Circular Cumulative Causation (CCC) a la Myrdal and Kapp--Political Institutionalism for minimizing social costs.

Author:Berger, Sebastian

This paper reconstructs the CCC's original meaning, and methodology from the writings of Myrdal and Kapp to explore the unique characteristics of this key concept of institutional economics. Moreover, the paper demonstrates the CCC's application to minimize social costs via economic planning and its implications for Political Institutionalism, pursuing the research project outlined in the Journal of Economic Issues, (Berger and Forstater 2007). Incorporating new unpublished material from the Kapp Archive, namely the Myrdal-Kapp correspondence and Kapp's CCC lecture notes, the paper provides valuable insights about the cooperation between the two economists, and about Kapp's conceptual understanding of CCC. In the second part of the paper, important differences to Veblen's Cumulative Change [CC.sup.V] and Kaldor's Cumulative Causation [CC.sup.K] are pointed out to underline the CCC's uniqueness and significance for institutional economics.

The Origin of CCC

Myrdal formulated the CCC for the first time in Appendix 3 of American Dilemma--The Negro Problem and Modern Democracy (1944), using it as a research hypothesis for the circular (self-reinforcing) causation between prejudices, institutions, and poverty. This triggers a vicious circle or "cumulative effect" of increasing inequalities, and poverty. Myrdal defined two distinct elements of the CCC, i.e., circular causation and its cumulative effect, in Asian Drama--An Inquiry into the Poverty of Nations (1968):

[...] circular causation will give rise to a cumulative movement only when [...] a change in one of the conditions will ultimately be followed by a feed-back of secondary impulses [...] big enough not only to sustain the primary change, but to push it further. Mere mutual causation is not enough to create this process. (Myrdal 1968, 1875) Elsewhere he had formulated:

Because of such circular causation a social process tends to become cumulative and often to gather speed at an accelerating rate. (Myrdal 1957, 13) Kapp applied CCC throughout his analyses of social costs since the 1940s, and systematically elaborated the concept's significance for the integration of the social sciences in the 1950s (Kapp [19501 [1963] 1977, 23, 25; 1961, 183, 187-8).

Meaning and Methodology

The CCC is the main antithesis to the mechanistic analogy and stable equilibrium of the social and economic system. As such it denies a necessary ameliorative trend in development, rejects stage theories, and anticipates the danger of poverty, and societal crisis. However, CCC is no doctrine of hopelessness because vicious circles can be broken, virtuous circles are possible, and a cumulative process also calls forth counteracting forces (Myrdal 1944, 1065; 1957, 35; 1968, 1857, 1859; Kapp, unpublished lecture notes).

As a precondition for self-reinforcing causation, CCC presupposes reciprocal causation and rejects the "primum mobile" causation theory (Kapp 1961, 188). Thereby, the CCC takes a stand in an old philosophical debate about cause and effect. For instance, Hegel was convinced that the reciprocal relation of cause and effect is the next truth that science will discover, whereas Schopenhauer stated that an effect cannot be the cause of its cause. Also, Marx saw the development of the whole as being constituted of factors that interact with each other and with the whole. Regarding Marxian dialectics, Kapp argued that the CCC neither doubts the relevance of ideological nor material factors but that it rejects that one factor is per se exclusive and that the analysis can be restricted to it. Contradictions between material conditions and ideas, etc., are however, possible (Kapp, unpublished lecture notes, Kapp Archive). Myrdal rejected Marxian dialectics if they are interpreted as attributing causal potency to the economic factor alone (Myrdal 1968, 1855-1905).

If social events and social change emerge in a process of reciprocal interaction between the elements of the system (i.e., within the inner structure), it is no longer adequate to attribute causal potency to an individual variable or impulse. Rather, the outcome (the event, the process) must be viewed as the result of the entire initial situation and the interaction process as well the basic properties of the total social structure. (Kapp 1961, 188) Therefore, attributing causal potency to the economic factor leads to only seemingly clear correlations. The CCC hence focuses on all relevant factors and rejects working with analytically closed models. The relevant factors can, of course, only be determined empirically in a given situation. Denying the existence of a primary cause neither implies a denial of the causal principle nor renders the search for relevant factors, their interdependence, or the direction of their change futile. The economic process is part of a larger social process and has to be analyzed as such. Thus the CCC, as applied in the context of economic planning, has focused on the conditions of the following categories of the social system that are by no means exclusive: (1) output and incomes; (2) conditions of production; (3)...

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