Economic theory and the big economy.

Author:Farmer, David John

the ideas of economists and political philosophers, when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else.

--John Maynard Keynes.

Indeed, Keynes (1936, pp. 383-384) was right that the world is ruled by little else. This paper is about economic theory that co-rules, a theoretical pillar of what we will explain as Big Economy. It centers on a striking feature: economic theory appears so robust in terms of methodology and so slender in terms of substance. Replete with accelerating mathematics and with reliance on the rationality of economic man, it is a methodology that is typically characterized by economists in terms of rigor and science. It is suggested that the rigorous and scientific reputation of its methodology--at the cost of the slenderness of its substance--allows economics to have the appearance of being a stronger theoretical pillar of market fundamentalism. Such market fundamentalism (or neoliberalism) is in the sense of the free market explained by Friedrich von Hayek (1944) and embraced by adherents of the Chicago School like Milton Friedman (1994, p. ix), regarding the market as a self-organizing system, a spontaneous order and our best device for allocating resources. It constitutes a stronger theoretical basis, if that basis is regarded as science, for advocating perspectives represented by a term like Big Government. This has three implications, at least, for Macro Public Administration and other non-economist theorists with an interest in governance, as well as for practitioners engaged in (say) New Public Management or in (say) activities like outsourcing to the private sector.

The first implication for Macro Public Administration theorists is that it should turn even more to analyze whether economic theory is right about governmentality, described in the next section--and to reframe the focus toward what will be explained as Big Economy, including market fundamentalism. For the latter, for instance, is Friedrich Hayek (1944) right that the market is the only true, or prudential, guide to life? Is he right that the role of government is to preserve the framework of strong private property rights, free markets and free trade--with its emphasis on privatization, deregulation, and the withdrawal of social provision of services. I have indicated before why I do not think that Hayek is right (Farmer, 2007, pp. 345-357); other relevant and useful Public Administration literature is also available (e. g., Thorne & Kouzmin, 2006, 2010; Kouzmin, 2010), and the matter has also been discussed at conferences (e.g., again at the 2012 Public Administration Theory Conference where the keynote speaker Hugh Miller made a presentation on "A narrative border crossing: How market fundamentalism frames state and civil society"). Some will agree, and others will not; and, clearly, there is a also a non-Public Administration literature on this (e. g., Harvey, 2005). But that is not the point; more is needed. Recommended for Macro Public Administration theorists is to seek to re-frame imaginative analysis (see sections 2 and 4 of this paper) by developing the notion of Big Economy, which will be later explained as a counterpart of Big Government. Part of this re-framing includes emphasis on analyzing economics as a theoretical foundation of market fundamentalism and Big Government. It includes analysis of the undue power from the scientific status claimed for economics. This can also include analysis of the prevalence of scientism in society, the longing for the status of a physics (e. g., in economic science, political science and even in "administrative science").

The second implication is that non-economists with an interest in governance--like public administration theorists should contribute more to the supply of economic theory, and especially to the foundations of economic theorizing. (The latter would include, again, the preference for science and scientism and the literature on philosophy of economics (e. g., see Hausman, 1984; 2008). Non-economists should be more than mere buyers of economic theory; they bring valuable insights for upgrading the substance of economics. Recall that oligopsonists are not without power as buyers in a market, such as buyers in a market of ideas. Recall that bi-directional benefit-seeking is a principle used in some peripheral areas of economics, e. g., in neuro-economics. But even more importantly, such noneconomists should recognize that the imbalance between rigor of methodology and narrowness of substance is large and significant. Sophisticated as the methodology is, the economic substance is too scarce for comfort. Such needs have been recognized by some within the economics discipline, and other disciplines can contribute.. Thus, this paper devotes significant attention to underlining the mainstream view of rigor and substance.

Seeking such a change in the imbalance between methodology and substance can be sought rationally from the "outside," on the one hand, through emphasis on hermeneutics. The imbalance between robust methodology and slender substance can be seen as an imbalance between attention for what is considered science and what could be added by hermeneutics. Others might go even farther: a more expansive claim might speak of the greater productivity of hermeneutics, compared against what is counted as positivist. For economists, adjustments in the balance between robust methodology and slender substance can be assisted by greater recognition that, at a minimum, positivism does not rule out hermeneutics. Hermeneutics concerns developing understandings and meanings and reasons, as Philosophy of Science distinguishes such understandings (and meanings and reasons) from positivist aims like explanations and causes (e.g., see Diesing, 1991). Economist David C. Calander (1999), for instance, labels himself as an economic gadfly because he opposes the Chicago (the Becker/Friedman) approach (itself a conclusion open to hermeneutic analysis) "that the market is the solution to everything" and the M.I.T approach that "reduces everything into quasi-formal models." He does support the art of economics, which he describes as going back to Lord Keynes' father, John Neville Keynes. On the other hand, such fixit attempts and disciplinary deviations from the status quo in both economic and non-economic disciplines can be inhibited by extra-rational social and individual factors, and they require discussion about whether a minimalist or a radical approach is more hopeful. The social can be symbolized in terms of magma, described by Castoriadis (1997) and others; the individual can be symbolized in terms of the repetition compulsion, described by Freud (1914) and others.

A third implication is that other hermeneutic tools for contributing to the supply of economics may well be identified by public administration macro theorists (and others) being willing to learn from the experience of the economic discipline, identifying how (say) economic theory has structures and patterns of thought that are parallel to problematic conceptual practices within their own disciplines. Recall that learning from the competition, as it were, is good entrepreneurial practice. One way for the public administration thinker to read this text is to play (or fantasize), as we go along, about any parallels between economics and public administration (or political science). For instance, the reader may decide that public administration parallels economics in terms of substantive output, and both have ways of compensating for the differing levels of emptiness in their substantive buckets. Arguably, public administration compensates by appealing to practicality, and mainstream economic theory does so by increasing its degree of mathematicization. The reader may then go on to fantasize about the respective roles of ideology; and so on. What do the text and sub-text of economic theory (no less than public administration theory) tell us? Granted, there are still difficulties. Those who conceptualize public administration as consisting only of skills training for low-level public employees would have little interest, for instance.

This paper consists of four sections about mainstream economic theory and its importance both to economists and non-economists. First, there is this introduction. Second, there is Big Economy and the first implication--noted above--for Macro Public Administration thinkers. The third explains methodological rigor and substantive slenderness, and relates to the second and the third implications--also noted above--for Macro Public Administration Theory. The fourth relates to all three of the implications noted for Macro Public Administration theorizing and practice. It is a reprise to Big Economy, fixit opportunities, examples of inhibiting factors represented by magma and the repetition compulsion, and examples of approaches represented by Ha-Joon Chang (in 23 things they don't tell you about capitalism), Joseph Stiglitz, Amartya Sen and Jean-Paul Fitoussi (in Mis-measuring our lives) and Georges Bataille (in The Accursed Share). For both non-economists and economists, the relative advantages of a minimal and a radical change approach are illustrated.


What is big economy and big government, and why are they significant? Should the analysis be re-framed toward discussing the method-substance imbalance in economic theory insofar as it can be understood as theoretical support for Big Economy? This speaks to the first implication, noted earlier, for Macro Public Administration theorists. Borrowing the phrase from Wittgenstein (1953, p. 103) writing in a different context, can Big Economy "show the fly the way out of the fly bottle?" Or, as we would put it now, can Big Economy be used to show economics the way out of the box.

Let us continue with "A Balanced Approach?" and "Mixed...

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