Book Review: Wolff & Resnick, “Contending Economic Theories”

One of the core principles of scientific theory is that all theory is specific and limited in its domain. A theory which attempts to explain everything, explains nothing. Equally, the mere observation that ‘everything depends on everything else’ is, while undoubtedly true, useless for scientific inquiry – the virtue rests in identifying the specific and causal connections where possible, or at the very least a model or theory that can explain some subset of the totality of connections in a way that helps us solve problems. To point this out may seem banal, but Richard Wolff and Stephen Resnick would have done well to keep it in mind when writing their book, Contending Economic Theories: Neoclassical, Keynesian, and Marxian. As the name implies, this is a work of comparative economic theory, presenting the elementary (say, undergraduate level) versions of each of the theories in a way that allows novices in economics to compare and contrast their methods and approaches.

Such a book is a great idea, as there is a real shortage of clear and accessible comparative material that gives an overview of the different theoretical conceptions and methodological justifications that exist in economics, both orthodox and heterodox – not least because the interaction between method and content is perhaps nowhere as important as in that discipline. Moreover, as Marxist economists of some recent popular renown – at least in the case of Richard Wolff, as Stephen Resnick sadly died earlier this year – you’d expect the authors’ heterodox view of economic theory to make such a comparison more fair and useful than it would be if undertaken by an orthodox neoclassical historian of economics.

Unfortunately, I am unable to say that the book fulfils this promise. In the second edition (2012), it consists of four parts: a discussion of the standard neoclassical theory, of Keynesian economics, and of what the authors dub ‘Marxian’ economics, followed in this edition only by a new section on late neoclassical developments. This final section is actually by far the most useful and interesting part of the book, providing an admirably clear and understandable overview of the nature and implications of the move in mainstream economics towards game theory (classical and evolutionary), bounded rationality models, behavioral economics, and institutionalism. Necessarily, this part is short, but it is to the point. Since these approaches seem likely to become more and more significant in the mainstream of the discipline in the future, it is helpful to have a quick and accessible overview. In fact, the presentations of standard neoclassical economics and the Keynesian approach are acceptable enough, and will serve the purpose as well as any other textbook on the subject would. The same cannot be said of the other sections.

What really mars the book’s comparative purpose is the bizarre quasi-sophisticated epistemological framework the authors impose upon the theoretical material. From the introduction onwards, Wolff and Resnick insist on a number of in my view highly questionable judgements about the status and purpose of the economic theories involved. Not only do they count neoclassical economics as dating from 1870 (dubious) and Keynesian economics as systematically different from the neoclassical (arguable), but they view each of the three theories through a philosophical lens: according to the authors, neoclassical economics is fundamentally ‘humanist’, Keynesian economics is fundamentally ‘structural’, and Marxian economics is fundamentally ‘overdetermined’. By ‘humanism’, they seem to mean methodological individualism, although their actual description is so general as to be useless: “Humanism affirms that human beings can become masters of their lives on earth. Their actions alone can produce a better life for them. Neoclassical economics is the application of this humanist conception to the production and distribution of wealth” (p. 15). Not only is this so vague as to tell us nothing that distinguishes neoclassical economics, but it is also unintentionally far too great praise – as if all other economic theories rely on supernatural or metaphysical postulates! Would not Marx, who took human material reproduction in history as his starting point, be a humanist in this sense?

Similarly, it is by no means clear why Keynesianism should be more ‘structural’ than neoclassical economics. For the authors, Keynes’ notion of uncertainty and the ‘animal spirits’ that govern the psychological investor response in the face of it is an ad hoc concession to humanism in an otherwise structuralist explanation. But what makes Keynes’ theories structuralist? Nothing other than that Keynes’ theory is macroeconomic rather than microeconomic: “Keynesian theory analyzes and presents (1) the rules and laws that give the economy its overall structure and (2) the ways in which that structure essentially governs the activities of producers, consumers, and other individual economic actors” (p. 19). But of course, neoclassical economics properly also does this, already as far back as Alfred Marshall, insofar as it concerns itself with macroeconomic explanations. And insofar as these are to be reducible to micro-foundations, Keynes did not oppose this, but simply did not consider it the subject of his critique – rather, the perfect equilibrium model being a special case of his ‘general theory’. Again, nothing of any use for comparative purposes is added by this pretend philosophical framework, and all it does is mislead on the strength of the distinction between classic Keynesian economics and the standard model neoclassical economics, which in reality came about in large part precisely to unite the two (as in Paul Samuelson’s synthesis). The overly early identification of neoclassical economics and its reduction to microeconomics here are the choices of the authors that mislead themselves into making this awkward and unhelpful opposition.

This false sophistication of methodological comparison extends further, however. The very end of the book considers why one should choose one theory over another – and in a few pages, the reader is treated to potted versions of the authors’ notion of ’empiricism’, of ‘rationalism’, and their opposition, as well as such insights as that facts, logics, and theories are not independent entities. Very helpful! In fact, it doesn’t seem to really matter what you choose at all, as “the choice you eventually make depends on all the the influences that overdetermine you” (p. 377). In the postmodern Althusserianism of Wolff and Resnick, everything is ultimately ‘overdetermined’, and therefore all theoretical and methodological differences are ultimately arbitrary – not just at the level of realism versus antirealism, where this could be justified, but even at the practical level of modelling, method, and theoretical dispute.

Overdetermination, the authors tell us, means that “every object of a theory may be understood as always both cause and effect of every other object… The objects of such a theory would be linked to one another in a logic of mutual causation that we refer to as ‘overdeterminist'” (p. 36). What’s more, for Wolff and Resnick this sense of overdetermination is strongly in contrast with the methods of neoclassical and Keynesian economics, which are branded with the reproach of ‘determinism’: a moniker that condemns any theory “where some objects of a theory are viewed as causes that determine other objects as their effects” (p. 35). To my complete bafflement, the authors seem to think it fairly evident that the former is to be preferred over the latter, although the choice, being itself ‘overdetermined’, is of course arbitrary and purely a matter of taste. They have a manic consistency here, at least, while utterly ignoring that a theory that posits no identifiable causes or effects at all is not actually a theory, explains nothing, and can serve no purpose whatsoever. As mentioned, stating that everything depends on everything else is not an explanation and is not a theory, but is a banality used by obscurantists to seem intelligent and by the bored to shut up their interlocutor. That the authors seem to think that deduction, reductionism, essentialism, and determinism are all the same thing does not improve my impression of their understanding of elementary philosophy of science.

This philosophical oddity would perhaps not have such consequences if the authors had not decided to make the ‘entry points’ of the three theoretical schools the central point of comparison, next to the method. For them, neoclassical economics is humanist, Keynesian economics structural, as we have seen; Marxian economics, in the authors’ version of it, has the misfortune of being characterized by its ‘overdeterminism’ method. Each also has its own entry point, however, corresponding to these methods. For neoclassical economics, this is the individual’s preferences and the resource endowment (including technology); for Keynesian economics, this is the economy as a whole (it is not explained how this can be an entry point in their sense); for Marxian economics, this is class. This latter notion, class as the entry point of Marxian economics within a general framework of overdeterminism, dominates Wolff and Resnick’s explanation of Marxian economics itself.

Much of the discussion of its actual content is fairly straightforward, as with the other two theories, although there are better and more clear introductions to Marxist economic theory to be had (such as Fine & Saad-Filho, or Harvey, or Heinrich, say). For Marxist economists, they understand the basic notion of capitalism as an example of a class society producing and distributing a surplus, but surprisingly little else emerges. They do not understand that the value of a commodity is the socially necessary labor time required to reproduce it, not to initially produce it (p. 169). There is no discussion of Marx’s theory of money, or of finance and credit, or of rent, or technology and the rate of profit, other than as phenomena relevant to the distribution of value. This the authors put great emphasis on, almost to the point of a purely distributionist political economy that weakens much of the strong points of the Marxist contribution. Here, too, various strange idiosyncrasies show up, such as the insistence of the authors that each class mode of production – and in an oddly orthodox fashion they determine their exact number and name in advance – has its own ‘fundamental class process’. This seems fair enough of itself, but then the authors consider each class process analogous to it in present society as properly belonging to that mode of production – so that for example labor in the nuclear household is ‘feudal’ (p. 230), and they suggest that capitalism is rife with ‘ancient’, ‘slave’ etc. class processes even today (p. 168). Now of course they are right to not want to reduce actual capitalist societies to markets, nor to the pure form of capitalism as presented in Capital, but this is conflating terminology to such a degree as to make it unhelpful. Banaji’s discussion of forms of exploitation in Theory as History is much better on this issue.

The authors’ strength when talking about productive versus unproductive labor and the distribution of surplus value, and their weakness on any of the elements of Marxist theory not immediately concerned with the distribution of value, may well come from their idea of class as an ‘entry point’ for Marxian economics. In fact, for Marx at least, the entry point of his economic theory was not class but the commodity – the first pages of Capital are very clear on this point. What’s more, for the authors’ overdeterminism perspective, the choice of class that supposedly characterizes Marxian economics must be itself essentially arbitrary. After all, everything causes everything else, so why focus on class? They defend this by the rather ridiculous proposition that “the point was not to claim that class was any more important a part of society than power, individual preferences, institutions, language, race, or gender. Marx’s purpose in making class his entry point into social analyses was to remedy the ignorance and underestimation of class which, in his view, undercut the revolutioary projects he supported” (p. 242). Does anyone recognize Marx in this? I certainly do not.

Of course, Wolff and Resnick are quite entitled to their own economic theories, and equally to present Marxist economics in a way that to them seems most coherent and comprehensible. There are many disputes within that field, as in any other, and one has to make choices for the purpose of a comparative work like this. But it seems much less legitimate to present as ‘Marxian economics’ a version of it which absolutely nobody in the history of that intellectual tradition has argued in this way, let alone to literally ascribe their own views on ‘overdetermination’ and their amateur philosophy to Marx himself when he made explicit contrary statements. By presenting the theories as a series of ‘entry points’, one no more substantiated than the other and all equally overdetermined by everything else so as to make even the choice irrelevant, the whole possibility of dispute in economic theory becomes an arbitrary and redundant affair. How this is to be squared with their stated purpose of presenting Marxist economics in a way that enables a meaningful comparison with others is not immediately apparent. One would not want the interested layperson to learn first from these Feyerabends of economic theory.

Ultimately, one wonders why the authors do not simply ditch the claim to present these economic theories as they are, and rather present a book on their ideas of methodology in economics, or their own view of what Marxist economic theory should transform into: Resnick-Wolff Theory, or Wolffian economics. There is no sarcasm in this: precisely being influenced by major predecessors but redeveloping and refashioning ideas in new ways is how (social) science progresses. Piero Sraffa did just that in the 1930s, building on Marx but rejecting or transforming major elements of his theory. Such a book could be interesting – Resnick and Wolff’s work on the structure of the Soviet economy, Class Theory and History, could then be seen as an application of their economic theory. But this book is presented as a comparative introduction to the major schools of thought, to be useful for a newcomer. Such a newcomer would not know how idiosyncratic and outright misleading much of the presentation is. That is not acceptable, and for that reason for its stated purpose, this book must be judged a failure – not least in its field of expertise, the presentation of Marxism. Fortunately for us, the authors do clearly contrast their notion of Marxism with what they dub ‘traditional Marxism’, concerned with such rigid determinism as ’cause and effect’. At least we still have that.