RESEARCH INSTITUTE POLITICAL ECONOMY - PERI ECONOMY RESEARCH INSTITUTE Methodology and Radical...
Transcript of RESEARCH INSTITUTE POLITICAL ECONOMY - PERI ECONOMY RESEARCH INSTITUTE Methodology and Radical...
PO
LIT
ICA
L E
CO
NO
MY
R
ESEA
RC
H IN
ST
ITU
TE
Methodology and Radical Political Economics
Martin H. Wolfson
October 2007
Presented at
REBELLIOUS MACROECONOMICS:
MARX, KEYNES & CROTTY
A conference in honor of James Crotty
Gordon Hall
418 North Pleasant Street
Amherst, MA 01002
Phone: 413.545.6355
Fax: 413.577.0261
www.peri.umass.edu
Methodology and Radical Political Economics
Martin H. Wolfson Department of Economics and Policy Studies
University of Notre Dame Notre Dame, IN 46556
Prepared for the Conference in honor of Jim Crotty University of Massachusetts at Amherst
October 19-20, 2007
Methodology and Radical Political Economics
by Martin H. Wolfson
1. Introduction
Radical political economics has always encompassed a wide variety of economic theories
and perspectives. In fact, printed in each issue of the Review of Radical Political Economics is
the following statement: "As the journal of the Union for Radical Political Economics, the
Review publishes innovative research in political economy broadly defined as including, but not
confined to, Marxian economics, post-Keynesian economics, Sraffian economics, feminist
economics, and radical institutional economics."
Given the broad purview of radical political economics, the question arises: do the
various theories that make up radical political economics have some methodological coherence,
or are they disjoint B united in their opposition to neoclassical economics, but with theoretical
assumptions, principles and methods, i.e., methodologies, that are incompatible with each other?
The argument of this paper is that there is coherence.1 In particular, there is an emerging
heterodox macroeconomic framework that builds upon the perspectives of Karl Marx, John
Maynard Keynes, and institutionalists like Wesley Clair Mitchell.2
A leader in the development of this framework is James R. Crotty. Throughout his
career, Crotty has investigated, and sought an integration of, Marxian, Keynesian, and
institutionalist perspectives. In particular, Crotty's contributions have been to 1) combine
principles from the three perspectives into an integrated framework, 2) deepen our understanding
of the three perspectives by indicating how they are more complementary than typically
understood, and, 3) extend the basic principles to provide a coherent understanding of the current
2
global economy.
In the next section of the paper, key assumptions and principles of the Marxian,
Keynesian, and institutional perspectives, which form the building blocks for the new
framework, will be discussed. In the third section, Crotty's contributions to combining,
deepening, and extending these perspectives into a new framework will be addressed. Finally,
the fourth section concludes with a statement of the new methodological framework.
2. Building Blocks: Marx, Keynes, and Mitchell
Below are the building blocks, or starting points, for the new heterodox macroeconomic
framework. They are basic methodological assumptions and principles from Marx, Keynes, and
Mitchell. They are often taken to be representative of three separate theories, with little or no
convergence.
2.1. Karl Marx
1) Historical Materialism
This basic philosophical perspective of Marx's has been the subject of numerous books,
articles, and treatises. At the risk of oversimplification, I take it to mean two basic concepts.
First, people's "material conditions," especially the social relations of production (the
relationships people enter into in the process of production), have an important influence on the
ideas, culture, religion, politics, and other aspects of the "superstructure" of society. This
materialist point of view should be distinguished from determinism, which claims that the
material conditions determine the superstructure, and from the view that the superstructure has
no effect or influence on the material conditions. An important implication of Marx's materialist
philosophy is that one needs to make a "concrete analysis of concrete conditions," i.e.,
3
thoroughly investigate the reality one is trying to explain.
Second, historical analysis is an essential component of the Marxian perspective. One
cannot understand current reality without analyzing the historical forces that have brought the
present into being.
2) Dialectical contradiction
The process that propels history forward is the working out of the contradictory
relationship between two opposing forces. These opposing forces have different interests and
are always in struggle with each other. This perspective has two important and related
implications.
First, the change that results from contradictions is endogenous. It is internal to the
contradictory relationship being analyzed. Second, there is no permanent equilibrium. The two
opposing forces within a contradiction can arrive at a temporary equilibrium, which is best
understood as stabilization at a moment in time. But because the two forces continue to be in
contradiction with one another, struggle will continue that will eventually disrupt that temporary
equilibrium.
This is not to say that exogenous events cannot play a role in Marxian analysis. But
Marx's concept of dialectical contradiction rules out the neoclassical view of equilibrium as a
permanent end point that can be disrupted only by exogenous "shocks."
3) Class conflict
In Marx's analysis, the fundamental contradiction in capitalist society is between capital
and labor. The historical working out of the contradiction between these two opposing forces is
the key to understanding the dynamics of a capitalist economy.
4
Also important are intra-class conflicts, such as those between industrial and financial
capital, among capitalist firms competing with each other, and also among segments of the
working class.
4) Theory of the state
In capitalist society the dominant class, i.e., the capitalist class, has a dominant influence
on the "state," taken to be the apparatus of government broadly conceived: the legislative and
executive branches, the courts, police, military, etc. Many Marxists view the state as a
"contested terrain," in which labor can vie for influence, but in which the capitalist class usually
dominates because of instrumental and structural influences.
Because of its income and wealth, the capitalist class can influence the levers, or
"instruments" of state power. For example, representatives of the capitalist class can be
appointed or elected to positions of power, and their lobbyists can influence decisions.
Also, capitalists hold a central structural position within a capitalist economy. They hire
and fire workers and make decisions about the expansion of production and investment. Even
governments sympathetic to labor are influenced by the powerful role capitalists play in a
capitalist economy.
5) Evolution of economic systems
Marx analyzed a progression of economic systems, from simple commodity production,
slavery, feudalism, to capitalism. He predicted that capitalism would be replaced by socialism.
In the contradiction between capital and labor, labor would become dominant and would change
the institutional structures defining capitalism to those compatible with a socialist system.
Aiding this transition would be the contradiction between the forces of production (such as plant
5
and equipment, technology, and human skills and abilities) and the social relations of production.
Marx thought that capitalist social relations would increasingly become obstacles to further
growth of the forces of production, and would be transformed.
Despite continuing controversies about Marx's prediction of socialism, his theory that
class struggle, and the contradiction between the forces and social relations of production, would
lead to a new institutional structure is a key building block of the new macroeconomic
framework, as discussed below.
2.2. John Maynard Keynes
1) Fundamental uncertainty
Nobel laureate Niels Bohr said Ait is difficult to make predictions, especially about the
future.@ As Keynes stressed, about much of the future, we simply do not know. Note that this is
much different from the neoclassical concept of risk, which enables one to know all possible
future events and establish a probability for each.
2) Financial crises and speculation
Because of fundamental uncertainty, financial markets are subject to crises and
speculation. Herd behavior leads to euphoric booms and sudden panic, when the optimistic
expectations that fueled the boom are not fulfilled.
2.3. Wesley Clair Mitchell
1) Endogenous business cycle
Mitchell, the founder of the National Bureau of Economic Research, was a leading
institutional economist of the early twentieth century. He pioneered quantitative research on the
business cycle. Based on his research, he hypothesized an endogenous business cycle with
6
various stages, such as recovery, expansion, crisis, panic, and depression. Mitchell's business
cycle is endogenous in the sense that it traces a process of cumulative change in which one stage
of the cycle is transformed into the next.
2) Institutional methods
Mitchell's methods were both quantitative and institutional. He accumulated data on
hundreds of data series and then analyzed the data inductively to create his theoretical concepts.
He focused on quantitative data. Other institutionalists have used other methods, such as
surveys, participant-observer techniques, pattern models, historical analysis, etc. But like all
institutionalists, he understood that a concrete, detailed investigation of institutional conditions
was a necessary element to the understanding of social reality.
3. Crotty's Contributions
James R. Crotty starts with the basic building blocks from Marx, Keynes, and Mitchell,
but extends them by combining, deepening, and extending the basic theories.
3.1. Combining Mitchell and Marx: Class conflict and the business cycle
Crotty, with co-author Raford Boddy [1974, 1975], viewed Mitchell's endogenous
business cycle through the lens of class conflict. Mitchell, using data from business cycles in the
early twentieth century, observed an increase in labor costs and a decline in labor productivity
towards the end of the business-cycle expansion, with a resultant negative effect on profits and
investment. Boddy and Crotty, analyzing the business cycles of the early post-World War II
period, observed similar trends but interpreted them in the context of Marx's "wage-squeeze"
crisis theory.
In Marx's theory [1967, chapter 25], the wage squeeze is due to a depletion of the
7
industrial reserve army (the unemployed) and thus an increase in the bargaining power of labor.
Boddy and Crotty extend Marx's theory by viewing capital's reaction in the context of
macroeconomic policy and Marx's theory of the state. In the business cycles that Boddy and
Crotty investigated, the Federal Reserve raised interest rates, which slowed economic activity
and helped to replenish the reserve army. It thus intervened on the side of capital to reduce the
power of labor and the wage squeeze on profits.
In addition, in their analysis Boddy and Crotty employed the approach of both Marx and
Mitchell: the institutional investigation of concrete conditions.
3.2. Adding Keynes: Financial crises and speculation
Boddy and Crotty's analysis of the business cycle, carried out in the 1970s, focused
primarily on real variables. As time went on, it became clear that the financial system played a
significant role in the dynamics of the business cycle and needed to be incorporated into the
macroeconomic framework.
Post Keynesians had stressed the neglect by neoclassical economists of Keynes's theory
of fundamental uncertainty. But if the future was unknowable, how could decisions that implied
knowledge of the future be made? By incorporating Keynes's ideas about conventions, herd
behavior, and conditional stability, Crotty [1994] demonstrated how fundamental uncertainty
could be an essential part of a coherent macrotheory and an integral part of business-cycle
analysis.
Those who need to make a decision, but who do not know the future, would fall back on
"conventional wisdom," what most people thought most other people thought. Often the
conventional wisdom was that the future would be like the past. Speculative booms could
8
develop, as financial market participants projected an optimistic scenario far into the future.
Even market professionals would invest because they thought everyone else would be investing.
But because these conventions were not based on any firm knowledge of the future
(which was impossible), they were liable to be quickly rejected at the first sign of trouble.
Financial market participants could quickly head for the exits and initiate a financial crisis.
3.3. Deepening our understanding of Marx: Finance and the business cycle
Most discussions by radical political economists in the 1970s of Marxian crisis theory
considered only real variables. The assumption was that Marx saw crises originating in the real
sector, in the sphere of production. So if one wanted to combine the real and financial sectors of
the economy in a more comprehensive business-cycle theory, it would be necessary to go beyond
Marx by incorporating insights from Keynes.
However, in an insightful analysis in the mid-1980s, Crotty [1985, 1987] argued that the
limitation of Marx's crisis theory to the sphere of production was a misunderstanding of Marx's
methodology. Crotty's argument was that Marx treated production and circulation as a unified
whole and did not give production a logical priority over circulation.
Crotty's interpretation of Marx's argument is that a crisis comes about as a result of the
interaction of both the real and financial sectors. Once money is used as a means of payment (to
repay debts), contractual commitments on debt can escalate over the course of the business-cycle
expansion. Problems with profitability make it difficult to repay these debts. It is the interaction
of profitability problems with the high level debt repayment commitments that causes the crisis.
Thus Crotty's analysis shows that Marx analyzed both the real and financial sectors, and
that a heterodox macroeconomic framework is strengthened by incorporating the analyses of
9
both Marx and Keynes on financial crises and instability.
3.4. Extending institutional analysis: Stages of capitalism
The increased attention to financial variables in the 1980s was not a coincidence. More
attention was paid to these variables because financial problems and crises became more
prominent. Radical political economics, and others, devoted increasing attention to changes in
the U.S. and global economies over the course of the post-World War II period. It became clear
that institutional changes had occurred that had led to a qualitatively different stage of
capitalism.
These qualitatively different stages of capitalism were characterized by changes in how
the macroeconomy operated and how macrotheory was to be interpreted (more on that below).
Thus radical political economists had to adopt an institutional methodology if they were to
comprehend the changes in the economy and adopt a relevant macrotheory.
A number of theories of stages of capitalism exist. Baran and Sweezy's Monopoly
Capital [1966] is one; the social structure of accumulation theory by David Gordon and his co-
authors [Gordon, Edwards, and Reich; 1982] is another. But Crotty [2002] is a leader in
analyzing the post-World War II stages of capitalism as a transition from a "Golden Age" to a
stage characterized as "Global Neoliberalism."
3.5. Deepening our understanding of Keynes: Keynes's institutional methodology
Neoclassical economics views Keynes's General Theory [1936] as a timeless analysis of
capitalism as an economic system. Even some radical political economists view it in this way.
But, as Crotty [1990] demonstrates, Keynes's analysis in the General Theory applied only to the
specific institutional structures that existed in early twentieth-century capitalism. Keynes
10
thought that the different institutional conditions of the nineteenth century constituted a different
stage of capitalism with different economic characteristics.
Keynes, according to Crotty, saw a "heroic" entrepreneur in the nineteenth century, one
who viewed investing as a way of life and plowed back the firm's profits into investment without
regard to cost-benefit analysis. Accompanying the heroic entrepreneur was the Victorian rentier
class that was content to put its savings into long-term bonds and preferred stock (not common
stock) for long-term income rather than short-term capital gains. Under these conditions, long-
term real investment was encouraged.
In contrast, in the twentieth century institutional conditions were significantly different.
Inflation following World War I undermined the rentier class, firms began to rely much more on
external equity financing, and owners became increasingly distinct from managers. Under these
conditions, the speculation and instability of investment described by Keynes in the General
Theory became the norm.
The important points to note, at this point, are the centrality of institutional analysis to the
emergent heterodox macroeconomic framework, and the ease with which Keynes's analysis falls
within the institutionalist perspective.
3.6. Extending institutional analysis: Macrotheory differs across stages of capitalism
The significance of stages of capitalism for a heterodox macroeconomic framework is
that the behavior of economic actors and the nature of macro policy differ across different stages,
and thus the relevant macrotheory does as well. In a series of articles, Crotty has systematically
investigated this process. In particular, he has explored the behavior of industrial and financial
corporations, the nature of macro policy, and the characteristics of economic and financial crises.
11
1) The behavior of industrial and financial corporations
Crotty [1993] cites Marx's distinction between "fraternal" and "fratricidal" modes of
competition. Under these two modes of competition, investment behavior by industrial
corporations differs. Fraternal competition leads to "corespective" behavior and investment that
is primarily capital widening (expanding the scale of investment incorporating current
technology). In contrast, fratricidal competition leads to "coercive" investment that emphasizes
capital deepening (investment incorporating new technology that has the potential to undermine
the value of the existing capital stock).
Crotty applies this analysis to the corespective Golden Age and the competitive
neoliberal era. He describes some additional characteristics of corporate behavior under
neoliberalism: "Disrupting organizational structure and routine, firing workers, slashing wages,
closing (or slaughtering) nonamortized plants, attacking unions, taking on debt levels previously
considered to be intolerably dangerous" [Crotty, 1993: 19]. He notes that these behaviors are
risky tactics. They did not characterize corporate behavior during the corespective Golden Age;
they are adopted in the neoliberal era only because of the pressure of fratricidal competition.
The changed corporate behavior has important implications for the global economy.
Crotty [2000, 2003a] concludes that this behavior (coercive investment, attacking labor, etc.)
under neoliberalism has led to both chronic excess aggregate supply and chronically inadequate
global aggregate demand. This inability of aggregate demand and supply to equilibrate, an
impossibility in neoclassical analysis, is explained by Crotty [2000: 367] as the interaction of
demand and supply effects in a vicious cycle: "The more competitive pressures develop, the
more they force firms to cut wages, smash unions, substitute low for high wage labor, and
12
pressure governments to cut spending and generate budget surpluses. But these actions constrain
global aggregate demand even more tightly, creating yet stronger competitive intensity."
Deregulated financial markets in the neoliberal era have also been subject to increased
competitive pressures. This has led them to become increasingly speculative and to take on
increasing risk, a process that thus far has enabled financial corporations to report increased
profits [Crotty, 2007].
However, financial markets have put additional pressure on nonfinancial corporations.
Crotty [2003b] analyzes the shift in financial markets from "patient" finance to impatient
financial markets. He points out that financial markets under neoliberalism have forced a
portfolio conception onto nonfinancial corporate behavior: corporate assets must continually be
restructured to maximize the corporation's stock price. Moreover, the pay structure of corporate
management has shifted: instead of being rewarded according to the long-term success of the
firm, corporate manager compensation is now much more firmly tied to the corporate short-term
stock price.
This has led to what Crotty [2003b: 271] calls the "'neoliberal paradox': financial markets
demand that corporations achieve ever higher profits, while product markets make this result
impossible to achieve." He concludes that this impossible situation led to the increase in
financial accounting fraud that was observed in the late 1990s.
2) The nature of macro policy
The change from the Golden Age to the neoliberal stages of capitalism has had
implications for the nature of macroeconomic policies. Crotty [2003a] describes a number of
changes in macro policy under neoliberalism, all of which have contributed to the problem of
13
chronically inadequate aggregate demand growth.
Monetary policy has become decidedly more oriented to an anti-inflation stance. The
deregulation of financial markets has enabled financial corporations to use capital flight to
punish countries that do not adopt the corporations' preferred high interest-rate, low-inflation
monetary policies.
Fiscal policy has also become increasingly restrictive. Crotty notes that large cuts in the
social safety net and an aversion to fiscal deficits have characterized fiscal policy under
neoliberalism.
Restrictive monetary and fiscal policies have been enforced on many countries by the
International Monetary Fund's austerity policies. Crotty estimates that 40% of the world's
population, living in 55 countries, has been subject to such policies. Also, financial deregulation
and liberalization, and the IMF's dominant role, have forced many countries to abandon policies
that regulated the macroeconomy, such as capital controls and state regulation of credit
allocation.
3) The character of economic and financial crises
In a series of articles on the Asian financial crisis (such as Crotty and Dymski, 1998),
Crotty and his co-authors explain the connection between increasing international financial
crises and the neoliberal model. The defining elements of the neoliberal model B deregulation,
privatization, and liberalization B have led to heightened capital mobility, widespread
speculation, and increasing financial crises.
It is perhaps no accident that we observe both increasing financial crises and chronically
inadequate aggregate demand in the neoliberal era. Both likely can be linked to some of the
14
corporate behavior discussed earlier: firing workers, slashing wages, and attacking unions.
These strategies, along with tax cuts that favor the wealthy, and a whole host of government and
corporate policies, have dramatically increased income and wealth inequality. And has John
Kenneth Galbraith [1988: xiv] so colorfully reminds us, "what well-rewarded people regularly
do with extra cash" is to "sluice funds into the stock market" and other financial investments.
Falling wages and weakened unions, along with increasing inequality and financial
capital mobility, have resulted in chronic underconsumption problems and increasing financial
speculation and financial crises. The conditions that led to the wage-squeeze economic crises in
the Golden Age have changed, and so have the nature of economic and financial crises in the
neoliberal era.3 Although Crotty has not yet revisited this issue in the context of his 1970s
papers with Raford Boddy, it may well be on his agenda.
3.7. Extending Marx: Historical change in the capitalist global economy
The idea of stages of capitalism obviously raises the issue: how does one stage of
capitalism transform into the next? What is the process of historical change?
Here is where Marx's concepts of class struggle and contradiction between the forces of
production and the social relations of production come into play. Crotty [2002] shows that a
similar analysis can be used to analyze the transition from the Golden Age to neoliberalism.
Although the Golden Age constituted a settled institutional structure, the ongoing
contradictions of a capitalist society (between capital and labor, between industrial and financial
capital, among capitalist firms, etc.) changed the economic environment. Crotty [2002]
discusses rising inflation, increased trade competition, balance of payments deficits, etc. These
changes in the economic environment put pressure on the existing institutional structure of the
15
Golden Age, such as the Bretton Woods monetary system. Eventually the old institutions could
no longer function. A crisis ensued, and the old institutions were dismantled.
What would be the new institutional structure to be created? Crotty [2002] explains that
the new institutional structure, neoliberalism, was not inevitable. Neoliberal institutions were
created because they were the deliberate choice of "elites" (capital) and because the capitalist
class had the power to enforce its choice. Here the basic concepts of Marx are extended to apply
to the historical change that transforms one stage of capitalism into another.
4. Methodology and Radical Political Economics
What, then, are the methodological principles that constitute the emergent heterodox
macroeconomic framework? Below is a summary of the main points that emerge from the
review of Crotty's contributions.
4.1. Contradictions, class conflict, endogenous change, and the business cycle
The working out of the main contradictions of capitalism, particularly the class conflict
between capital and labor, provide the impetus for endogenous change in the capitalist economy.
In particular, class conflict (and intra-class contradictions) strongly influence the dynamics of
the business cycle.
4.2. Fundamental uncertainty, financial crises, and speculation
Macroeconomic activity takes place under conditions of fundamental uncertainty.
Speculation and financial crises are an outcome of decision-making under fundamental
uncertainty and the interaction of real and financial developments.
4.3. Institutional conditions and stages of capitalism
The macroeconomy behaves differently under different institutional conditions, in
16
particular the different institutional conditions that characterize different stages of capitalism.
The behavior of industrial and financial corporations, macroeconomic policy, even the dynamics
of the business cycle and the nature of economic and financial crises, have changed as the
institutional conditions of the Golden Age were replaced by those of neoliberalism.
4.4. Historical change and possibilities for the future
Historical change takes place as economic changes, driven by the contradictions of
capitalism, erode, or come up against, the institutional structure. A crisis takes place as the old
institutional structure is swept away. The new institutional structure that takes its place, whether
a new stage of capitalism or a new economic system, depends on the relative balance of power
between the economic classes.
The emergent heterodox macroeconomic framework depends on an integration of
principles from Marx, Keynes, and institutionalists like Mitchell. To that new framework, Jim
Crotty's contribution is significant. His analysis is leading the way forward to a new
methodology for radical political economics.
References
Baran, Paul A., and Paul S. Sweezy. 1966. Monopoly Capital. New York: Monthly Review
Press.
Boddy, Raford, and James R. Crotty. 1974. "Class Conflict, Keynesian Policies, and the
Business Cycle," Monthly Review, 26 (5), pp. 1-17.
______. 1975. "Class Conflict and Macropolicy: The Political Business Cycle," Review of
Radical Political Economics, 7 (1), pp. 1-19.
Crotty, James R. 1985. "The Centrality of Money, Credit and Financial Intermediation in Marx's
Crisis Theory." In S. Resnick and R. Wolff, eds., Rethinking Marxism: Essays in Honor
of Harry Magdoff and Paul Sweezy. New York: Autonomedia, pp. 45-82.
______. 1987. "The Role of Money and Finance in Marx's Crisis Theory." In R. Cherry, et. al.,
eds., The Imperiled Economy, Volume 1. New York: Union for Radical Political
Economics.
______. 1990. "Keynes on the Stages of Development of the Capitalist Economy: The
Institutionalist Foundation of Keynes's Methodology." Journal of Economic Issues, 24
(3), pp. 761-80.
______. 1993. "Rethinking Marxian Investment Theory: Keynes-Minsky Instability,
Competitive Regime Shifts and Coerced Investment," Review of Radical Political
Economics, 25(1), pp. 1-26.
______. 1994. "Are Keynesian Uncertainty and Macrotheory Incompatible? Conventional
Decision Making, Institutional Structures and Conditional Stability in Keynesian
Macromodels." In G. Dymski and R. Pollin, eds., New Perspectives in Monetary
Macroeconomics: Explorations in the Tradition of Hyman Minsky. Ann Arbor: Univ. of
18
Michigan Press, pp. 105-142.
______. 2000. "Structural Contradictions of the Global Neoliberal Regime." Review of Radical
Political Economics, 32 (3), pp. 361-68.
______. 2002. "Trading State-Led Prosperity for Market-Led Stagnation: From the Golden Age
to Global Neoliberalism." In G. Dymski and D. Isenberg, eds., Seeking Shelter on the
Pacific Rim: Financial Globalization, Social Change, and the Housing Market. Armonk,
NY: M.E. Sharpe, Inc., pp. 21-41.
______. 2003a. "Structural Contradictions of Current Capitalism: A Keynes-Marx-Schumpeter
Analysis." In J. Ghosh and C.P. Chandrashekar, eds., Work and Well-Being in the Age of
Finance. New Delhi: Tulika Books, pp. 24-51.
______. 2003b. "The Neoliberal Paradox: The Impact of Destructive Product Market
Competition and Impatient Finance on Nonfinancial Corporations in the Neoliberal Era."
Review of Radical Political Economics 35 (3), pp. 271-79.
______. 2007. "If Financial Market Competition is so Intense, Why are Financial Firm Profits so
High? Reflections on the Current 'Golden Age' of Finance." A paper prepared for a
conference on "Financialization: in retrospect and prospect," sponsored by the IWGF,
University of Manchester, London, February 12-13.
______ and Gary Dymski. 1998. "Can the Global Neoliberal Regime Survive Victory in Asia?
The Political Economy of the Asian Crisis." International Papers in Political Economy, 5
(2), pp. 1-47.
Galbraith, John Kenneth. 1988. The Great Crash: 1929. Boston: Houghton Mifflin Co.
Gordon, David M., Richard Edwards, and Michael Reich. 1982. Segmented Work: Divided
19
Workers. New York: Cambridge University Press.
Keynes, John Maynard. 1936. The General Theory of Employment, Interest, and Money. New
York: Harcourt, Brace, and World.
Kotz, David M. 2007. "Crisis Tendencies in Two Regimes: A Comparison of Regulated and
Neoliberal Capitalism in the U.S." A paper presented at a panel on "Reconstituted Social
Structures of Accumulation: Macroeconomics, Profits, Finance, and Performance" at the
Union for Radical Political Economics sessions at the Allied Social Science Associations
annual conference in Chicago, January 6, 2007.
Marx, Karl. 1967. Capital, Volume 1. New York: International Publishers.
Wolfson, Martin H. 2001. AInstitutional Analysis of Financial Crises,@ in Amitava Krishna Dutt
and Kenneth P. Jameson, eds., Crossing the Mainstream: Methodological and Ethical
Issues in Economics. Notre Dame, IN: University of Notre Dame Press, pp. 332-352.
______. 2003. "Neoliberalism and the Social Structure of Accumulation." Review of Radical
Political Economics 35 (3), pp. 255-262.
Notes
1.This paper concentrates on methodological assumptions and principles. For a discussion of institutional methods, see Wolfson [2001].
2.Two characteristics of this framework should be mentioned. First, it does not reduce all theories within radical political economics to a common set of assumptions. Although there are various theories within neoclassical economics, such as New Keynesian economics or new classical macroeconomics, all of these theories are based on the same basic assumptions of individual rational agents maximizing under constraints. The framework discussed here does not claim that all theories within radical political economics are derived from the same assumption set. Rather, it claims that there are important aspects of various theories that can be combined in a coherent way to create a framework with greater explanatory power.
Second, the framework does not encompass all of radical political economics. For example, important aspects of gender and race emphasized by radical political economists are not included. Nonetheless, the framework is an important step in the development of an integrated radical political economic analysis that can function as an alternative to neoclassical economics.
3.For more on this issue, see Wolfson [2003] and Kotz [2007].