pages of citations from others like themselves.

 

Perhaps you would like to write a dissertation on this and help us avoid the pitfalls of gobbledy gook .

 

Reiver was Scucca at Debate Politics until he got banned there. For an absolutely hilarious example of the socialists' "don't cite many sources" tactic for attacking free-market economists, check out this link to the DP archives:

http://www.debatepolitics.com/archives/35325-collapse-dollar-inevitable.html

I started that thread in August 2008. It was the first paper I ever posted on an internet forum (observe that I didn't know how to do block quotes or embedded links) and I was appalled by the ferocity of the socialists' attacks on me and by the fact that they were completely devoid of logic.

I have a degree in mathematics, not economics, and was naively expecting people to employ logic. Silly me!