KULTUR KRITIK

Well, thanks to TV, I have in the past few days seen both The Matrix and The Matrix Reloaded and I still don't get it.  I must be irredeemably old.

A CRITIQUE OF KEYNES CONCLUSION

All of the modern efforts to manipulate, manage, shape, control, and direct an essentially private capitalist economy rest on this Keynesian theory, with its subjective psychological foundations. In the tradition of British philosophy and political economy from which he derives, Keynes takes subjective propensities as given data – impenetrable, inexplicable, beyond argument or appeal. They are, to use the term of which economists are fond, exogenous variables, which is to say they come from outside the system. They are given in exactly the same way that the laws of nature and the resources of the earth are given.

It is worth pausing for a moment to reflect on how far economics has moved from its classical assumptions by the time we come to Keynes. Originally, all agents are assumed to maximize gain in an environment of perfect certainty and complete knowledge. Prices, wages, profits, rents, and the rate of economic growth are, under these conditions, functions of two factors: the objective technology of production, which determines what combinations of inputs are required for specified outputs; and the relative strength of the several classes of the society, which determines how the annual net social product will be divided up among the workers, the capitalists, and the landlords.
 
As the world becomes, and is recognized to have become, more complex, the simplifying knowledge assumptions of the classical model must give way to the acknowledgement of risk, uncertainty, and finally subjective expectation. At the same time, as it becomes clear that workers do not live permanently at the level of subsistence, that landlords are not mere idle consumers, and that capitalists, for a variety of reasons, are not perfect accumulators, the elegant theorems derived from the simple behavioral assumptions of classical political economy must be given up.
 
Faced with the intrusion of subjective non-rational elements into the process of economic choice and decision, post-Keynesian economists are forced to alter fundamentally the way in which they seek to understand a capitalist economy. Instead of a priori analysis built on elementary assumptions of profit-maximization, they offer econometric models in which dummy variables and functions stand for the several elements of the decision-making process. A variable for liquidity preference; a variable for the propensity to consume; a function separating a worker’s leisure/labour trade off, which is to say the proportion of total available labour-time that the worker prefers to devote to leisure, expressed as a function of income. And so on and on. Any of you who have taken even an elementary course in macroeconomics will be aware of the extent to which the subject, as now taught, rests on this sort of model-building.

The result is that economics has become an extremely elegant, complex, mathematically sophisticated way of guessing at the shadows on the wall of the cave. In Plato’s REPUBLIC, you will recall, Socrates relates an allegory of the human condition. We are to imagine, he says, that a group of men are chained to the floor of a dark cave, so that they can only look to their front at a blank wall. Behind them, fires are lit, and unseen attendants walk before the fires, carrying small scale models of physical objects and people. The light casts shadows of these objects on the wall, where they flicker in fantastic distortion. At first, the captives are simply mystified by the succession of shadows, but after a while, some of them, those best adapted to a troglodytic existence, begin to discern repetitions and patters in the images. They formulate theories about what shadows will appear next, and the most skillful among them acquire considerable reputations for their ability to anticipate by a few moments the next images. Some, we may even imagine, extending the story a bit beyond Plato, become tenured professors of shadow-guessing, and a few whose theories of the shadow world have risen to heights of mathematical elegance even win Nobel prizes for shadow-guessing.
 
One of the captives, Socrates tells us, driven by some obscure instinct that the world holds more than shadows, works himself free of his bonds and crawls painfully to the mouth of the cave. Dazzled by the bright sunlight, he slowly acclimates himself to the brilliant light, and sees for the first time the real physical objects whose twisted and distorted shadows he has all these years observed. At last he realizes that these are the reality of which the shadows are more imperfect reflections or appearances. Rushing back into the cave to bring this momentous news to his fellows, he is temporarily blinded by the darkness, and staggers about as though mad. Naturally, the remaining captives simply laugh at his insistence that their shadows are inferior appearances, behind which lies a truer reality. Puffed up by their skill at shadow-guessing, they consider merely comic the claims by their former comrade that they are enmired in unreality.

Marx had a name for the masters of shadow-guessing. He called them Vulgar economists and contrasted them with the classical economists -- Petty, Quesney, Smith, Ricardo -- whom he considered serious students of economic reality. Paul Samuelson, the greatest of the shadow-guessers, has returned the compliment by characterizing Marx, in a famous essay, as a “minor post-Ricardian,” and, worst of all, “an auto-didact.” (To be self-taught, I suppose, is from Samuelson’s standpoint even worse than to be a minor follower of the wrong economist, for if it should turn out that one can teach oneself to understand economics, that will put an end to the hegemony of the profession.)
 
The dummy variables and functions of econometric model-building refer to nothing at all that can be directly studied. There is no way that we can get at an individual’s “propensity to consume,” for the purpose of constructing a more adequate theory of consumer behavior. Nor can anything useful be said about the inner determination of the capitalists’ expectations for future gain, so as to lay the foundations for a scientific theory of investment and growth. Instead, economists are forced to amass countless time-series of date, on which, in a manner that would have made David Hume proud, they can perform simplistic extrapolations.
 
There are two central problems with this mode of theoretical operation, and together they have brought economics to its present sad condition. The first problem is that there is no stable set of psychological propensities or motives about which reliable knowledge can be accumulated. As I pointed out when discussing Mill’s introduction of the factor of habit or custom, these labels or placeholders -- habit, custom, propensity to consume, liquidity preference, leisure/labour trade-off, and the rest -- are merely summary names given to whole congeries of heterogeneous and shifting motivations. Some consumers may be guided in their decisions about savings versus consumption by a consideration of present versus future pleasures; others may be influenced by the uncertainty of unemployment; still others may be reacting to the experience of seeing savings shrink in value under high rates of inflation. And some consumers may even have been influenced by the sorts of public service advertising that first surfaced during the Eisenhower years, when Americans were exhorted to buy on credit as a way of showing their faith in the American system

Economists extrapolate from past behavior, only to find that the present deviates from the past. As they make mid-course corrections in their econometric estimates, reality continues to shift beneath them. The problem is not that modern economic reality is complex. Their formal models are more than adequate to handle a high level of complexity. The problem is that their theories are theories of appearances, surface manifestations, and hence give no genuine insight into the causes of the shifting shadows.

The second problem, more serious even than the first, is that economics is a study of human choice and decision, not of inanimate nature or animal behavior. The consumers, investors, and entrepreneurs whose preferences and propensities are modeled by the econometricians are themselves self-conscious agents increasingly aware of and influenced by the descriptions, predictions, hopes, and anxieties of economists, public figures, and social commentators.

All of you are familiar from today’s newspapers with the ways in which the interplay of economic prediction and private investment or consumption decision wreaks havoc with the efforts of the central government to manage the national economy. Businessmen postpone the expansion of productive capacity in the expectation that high interest rates will slow recovery, balloon the federal deficit, send the government into the money market for even greater borrowing, and thereby maintain the high rates. The government enacts a tax designed to draw a larger share of income into savings, but the stock market discounts the effects of the act six months before it goes into operation, condemning it to failure.
 
Under these circumstances, madcap schemes acquire respectability, and establishment politicians and economists react by labeling them “voodoo economics.” But in fact, this is merely the effort by licensed witch doctors to drive their upstart competition back into the bush.

What is the heart of the problem? I should like to suggest to you that Marx’s style of diagnosis still retains considerable merit. The underlying problem, as he would have argued, is that the forms of capitalist development have become fetters. In the early stages of capitalism, the pressures of a permanent excess supply of workers, together with the almost total lack of collective or legal protections, held wages at or near subsistence. Severe competition among large numbers of small businesses forced firms to strive for maximum growth if they were to survive at all. The effect was rapid, although uneven, expansion of the productive capacity of the economy.

With the rise in worker standard of living and the unrelenting amalgamation of small capitals into large, with the advance of collective bargaining and the development of a system of money and banking sophisticated enough to support the new capitalist order, growth and prosperity increasingly came to depend on the appropriate rate of savings and investment and the proper management of the expansion of effective demand for the consumer goods and capital goods being produced.
 
The new economics of Keynes and his followers sought to preserve an essentially private economic order, in which not only mere legal ownership, but more importantly the effective control and management of the means of production, remained lodged in countless uncoordinated private firms. What this meant -- and means still today -- is that the ultimate determination of the allocation of the collective social product rests with the irrational and impenetrable subjective preferences, propensities, and expectations of private individuals. It is scarcely surprising that even the most agile shadow-watchers are unable to either predict or to control the flow of images on the wall of our cave. What is to be done? There are three possibilities, each corresponding to a different conception of the relationship between the economic theory and the practical management of the economy. The first possibility is to press forward as we have been doing, with more elaborate and refined macroeconomic models, more complex fiscal and monetary programs, all imposed on a private economy organized on the pursuit of profit. This course we may call the persistence of the actual, and as metaphysicians have often observed, the actual occupies a privileged place in our experience and beliefs. I am absolutely convinced that this course of action is doomed to failure, but I rather imagine it will take another decade or two of the economic disaster before the American people are prepared to scuttle the conventional wisdom and adopt some better means of social decision.
 
The second possibility is to turn the clock back two centuries and try, by an act of faith and will, to re-instantiate a world in which the classical economic theories work. This I shall call the yearning for the impossible, and it is now, with the advent of the theory of rational expectations and so-called supply-side economics, reaching the height of its brief resurgence. The impossible has always exerted a powerful attraction on credulous souls, sometimes even eclipsing the actual by its beauty and simplicity. In earlier days, when society was less thoroughly interconnected, it was possible to embrace the impossible for quite some time before being brought up short against reality. Now, unfortunately for Mr. Reagan, the impossible succumbs to the actual in about as long as it takes to get from a presidential to a mid-term election. I think we can with confidence conclude that rational expectations, supply-side economics, and the revival of the theory of the free market have already peaked and are on the decline.
 
[Alas, when I wrote this, I was in the grip of an optimism that Keynes would have considered a very great effusion of animal spirits.  A quarter of a century later, things have only gotten worse, which I suppose some people would conclude means that are closer to revolution!]

We are left with the third alternative, which is to confront directly the underlying cause of the failure of modern economics, and respond by changing both our theory and our practice.

As we saw, the problem is this: an economy guided by the uncoordinated decisions of private individuals must necessarily rest upon subjective, variable, and self-referentially influenceable motivations. So long as the theories of the behavior of producers and consumers become factors influencing that behavior, no stable theory can be developed by means of which the economy can be guided.

There is, however, a solution. What are now predictions by external observers of the way in which economic agents will probably behave can be transformed into collective decisions about how economic agents choose to act. Instead of attempting to shape and guide an economy on the basis of predictions about what proportion of income consumers will save, or what level of profit will draw new capital into investment, we can as a society choose a level of savings that fits our collective goals and desires. We can decided to invest at a level and in a pattern calculated to achieve whatever regeneration or expansion or transformation of our industrial plant it is that serves our collective social ends. We need not rest our hopes for full employment on the armchair psychological maxim that consumers will save a larger fraction of each additional dollar of income, nor need we count for new capital investment on the fragile, variable, semi-informed subjective expectations of individual capitalists.
 
The economic theory suited to the rational management of a modern industrial economy is not the elaborate shadow guessing of modern econometrics. Rather, it is the physical-quantities linear analysis developed by Wassily Leontief as input-output analysis, together with the theory of linear programming, and the modern mathematical reinterpretation of Marx carried out by Piero Sraffa and a host of economists around the world. This theory has its roots in the Tableau économique of Quesney and the physiocrats, and builds on the analysis of Ricardo and Marx. Theories of this sort are already being employed as tools of rational economic planning in Eastern Europe, and would have a far more powerful and effective application to an economy as advanced as that of the United States.
 
The foundation of economic planning is a set of objective data specifying the available technologies, on the basis of which one can calculate the direct and indirect physical requirements for whatever final output is collectively chosen by the society as the goal of its economic activities. The level of output and rate of growth of an economy have natural limits, imposed by the state of technology, the size and skills of the labour force, and the stock of available tools, raw materials, and machinery. Neither ideology nor economic theory can change these constraints, although over time, rational social planning can alter them in major ways. With the modern methods of analysis to which I have referred, it is now becoming possible to undertake complex society-wide planning based on objective facts and collective choices, rather than on shadow appearances and subjective preferences and expectations. The anarchy of the marketplace can finally give way to rational social management founded on a politics of public deliberation and determination of collective economic goals.
 
There is, of course, an obstacle to the triumph of the rational, as we may call this third course of action. The obstacle is not primarily theoretical, nor is it technological. Rather, it is political. Those who are systematically benefitted by the present economic order will fight to maintain their advantage. Hence the struggle for socialism, which is of course what I am talking about, must be carried on in every political arena, as well as in the literature of economic theory.
 
Nevertheless, there is a great deal to be gained by confronting established dogma and exposing its true nature as the scholasticism of shadows. The economics of the neo-classical synthesis, as it has been called, is in retreat. The master shadow-guessers of Samuelson’s generation are giving way to epigoni who struggle helplessly to reassert their authority in the face of economic disaster. Theories of collectivel rational economic choice will not substitute for political action, but they have an indispensable role to place in the social transformation that must be undertaken. Perhaps my observations this afternoon will encourage some of you to revisit the dismal science -- or to make its acquaintance for the first time -- and to explore the new theories which are arising to challenge the old.

TWILIGHT RUMINATIONS

The recent vigorous discussion on this blog about political action and its many modes has provoked in me some autobiographical reflections about the trajectory of my own engagement with the public world.  I offer these reminiscences and musings for such interest as they may hold, especially for my younger readers, who have not yet had the experience of spending fifty years being disappointed.
I date my awareness of politics from 1948, in which year Harry Truman, Tom Dewey, Strom Thurmond [for the Dixiecrats], and Henry A. Wallace [for the Progressive Party] contested for the presidency.  In those days, so shortly after the Second World War, and in the aftermath of the seemingly endless presidency of FDR, I listened to the folk music of Woody Guthrie, Huddie Ledbetter, and Pete Seegar, read PM [the leftie New York newspaper that eschewed all advertising], and sang the songs of the Lincoln Brigade [Los Quatros Generales comes to mind.]

This was a time when Jim Crow still ruled, when women were expected to return to the home after staffing the war factories left vacant by absent soldiers, when homosexuality could not even be mentioned, save with a snigger, when there were Jewish quotas at elite colleges, and when even the Federal Housing Authority stated openly in its literature that it would not underwrite mortgages for Black families seeking to buy in White areas.  In short, it was not an idyllic Golden Age, by any stretch of the imagination.

My first active engagement with the public world came some years later, in the late '50's, when I became deeply involved in the Campaign for Nuclear Disarmament.  I gave public speeches, appeared on television, debated Herman Kahn before an audience of a thousand in Boston, wrote for the New Republic and The Nation, sat on the board of the Bulletin of Atomic Scientists, and even managed to get a letter published in the NY TIMES [which triggered a vicious attack from right-wing columnist Westbrook Pegler and, oddly enough, a matching attack in Literaturnya Gazyetta for being a petty-bourgeois running dog of imperialism, as I recall  -  this for agreeing with Nikita Khrushchev!]  Like many of my comrades, I was terrified of the danger of an accidental nuclear war, a fear that was almost realized during the Cuban Missile crisis a few years later.

The principal turning point in my political evolution came not from reading a book, but from the shock of the abortive invasion of Castro's Cuba at the Bay of Pigs.  Having grown up with FDR, I more or less automatically supported the Democratic Party, but the Bay of Pigs made me and my friends at Harvard begin to think of ourselves in a new way -- as "radicals," whatever that meant.

At the University of Chicago, I joined others in protesting the university's overt policy of discriminating against Black renters, even its own Black students, in the name of preserving "racial balance" in Hyde Park. 

By the middle sixties I had moved to Columbia, where I took an active role supporting the '68 student uprising and building seizures.  It was during my Columbia years that I wrote In Defense of Anarchism, which offered a theoretical justification for the refusal of young men to obey orders of induction into an army fighting a war they [and I] believed to be both immoral and completely unjust.  These were discouraging times, with the deaths of Martin Luther King, Malcolm X. , and Bobby Kennedy.  A propos the theory of making things worse so that they will become better, I actually went into the voting booth in '68 intending to vote for Richard Nixon, but my arm would not obey my command, and I ended up pulling the Democratic lever after all.

I left Columbia shortly thereafter, fed up with the self-congratulatory privilege of the Ivy League, and went to the University of Massachusetts.  My writing continued to express my ever more carefully worked out commitment to the ideas of Marx, but increasingly I turned inward, devoting much of my time to raising my two sons and fighting to create a doctoral program in Social and Political Philosophy and Recent Continental Philosophy.  At the same time, I launched Social Thought and Political Economy, a left-wing interdisciplinary undergraduate major that flourished and exists to this day.

By '85, I had become involved in the struggle to end apartheid in South Africa, and that effort, first as the unpaid Executive Director of Harvard/Radcliffe Alumni/ae Against Apartheid and then as the founder of University Scholarships for South African Students, consumed and continues to consume much of my energy.

For a time in the late sixties and early and middle seventies, it was possible to think that America was embarked domestically on a steady move to the left, despite the continuation and enlargement of an imperial foreign policy that put the country on a permanent war footing.  Paradoxically, the eighties and nineties were a good time for the Black, Women's, and Gay Liberation Movements, and changes took place that, despite the best efforts of reactionaries, will never be undone.

But as I have grown older and older and older, it has became harder and harder and harder to believe that some day the socialist transformation to which I have so long been committed will ever occur.  Indeed, with the rise of a resurgent religiosity and the loss of any connection with America's small socialist movement, the public discourse today is worse than it has been for most of my life.

It has been a difficult sixty years, to put it mildly.  For a while in the seventies it was possible to hope that I was being carried along by a progressive tide, but in retrospect it is clear that that has been reversed by a powerful reactionary undertow.

Because I am by nature optimistic, I continue to work for whatever seems to me to be the best available alternative.  I have already explained why I think I have an obligation to do so.  But the brave hopes and committed convictions of my grandfather and all the others who believed a revolutionary transformation was coming have proven unfounded.  I am now afraid that in the short time I have left, whether it be a few years or more than a decade,  I will not see a marked turn to the left in America.  What my grandchildren, Samuel and Athena, will see I cannot say.

GUEST POST BY JUDITH BAKER

While I was engaged in the recent discussion on this blog about political action and political commitments, I received a circular email from an old friend and comrade, Judith Baker, about her recent experiences in South Sudan.  Judith and I have been friends for twenty-five years, going back to our time together in Harvard/Radcliffe Alumni/ae Against Apartheid.  Judith should have graduated from Radcliffe in 1970, but she took part in the Viet Name War protests at Harvard that year, and was bounced.  She returned to finish up a year later, and then pursued a career as a teacher in the Boston schools.  For as long as I can remember, Judith has been working in Africa [initially in South Africa] to help teachers to learn to teach more effectively.  Unlike me, she goes to Africa for weeks or months at a time, not just for quick trips there and back.  If I were the pope of a secular church, she would be my first nominee for the rank of secular saint.

Here is the circular letter I received.  It is fascinating as a picture of what is happening in South Sudan, but it is also an object lesson in how to be political, which was the subject of my posts and the discussion they engendered.  Since she has given me permission to post this letter, I think it would be perfectly all right for you to circulate it in whatever way you wish.

Dear Friends,

 In the past, when I've been in Africa, I've written some sort of letter home to my friends and family.  This time I've had a very hard time summoning words for my letter. It's been almost a month since I returned from South Sudan and I have wondered why it's been so hard to say anything when people ask 'how was your trip?' 

Finally, though, I think I am beginning to understand why the words have come so slowly. In short, South Sudan made me intensely angry and intensely uncomfortable. Usually I am in Africa working with local teachers and parents who, though they may not have a lot of material resources, may not even have enough to eat or access to health care, have invited me in because they are building something, and while I am there, they are sharing their culture with me, teaching me about themselves and what they believe and care about, singing perhaps, joking, telling stories. But Sudan is a genocidal dictatorship, and the government of Sudan has been bombing and starving its own more marginalized peoples for 30 years, creating vast UN refugee camps and IDP camps [internally displaced people] out of the survivors, destroying the very cultures of those survivors, in order to replace them with favored groups. And because I don't usually write about politics in my Africa letters, I guess it's been hard to write about anything else. My original involvement with Sudan was to work with the MA Coalition for Darfur which was founded to try to stop the ongoing genocide in that part of Sudan, and this was my first actual visit to any part of Sudan. But despite all the survivors I'd met and worked with, all the video footage and news I'd seen, I guess I was not emotionally or spiritually prepared to be part of the reconstruction. I felt totally inadequate, could see very little way to contribute, and it left me with a blankness that I'm determined to overcome, but have not yet conquered. The world's collective inability to protect the Sudanese and the activist community's failure to mobilize adequate response to war and genocide must have created in me a fear of failure greater than I could face in South Sudan. Now that I'm finding the words, perhaps I'll also find some of what I will need.

People in South Sudan [almost the poorest country in the world, although when its oil is developed that will change] became independent last July and the signs of progress are everywhere - buildings going up, hotels being built for the flood of aid workers and business people, even a few tourists, schools and hospitals being sponsored by international allies, regular international flights into the capital of Juba. There is certainly a resilience among the people and palpable dedication to a new way of life. Huge trucks carry food from Uganda and Kenya and business people from Ethiopia and Kenya are opening small hotels and restaurants and shops with credit unavailable as of yet to most Sudanese, who in any case are not as experienced in business. I expected to be inspired and was hoping to be useful in some way to the educators I would be working with, who I had already worked with before and liked.

But what I found was people who have known war all or most of their lives, have had their traditions seriously disrupted, have been forced to depend upon dedicated but underfunded aid agencies and sometimes fickle donors, and have not yet found their balance in a very unbalanced and precarious globalized world in which they are far behind and know it. Traditionally a proud, almost aloof, people, wholly self-reliant and somewhat isolated, now the Dinka [I worked in a Dinka village, but they are one of many South Sudanese cultures] must catch up to the 'modern' and educated world while still at risk of murderous air attacks by the Sudanese army. The contradictions are intense, and I could not negotiate them. I was in awe of the Sudanese women who have been trying to build a network for peace, of My Sister's Keeper for sticking with them and with the Kinyuk School project and trying to widen its reach, and I don't want to write anything which diminishes that hopefulness. But I have to say that I personally am still reaching for the spiritual resources and courage to face the South Sudanese educators and say honestly that I think this or that will work. 

 This was a short trip - 2 weeks in South Sudan to visit the Kinyuk School for girls, a project of My Sister's Keeper at Bethel AME Church in Jamaica Plain. Pastor Gloria White-Hammond and Director of MSK Sarah Cleto Rial had gone to Kinyuk recently to administer a test to the students to see if they could get a sense of the educational progress the girls were making. The results were very troubling, with few students below Primary 6 able to write anything from dictation, or to read much more than a few words [in English, the language of school instruction from primary 4 on, and introduced in primary 1]. In response to the assessment results, MSK invited a team of 3 teacher educators from Central Washington University to do an 8 day training for teachers and me to observe and help figure out how to move forward.

 This is a primary school, but girls are welcome to enter quite late, so they tend to be older than elementary students in the US. The community is uniformly Dinka, Christian, and cattle herders and the school is located close enough to the Sudan border for people to fear a new outbreak of war which seems in fact to be happening. The area is flat, dry, prairie-like, green in rainy season as long as the rains come, very very hot, and plagued by air that is full of dust in dry season, insects in rainy season. The people are expert at getting the most from their land and their animals. They live in large thatched mud homes in family compounds surrounded by reed fences. There is a bore hole for water and a market, government schools and also Kinyuk, but no hospital or doctor, government offices, obvious police or court, paved roads or public buildings. There is a large Catholic church under construction, and the market has some very small drinking places with tv's. Fewer than half the children go to school as their families can't afford the fees or uniforms, and there is very little employment other than subsistence agriculture, trading, and perhaps, since the country was at war from 1975-2005 and may return to war, the army. 

 Teachers in South Sudan have had few opportunities for advanced education so one needs only to have successfully completed Primary 4 to teach at the primary level. The district supervisor, a strong and dedicated educational leader, was studying for his secondary school certificate exams when I was there. Until independence, the government of Sudan operated very few colleges or high schools in the South, with most teaching in Arabic, and this lack of services was a primary reason that people in the South rebelled against it. The new government has decreed English as the language of instruction, leaving some experienced teachers at a great disadvantage, although many are trying to complete their secondary education and improve their English skills so they can keep their jobs or perform them well. Salaries are about $100 a month, and some teachers are volunteers since budgets are too low to pay them.

 There are virtually no books or newspapers here, and even the schools have few books and very little secure space to store them. No sewers of course, no place for garbage, and no electric power other than from generators. The World Food Program used to supply food to the school, but had to move on to even needier people than students, and when it did, half the students stopped attending. A camp for South Sudanese recently expelled from Sudan and also camps for people fleeing genocidal attacks on areas of Sudan by its own government [the Nuba Mountains and Blue Nile regions] are close by. Were it not for international agencies, UN in particular, people would starve. Transport is tough. Very few people have access to vehicles, and it cost us $200 to get a ride from Akon to the nearest town with an airstrip [only an hour away by truck over a dirt road], so if you get malaria or some other deadly disease, it is normal to just die. The hospital is an hour away but that may as well be on another planet if you don't have cash. 

Women are very highly valued here in some ways - bride price here is much higher than I've ever seen it in other African countries and can easily run to more than 100 cows - but many men have more than one wife, and women are very quiet. I was told that traditionally, when a woman cooks a chicken, she cuts it into 8 designated pieces so that her husband can easily count to make sure she hasn't taken any for herself or the children. These women can be very tough, and the girl students eager to become educated, so I know this is changing, but gender differences are deep and obvious.

 The new South Sudan constitution guarantees equal rights and education for women, and this is well known, but will take at least a generation to enter most people's consciousness. For example, the training was to be half women, and included teachers chosen from 4 schools, but only 3 of the 26 participants were women, and none took a vocal role. Yet it seems clear to me that women will be the key to the sort of society that emerges from these ashes. If this becomes a corrupt, criminal-driven economy or if justice and a sense of community prevail – the outcome seems unlikely to be good without full participation of women. The hardened hatreds and calls for revenge, justified but I think counter-productive, are more likely to come from the men who have fought and may soon fight again, than from the women who have borne the domestic burdens for so long.

 In the end, if I learned anything at all, it is that protracted war and international failure to protect people victimized by it can do much more than kill and maim - it can damage or destroy whole cultures, wipe out local knowledge and tradition leaving people so far behind as to make equity and justice nearly unimaginable. I know the Dinka people will survive and will rebuild, but the cost is stunning, and it has forced me to rethink much of my own work in Africa.

 I hope you will pay attention to what happens in Sudan and to what the US role turns out to be.  Thanks for reading this far, 

 Judith  April 2012

 Judith K. Baker

Great African Storybook Project
Literacy Activist and Consultant
Boston Public Schools, Retired
50 Melville Avenue, Dorchester, MA 02124

AFGHANISTAN

Last night, the President announced a new twelve year commitment to the maintence of U. S. forces in Afghanistan.  From the very beginning of the 2008 presidential primary campaign, Obama has been wrong on Afghanistan, and at every step along the way he has compounded that mistake.  He had the opportunity to reverse course after the in-depth strategic review he ordered, and he chose instead to escalate America's military involvement.  Despite the total failure of the announced goals of that escalation, he has now made what is essentially an imperial commitment in perpetuity.  As Tallyrand said of Napoleon's decision to execute the Duc d'Engien, this is worse than a crime.  It is a blunder.  Even if you endorse America's imperial foreign policy, which I have been arguing against for more than fifty years, this is a mistake.  Because America is so rich and so powerful, it is not a fatal mistake [save for all those who will die as a consequence of it], but it is a mistake nonetheless.

Obama has received much counsel opposing this sort of Afghan involvement, so this is clearly his deliberate decision.  Nor do I think it is based on a politial calculation [like his obvious decision not to "evolve" into support for same-sex marriage until after the election.]  He really believes this is in America's national interest, which it is his job to promote, and he is just wrong.

Since 1959 at least, I have been publicly arguing for a non-imperial foreign policy -- for a foreign policy commitment to the advancement of progressive interests around the world.  I will not repeat those arguments here.  For half a century and more there has been a bi-partisan consensus on the fundamental direction of American foreign and military policy that has won the support across the political spectrum of every major American political figure, from the Kennedys to the Bushes.  I have long since despaired of ever seeing that policy changed.

Naturally, all those who oppose my decision to work for Obama's re-election will now ask how I can possibly do so in light of this decision, and the policy on which it rests.  My answer is the same:  Consider the alternative.  Do not be deluded by the non-interventionist stance of marginal figures like Ron Paul.  The Republican Party is as committed to the bi-partisan imperial policy as the Democratic Party, and on the evidence of the past dozen years, considerably more destructive in its implementation of that policy.

If this decision, or all the previous decisions, persuades you to disengage from electoral politics and commit your energies to other projects that advance progressive interests, I honor and respect that.  But do not imagine that by doing so you are somehow weakening the grip of imperialism on America. 

A CRITIQUE OF KEYNES PART TWO

Originally, as we have just seen, economists presumed that all indices, including rents, were determined by the interplay of objective factors (facility of production, fertility of land, and so forth) as these are taken up into the rational calculations of profit-maximizing agents. The calculability of economic magnitudes -- the possibility, that is, of deducing the magnitude of changes in prices, rents, wages, or profits that would result from a change in a technique of production, say, -- depends completely on this assumption of rational self-interest. In order to determine the effect of an improvement in the technique for producing corn, for example, we must assume that corn producers will adopt the new technique unhesitatingly once they calculate that it is more profitable; that consumers will bid down the price of corn as soon as there is excess supply in the market; that producers in less profitable lines will shift their capital as soon as possible to the corn sector, where higher profits are being made; and that landlords will readily rent out their land for as much as or as little as they can get.

 With these assumptions, some very nice theoretical deductions can be made. For example, with the aid of modern mathematical techniques, it can be shown that any technological innovation that it is profitable for the individual firm to introduce at current prices will, once the total system of prices has adjusted itself to the innovation, have the effect of raising the system-wide rate of profit. Or, to take a very much more elegant and powerful result due to the great mathematician John von Neumann, any economy engaged solely in the production of capital goods and wage goods has available to it a balanced growth path along which the growth rate of the economy exactly equals the profit rate. And so on and on.

Once we introduce Mill’s factor of custom, however, all such deductions become in principle impossible. If the rental for land depends in part upon custom and habit, what will be the effect on rents of an improvement in the techniques for producing corn? If custom is not a factor, the answer is simple: rents will rise. With a little modern algebra, one can even calculate exactly how much they will rise. But if custom is a factor, there is really no telling. The most we can possibly say is that if custom holds sway, rents may change not at all. If competition is the sole determinant, the full effect will be felt. Somewhere between the two lies the answer.

 Now, growth depends on the disposition of the annual surplus, and according to the behavioral assumptions of the classical model, capitalists invest and landlords consume. So clearly the secondary effect of custom will be to alter the growth rate of the economy. The more custom operates to hold rents at the traditional levels in the face of technical advances in corn production, the more will the additional output resulting from those advances turn up as profit in the pockets of the capitalists, there to serve as additional capital for growth. The less custom operates, the more additional output will end up as increased rents, to be consumed unproductively by the profligate landlords.

 How can we adjust our theory to take account of custom? The obvious maneuver, and the one which is essentially at the heart of modern econometrics, is to introduce into our equations a dummy variable standing for the influence of custom on rents. We can, for example, stipulate that when techniques of corn production change, the rents will change by a factor of k times the amount that would change if competition along were operative.

 The value of k, obviously, cannot be calculated by the sort of a priori reasoning on which classical theory rests. In order to put a value to k, it would be necessary for us to collect large amounts of data from actual land-rentals over long periods of time. We would then have to make a number of simplifying assumptions, such as that all renters are affected by custom to the same degree, that the effect of custom is reasonably constant over time, and so on.

Now, it is very important to understand that this something called custom which is thereby introduced into our model has an ontological status if you will permit me some heavy philosophical artillery, fundamentally different from that of the rational self-interest underlying competition. “Custom” is not that name of a principle of rational choice, nor is it even the name of a stable, identifiable non-rational psychological element. “Custom” is simply a catch-all title for the sum-total of all the deviations from rational self-interest that might cause ground-rents to be something other than what the pure theory of competition dictates. Some landlords may fail to adjust rents because of laziness, others because of stubbornness, others for religious or family reasons, and others still because of bonds of baronial loyalty to the peasantry. Obviously, a wide variety of historical, social, economic, and cultural forces may manifest themselves under the heading of custom, with economic consequences of quite varied sorts.

With the marginalist revolution of the 1870’s, based on the substitution of subjective utility for objective technology as the fundamental determinant of price, all hope is given up of a theoretically a priori determination of economic magnitudes. Individual consumers are assumed to have consistent preferences among alternative bundles of commodities, but these preferences -- summarized under the heading “utility functions” -- are asvaried, as idiosyncratic, and as unfathomable as any subjective psychological phenomena can be. Economists have sought to overcome the anarchy of subjective preference by a number of heroic assumptions about the general mathematical shape of individual indices of satisfaction -- assumptions that bear no particular relation to reality. The result is an elegant structure of microeconomic theory -- what is now called the theory of consumer behavior -- whose principal virtue is its ability to support the ideological claim that capitalism is both efficient and fair. What has been lost, however, is the ability to relate the objective facts of technology and production in some direct way to the structure of prices, wages, profits, and rents through which the social product is distributed among the major classes of the society. It is in fact quite striking that the original theoretical model of equilibrium put forward by Leon Walras is actually a model of pure barter or exchange, in which production does not figure at all. Only after he has established his major theoretical propositions for the case of an exchange economy in which the goods being exchanged are simply posited, or given, at the outset, can Walras move on to extend his theory to the case of production.

 The central theoretical claim of marginalism, of course, was that a capitalist economy, unfettered by state restrictions or legal distortions, would achieve and maintain an equilibrium position in which all markets, including the market for labour, would clear and in which no further improvement in subjective satisfaction could be achieved by mutually acceptable exchanges. To say that the labour market clears is to say that there is no long-term involuntary unemployment. Those who are out of work are either between jobs, as it were, or else prefer leisure to employment on the terms being offered.

 The equilibrium thesis of marginalism was mortally wounded by the experience of the great depression. The presence of millions of unemployment workers, unable to find work year after year, constituted as much refutation as any scientist could want of the theses of the established economic theories. It was clear that the microeconomic foundations of economic theory were incapable of yielding plausible macroeconomic conclusions. There were two options open to the economist: the first was the reject the microeconomic foundations, and begin a search for a theoretical perspective capable of yielding conclusions more in keeping with reality. The second was to formulate a theory of the economy as a whole, and leave to one side, at least for the time, the relation of the large scale theory to the theory of individual economic units. As you all know, John Maynard Keynes’ GENERAL THEORY took the second tack.

I do not propose today to review Keynes’ theory. Rather, I wish to call attention to certain of its foundations which tend to be lost sight of in the complications and elaborations of macroeconomic model-building. Essentially what Keynes does is to extend and generalize Mill’s notion of custom by introducing into his analysis of the behavior of capitalists and workers the idea of subjective preference and subjective estimates of probability.

 The most dramatic break with previous economic theory was the substitution of subjective expectation for objective probabilities or perfect knowledge. It is, on reflection, obvious that what actually determines a capitalist’s decisions is his subjective estimate of future prices, future sales, future costs, not the actual prices, sales, and costs that ensue. Keynes, who was methodologically quite sophisticated about matters of rational choice and probability, therefore constructs his entire model of investment and employment on the basis of such subjective estimates of probability, or, as he calls them, expectations.

 At the same time, Keynes loosens up the classical behavioral assumptions by recognizing that capitalists are not perfect accumulators and workers are not perfect consumers. Instead, each individual is thought of as having a certain innate psychological inclination or propensity to consume some proportion of his or her available income. When it comes to disposing of the remainder of the income, the individual is conceived as having a second propensity or subjective preference, namely a preference for holding a certain proportion of the non-consumed income in the form of money, the remainder to be invested.

 This positing of psychological propensities and preferences is in keeping with a long tradition of British empiricist thinking, which goes all the way back to the writings of David Hume, Lord Shaftesbury, and Frances Hutcheson. Like his distinguished predecessors, Keynes is essentially an armchair psychologist, offering quasi – a priori reasoning rather than experimental evidence in support of his claims about human motivation.

           Here, for example, is Keynes introducing one of the building-blocks of his theory:

 "The fundamental psychological law, upon which we are entitled to depend with great confidence both a priori from our knowledge of human nature and from the detailed facts of experience, is that men are disposed, as a rule and on average, to increase their consumption as their income increases, but not by as much as the increase in their income."  (Keynes, p.96)

Keynes then offers a mathematical expression of this so-called “law” which makes it look quite impressive and objective, but obviously we have here nothing more than an ad hoc stipulation.

 The central concept of Keynes’ analytical model is what he calls the “marginal efficiency of capital.” He defines this, in a manner familiar to those who have studied some economics as follows:

 “the relation between the prospective yield of one more unit (of a certain type of capital) and the cost of producing that unit.”

 The key word in this definition, though it may not seem so, is “prospective.” The cost of producing one more unit of machinery, is objectively determined by the current state of technology in the machinery-producing industry taken together with the current costs for steel, coal, labour, and so forth. In short, the cost of producing one more unit of machinery, or of any other sort of capital, is the sort of objective fact that classical economics dealt in. But the prospective yield of that additional unit is quite another matter. “Prospective yield” simply means “yield expected by the capitalist making the investment.” If his hopes are high, his animal spirits frisky, then he will evaluate the prospects for future yield quite favorably, and as a consequence the marginal efficiency of the capital will be high. If, with exactly the same technology available and the same current prices ruling in the market, he takes a gloomy view of the future, anticipating a downturn, dreading the turn of international affairs, fearing a resurgence of the Labour Party and a decline of the Tories, then the marginal efficiency of capital will decline.

 These remarks are in no sense an exposé of the hidden and unacknowledged implications of Keynes’ theories. Quite to the contrary, he is insistant to the point of repetition on the subjective sources of economic indices. “It is evident,” he says at one point in his discussion of the incentives to liquidity, “that the rate of interest is a highly psychological phenomenon.” (p. 202). And when he comes to restate his general theory, he lists among his ultimate variables “the three fundamental psychological factors, namely, the psychological propensity to consume, the psychological attitude to liquidity and the psychological expectation of future yield from capital-assets,” which is to say, the propensity to consume, liquidity preference, and the marginal efficiency of capital.

A CRITIQUE OF KEYNES PART ONE

Herewith the first part of as lecture I gave at Williams College a quarter of  century ago.  Although much has happened since, the central thesis is, I believe, even more pertinent now than it was then.  This is the first of three parts.

                                                            A Critique of Keynes

It is my purpose this afternoon to urge upon you the virtues of socialism. I shall argue that at the present time, the proper way to manage our economic life is through social planning founded upon collective management of the means of production. I shall not advance this proposition in the customary way, however, by telling you affecting tales of human suffering or by thundering at the injustices of the capitalist system. Human suffering we have aplenty in our society, and there is more than enough injustice to support a multitude of tirades. But I have charted a quieter course for myself this afternoon. I shall review with you something of the history and development of economic theory during the past two centuries; in order to show you why even the most sophisticated elaborations of modern neo-classical econometric model-building no longer serve to keep us from disastrous economic trouble. My argument will be quite simple and rather abstract, as benefits a philosopher, and there will be very little in it to puzzle or put off those among you who have not yet undertaken the study of economics. The heroes of my story are an Anglo-Jewish stock broker, an émigré from Soviet Russia, the son of an Italian jurist, and a left-Hegelian romantic philosopher -- which is to say, David Ricardo, Wassily Leontief, Piero Sraffa, and Karl Marx.

I begin by voicing what is, I hope, our shared agreement that the American economy is in a godawful mess. We will also agree, I hope, that the establishment of professional economists is no longer able to speak with solid, collective scientific confidence about the causes of our present disaster and the alternative possible cures. The present disarray of the economics profession is manifest in the self-doubts expressed in technical journals and presidential addresses to associations of economists, in the absence of consensus among those middle-of-the-road economists who are routinely looked to by both major parties for guidance and counsel, and in the bizarre emergence into respectability and even hegemony of such pseudo-science -- Voodoo economics, our vice-president once called it -- as supply-side theory.

 The profession of economics – or political economy, as it was once called – has gone through a succession of stages of confidence and self-doubt during the past two centuries. The triumphant reception of the elegant and powerful theories of David Ricardo in the first quarter of the nineteenth century gave way to increasing doubt and confusion as the century wore on, both because of the internal theoretical inadequacies of Ricardo’s principles and because of a succession of increasingly violent business cycles of boom and bust which threatened both social peace and the continued growth of capitalist enterprise. The new marginalist theories of the last third of the nineteenth century laid the theoretical foundations for a moral justification of capitalism, as set forth most famously in the work of J.B.Clark, and also for the scientific conclusion that in a properly functioning free market, there could be no sizeable long-term involuntary unemployment. The great depression after the first world war strained belief in this bit of economic science to the breaking point, for as the depression grew deeper and unemployment in the United States, for example, exceeded a quarter of the work force, it became more and more difficult to maintain that this violent deviation from rational, efficient full-employment was simply a short term frictional imperfection or a perverse consequence of sub-optional collective bargaining.

With the macro-economic theories of John Maynard Keynes, the economics profession entered a new era. If Keynes was right, then it ought to be possible to salvage capitalism by managing the swings from boom to bust with counter-cyclical actions by the central government. The state, it seemed, was not to be confined under capitalism to the role of night-watchman. Instead, it had a much more important task to perform, as the regulator of effective demand in the service of full employment growth.

 The great test of Keynesian theory came with the end of the second world war. In the United States and Western Europe, the experiment was made of capitalism with the state as a macro-economic governor. For a quarter of a century, the theory seemed to work with brilliant success. Unemployment was low, growth was steady and rapid, inflation was kept to an acceptable level and the inevitable business contractions were softened so as to be nothing more than pauses on the way to ever greater growth. It was during this period – the golden age of the profession of economics – that Nobel prizes began to be distributed to these physicians of the body politic. Clearly, ideology and politics had given way to science.

 Alas, the reputation of economics, like the housing and automobile markets, has soared to ever greater heights, only to plunge to new depths. As unemployment creeps toward ten percent and the United States, once proud leader in per capita gross national product, dips to tenth place behind even Italy, once the weakest partner in the Atlantic Alliance, it is perhaps time to stand back and reflect a bit on what has gone wrong.

My message today is scarcely original, but it is, I believe, true. I shall argue that it is fundamentally irrational to permit the direction and shape of our economic life to emerge as the unplanned consequence of a myriad of private decisions. For reasons which are simple but theoretically quite fundamental, an industrial economy in which there is both population growth and technological innovation cannot be relied upon to grow in a crisis-free manner. What is more, efforts to shape or direct an essentially private economy by fiscal or monetary policies of the central government are doomed to fail. The only rational solution, I shall suggest at the end of my talk, is a thoroughly socialised economy in which the course of capital accumulation and allocation, as well as the pattern of distribution of the social product, is made the object of collective social choice. 

 Let me begin my story almost two centuries ago, with the classical vision of a capitalist economy as a free market system in which the pattern of prices, of capital accumulation, of distribution, and of growth emerges as the unintended consequence of the interactions of rationally self-interested workers, consumers, and entrepreneurs. This vision, first adumbrated  by Adam Smith and brought to rigorous fulfillment in David Ricardo’s PRINCIPLES OF POLITICAL ECONOMY AND TAXATION, rested upon a number of simplifying assumptions, each of which in a different way made it possible for Ricardo and his followers to draw powerful theoretical conclusions from the premises of perfect competition, rational self-interested, and a free market.

 The assumptions fall into three categories: behavioral assumptions about the criteria or guidelines followed by the several classes of agents in their economic decisions; knowledge assumptions about the kind, degree, and accuracy of the information available to economic agents; and a rather special assumption about the nature of money.

 The behavioral assumptions are these: capitalists were assumed to be motivated entirely by a rationally self-interested pursuit of profit, which they measured in monetary terms. Confronted by a choice among several alternatives, capitalists could by and large be counted on to choose the most profitable. Furthermore, capitalists were conceived as perfect accumulators, so to speak. “Accumulate! Accumulate! That is Moses and the Prophets!” said Marx of the capitalist class. In effect, what this meant was that the total private consumption of the capitalist class was so small, in comparison with the aggregate output of the economy as a whole, that it could, for purposes of economic calculation, be treated as effectively zero. In part, of course, this assumption was justified by the relative smallness of the capitalist class as a group. Even a high standard of living per capitalist does not add up to much in the way of aggregate consumption. But more important was the behavioral assumption that capitalists, for whatever reasons, were driven by a desire to accumulate capital as rapidly as possible. To this end, they reinvested almost their entire profits in an expanded scale of operations. The classicals and Marx viewed this process of reinvestment as the primary engine of economic growth.

 The landlords – who loom larger in the writings of Smith and Ricardo than in those of Marx – are by contrast conceived as grasshoppers, as perfect consumers. They save nothing, and support a large population of unproductive servants. As a consequence, of course, the portion of profits diverted to them as rentals drops out of the economy and plays no role in the process of growth.

Finally, the workers are presumed to live at or near the subsistence level, with the consequences that as a class they do not save. In the short run, to be sure, individual workers may succeed in saving enough to rise into the class of small entrepreneurs, and during the transitional periods of labour shortage wages may rise significantly above subsistence for large numbers of workers; but both Ricardo and Marx thought that over the long run, external pressures of population or unemployment would hold wages at a level at which worker saving could not regularly take place.

 The effect of these behavioral assumptions, you will immediately realize, is to make certain theoretical calculations extremely simple. The quantity of capital directed toward investment will be exactly equal to aggregate profits. Effective final demand for consumer goods will simply equal rents plus wages. And so forth. To an extent that is not always recognized, particularly by those outside the profession of economics, the distinctive a priori character of the reasoning of classical economic theory derives directly from these behavioral assumptions.

 In addition to the behavioral assumption, classical theory makes a number of powerful simplifying knowledge assumptions. Consumers and sellers are presumed to have effectively a perfect knowledge of the market – what is being sold, where, and at what price. Entrepreneurs have perfect knowledge of the available production techniques, of the prices in factor markets, of the risks and constraints of different modes of production. Entrepreneurs know also how other entrepreneurs are doing, so that superprofits anywhere in the economy will fairly quickly draw interested investors to the favored sector. The result of these assumptions is to consign to the margins of the theory any consideration of market imperfections.

 The familiar model of a self-correcting economy in dynamic equilibrium, efficiently allocating available resources in response to consumer demand, rests upon these twin pillars of simplifying behavioral assumptions and the assumption of perfect knowledge. The theorems of the classical model, and also those of the neo-classical model as well, can be proved only because the knowledge and behavior of economic actors is conceived in this manner.

One final theoretical assumption underpins the classical theories, an assumption concerning the nature of money. It is an odd fact – odd, I might say, to the point of absurdity – that there is no place for real money as we know it either in the economic theories of the classicals or in the marginalist theories of modern economics. Ricardo conceived of money as simply one commodity among others – gold, of course, in the world he was looking at – whose value was determined, as was the value of every commodity, by the conditions of its production. An ounce of gold exchanged for so much linen, coal, or corn, he thought, because the conditions under which it was mined and refined bore a certain relation to the conditions under which linen was woven, coal dug, and corn grown. Just as a change in the techniques for growing corn would affect its value relative to other commodities, although in ways more complex than Ricardo had originally thought, so too a change in the techniques for mining and refining gold would alter the rate at which gold exchanged with other goods.

 The assumption of commodity-money, as it was called, an assumption which Marx shared, makes even modern capitalist economic transactions essentially sophisticated acts of barter. The grounding of the economic system in a physical base of commodity production is thereby rendered transparent, with the consequence that such phenomena is inflation, credit squeezes, the so-called money-illusion, and so forth can play no theoretical role in the analysis of the economy.

 The classicals concluded from their simplified model that in the absence of distorting interventions from the central government, a capitalist economy would function efficiently in long-run equilibrium. Marx sought to demonstrate that capitalism, even in this extremely simple conception of it, is internally unstable and prone to operational breakdowns. But Marx shared with the classicals all of the behavioral and knowledge assumptions I have just sketched.

 One of the first major departures from this simple model appears in John Stuart Mill’s PRINCIPLES OF POLITICAL ECONOMY, a book which, in many editions, was the leading economics textbook of the nineteenth century. In a little chapter entitled “Of Competition and Custom,” Mill introduces a new element into political economy which, I shall argue, destroys classical theory and eventually leads to an entirely different understanding of capitalism. It is completely typical of Mill that at one and the same time he understands the theoretical significance of what he is doing, and yet treats it as a mere adjustment to a theory which he is otherwise prepared to continue supporting. This paragraph, from the opening page of Mill's little chapter "Of Competition and Custom," is worth quoting:

 "So far as rents, profits, wages, prices, are determined by competition, laws may be assigned for them.  Assume competition to be their exclusive regulator, and principles of broad generality and scientific precision may be laid down, according to which they will be regulated.  The political economist justly deems this his proper business:  and as an abstract or hypothetical science, political economy cannot be required to do, and indeed cannot do, anything more.  But it would be a great misconception of the actual course of human affairs, to suppose that competition exercises in fact this unlimited sway.  I am not speaking of monopolies, either natural or artificial, or of any interferences of authority with the liberty of production or exchange.  Such disturbing causes have always been allowed for by political economists.  I speak of cases in which there is nothing to restrain competition;  no hindrance to it either in the nature of the case or in artificial obstacles;  yet in which the result is not determined by competition, but by custom or usage;  competition either not taking place at all, or producing its effect in quite a different manner from that which is ordinarily assumed to be natural to it."

 In his development of this idea, Mill emphasizes the customary character of groundrent, and also to a lesser degree of market prices for consumer goods. Now, I wish to suggest that once custom has been acknowledged as a determinant of any of the central economic variables, the entire edifice of classical economic theory must surely crumble. Before turning to the way in which Mill’s little point about custom has been expanded into a full-scale theoretical transformation of the classical theory, let me explore for a bit the significance of the elementary example Mill offers.