Economics: Classical vs. Liberal

619 words | 3 page(s)

Arguably, the shift from classical economics to liberal economics is as much a shift induced by the degree of emphasis placed on sociological and anthropological concepts, as it is by economic concepts. In light of this view, the historical distinction Aristotle made in between oikonomia and chrematistics: the former concept denotes what Wilfred L. David terms “ a historical consciousness, that is, more emphasis is placed on long-term dynamics rather than the short run.” This dovetails into the second point concerning oikonomia, whereby “benefits to the community as a whole take precedence over private economic transactions based on rational self-interests and markets.” In contrast, the “chrematistic economy is exemplified by provenance of money, speculative financial flows, computer driven-currency trades.” The radical shift, from this perspective, in the history of economics is therefore one that can be summarized according to the de-centering of the anthropological and social aspect of economics in favor of so-called “value-free” economics. In other words, in the former economics is only part of a greater social project, conceived upon human beings’ vision of how they are live together and thus anthropological self-conceptions, whereas, in the latter, these aspects are subsumed to the “value-free” realm of the purely economical in its chrematistic sense.

Arguably, what generates this shift are scientific narratives. In so far as science is concerned with repeatable and thereby verifiable behavior of phenomena, such as in the form of consistent cause and effect relationships, the study of economics, in order to become scientific, requires a similar methodology. However, in consequence, it is precisely the human element that is eliminated from economics: the human factor in the schema is instead to be subdued to what is presumed to be the more determinable and thus purely scientific workings of economics itself. In essence, this is an approach to economics that tries to minimize the importance of the human actor in economics to the extent that the latter is presupposed in terms of a contingency that makes the human difficult to capture within the scope of a “scientific” methodology.

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Such a transition in consequence makes wide-spread changes to an ethics of the human being, although these are only implicit to this shift, simply because according to the latter the human being is to be de-emphasized. To use Aristotle’s account, what emerges is a chrematistic account of oikonomia: the latter is to be fit into the world-view of the former. Arguably, such a force-fitting finds its own historical consequences. Whereas the Marxist approach to economics in a sense also accepted a chrematistic account of economics, trying to develop the stages of economic development, what happens in Marx’s theory is, in essence, a necessary humanist element that emerges at the end of this development, because the economic system, despite being “value-free”, ultimately collapses due to its own limitations. It can be argued that these limitations are, however, in the end tied to the anthropological or sociological aspect of economics, for example, exploitation and class consciousness.

At first glance, it seems that the classical and liberal economic theories are irreconcilable, to the extent that they take radically different approaches to the role of the human being. The value-free nature of liberal economic theory in other words is incompatible with a classical theory that places human values at the very center of its account of economics. However, perhaps a theory such as that of Marx’s shows a way in which dialogue is possible: there are “oikonomic” and “chrematistic” aspects of economy – understanding their interrelationship, instead of subduing one viewpoint to the other, creates a path of dialogue between the two accounts.

  • David, Wilfred L. The Humanitarian Development Paradigm: Search for Global
    Justice. Lanham, MD: University of America Press, 2004.

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