The Economic Sphere

The Economic Sphere

Print Friendly, PDF & Email

Herman Dooyeweerd (1985) argued that among the aspects making up the fabric of reality a specifically economic one is to be found. The aim of the present paper is to discuss the texture of such an aspect and how it both differentiates and intertwines with others.

Dooyeweerd’s view entails that the proper object of economics is irreducible to that of other disciplines, but a non-reductionist view of the object of economics presupposes that the nuclear meaning of that discipline has been clearly delimited: this is required in order to determine its nature and separate identity as a scientific discipline. By ‘the nuclear meaning of a discipline’ I understand a pre-theoretical delimitation of its field of research, such as that of the field of physics, characterized by the laws governing force and energy. Within one and the same field there may be many theories, theories competing to explain the same phenomena, or dealing with phenomena so different that it is nearly impossible to trace conceptual connections among them. This last situation calls for a unified-field theory.

width=665
Spiral staircase in the medical school of Universidad de Antioquia, MedellÌn, Colombia.

In the first section of this paper I will attempt to defend a rather commonly accepted definition of the field of economics that sees this discipline as a science of choice. In the second I will discuss the meaning of the most general, supra-arbitrary economic laws—the modal laws of economics; I end up offering a non-reductionist view of economics that nevertheless takes into account its intertwining with other spheres.

The Nuclear Meaning of the Economic Sphere

According to the philosophy of the Law Framework,1 there are irreducible economic properties and laws, namely those which determine the guiding function of economic structures and processes. This philosophical statement has far-reaching implications for the conception of economics as a science, because it surely implies that all economic structures and processes in the history of mankind are regulated by the same laws. Does this mean that it is possible to build an economic theory that explains the functioning of any economic structure or process whatsoever?

According to Herman Dooyeweerd, an economic structure or process is economic iff its guiding function is

the sparing or frugal mode of administering scarce goods, implying an alternative choice of their destination with regard to the satisfaction of different human needs (Dooyeweerd 1985, vol. 2, p. 66).

This sparing or administering of scarce goods is called ‘the nuclear meaning of the economic aspect or modality’. Thus, an economic situation is one in which there is a man—or group of men—with defined needs and given resources which are insufficient to satisfy all these needs, so that (1) a decision must be made, based upon a preference ordering, regarding which among these needs are to be satisfied, and (2) the use of the resources must be optimal in the sense that, to the best knowledge of the men involved in the decision, the greatest number of needs must be satisfied with the given resources. A use of scarce resources which obtains the proposed ends with minimum waste I shall call rational. Hence, in economic structures and processes a rational use of scarce resources is the goal.

This characterization of the economic aspect is strikingly similar to the prevailing conception of the economic realm as developed by Lionel Robbins in an influential book published for the first time in 1932. First of all, Robbins distinguishes a classificatory conception of economics from an analytical one. An analytical conception

does not attempt to pick certain—of behavior, but focuses attention on a particular aspect of behavior, the form imposed by the influence of scarcity. It follows from this, therefore, that in so far as it presents this aspect, any kind of human behavior falls within the scope of economic generalizations (Robbins 1984, pp. 16-17).

The logical analysis of Dooyeweerd’s and Robbins’ shared definition of the nuclear meaning of the economic point of view clearly displays four universal components in the economic aspect of any economic behavior:

(C1) Human needs or ends that have different importance for the agent(s).

(C2) The resources or means available to satisfy the needs or achieve the ends are scarce.

(C3) The means or resources are capable of alternative application and can be used to satisfy any of the needs or achieve any of the ends, but not all of them at the same time.

(C4) A frugal or efficient choice regarding this application, seeking to satisfy as many needs or achieve as many ends as possible, starting with those that are deemed as more important by the agent.

By the term ‘entity’ let us understand anything that has real existence, be it a thing (a corporeal thing like a stone, a plant or an animal), or an artifact (be it animal like a nest, or human like a car), a process, event, state of affairs, and also social structures, like a state or a family. By ‘aspect’ the Law Framework theory understands a type of properties and laws (like the type of physical properties and laws). A thesis of the Law Framework theory is that every entity has active or passive properties of all aspects and is subject, actively of passively, to the laws and norms of all of them. But the nature or “essence” of every entity — but man — is characterized by a type law, a set of certain types of properties and laws, precisely those laws that govern its internal structure taken as a whole. Thus, even though every entity somehow functions in all aspects of experience, not every entity is guided or qualified by the economic modality (for a lengthy and systematic exposition of this thesis see Clouser 2004, ch. 11, and 2009). In particular, the presence of conditions (C1)-(C4) makes human acts have an economic aspect:

when time and the means for achieving ends are limited and capable of alternative application, and the ends are capable of being distinguished in order of importance, then behavior necessarily assumes the form of choice. Every act which involves time and scarce means for the achievement of one end involves the relinquishment of their use for the achievement of other. It has an economic aspect (Robbins 1984, p. 14).

Nevertheless, not all human acts are economically qualified. Consider, for instance, a theatrical performance. This is a process whose guiding function is Êsthetical, even though there is no doubt that in it scarce goods have to be administered: In order to obtain the best coreographic results, an optimum use of cardboard, lights, wood and so on must be made. There are of course other scarce resources whose use has to be also rational, but all of them are governed by the Êsthetical effects that are being pursued by the producers of the performance: What the producers have in mind is a certain artistic achievement, no matter what it takes to obtain it, but unfortunately (for them and the art) under certain budget constraints. Hence, even though there are economic situations involved in the production of the performance, they are subordinated to other aims and purposes. In contradistinction, an activity whose chief aim is merely to economize, for instance improving a procedure to harvest corn, is subordinated to a purely economic end and should accordingly be properly classified as economically qualified.

The Modal Laws of Economics

At the present time we are not intending to create a specific economic theory, that is a theory about some particular kind of production system, let alone a mathematical-economic one. Our aim here is to probe for those large-scale laws that direct any economic process disregarding its historic form (i.e. ancient, feudal, capitalist, and so on). Since all of these processes and structures are economic, there must needs be some common structure, lest the term ‘economic process’ be rendered entirely equivocal. I am aware of the sound criticisms raised by historical materialism against certain versions of this project. Roughly, the basic criticism is that almost all such projects intend to transpose laws (or forms of manifestation of these) that are valid exclusively for certain historic economic formations to all ages. This was the criticism raised by Marx against “bourgeois economics” and with good reason, because there is scarcely any doubt that the production relations of modern economies are quite different from those of (say) the Roman Empire. Rather, our endeavor is to find those large-scale laws that define the Gegenstand of the science of economics; which provide the basic, if not the entire conceptual framework within which “a workable body of descriptive propositions for a given (economic) reality” (Georgescu-Roegen 1971, p. 331) can be built.

The guiding thread in our query shall be the concept of human artifact. According to Clouser (2005, 2009), there are a total of three aspects involved in the qualification of a usual artifact, like a car, namely the kind of natural material, the kind of production process, and the kind of plan that guided the production process. The first two are foundational, whereas the plan is the guiding function. I think that this a good approach indeed to the concept of artifact, but it must be refined further. In the first place, the approach presupposes that the prime or raw material used in the production of an artifact is homogeneous, for otherwise it would be unwarranted to speak of the kind of natural material. Nevertheless, as a matter of fact, in one and the same artifact several materials with different qualifying functions may enter simultaneously as parts or enkaptic sub-wholes, i.e. parts that can exist and function separated from the whole. Consider, for instance, a garden including stones, plants, animals and also some artifacts like man-made ponds and lamps. Hence, there is no reason to avoid saying that an artifact may have more than two foundational functions at the same time. Let me call ‘material functions’ those modalities that qualify the materials out of which the artifact is made. The modality that qualifies the production process, on the other hand, I shall call the ‘technical function’. The guiding function is expressed—as before—in the plan that guides the production of the artifact.

The former assertions intend to characterize usual human artifacts. The distinction that I have in mind is that between social and non-social artifacts. Social structures are artifacts in which the material functions are lacking, since they are made out of humans and humans—according to the Law Framework theory—have no qualifying function. Thus, by artifact I understand an entity that is the product of human activity according to a plan, that has at least a technical and a guiding function. The artifact is called social if its qualifying function includes only a technical and a guiding function; it is called non-social or usual if it also includes material functions. Any human activity that produces artifacts shall be called a labor process. The science of economics is concerned with both kinds of artifacts and also with labor processes.

Economic means, ends, and distribution relations, are all artifacts and must be analyzed accordingly. Economic means are precisely entities that enter into a labor process and that therefore appear as the prime or raw materials of the process, or as instruments (tools) of labor. If the qualifying functions of the raw materials survive the transformations effected by the labor process, the same functions become the material functions of the resulting produced artifact. In many cases, the economic means are themselves the result of another, previous labor process, in which case they are called precisely prime materials. Their leading function is “cultural”, better called~technical, since their end is to feed another production process (production of goods by means of goods). The economic means that are not artifacts or semi-manufactured products themselves are called raw materials.

Dooyeweerd (1979) characterized the nucleus of the historical aspect as

the cultural (what I call ‘technical’) way of being. Cultural activity always consists in giving form to material in free control over the material. It consists in giving form according to a free design (Dooyeweerd 1979, p. 64).

Compare this with Marx’s claim that

what distinguishes the worst architect from the best of bees is that the architect builds the cell in his mind before he constructs it in wax. At the end of every labor process, a result emerges that had already been conceived by the worker at the beginning, hence already existed ideally. Man not only effects a change of form in the materials of nature; he also realizes (verwirklicht) his own purpose in those materials. And this is a purpose he is conscious of, it determines its mode of activity with the rigidity of a law, and he must subordinate his will to it (Marx 1976, vol. 1, p. 284).

Thus, it turns out that Dooyeweerd’s concept of cultural activity and Marx’s concept of human labor are virtually identical. This would imply, in effect, that man’s capability to work or—as Dooyeweerd’s prefers to call it, the cultural way of being—is the meaning-kernel of the historical aspect.

It is clear that cultural activity requires power to be carried out. Without power, no discovery or invention that aims at controlling nature, create a new social institution, or improve an existing one, can be historically formative. As Dooyeweerd (1979, p. 67) put it, “power is the great motor of cultural development.” But power and the exercise of power are subject to norms. These norms are precisely the modal laws of the historical aspect and therefore also part of those laws in which the science of economics ought to be interested.

Dooyewerd distinguishes at least three laws within the historical aspect, namely: the norm of historical continuity, the norm for the opening or disclosure of culture, and the norm of historical development, also called principle of cultural economy. The law of historical continuity forces every creator of new forms to acknowledge the fact that the given cultural structures cannot be dismissed entirely, but only modified to some extent. This puts a bridle, of course, in the mouth of those revolutionaries that would like to destroy everything and create everything anew, and also puts shackles on the hands of those who would like to destroy culture altogether. It can be expressed by means of the motto that history is the production of culture by means of culture.

The norm for the opening or disclosure of culture requires

the differentiation of culture into spheres that possess their own unique nature. Cultural differentiation is necessary so that the creational ordinance, which calls for the disclosure or unfolding of everything in accordance with its inner nature, may be realized also in historical development (Dooyeweerd 1979, p. 74).

This norm calls on us to develop new vital cultural forms, removing the bridle from those truly creative geniuses and also the shackles from those who want to innovate in any sphere of life.

The norm of historical development, or principle of cultural economy, finally, requires that “the historical power sphere of each differentiated cultural sphere should be limited to the boundaries set by the nature proper to each sphere” (Dooyeweerd 1979, p. 81). This is clearly an historical aspectual formulation of the principle of the sovereignty of the spheres, the principle according to which every social sphere must develop without interference from other spheres. The obedience to this principle guarantees harmonious cultural development, preventing the one-sided encroachment of one power-sphere upon the others.

The science of economics is concerned with the laws (norms) that qualify economic behavior, processes and structures. These laws are the basic framework for the creation of new means, ends, and distributive relations, since their creation is indeed cultural. This can be expressed as the claim that even though ordinary production and distribution of goods is not historically guided, it is nevertheless historically founded. In other words, the creation of new economic species is controlled by the historical norms, but always guided by the efficient allocation of resources.

This brings us back to our problem, which was the searching for the modal laws of economics. Clearly, by ‘modal laws of economics’ one must understand the general laws constituting the economic modality or aspect. But it is clear that the science of economics cannot neglect the ruling of economic processes and structures effected by historico-cultural laws under the guidance of those belonging to the economic modality proper. It seems to me that, from the point of view of the Law Framework theory, the grains of truth contained in Hegel’s Rechtsphilosophie, in historical materialism, as well as in Georgescu-Roegen philosophy of economics, boil down to this thesis. Hence, the science of economics must be concerned not only with the meaning-kernel of the economic modality and its laws, but also with those of the historic modality. More precisely, it must be concerned with the connections between modal economic and basic historic laws. These connections bring us to the structure of individuality or type law determining the radical type economic entity. The general theory of economics has as a task precisely the investigation of this type law; i.e. the law that ordains and governs entities that are economically qualified. The regional theories of economics, as specializations of the general one, have as a task the investigation of the genotypes of this radical type, namely, the different production systems. The methodological injunction that can be adopted here is that mathematical models and measurements of an economic process should be produced only when a substantial progress has been made in the understanding of its individual peculiarities, under the light of its corresponding genotype. The general theory of economics must satisfy the following methodological constraints:

Methodological individualism. The thesis that all social phenomena should be explained in terms of individuals, properties of these individuals (such as beliefs, desires, other mental states and actions) or relationships among these individuals, where “individual” is not an historical category, but means “psycho-physical unit of action with rational capacities”.

Nomic methodological individualism. The thesis that also norms and laws should be included in the explanation of social phenomena, and social institutions must be seen as relational structures (hence relationships among individuals) built as human responses to these norms and laws. Nomic methodological individualism requires that economic phenomena be explained in terms of institutions, norms and choices taken by concrete human beings, or of (intended or unintended) aggregated consequences of these choices. These choices have to do with allocations of goods (including services) and labor.

Notice that choices in undifferentiated societies (tribes or clans) are also individual choices. Recall that a choice made by a deliberative council counts as individual, unless it is made by voting. In undifferentiated societies labor is “immediately” social; i.e. the governing chief or council has to allocate labor, assigning to each member of the community a given task.

Since modal laws and norms are ontological, supra-arbitrary, trans-historical and perfectly general, the nuclear meaning of the economic modality is the efficient use of scarce resources. Efficiency is the supreme value of this modality. Hence, economic modal laws are norms ruling the efficient allocation of goods and labor. Both a community (Gemeinschaft) and a bourgeois society (Gesellschaft) must obey the modal laws if they are to survive as societies. Admittedly, the form of manifestation of the modal laws may vary, depending of the particular social structure.

The first modal law imposes itself when the economic process of a society cannot be sustained, reproduced or transformed, unless goods are distributed among the households, individuals and productive units in a certain way. This involves, of course, a certain idea of equilibrium. This law is interlocked with justitial laws, requiring that the allocation be made according to a sense of justice. A Gemeinschaft that ignores this interlocking is in jeopardy because cooperation among its members tends to wane. A Gesellschaft ignoring it may enter into social turmoil.

The second modal law has to do with the social distribution of labor. It can be formulated thus: social labor must be distributed in such a way that all branches of the economy receive the required amount of labor to make feasible the production of all the required goods to reproduce the economy and sustain the members of the society (at least the labor power). Marx (1868) formulated this law in the following, rather forceful way:

It is self-evident that this necessity of the distribution of social labor in specific proportions is certainly not abolished by the specific form of social production; it can only change its form of manifestation. Natural laws cannot be abolished at all. The only thing that can change, under historically differing conditions, is the form in which those laws assert themselves. And the form in which this proportional distribution of labor asserts itself in a state of society in which the interconnection of social labor expresses itself as the private exchange of the individual products of labor, is precisely the exchange value of these products.

The form of manifestation of this law in primitive societies is through the setting of a common criterion to measure the contribution of the different members of the society to the labor pool. Says Mandel (1962 , pp. 56-57):

While primitive society, cooperatively organized, does not know yet another division of labor than that separating the sexes, the rythm of labor shall be established by custom and rites. The moment a more consequent division of labor is established, the communitarian contribution of each producer will be measured by a common criterion. Otherwise the cooperation of labor will tend to disaggregate by the establishment of favored and unfavored groups. This common organizational measure cannot be but the economy of labor time.

According to this same thinker,

The village can be considered as a great family. The sum total of annual production must correspond more or less to the needs of subsistence means, clothing, housing, and labor instruments. In order to prevent disequilibrium among these different productions, to prevent the peasants from devoting an exaggerated part of their labor to the production of pottery, leather articles, letting to lie fallow a part of the fields, it is necessary to establish a balance of available labor time and to allocate this having taken into account, first, the essential sectors indispensable for the good functioning of the community, leaving afterwards to each one to employ the rest of his time as he pleases (Mandel 1962, p. 57).

In differentiated societies labor may still be clearly social, insofar as there is a conscious accounting of labor. For instance, in the Japanese peasant economy,

the labor journeys of men constitute the principle of exchange. If a family “a” is composed of two men working during two journeys over the fields of family “b”, this family “b” will provide an equivalent (in labor) for the fields of “a”, equivalent that might consist of three men working during one day and a man carrying out a complementary journey or any other combination, equalizing (the work of) two men during two days … When four or five families collaborate in a kattari group (cooperative work to transplant rice), the calculation is made on the same basis. This demands an accounting book to compare the days and the men at work (the number of journeys carried out) (Embree 1939).

Many other concrete historical examples of societies with a conscious accounting of labor are provided by Mandel (1963, pp. 57ff.).

In contradistinction to simpler societies, modern societies are characterized by an increasing social division of labor, resulting in more complex systems of needs and the decentralization of choices. From barter to the introduction of money a long time elapsed but the net result is that, what in primitive undifferentiated societies was a direct social relationship, in modern differentiated societies became a monetary relationship or one among commodities (this is what Marx called “the fetishism of commodity”).

As it has been argued above, the notions of preference, demand, and commodity allocation are essential in economic analysis. But the notion of labor allocation, or distribution, is also essential. The two facets of any economy are distribution of goods and distribution of labor. It is important to understand the mechanism of labor distribution in any economic system, as it is important to understand that of commodity distribution. It seems that prices (in modern market economies) must be explained in terms not only of consumer preferences (and demand), but also in terms of labor, since the distribution of labor in a society imposes bounds to the fluctuation of prices. Hence, a non-reductionist view of economics must take into account the following points:

  • There are other spheres of human life that cannot be reduced to, or explained in terms of economic concepts, even though they have an economic aspect.
  • The preferences of the consumer are as important for the formation of prices as the mechanism of the distribution of labor, whose form of manifestation varies throughout history. Hence the labor theory of value and “Neoclassical economics” should be fused into a larger theory.

The needs a man has have an historical character. I do not wish to deny that all men at all times need food and shelter. What I say is that these needs can be satisfied by means of very different cultural forms, and also that new needs arise on top of these elementary ones. The arising of new needs is governed by the norm for the opening of culture, which is a calling to create new cultural forms according to their proper nature. Hence, human needs go far beyond what is given in nature and so the resources that are needed either for consumption or production require labor to be produced. Now—since labor is not given in unlimited supply, because it is the cultural activity of a bounded number of concrete individual humans—these resources may be scarce for a given demand. The problem is that this very demand may in turn depend on the given social distribution of labor, which posits an interesting riddle for economic theory: the interdependence of the factors in the economic process.

At a certain synchronic slice of the economic process, certain means, ends and distributive relations—certain cultural forms—are given while others are being created. What matters most, every economic agent is endowed with a certain structure of cultural power, which includes (1) the enjoyment of things, capabilities and certain education that allow him to define his own ends; and (2) a certain position within the web of distributive relations that imposes restrictions on the ends that can actually be pursued. Clearly, the type of ends that a given agent pursues is conditioned by his religious faith, morality and other personal features.

The web of distributive relations may or may not have an explicit juridical form—i.e. be codified like a positive law—but at any rate it is a constitution, i.e. a set of rules or procedures by means of which the sum total of social resources is allocated. Perhaps this aspect of the economic process may be modeled by means of game-theoretic notions, but I shall not consider this question here. Another important question is whether the given constitution is optimal from a justitial viewpoint, given the distribution of power among the economic agents. What I am suggesting is that perhaps a different use of the formative power available, as it is distributed among the agents, might bring a better situation from a justitial viewpoint, a situation that is closer to the fulfillment of justitial and ethical laws. This leads immediately to the cluster of problems associated with social choice, including the question of the “common good” (usually formulated in terms of the problem of a social welfare function).

The central law of the economic process, therefore, governs the interdependence of the factors of the economic process. This is a law of distribution of scarce resources and labor that delimits the distributive conditions under which a certain society may not only reproduce itself, but fulfill the three fundamental historical norms as well as the norms of ethics and justice. It is a law that norms the coordination of the different types of labors—or callings—in such a way that each member of the society can at least return at the end of the productive cycle to the same distributive position in which he was at the beginning.


Endnotes

1 For an updated brief, albeit cogent and analytically lucid presentation of the Law Framework ontology, see Clouser (2009).

References

Clouser, R.A., 2009, “A New Philosophical Guide for the Sciences: Ontology Without Reduction”, this volume.

_____, 2005, The Myth of Religious Neutrality, University of Notre Dame Press, Notre Dame.

Dooyeweerd, H., 1985, A New Critique of Theoretical Thought, 4 vols., Paideia Press, Jordan Station.

_____, 1979, Roots of Western Culture, Wedge, Toronto, 1979.

Embree, J., 1939, Suye Mura, a Japanese Village, University of Chicago Press, Chicago.

Georgescu-Roegen, N., 1971, The Entropy Law and the Economic Process, Cambridge University Press, Mass, Cambridge.

Krause, U., 1982, Money and Abstract Labor, Verso, Cambridge.

Mandel, E., 1962, Tratado de economÌa marxista, 2 vols., Ediciones Era, MÈxico.

Marx, K., 1976, Capital, 3 vols., Penguin Books, Harmondsworth.

_____, “Letter to Ludwig Kugelmann in Hanover, 11 July 1868”, in Marx-Engels Collected Works, volume 43, p. 67, http://www.marxists.org/archive/marx/works/cw/index.htm.

Robbins, L., 1984, An Essay on the Nature and Significance of Economic Science, New York University Press, New York.