Saturday, June 28, 2014

Daniel Little — Thelen on the prospects for egalitarian capitalism

There is a version of economic historical thinking that we might label as "capitalist triumphalism" [aka market fundamentalism and economic liberalism] -- the idea that the institutions of a capitalist economy drive out all other economic forms, and that they tend towards an ever-more pure form of unconstrained market society. "Liberalization," deregulation, and reduction of social rights are seen as economically inevitable. On this view, the various ways in which some countries have tried to ameliorate the harsh consequences of unconstrained capitalism on the least well off in society are doomed -- the welfare state, social democracy, extensive labor rights, or universal basic income (link). Through a race to the bottom, any institutional reforms that impede the freedom and mobility of capital will be forced out by a combination of economic and political pressures.

The graphs above demonstrate the current structural differences among Denmark, Sweden, Germany, Netherlands, and USA when it comes to training and income support for the unemployed and underemployed. It is visible that the four European economies devote substantially greater resources to support for the unemployed than the United States. And on the triumphalist view, the states demonstrating more generous benefits for the less-well-off will inevitably converge towards the profile represented by the fifth panel, the United States.… 
Thelen's most recent book, Varieties of Liberalization and the New Politics of Social Solidarity addresses the question of capitalist triumphalism. (That isn't a term that she uses, but it seems descriptive.) She locates her analysis within the "varieties of capitalism" field of scholarship, which maintains that there is not a single pathway of development for capitalist systems. "Coordinated" capitalism and neoliberal capitalism represent two poles of the space considered by the VofC literature.
From the beginning, the VofC literature challenged the idea that contemporary market pressures would drive a convergence on a single best or most efficient model of capitalism. (kl 228)
Thelen is interested in assessing the prospects for what she calls "egalitarian" capitalism -- the variants of capitalist political economy that feature redistribution, social welfare, and significant policy support for the less-well-off. She focuses on several key institutions -- industrial relations, vocational education and training, and labor market institutions, and she argues that these are particularly central for the historical issue of the development of capitalism towards harsher or gentler versions.…
A key finding in Thelen's analysis is that "coordinated" capitalism and "egalitarian" capitalism are not the same. Coordinated capitalism corresponds to the models associated with social democracies of the 1950s and 1960s, the "Nordic" model. But Thelen holds that egalitarian capitalism can take more innovative and flexible forms and may be a more durable alternative to neoliberal capitalism. 
Understanding Society
Thelen on the prospects for egalitarian capitalism
Daniel Little | Chancellor of the University of Michigan-Dearborn, Professor of Philosophy at UM-Dearborn and Professor of Sociology at UM-Ann Arbor

Capitalism is commonly misunderstood as being an economic system. Rather, it is a complex web of institutional arrangements the foundations of which are legal, hence, political. Difference in institutional arrangements result in varieties of capitalism.

Power is the underlying factor and not "capital," whatever than is. Those who/ve been paying attention to the Piketty "capital controversy" know that the debate hinges on the meaning of capital. The controversy reveals there is sharp divergence of views over capital.

Irrespective of how capital is defined, there are varieties of socio-economic theory and ideology that underly different political systems as determined by their legal arrangements. These result in varieties of ownership, distribution, and other socio-economic categories and classes. The economics follows from the institutional arrangements and these are political choices that ayer determined by power relationships.


Magpie said...

What is "power" and how do you measure it?

These are the questions people have asked about capital. Can theorists of power answer them any better?

Matt Franko said...

Magpie I have "power" as "ability" or perhaps "capability"...

It looks like people who end up with more wealth/much wealth obtain "ability" ...

It may not be that it is measured per se... iow it may be a binary concept iow you either have it or you dont...

Rentiers perhaps could be looked at as having certain 'ability' when they are in relationship to those outside ...

iow 'rent seekers' have certain ability when they encounter 'rent payers' ....

it may not be that power is measured, but what perhaps can be measured is the delta between the person having the ability and the person who doesnt have the same ability...

it perhaps is like looking at "the deficit" in that we can only see the difference in 'power' or 'ability' in human relations ... and it is a concept that doesnt have an absolute magnitude on its own...


Tom Hickey said...

No, and that is why social science is limited as (positive) science.

Positivism (positive science) assumes that the subject matter off science is objective and quantifiable. That excludes the qualitative from the subject matter of science, as well as the subjective.

This is OK (sort of) in the case of the natural sciences, but many philosophers of science have also argued that it is really not OK at all. I'll leave that debate for another day.

Suffice it to say that whether he thought so or not, many subsequent economists thought that Adam Smith considered economics to be a natural science on the order of Newtonian physics. From this view positive economics developed.

On the other hand, Marx took a different take which later came to be called constructivism and institutionalism. This view sees knowledge as a construct based on cultural conventions and institutional arrangements that could be different and are different historically. Marx identified these differences in economic anthropology and sociology with the means of production and ownership that result in power relationships.

Hence there is a split in post-classical economics into those economists that follow the neoclassical approach of positive economics based on the naturalistic assumption and economic anthropologists, economic sociologists, economic political scientists, and some heterodox economists assume some kind of constructivism, instrumentalism or institutionalism.

These two approaches are incompatible in that the naturalistic-positivist approach excludes a great deal of what the non-naturalistic non-positivist approach regards as not only relevant but foundational.

The naturalistic and positivist approach confuses action with behavior. They are different. The same action can be performed with different motivation, for different reasons, in different contexts, etc. On the other hand, behavior includes the human, social, and systemic aspects of actions that humans perform.

As a result the naturalistic-positivist approach seeks to discover quantifiable invariant relationships as economic laws similar to the laws of physics, for example.

The non-naturalistic non-positivist approaches deny this is possible, e.g., due to non-ergodicity of human behavior.

The non-naturalistic non-positivist approaches hold that is not necessary to quantify power as much as to identify the different power relationships make in different contexts, who holds power over whom, etc. And there are ways to test this empirically in terms of differences in different configurations and the quantifiable results of this, e.g., in income and wealth distribution.


Tom Hickey said...


Power cannot be measured directly but it can be identified by examining culture and institutions, and it can be measured indirectly through its effects. And there is plenty of criticism of the production function. Does that imply that capital doesn't exist. No. Just that it is difficult to quantify it realistically, and models using non-realistic assumptions are likely to be non-representational of events. This is the debate going on now between the formalists and the critical reasists, for example, with critical realists holding that ontology counts.

Is is possible to write functions for power? Probably not realistically. But that doesn't imply that that power is either non-existent or irrelevant as a factor in economics.

The Piketty capital controversy is a good illustration of this. Piketty takes a non-naturalistic and non-positivist historical stance although he uses positive science as a tool. Those who adhere to the naturalistic-positive approach mistake this and think that he is writing as one of them and criticize him on that basis, missing what he is actually saying based on history.

It's the same with their criticism of Marx and other heterodox thinkers. Those adhering to the naturalistic and positivist approach are essentially criticizing Marx and others for not adopting this approach since — TINA. They assume that economics is like Newtonian physics —not even contemporary physics, which is deeply involved in the study of complexity. Those who do not assume this don't fall under this delusion that human beings are like atoms.

As result for naturalistic and positivist economists, mathematics has become a ritual rather than a tool, and quantification an ideological dogma.

Tom Hickey said...


Even classical economists like Smith and Ricardo took power into consideration because they were concerned with distinguishing economic rent from unearned gains.

When power relationships were dismissed by neoclassical economists, economic rent was excluded from consideration.

Did this have anything to do with the influence of Marx and Henry George at the time? Some historians of economics think so.

Tom Hickey said...

clarification: I said above, "Hence there is a split in post-classical economics into those economists that follow the neoclassical approach of positive economics based on the naturalistic assumption and economic anthropologists, economic sociologists, economic political scientists, and some heterodox economists assume some kind of constructivism, instrumentalism or institutionalism. These two approaches are incompatible in that the naturalistic-positivist approach excludes a great deal of what the non-naturalistic non-positivist approach regards as not only relevant but foundational."

The two approaches are constructivist-instrumentalist, which are cognitive-epistemological, and institutionalist, which is based on social factors such as cultural convention like customs, as well as politics and law. These approaches are not mutually exclusive and can be complementary.

The naturalistic-positivist approach may be said to assume that knowledge mirrors the objective world essentially as it is and in the essentially the same way in all subjects.

The non-naturalistic non-positivist approach assumes that subjects contribute to shaping of knowledge and also the perceived "facts," and that there may be variance among individuals and groups.

Cognitive science tends to support the later view are more realistic based on differences in brain function.

Jan said...

Off topic again Tom,but
Lars Syll vs P.Krugman on methodology continues...

Magpie said...

"No, and that is why social science is limited as (positive) science. "

So, if it cannot be measured and its definition isn't much clearer than capital, personally, I see no reason to prefer "power" to "capital".

However, I let you explain, why should me or anyone else forget about capital and use power instead as explanation?

Tom Hickey said...

I think that there is a difference that makes a difference between capital considered as real and financial and power. Power is not necessarily wielded by capital. Power exists in the prehuman world based on factors like strength and fitness.

But even taking capital and power to be equivalent, in many cases it is rhetorically advantageous to prefer "power" to "capital." Just about everyone gets power in human relationships in terms of dominance-submission, being powerless, etc. whereas "capital" is both ambiguous and charged with propaganda.

The "power elite" says a lot more that "capitalists" in my view.

Power is also more compatible with egalitarianism. Most people likely think that in a democracy no persons or groups think that other individuals or interests should be privilege with extraordinary power, whereas polls show that most people accept and even expect some inequality in wealth, real and financial.

Power is also crucial in accounting for return on capital commensurate with risk and economic rent as extraction beyond the normal operation of a level playing field.

Asymmetries of wealth are explained in the conventional model based on merit and just desert. The alternative model explains asymmetries of wealth in terms of asymmetry of power that enables rent extraction.

In my view class is better defined in terms of power rather than wealth, too. By custom and in many legal jurisdictions the male head of household is invested with power.

Social status is different from class, gender, race, wealth, and other such distinction, which intersect in power relationships. Social ranking is based on power relationships that are reflected in class interests, gender relationships, racial and ethic background, and other such differences.

So I think that it's clearer conceptually and more advantageous rhetorically to focus on power, power relationships like dominance-submission, and power structures, as well as the function of power in groups. Capital (ownership) is only one factor in this mix.

And ownership can be analyzed as a function of power in that one has power over what one owns, for example, through legal rights of ownership, which are institutionally constituted, and through the control that ownership bestows that can affect only what what owns but also the often far-reaching effect of this on others.

Magpie said...

"But even taking capital and power to be equivalent..." Who is taking them to be equivalent? Not me.

Let's recap. The complaint against capital was that (1) it is hard to define, and (2) it is hard to measure.

I do not dispute there is truth in those complaints. What I say is that, if that is the problem with capital, then power is not the solution: power is (1) impossible to define and (2) impossible to measure.

Note the words: hard vs impossible. There's no equivalence there and yet, it did not stop people from proposing power instead of capital.

And I'm not the one making up those claims about power. Matt Franko (June 29, 2014 at 1:40 PM) put it very well above: "It may not be that it is measured per se... iow it may be a binary concept iow you either have it or you dont...". That's the claim it is impossible to measure.

Tom Hickey said...

"Capital" as an economic terms is supposed to be measurable. Conventional economists reject Marx's notion of capital a process and regard it as a stock that is produced by the flow of investment, for example, or as stock of savings resulting from a flow of saving.

"Power" is not an economic term in the same sense as capital in conventional economics, and it extends beyond what is usually considered the purview of economics, although it has specific application in economics as "economic power." It could be argued that economic power can be measured through quantifiable effects like economic rents that are gains over and above what competition in fair markets would produce.

But there is also "bargaining power." How is that quantifiable, yet economists often use the term, as in asymmetrical bargaining power, labor bargaining power being reduced by unemployment, etc.

Probably few economists would deny that economics is influenced by economic policy, which is the outcome of the application of political power. there is no direct way to quantify this, although one could take campaign contributions as a sort of proxy, for instance.

So I think that power avoids some of the ambiguity and controversy that has arisen around capital as an economic term, and it has the further advantage of getting economists to recognize a factor that most of them seem to prefer to ignore.

I would go so far as to say that the greatest failure of conventional economics is failure to incorporate power especially asymmetric power. For example, asymmetrical information results in asymmetric market power, which is a reason for banning insider trading.

However, conventional economics models assume symmetric information explicitly and symmetric power implicitly. Asymmetric power vitiates the assumption of a naturalistic system, hence, economic laws.

No such issues arise treating capital simply as a stock, whether it is the stock of capital goods, or the stock of wealth.

However, asymmetries of ownership and wealth can also be viewed as evidence of economic rent that results from the application of economic power above the return that perfect markets would yield.