Limits of mainstream economics today — David F. Ruccio

In this post, I continue the draft of sections of my forthcoming book, “Marxian Economics: An Introduction.” The first five posts (here, here, here, here, and here) will serve as the basis for chapter 1, Marxian Economics Today. The text of this post is for Chapter 2, Marxian Economics Versus Mainstream Economics (following on from the previous posts, here, here, here, and here).

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Limits of mainstream economics today

David F. Ruccio | Professor Emeritus of Economics, University of Notre Dame

My comment over there.

A major distinction between mainstream "orthodox" economics from "fringe" heterodox economics lies in the way that treat economic rents and rent-seeking behavior. Classical economics was concerned with economic rent, and this analysis culminated in Marx. 

I would feature economic rent and rent extraction, e.g., as surplus value in a "monetary production economy" (Keynes), that is similar to rent extraction by landlords in a feudal economy. Rent extraction explains worker (producer) exploitation. For example, Robert Paul Wolff uses the term "expropriation" rather than "exploitation" in his quantitative analysis showing how this works.

Neoclassical economics can be viewed a reaction to this earlier focus on rents, e.g., Marx and George. This is important since the neoclassical argument is based on Pareto equilibrium, with all factors receiving their "just deserts" based on productive contribution, which is then illogically imputed to individual firms and workers.

Heterodox economics–Marxism and Marxianism, institutionalism (Veblen), Keynes and Post Keynesianism all take up the earlier classical consideration of rent extraction, buttressed by economic sociology, economic anthropology, and economic history.

For example, sociologist C. Wright Mills showed how economic rent extraction led to class structure socially, asymmetry politically, and vastly unequal distribution economically.  From the economic POV, this is founded on rent extraction of one form or another, with capitalism having its own unique characteristics.

I would also not characterize Krugman et all as "Keynesian." Their school is called New Keynesianism but such a bastardization of Keynes that it is misleading to feature the association. Rather, it is based on Samuelson's  new synthesis of Keynes and neoclassical economics, with emphasis on formal modeling, which Keynes eschewed in his criticism of Tinbergen, owing to economics being a "moral science" (social science) rather than akin to natural science. Radical uncertainty and all that. So it seems to me that the association of this school with Keynes is superficial. Especially, since Samuelson's approach was an acceptable replacement of Tarkis, after he was attacked by McCarthyites for presenting a genuine view of Keynes in his textbook, Elements of Economics.

I realize that this is difficult to do in a primer like this, but as Aquinas said in De ente et essentia,  paraphrasing Aristotle, "A small mistake in the beginning becomes a big one by the end." So why not start on a stronger footing?

Also, I think that using economic rent and its expropriation instead of exploitation may be better suited to distinguishing Marxian economics from Marxist economics. Some Marxians at any rate don't consider themselves "Marxists," that is, like people they view as overly dogmatic, whereas Marx himself emphasized the historicity and dynamism of economics as socially embedded in societies that change over time.