Contemporary Radical Economics Economic

Contemporary Radical Economics, Radical Economic

Radical economics, based in part on Marx, evolved into a school of thought in its own right in the late 1960s and 1970s, partly in response to the social strains of the Vietnam War. In 1968 a group of young economists formed the Union of Radical Political Economy. This organization publishes the Review of Radical Political Economics, a central journal of radical economic thought. It is supplemented by the Monthly Review, Science and Society, and Cambridge Journal of Economics. Although radical views are diverse, certain ideas about what is wrong with neoclassical economics and market-oriented economics bind them together. According to Eileen Applebaum (1977), the radical position encompasses the following three points:

1. Radical economists think that "major socioeconomic problems can be solved only through a radical restructuring of our society." They argue that poverty, racism, sex discrimination, destruction of the environment, allenation of workers, and imperialism "are not pathological abnormalities of the system, but rather are derived directly from the normal functioning of capitalism."

2. Radicals argue that there are major inconsistencies between neoclassical theory and real-world experience. Where mainstream economists see social harmony, radicals see conflict.

3. Following their Marxist heritage, radicals view society as an "integrated social system existing in concrete historical circumstance." They believe that mainstream economics simply accepts existing institutions, such as the market, as given and does not consider a wide variety of proposals to change those institutions. They see the incremental changes advocated by mainstream economics as hardly worth considering. As Eileen Applebaum states, radicals "are interested in ending—not salvaging or stabilizing— monopoly capitalism" and replacing it with "a socialist society based on participatory planning, public ownership of the means of production, the elimination of private appropriation of profit, and a genuinely egalitarian redistribution of income and wealth."

Given these views, radical analysis of the economy is significantly different from mainstream analysis. The radical premise is that the problems of Western society are inevitable consequences of the capitalist institutional structure. Radicals emphasize in their analysis that technology embodies the social relations between individuals and that any analysis must study why capitalism exists rather than take it as given.

Many radicals explain the existence of capitalism by means of class analysis, contending that any useful economics must incorporate class analysis. Most radicals also believe that capitalism embodies internal contradictions that inevi­tably will bring the system down, although this process is slowed by the repressive state, which exists to serve the interests of the capitalist class, and by institutions such as schools, which are arms of the state.

Since the mid-1970s, radicals have played a smaller role in mainstream economic debate. The reasons for this are varied. Some radicals have turned inward to debate doctrinal Marxian issues, such as the tendency for the rate of profit to fall and the transformation problem (how one can move from a labor theory of value to a set of values or prices of goods in a multi-industry model). But other radical work of the 1970s has influenced mainstream analysis. An example is Steven Marglin's "What Do Bosses Do?" Marglin argued that technology is not given but is chosen by a particular group of individuals within the society. In capitalism this group is the managers, or "bosses," who choose the technology that provides them with the strongest role. In stating his argument, Marglin reconsiders Adam Smith's example of the pin factory, which Smith used to demonstrate the advantages of the division of labor. Marglin argues that by bringing all the workers under one roof, the bosses (organizers) gained control over the workers, securing their own role in the production process and allowing them to extract a larger surplus from the workers. Although this analysis is hot found in introductory textbooks, it is known to most economic organizational specialists.

A second radical argument that has gained recognition within mainstream economics concerns the economics of education. The mainstream analysis of schooling holds that individuals invest in schooling and receive a return in the form of increased future earnings. The investment makes them and society better off. Significant empirical research has gone into showing what that return is, and on the basis of this research neoclassical economics concluded that we have underinvested in schooling. Samuel Bowles and Herbert Gintis disagreed, argu­ing that schooling does not necessarily enhance the well-being of society. Their hypothesis is that the higher earnings of educated persons are sometimes simply a return for being allowed into a monopoly. Schooling, they contend, does not necessarily increase the true value of workers; it may merely provide a union card that allows individuals into a set of professions they could not enter without it. Bowles and Gintis assert that because econometric work cannot separate these two hypotheses, the question of education's contribution to society remains open.

Another inroad of radical thought into mainstream economics came from a "more acceptable" radical (so acceptable that he might not even be considered radical). That inroad is Michael Piore's dual labor market analysis. Piore argues that it is wrong to view the labor market as a single market, because major structural and social constraints limit the mobility of labor. For example, a worker hired as a shipping clerk will find it almost impossible to be promoted to a managerial position, no matter how capable he or she is. It follows that the relative desirability of various jobs cannot necessarily be ranked by pay, because a position with possibilities of upward mobility may initially pay less than a position without such possibilities. Because each job is done by a separate class within labor, Piore says, neoclassical analysis of the labor market as competitive does not fit the reality. One should instead analyze the labor market as a structurally constrained market, which he calls a dual labor market. Although this analysis conforms to Marxian analysis in that it incorporates a type of class distinction, the dual labor market has become part of mainstream Keynesian analysis.

With the demise of many of the world's socialist economies, radical econo­mists have been pressed to explain how they can maintain their position when the type of economy they proposed has failed. One response is that the socalled socialist economies of Eastern Europe, for example, did not really try true socialism, since their economies had been subverted by capitalist influences and by individuals who had lost sight of socialist ideals. Moreover, the failure of socialist economies has little or nothing to do with the problem of inequalities that radical economists see as existing (or inherent) in capitalist economies. A second response has been a gravitation away from Marxian socialist economics and a search for alternative institutional structures that avoid the problems of both socialism and capitalism.