Market, socialism and democracy in an interdisciplinary perspective

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Hermann, Arturo, (2013), Market, socialism and democracy in an interdisciplinary perspective, World Economics Association (WEA) Conferences, No. 2 2013, The economics curriculum: towards a radical reformation, 3rd May – 14th June 2013



In this period of economic and social distress, a thorough re-appraisal of the foundations of our economic and social systems has been emerging in virtually all the most developed Countries.

We will address some elements of such issues by analysing how, within a pluralistic and interdisciplinary perspective, a number of heterodox theories — in particular, institutional economics, Marxism and other theories of socialism and social justice — can help us to identify significant aspects of market, capitalism, socialism and democracy.

In fact, although these “familiar” concepts have shaped the complex “material” and “spiritual” evolution of our societies, it is still largely unclear how this influence has unfolded in real situations.

As a matter of fact, these concepts convey complex meanings which are interpreted differently according to the different theories, interests, values of the subjects involved. Furthermore, these interpretations often acquire an implicit character, since, to each person, they are ingrained in deep seated habits of thought and life in which the unconscious component is likely to play a relevant role.

Also for this reason, the social and political conflicts related to these issues often assume an emotional and intransigent character, which does not help to clarify what are the real aspects at the stake.

For instance, there is a strong conflict between the advocates and the detractors of the market. But what is the meaning of the market? Is it, as held by classical and neoclassical economists, a kind of “exogenous”  mechanism strictly associated with capitalism? Or else, is it an institution created and maintained by public intervention and which, for this reason, can be present also in a socialist economy?

In our work, we will employ this pluralistic and interdisciplinary perspective for analyzing some controversial elements of the (i) definition and analysis of the market; (ii) authoritarian and democratic socialism, namely, how to bring together freedom and social justice; (iii) the possibility of reformulating Marx’s theory of value without reference to the concepts of Classic Economics; (iv) the theory of historical materialism and the importance of bringing to the fore also the cultural and psychological factors; (v) the links of these issues with the debate between holism and methodological individualism; (vi) the importance of an interdisciplinary approach for reaching out the manifold aspects of these concepts and, on this basis, to identify suitable policies for our most urgent economic and social problems; (vii) within this ambit, we focus on the psychoanalytic perspective in elucidating many aspects of person-society dynamics, with particular attention on how it can improve the process of policy action.

7 responses

  • R Kowalski says:

    I still think that there is tremendous merit in looking at Marcel Mauss’ theory of The Gift as an alternative framework to the market.

  • Andrea Micocci says:

    I have a problem with Hermann’s interpretation of Marx. It is complex issue and the consequences are very momentous, so for the sake of brevity I shall start from one simple observation. Hermann claims that the transition to socialism must take a long time according to Marx, without any quotation: where does Marx say that? It seems to me, on the contrary, that an argument can be proposed that in Marx the transition is – as it is a revolution – very short, thus avoiding leninist crimes such as reproducing the bourgeois state and misunderstanding the dictatorship of the proletariat with the dictatorship of the party.

  • Haiyun Zhao says:

    The paper highlights very important issues. I would like to see a more detailed explanation as to how Marxist theory could be applied in countries such as China, Russia, Hungary, Vietnam, North Korea or Cuba.
    Haiyun Zhao

  • There is a good “circumstantial evidence” that the evolutionary process was very present in Marx’s analysis. However, as already noted, there are no precise clues in Marx’s writings as to what to do after revolution. It remains then an open question whether Marx would have agreed with the following events in Russia or elsewhere.
    The question I have tried to address, however, runs on a different plane, and is the following: is it possible to free Marxism from Classical (and in particular, Ricardian) theory?

    As is known, Marx’s theory largely rests on Ricardian theory, and, on that account, there is a huge debate on the positive and negative implications of this feature for the development of Marx’s theory.
    In my view the negative aspects are overwhelming, and are related to the circumstance that a Ricardian perspective tends to provide a too dichotomic account of society and, for this reason, tends to overlook a number of relevant factors which have marked a substantial departure of our modern economies from the too simple assumptions of classic theory.

    We can mention, in particular (i) the growing importance of public intervention in the economy — which was stressed by various authors in the tradition of democratic socialism (for instance, Otto Bauer, Rudolph Hilferding and Adolph Wagner) — in order to provide a host of important public goods and also an adequate level of effective demand for private sector; (ii) The relevance of “market imperfections” which are associated with the emergence of big and articulated corporations; (iii) also for these reasons, there is an increasing importance of collective action involving every level of economic and social life: we can mention, in addition to the more pure “public” and “private” institutions, a number of “mixed institutions” such as unions, producers and consumers associations, political parties, philanthropic associations, etc; (iv) and, last but not least, this situation has been accompanied — without forgetting the reality of capitalistic exploitation in many situations — by a growing articulation of social classes and groups, that tends to increase the diversity of objectives and values of the subject involved.

    All this implies that the Marxian (and, up to (iii), also Classic) hypotheses — according to which (i) there are only two classes in society, entrepreneurs and proletarians, (ii) these classes tend to become more and more homogenous; (iii) this process is accompanied by an increase of proletarians and a concentration of power in the hands of entrepreneurs; and that (iv) for this reason, a revolution would be close at hand — are, for good or bad — far removed from the reality of our days.

    As we know, in our world the forms of exploitation and marginalization are as dramatic as before but they are much more complex and diversified.
    There are still, of course, the classic proletarians, but there are also the unemployed, the precarious workers, the immigrants, the elderly, the women, etc. Furthermore, all these groups are characterized by many internal differences, identities and stratifications.
    In this situation, it is difficult to reach “from scratch” a class consciousness, and these aspects can explain the difficulty of reaching an agreement on complex questions relating to production and distribution, and then the difficulty of carrying out a revolutionary process.
    So, the major task of today is to attain a better understanding of the multifariousness of these phenomena and, on that basis, to organise all these groups and classes around a sustainable and equitable project of social change.

  • A Barzey says:

    Perhaps better, for dissemination purposes, to follow academic convention and separate introduction and abstract.

    Page 6; If, as the paper claims Marx gave such primary importance to workers’ active participation in all aspects of collective life; why is this relegated to a footnote in, rather than central to, the paper’s representation of ‘Marxist theory’? If paper is drawing a distinction between Marx’s theory and Marxist theory then this should be made clear in the main text here, rather than in the next sub-section and/or the subsequent footnote.

    Page 7; Clarification needed, what are ‘primary needs’?

    Page 9; More clarity needed on meanings of ‘classless society’, ‘division of labour’ and how/why the latter ‘disappears’; how abstract the discussion here is, and how historical change is addressed. If not clarified the comment seems tautologous. Depending on these issues, among others, a ‘classless society’ might contain some (much?) of say, a capitalist division of labour.

    Page 10; Marx wrote of what he called ‘concentration’ and ‘centralisation’; which would form part of what in neoclassical analysis is ‘monopoly power’ and so imperfect competition. The paper does not seem to acknowledge this, also it needs to explain the ‘aspects’ referred to.

    I think Hermann will find that perfect competition forms part of neoclassical economics, but not classical economics. Hermann needs to show how perfect competition forms part of classical economics and Marx. Marx’s historical (dialectical?) materialist approach and focus is on capital. Analysis involves classes; the capitalist ignorant of the labour process (‘full capitalist does no labour; workers resist etc); capitalist faces dilemma of compliance/commitment; labour changes products, processes, people, technology etc. This is incompatible with a neoclassical methodological individualist, perfectly informed agents, ahistorical, static; labour no more/less significant inherently than any other factor of production; technology is given and the focus is on markets and how they clear optimally through prices.

    Page 11; Is the suggestion that there is no significant difference between Ricardian theory of ‘perfect competition’ and labour value, and Marx’s work? If so, this would need to be argued. If not, this would need to be made clear. In that regard, distinction between commodity exchange based on labour time of production (Ricardo) and based on socially, necessary, abstract labour time should be acknowledged (Marx). Additionally, Marx acknowledged differences between prices and exchange values; in part reflecting processes of accumulation and such ‘relevant phenomena’ as were present at the time. Also, do the ‘relevant phenomena’ and associated ‘growing complexity’ help with understanding the ‘huge process of exploitation in the productive process’?

    Page 12; Marx’s abstraction from monopolistic or monopsonistic forces, forms part of his version of ‘ceteris paribus’, to enable abstraction from any form of ‘ripping off’, exploitation in the process of exchange; enabling Marx to highlight how despite apparent equality, freedom, justice of exchange, in the hidden mode of production exploitation occurs necessarily for the capitalist to extract surplus value which can be realised as profit.

    Page 17; Despite claiming theory of historical materialism is inspired by Hegel’s dialectic, the account in sub-section 1.6 does not seem to display this.

    Page 18; The claim in a footnote (sic) is that class conflict remains central, however the account (in 1.6) of historical materialism does not seem to include class conflict. Arguably for Marx, class relations are seen as significant as the basis on which the whole society is produced, and class struggle the means to changing the fundamentals of the society. If and when such struggle takes forces and relations of production to such a point of fundamental change, e.g. one that ends wage-labour by enhancing scope for individual and/or social autonomous emancipator activity, it may be progress, if not it may well not be progress.

    Page 19; Again, the account of materialism excludes such dialectical influences, but arguably Marx’s does not.

    Page 26; Freudian analysis has faced much criticism in terms of logic and empirical evidence. However, seems to be accepted uncritically in the paper.

  • Thank you for your detailed “referee report”, I agree that I should make more clear a number of aspects. However, a central theme of my work has been to focus on a number of controversial aspects of Marx’s theory.
    In particular, by pointing out that (i) the notion of perfect competition — mainly derived from Ricardo’s theory — which was employed by Marx in order to formulate his labour theory of value and the corresponding phenomenon of exploitation — is highly unrealistic in consideration of the growing importance of market imperfections; (ii) a theory of exploitation can find a more realistic interpretation when considering the reality of the market power of the entrepreneurs operating in a setting of pronounced market imperfections; (iii) that, as a consequence of Marx’s adherence to Ricardian theory of perfect competition, his account of concentration of capital — e.g., of the growing importance of one central market imperfection — is not so far-reaching as it could be; (iv) the same applies to Marx’s appraisal of the economic crises: certainly, he provides interesting insights, but these remain largely encapsulated within the classical framework; (v) relatedly, there is a scarce acknowledgment of the fundamental circumstance that economic systems have become more complex and articulated over time, and so they have marked a substantial departure from the too simple two-classes world of classic economics; (vi) in this regard, true, the state is considered in Marx’s theory as a superstructure reflecting the power of the dominant class, but there is little acknowledgment and explanation of the structural tendency for public sector to increase over time; (vii) furthermore, there are a number of reasons for this trend — for instance, the role of public sector in increasing the effective demand and providing other essential “public goods” necessary for the development of capitalistic institutions — but none of them is really addressed and explained by Marx.

    In conclusion, at least in my view, these limitations of explicative power of Marx’s theory can be traced back to his adherence to Ricardian theory. Certainly, he employed that theory in order to show the contradictions of capitalistic institutions but, for this very reason, his critique did not question the basic hypotheses of Ricardian theory.
    In this sense, Marx has the great merit of taking classic economics to its extreme conclusions. In fact, he highlighted that the classic economy as resting on the hypotheses of perfect market and perfect competition constitutes a necessary stage of economic evolution which, owing to its contradiction, will be overthrown by a revolutionary process.
    The central point, however, is that, for the reasons set forth before, the classic economics’ world existed only in the reality of economics textbooks. This helps explain the growing importance of the so-called “mixed economies” and the related circumstance that capitalistic contradictions have taken a different shape than that envisioned by Marx.
    In this light, a central question arises: is it possible to free Marxism from Ricardian theory?
    I think this would be highly needed, as a first step for a more fruitful collaboration of Marxist theory with other strands of heterodox theories concerning issues like the role of public sector, market imperfections, public goods, the role of institutional frameworks and of cultural background, and many others.
    All these aspects would be considered in their evolutionary and interdisciplinary dimension.
    As regards Freudian theory, I have addressed in another work some of its most debated aspects. I will report in the next post a number of passages.

  • I report here some passages of the chapter 8 (Psychoanalysis and its Critics) of my book Institutional Economics and Psychoanalysis: How Can They Collaborate for a Better Understanding of Individual-Society Dynamics?, Trento, UNI Service, 2007, second enlarged edition 2009.

    Many criticisms have been levelled at psychoanalysis. The leitmotif of the great majority of them refers to the scientific status of psychoanalysis. According to these criticisms, psychoanalysis has no valid scientific status because its hypotheses cannot undergo the same tests of validation as those applied to the “truly scientific fields”.
    For instance, how can the existence of the unconscious or of the Oedipus complex be demonstrated?
    In the opinion of some authors, these concepts are fantasies without any scientific validity. Of course, the problem of “demonstrating” the scientific validity of psychoanalytic theories cannot find univocal and straightforward solutions. In fact, as is we well known, the unconscious — by its very nature — cannot be seen, heard, or touched, so we can only “prove” its existence by analysing our feelings in their interaction with those of others. For the unconscious is a dynamic concept (Fine, 1979) — elaborated from a great number of observations mainly related to psychoanalytic experience — which can help to explain and synthesize some aspects of the structure of mental processes.
    In this regard, the methodological approach underlying these criticisms does not seem convincing. In fact, by carrying such line of reasoning to its logical consequences, we would find that all feelings and motivations involved in human relations should be considered as groundless entities.
    For instance, in a romantic relationship, a person could not dare to say to his or her partner “I love you”, because the logical answer would be “how can you scientifically prove it?”; and, certainly, there are neither mathematical theorems nor laboratory experiments for validating such a statement.
    On the same grounds, no one could formulate any reasoned opinion regarding personal feelings and attributes.
    The same applies to the social sciences (including economics) and to all fields dealing with human achievements, like arts and literature. In this way, there can be no “true scientific foundation” for the central concepts of economics and sociology like egoism, altruism, interest, solidarity. By the same token, no one could say with any claim of objectivity “what a beautiful poem this is” because there is no way to corroborate this statement by means of a “truly scientific methodology”.
    Furthermore, even the so-called pure sciences would be badly affected by this reasoning. Indeed, as shown by many institutionalist, pragmatist and psychoanalytic contributions, much of what we call “pure science” is interpreted through the experiences, feelings and perceptions of those dealing with it.
    In this sense, we believe that psychoanalysis — as well as social sciences, philosophy and literature — is no less scientific than “pure sciences”, the only difference being that it deals with issues that require a different scientific approach and which cannot be simplified to fit a classical laboratory experiment.

    Some Controversial Aspects of Freud’s Theory

    In this section, we will try to bring into focus the most controversial aspects of the debate about Freud’s theory, since they impinge upon the basic concepts of psychoanalysis and the development thereof. As observed before, two different interpretations of Freud’s work can be identified:

    A) According to one interpretation, Freud tends to see psychic life as the arena for the perennial struggle between opposite instincts: for instance, in his continual elaboration — which we do not need for our purpose to follow in its complex evolution — between sexuality and self-preservation, or later on, between life (or eros) and death (or aggressiveness). According to this view, these instincts mainly depend on the innate individual biological constitution and, therefore, tend to be regarded as deterministic in their unfolding. Psychic life is considered to be the result of the “kneading” of these instincts, but there appears to be no real dialectic or interchange between them: they stand, in a Faustian spirit , in an irreducible opposition, and little can be done to improve such a situation.
    Take, for instance, the concept of sexuality. According to this view, sexuality is an instinct which lies basically in bodily needs — like hunger and thirst — and therefore is supposed to be driven only by the principle of pleasure. Furthermore, this instinct is considered as lacking any self-regulating or integrating process as it would strive for an uncontrollable satisfaction regardless of any other human need or feeling. Such an instinct, of course, would render any social life impossible, and, for this reason, must be repressed. However, this repression entails neurosis and — owing to the strength and pre-determined “biological” mould of these instincts — little could be done to reduce the trade off between neurosis and civilization.
    In this view, neurosis is seen as the necessary price to pay for moving from the principle of pleasure to the principle of reality—that is, through the education process, from the uncontrolled instincts of the child to the repressed, neurotic and “civilized” behaviour of the adult .

    B) However, this view seems too simplistic. In this regard, a key point is that Freud, although he tends to construct his theory on the basis of conflicting instincts, does not seem to assert that these instincts should display a deterministic development. As already noted, he expressly recognizes the importance in the development of a person of the joint action of the following factors: (i) a person’s “innate” constitution, including the entire set of his or her biological and intellectual traits; (ii) the influence of “accidental events”, by which he chiefly means the role played by the family and socio-cultural contexts.
    In order to elucidate the role of these groups of factors in psychic development, he introduced — in particular in Drei Abhandlungen zur Sexualtheorie, 1905 — the concept of “complemental series”.

    C) Considering the above outlined relations between neurosis and civilization, Freud’s position is far more complex than the simple statement that neurosis, as being based on the repression of instincts, is a necessary ingredient of social life. Certainly, in some passages he makes these kinds of statements, but, very importantly, he also stresses that neurosis is likely to sabotage the attainment of the objectives of civilization, because it is allied — most often, in a subtle and disguised way — with the forces hostile to civilization that have been (only apparently) repressed.
    In order to clarify this process, Freud (1908) describes the case of a woman who — owing to the conditions in which she contracted the marriage and to the experiences of her married life — does not love her husband but would like anyway to love him at any cost because this corresponds to the ideal of marriage which has been laid down upon her. She will thus repress (mostly at an unconscious level) her real feelings toward her husband and put great effort into playing the role of the affectionate wife. But the consequence of this repression will be the full emergence of neurotic symptoms which will take revenge upon the husband by causing him so much, and perhaps even more, trouble as would have been caused by the revelation of her real feelings.
    This example — which, of course, could concern the husband and many other family and social situations — is interesting because it brings together the role of family and social factors in shaping, maintaining and transmitting what could be defined as the typical social forms of neurotic conflicts . In this regard, as already noted, one of the central insight of Freudian analysis is that neurosis constitutes, for a person, a joint and unique product of (i) his or her innate biological constitution combined with the characteristics of human biological development, in particular the prolonged stage of dependency in the early stages of life, and (ii) the characteristics of his or her ISEF, including , of course, the characteristics of family setting.

    D) The previous remarks lead us to underscore another relevant point: even when Freud seems to adhere to a “hedonistic” view of human conduct — in the meaning of an unrestrained search for “pleasure”, regardless of any affective and social link — this does not seem to imply that he considers such orientation as an expression of natural and immutable laws but, rather, as an expression of neurotic conflicts which are, at least in part, specific to any given ISEF. Indeed, in these cases, as also elucidated by subsequent psychoanalysts, the obsessive search for “pleasure” acts — like, as observed before, any other neurotic symptom — as a defence from “incompatible representations” having their roots in the infantile story of the person.
    This point is extremely important and has been addressed, for instance, by Eagle (1984); in the concluding chapter, he makes clear that the supposed contrast between “instincts” and “reality” — to which should correspond a conflict between an uncontrolled unconscious (the Freudian “es”), and an ego conceived as a necessary controlling and “repressing” factor for the existence of society — is to be interpreted not as an expression of “human nature” but as a distinctive trait of a neurotic disturbance. Indeed, in these situations what is repressed (e.g., made unconscious) refers to all the aspects of personality that, owing to neurotic conflicts, assume an infantile and anti-social character. In this regard, it is also interesting to observe that these conflicts do not develop in isolation but encompass both the individual and social dimension.
    In this regard, Eagle observes that the more damaging expressions of this neurotic-driven aggressiveness, like nuclear wars and mass-destruction, do not take place out of bursts of “instinctual behaviour”, apart from and in opposition to social life, but are deeply ingrained in ISEF’s that can even be supposed to act as a repressing instance for the “instinctual behaviour” of the person. In this sense, as observed before, society may also act as a key carrier for the expression of aggressive behaviour—in particular, through the development of cultural forms and models that tend to be internalized in the ego and super-ego of the person.
    Of course, society also tries to curb aggressive behaviour but in the presence of relevant neurotic conflicts these attempts are not likely to be very successful, especially for abating the more “institutionalised” (e.g., more rooted in the structure of collective action) forms of aggressive behaviour.

    E) Perhaps, one key element that could bring a degree of unclarity to Freud’s theory is his employment of the concept of sexuality: as a matter of fact, although Freud has always underlined the manifold character of sexuality, in his writings he speaks of “sexual instinct” and “repression and satisfaction of instincts” in a way that sometimes may seem to refer only to the biological and “bodily” side of that instinct: however, as we have seen, according to his theory, sexual instinct reaches out not only to the normal biological sexual activity but also to the affective involvement related to such activity. And, relatedly, to the so-called “sublimated” activities of the person, which are linked, in a complex interplay, with all the social, intellectual and artistic creations upon which society is based. In this sense, sexuality, in non-neurotic situations, constitutes an important aspect of the eros or love, and, in this respect, lies at the heart of the interpersonal and social relations. The interpretative problem rests on the fact that the term “sublimation” carries two meanings, which, though highly blurred in most of our psychological experience, are neatly different at conceptual level: (a) a means for the expression of neurotic conflicts, and (b) a means for the expression of the normal motivations and orientations of human personality.
    In this sense, the eros can be considered as a manifold entity which can express itself in various ways. Thus, it is normal for the person to establish different kinds of relations, more or less sublimated but all based on the eros, with his or her fellows.
    These different concepts of sublimation are outlined but not always clearly singled out in Freud’s analysis, and this constitutes perhaps one of the reasons for some entangled aspects of his analysis of society.

    F) This unclarity emerges in particular in “Civilization and Its Discontents” — the work where (apparently) Freud more extensively has laid down his thesis about the necessity of repression of sexuality and aggressiveness for the preservation of society — but, in our view, it could be sorted out relatively easily. Here, in the first chapters, he speaks of sexuality and aggressiveness in broad terms, without specifying whether he considers these psychological instances as a normal or a neurotic expression of individual and social life.
    Nevertheless, even without such specification, his description of these instances is all alike to a neurotic disturbance and, in fact, later in his paper, he makes evident that this is the case. He stresses that, in this respect, society acts like a neurotic individual who, through the instance of the superego — which, as observed before, constitutes the “moral conscience” as emerging out of a feeling of guilt related to the child’s aggressive feelings towards its parents — tries to repress the neurotic expressions of sexual and aggressive “instincts”. Having discovered the existence of neurotic societies, Freud wonders (cf. also the next chapter) about the interesting possibility of employing psychoanalysis for interpreting and reducing these social-based psychological disturbances. In this regard, Freud considers this kind of intervention quite possible but is rather pessimistic about its viability in contemporary societies. There are, in fact, on the one hand, the difficulties in identifying the complex relations between individual and collective neuroses, and on the other hand, the problem of devising policies aimed at improving a better social understanding of these conflicts.
    We can conclude this chapter by noting that in Freud’s theory the concepts of instincts and, within this ambit, of psychosexuality (the eros or libido) are very complex and far-reaching as they embrace all the aspects of human personality, including the affective and intellectual. Far from saying that the mind — e.g. the spheres of feelings and intellect — is something different from “instincts” and, on that account, substantially powerless against these, Freud seems only to posit that the study of the “mind” should be considered in all its complex interchanges with the “body”, simply because we do not live apart from our body. If, as effectively expressed by Rollo May (1972), a person can safely say, “Certainly, I am my body, but am also my mind”, also the symmetric relation holds true, and then it would be appropriate to say “Certainly, I am my mind, but am also my body”.