Re: Backed Money-etc. - Reply To Winslow re. Whitehead

[Ted Winslow <winslow@xxxxxxxx>]

Gunnar wrote:

> I just looked up Whitehead - he is talking SOCIOLOGY rather than Theory of
> Economics:
>
> "It is now time to give some illustration of assertions already made.
> Consider our main conclusions that our traditional doctrines of SOCIOLOGY, of
> political philosophy, of the PRACTICAL CONDUCT OF LARGE BUSINESS, and of
> POLITICAL ECONOMY are largely warped and vitiated by the implicit assumption
> of a STABLE UNCHANGING SOCIAL SYSTEM.  With this assumption it is
> comparatively safe to base reasoning upon a simplified edition of human
> nature.  For well-known stimuli working under well-known conditions produce
> well-known reactions.  It is safe to assume that human nature, for the purpose
> at hand, is adequately described in terms of some of the major reactions to
> some of the major stimuli.  For example, we can all remember our old friend,
> the ECONOMIC MAN.
>
> "The beauty of the economic man was that we knew exactly what he was after.
> Whatever his wants were, he knew them and his neighbours knew them.  His wants
> were those developed in a well-defined social system.  His father and
> grandfather had the same wants, and satisfied them in the same way.  So
> whenever there was a shortage, everyone - including the economic man himself -
> knew what was short, and knew the way to satisfy the consumer.  In fact, the
> consumer knew what he wanted to consume.  This was the demand.  The producer
> knew how to produce the required articles, hence the supply.  The men who got
> the goods on the spot first, at the cheapest price, made their fortunes; the
> other producers were eliminated.  This was healthy competition.  This is
> beautifully simple and with proper elaboration is obviously true.  It
> expresses the dominant truth exactly so far as there are stable well-tried
> conditions.  But when we are concerned with a SOCIAL SYSTEM which in important
> ways is changing, this simplified conception of human relations requires
> severe qualifications.
>
> "It is, of course, common knowledge that the whole trend of political economy
> during the last thirty or forty years has been away from these artificial
> simplifications.  Such sharp-cut notions  as 'the economic man', 'supply and
> demand', 'competition', are now in process of dilution by a close study of the
> actual re-actions of various populations to the stimuli which are relevant to
> modern commerce. [I.e., PSYCHOLOGY - insert GT].  This exactly illustrates the
> main thesis.  The older political economy reigned supreme for about a hundred
> years from the time of Adam Smith, because IN ITS MAIN ASSUMPTION IT DID APPLY
> TO THE GENERAL CIRCUMSTANCES OF LIFE AS LED, then and for innumerable
> centuries in the past.  Etc. etc." ('Adventures of Ideas', Free Press
> Paperback, 1967, pp. 93-94)


I must be misunderstanding you.  This passage explicitly contradicts your
claims that Whitehead is "talking SOCIOLOGY rather than Theory of Economics"
and that "Whitehead had nothing to say" about "the principles of that very
important science [i.e. "political economy]".  They single out classical
political economy's atomic conception of human nature - "economic man" - to
illustrate "our main conclusions that our traditional doctrines of
sociology, of political philosophy, of the practical conduct of large
business, and of political economy are largely warped and vitiated by the
implicit assumption of a stable unchanging social system."

The conclusion that "our traditional doctrines ... of political economy are
largely warped and vitiated by the implicit assumption of a stable
unchanging social system" repeats  the conclusion of a discussion found
earlier in the chapter.

"The conclusion to be drawn from this survey is a momentous one.  Our
sociological theories, our political philosophy, our practical maxims of
business, our political economy, and our doctrines of education, are derived
from an unbroken tradition of great thinkers and of practical examples, form
the age of Plato in the fifth century before Christ to the end of the last
century.  The whole of this tradition is warped by the vicious assumption
that each generation will substantially live amid the conditions governing
the lives of its fathers and will transmit those conditions to mould with
equal force the lives of its children.  We are living in the first period of
human history for which this assumption is false."  (pp. 92-3)

In both these statements of it, the conclusion is explicitly said to apply
to "our political economy", "our traditional doctrines ... of political
economy", as well to "our sociological theories", "our traditional doctrines
of sociology".

Whitehead, like Marshall, claims that traditional doctrines of political
economy ignore the fact that "man himself is in a great measure a creature
of circumstances and changes with them".  Marshall also criticized "English
economists at the beginning of the [19th] century" on just this ground.

"The change that has been made in the point of view of Economics by the
present generation is due to the discovery that man himself is in a great
measure a creature of circumstances and changes with them.  The chief fault
in English economists at the beginning of the century was not that they
ignored history and statistics, but that they regarded man as so to speak a
constant quantity, and gave themselves little trouble to study his
variations.  They therefore attributed to the forces of supply and demand a
much more mechanical and regular action than they actually have."
(Marshall, as quoted by Keynes, X, p. 196)

What connection do Adam Smith's claims about the physiocratic system have to
the claim that "Bentham's monetary writings concern 'the principles of that
very important science,' on which Whitehead had nothing to say"?

Re your claim in an earlier post about Keynes's relation to Bentham, here
are some more passages for you to consider.

In the essay on Marshall, in a footnote to the claim that Jevons's Theory of
Political Economy "lives in the tenuous world of bright ideas", he says:

"How disappointing are the fruits, now that we have them, of the bright idea
of reducing Economics to a mathematical application of the hedonistic
calculus of Bentham!" (X, p. 184)

In the discussion of Edgeworth's Mathematical Psychics leading up to the
conclusion that "the atomic hypothesis ... breaks down in psychics", he says
that Edgeworth:

"was disinclined, in company with most other economists of the classical
school, to reconsider how far the initial assumptions of the marginal theory
stand or fall with the utilitarian ethics and the utilitarian psychology,
out of which they sprang and which were sincerely accepted, in a way no one
accepts them now, by the founders of the subject.  Mill, Jevons, the
Marshall of the 'seventies, and the Edgeworth of the late 'seventies and
early 'eighties believed the utilitarian psychology and laid the foundations
of the subject in this belief.  The later Marshall and the later Edgeworth
and many of the younger generation have not fully believed; but we still
trust the superstructure without exploring too thoroughly the soundness of
the original foundations."  (X, p. 260)

In the 1946 essay, "Some Economic Consequences of a Declining Population",
he says

"it was, I think, an ingredient in the complacency of the nineteenth century
that, in their philosophical reflections on human behaviour, they accepted
an extraordinary contraption of the Benthamite School, by which all possible
consequences of alternative courses of action were supposed to have attached
to them, first a number expressing their comparative advantage, and secondly
another number expressing the probability of their following from the course
of action in question; so that multiplying together the numbers attached to
all the possible consequences of a given action and adding the results, we
could discover what to do.  in this way a mythical system of probable
knowledge was employed to reduce the future to the same calculable status as
the present.  No one has ever acted on this theory.  But even today I
believe that our thought is sometimes influence by some such
pseudo-rationalistic notions." (XIV, p. 124)

Finally, Keynes's own psychological premises are rather obviously
inconsistent with "utilitarian psychology".  As I have often pointed out on
this list, Keynes claims that the "essential characteristic" of capitalism
is "the dependence upon an intense appeal to the money making
and money-loving instincts of individuals as the main motive force of the
economic machine" (IX, p. 293). Elsewhere he says of this "main motive
force" that "the love of money as a possession ...  [is] a somewhat
disgusting morbidity, one of those semi-criminal, semi-pathological
propensities which one hands over with a shudder to the specialists in
mental disease." (IX, p. 329)

His theory of financial markets is grounded on the premise that

"the vast majority of those who are concerned with the buying and selling of
securities know almost nothing whatever about what they are doing.  They do
not possess even the rudiments of what is required for a valid judgment, and
are the prey of hopes and fears easily aroused by transient events and as
easily dispelled.  This is one of the odd characteristics of the capitalist
system under which we live, which, when we are dealing with the real world,
is not to be overlooked."  (VI, p. 323)

Best,

Ted

--
Ted Winslow                            E-MAIL: WINSLOW@xxxxxxxx
Division of Social Science             VOICE: (416) 736-5054
York University                        FAX: (416) 736-5615
4700 Keele St.
Toronto, Ontario
CANADA M3J 1P3