Evolutionary Economics
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Evolutionary Economics

Marc R. Tool

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eBook - ePub

Evolutionary Economics

Marc R. Tool

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About This Book

This two-volume work is intended to map the theoretical heartland of the institutionalist perspective on political economy. Volume I, "Foundations of Institutional Thought", identifies the origins of institutional economics and explores the primary analytical tools in its development. The papers included in Volume II, "Institutional Theory and Policy", consider basic economic processes, institutions for stabilizing and planning economic activities, the role of power and accountability, and emerging global interdependence. Marc R. Tool is the editor of "Journal of Economic Issues".

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Publisher
Routledge
Year
2019
ISBN
9781315492995
Edition
1

Part I

The Nature and Necessity of the Mixed Economy

Jerry L. Petr
An understanding of the highly complex societal processes of human provisioning, which we may also call “the economy,” can be approached in various ways. Understanding may be sought through examination or absorption of well-articulated, logically consistent, historically venerated, sophisticated world-views (models, dogmas). Two of the more widely recognized world-views that purport to explain “the economy”—laissez-faire capitalism and Marxism— each interweave logical deductions from originating postulates with selectively supportive historical evidence in monumental intellectual constructs that are simultaneously impressive and intimidating. And embedded in the understanding provided by these constructs are implications for societal policies that are consistent with and supportive of the world-views contained in the models. The understandings developed by the world-views generate associated policy prescriptions.
Or, in the search for understanding, the investigator may eschew the received wisdom offered by the adherents of those established ideological camps and may seek knowledge directly, without dogmatic filters, through investigation of the world itself. And, of course, if truth be sought by investigation anew each day, policy decisions must likewise be freshly created and regularly modified in light of the revised knowledge. To embrace this option may seem simultaneously foolhardy and arrogant, as “the world” is an exceedingly complicated and difficult puzzle. To skeptically disdain the dominant intellectual constructions that have emerged from decades of human interaction with that puzzle, and that provide both answers and directives to troubled human societies, may be an extreme example of hubris.
That recognized, it is appropriate to acknowledge that this essay is an attempt to explain and validate the latter approach—the institutionalist approach—in the area of economic analysis and policy formation. Our objective is to define appropriate policy formation in contemporary industrialized economies. The dominant bodies of doctrine, offering widely accepted catechisms on the subject, are the ideologies of laissez-faire capitalism and Marxism. Our approach in this essay is to offer not a third set of answers, but, instead, to offer an analytical perspective that may lead to multiple sets of answers—none of them universal nor eternal, and each appropriate to a particular set of existing circumstances. Such a perspective will be seen to be necessitated by societal attempts to achieve goals not attainable through the dominant theories.
Before we move into the substance of this ambitious undertaking, two observations are offered to soften a bit the sharp edge of the speculation that our task may be both foolhardy and arrogant. We note that, although humanity has extruded at least these two venerated intellectual constructs from history, the competing laissez-faire capitalist and Marxist versions of “truth” are not only dissimilar, they are in fact, inconsistent and contradictory. Therefore, our reluctance to fully embrace either of them appears more understandable and less foolhardy.
Furthermore, we assert that common to all human societies, however classified and however explained, is change. But the common competing versions of explanation from which we are asked to choose each strive to apply an invariant analysis and policy prescription to a great array of intertemporal and interspatial societal diversity. Although adherents of these theories admit societal realities differ and change, the fundamental lines of analysis and prescription display an ongoing sameness. Our advocacy of the approach that analysis and policy should adjust to conform to changing reality, as it is ascertained, therefore acquires a foundation of plausibility.

The Premises of Our Approach

“Very probably, there is no simple general answer to the question, ‘What is good public economic policy?’ 
 But something can be done to outline a framework within which a great many useful partial answers can be sought.”1
This essay is an attempt to validate that assertion of Morris Copeland. Rejecting the “simple general answers” provided by dogmatic rote, we seek instead to illustrate both the nature of and the necessity for a pragmatic, evolutionary, instrumental approach to the formation of economic policies and institutions. Conventionally termed, rather inelegantly, the “mixed economy,” as testimony to its impure policy amalgams, what we describe herein is better named the “sensible economy.” Such an economy is, as we shall see, an attempt to sensibly arrange economic institutions to utilize available technology to provision human societies in accordance with their own notion of a better life. It is an attempt to accomplish such provisioning where the dominant theories have failed to do so, and without regard for any “heretical” implications of such arrangements when measured against dogmatic purity.
But to reject adherence to revealed truth in economic ideology is not to reject premises for inquiry. Although the premises that inform and undergird our analysis do not tautologically contain within themselves a resultant set of policy prescriptions, they do condition the way we view the social world and the direction our analysis takes. Therefore it is appropriate to briefly note the institutionalist perspective from which we begin.
For us, the study of an economic system is the study of a process of human provisioning. It is the study of the relationships between changing technology and a set of changing institutions embedded in a culture and involving broad webs of interaction that spill over the boundaries of conventional academic disciplines.2 In many respects, the economy is viewed as a system of power, and, concomitantly, of powerlessness.3 Technology and technological change are seen as important sources and conditioners of that power, and the changing institutional structure is seen as the determinant of the use and abuse of that power.4 An important issue, therefore, becomes appropriate control of societal power. And, consistently, we understand economics to be a science of valuation (rather than allocation) in which the nature of “progress” is what is being continuously (re)evaluated.5The dynamic nature of human society is reflected in our insistence on the “evolutionary” characteristic of social organization and our discipline. It is clear, therefore, that analysis must be flexible, fact-based, and non-dogmatic, reflecting a clearheaded realism about the necessary impermanence of pragmatic policy choices. To repeat Copeland’s assertion, our analysis reflects skepticism about the eternal verities of generalized doctrines; we prefer the mundane assemblage of a “mixture” of partial improvements.

The Nature of a Mixed Economy

Proponents of appropriate mixed economies are adherents to a volitional, pragmatic and essentially democratic perspective on human societies in which the community makes and remakes itself. It is a perspective that credits humanity with the ability to make judgments about the relative merit of alternative futures, and to develop and modify institutions, and thereby behavior, in order to move closer to the preferred options.
Proponents of doctrinally sanctioned societies, on the other hand, are adherents to types of “natural law” perspectives on human communities in which social organization and operation follow from logically deduced consequences of self-interested individuals satisfying presumed natural “propensities” within the constraints of the “invisible hand” (Adam Smith) or from the progressive interplay between dialectally opposed social classes in the struggle over economic surplus (Karl. Marx). Both of these brilliant (and contradictory) intellectual revelations lead to judgments about desirable and undesirable societal institutions and policies. Both are essentially teleological, and neither leaves much optimism about the success of human intervention to divert human communities from the path each has foreseen. Laissez-faire leads either to capitalist paradise, or, to the Marxist, overthrow of a fatally flawed system. Any other outcome for either is analytically impossible. Institutionalism begins by assuming a third alternative can be comprehended.
As is nearly always the case, such attempts at brief distinctions between alternative points of view are overdrawn and simplistic. In fact, in the contemporary social world, there are no “pure” economies of either the Smithian or the Marxian type; therefore, the industrialized world consists only of “mixed” economies, differing in the nature of the mix. But the intellectual world includes many who see such mixed economies as unfortunate aberrations and as regretted departures from preferred purity.
Robert Heilbroner captured some of the significance of the distinction between the instrumental pragmatism of the institutionalist perspective and the dominant ideological world-views when he noted, “The new paradigm 
 consists in an abandonment of the view of social analysis as that of determining the immanent destination of a universe of goalless particles, and substituting a view of social science as the search for the means by which social goals can be attained 
 it elevates a desired terminus of the social process 
 to the status of the initial premise of economic analysis, while relegating behavior, the premise of conventional theory, to the status of an ‘instrument’ by which the terminus is to be attained. From this point of view, a search for the ‘laws’ of behavior—political and social as well as economic— becomes a matter of secondary concern, and the study of modes of influencing behavior rises accordingly in importance.”6
If we accept this view of social science as a “search for the means by which social goals can be attained”—which goals often then become means to yet further “ends-in-view,” and so on—we necessarily confront the issue of power in society.7 Obviously, the ability to transform desire or intent into reality involves the ability to exercise power of some sort: political, economic, social, psychological. And, although we analyze, understand, and even attempt to modify the development and use of power in the private sector, we also understand that the attainment of social objectives often involves the use of public, governmental power toward that purpose. Thus, the study of the mixed economy is, in large part, the study of public processes of attaining public objectives; and the nature of the mixed economy is a complex web of private and public institutions and policies that seem best able, at a particular time, to move the community “forward.”8
When we make power and therewith politics a part of our system, we can no longer escape or disguise the contradictory character of the modern state. The state is the prime object of economic power. It is captured. Yet on all the matters I have mentioned—the restrictions on excessive resource use, organization to offset inadequate resource use, controls, action to correct systemic inequality, protection of the environment, protection of the consumer—remedial action lies with the state. The fox is powerful in the management of the coop. To this management the chickens must look for redress.9
And so, as typically vivified by J. K. Galbraith, part of our consideration must involve the appropriate roles and protections for societal foxes and chickens as well.
Although mixed economies are primarily understood as broad “mixtures” of public and private activities directed toward human provisioning, it is important to acknowledge the much richer and more complex substance of contemporary societal examples. The thoughtful observer, in fact, confronts a vital amalgam of countless variations on themes of ownership, control, motivation, and responsibility. One must confront the reality of cooperative, charitable, and traditional institutions intermixed with the familiar nationalized and corporate forms. And it is precisely the creative instrumental possibilities in this richness that make the mixed economy “so marvelously well-adapted to changing, dynamic conditions.”10
Focusing in this essay on a conventional understanding of the nature of the mixed economy (involvement of the public sector in the creation and modification of institutions to shape and direct the use of societal power to move toward the attainment of current community ends-in-view), what can we observe about more specific elements of the ends/ means continuum in these societies?
Rather than focus immediately on a description of representative institutions in these contemporary societies, let us first consider the desiderata toward which the emergent institutions must be instrumental. Broadly stated, what are the objectives toward which modern industrial societies strive?
I suggest four, which, when defined and embellished in subsequent paragraphs, may be seen generally to provide an acceptable notion of “the good life,” or, more correctly, “the good society.” The four broadly understood ends-in-view of the mixed economy are: Adequacy, Sustainability, Equity, and Democracy. (Let no one assume that we will arrive at consensus on either the precise content or the unfailing attainment of any of these objectives. We will hope to arrive at sufficient clarity to promote intelligent consideration of the relationship between these concepts and the institutions of the political economy that may contribute to movement toward them 
 that is, in the right direction.)11

Adequacy

A satisfactory economy must provide an adequate quantity and assortment of goods and services, produced in ways consistent with a community’s sense of productive efficiency. That is to say, the economy must succeed in the fundamental task of provisioning the community with an appropriate level of consumables, goods and services, public and private, proportionate to the level of productive effort expended.
Contemporary mixed economies address the objective of adequacy by primary reliance on the familiar institutions of private ownership of the means of production and resource allocation through the market process. In this way, the mixed economy acknowledges the motivating power of self-interest, the demonstrated effectiveness, even to Marx, of capitalist production capabilities, the information-handling facility of market interactions, and a degree of power diffusion through some decentralization of production decisions.
But even a casual review of existing mixed economies reveals that adequacy must also refer to providing significant, and increasing, amounts of “product” through the public, rather than the private, sector. Ed...

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