The Definition of an Economy
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This is in response to HUD’s article: ‘How we Live and How we Might Live (3)’.
In the article, HUD states: ‘an economy is the way we organise ourselves to collectively produce and distribute the things we need.’
However, in ALB’s excellent series of articles, titled ‘How Capitalism Works’ – from 1979 – it is stated that an economy is a kind of society that is based on exchange, therefore, an economy is a synonym for a capitalist society*. HUD’s definition of an economy is a definition of a society (IMHO).
Other than that, the ‘How we Live and How we Might Live’ articles are amazing.
“therefore, an economy is a synonym for a capitalist society” I don’t think that is right, and does the linked article actually say that?
There is definitely something that could be referred to as economic activity (acts of buying and selling, including waged labour) in precapitalist socities.
Here is what Rosa Luxemburg wrote for a course on economics she taught at the German Social Democrats’ school that was translated and published in Australia under the title What is Economics?:
https://www.workersliberty.org/files/29544399-Luxemburg-What-is-Economics.pdf
Here are a couple of relevant passages.
“Sometimes economics is simply defined as follows: it is the “science of the economic relations among human beings.” The question of the definition of economics does not become clarified by this camouflage of the issue involved but instead becomes even more involved-the following question arises: is it necessary, and if so why, to have a special science about the economic relations of “human beings,” i.e., all human beings, at all times and under all conditions?” (page 224)
“If we understand at this point why the science of economics originated only about a century and a half ago, then, from the vantage point gained, we will also be able to construct its subsequent fate. If economics is a science dealing with the particular laws of the capitalist mode of production, then its reason for existence and its function are bound to the life span of the latter and economics will lose its base as soon as that mode of production will have ceased to exist. In other words, economics as a science will have accomplished its mission as soon as the anarchistic economy of capitalism has made way for a planful, organized economic order which will be systematically directed and managed by the entire working force of mankind. The victory of the modern working class and the realization of socialism will be the end of economics as a science.” (pages 244-5).
The pamphlet is not 250 pages long (the above is from a collection of her articles) but only 30 pages and well worth reading to see how she develops her argument.
– DJP
To be honest, I read the article a while ago, but put what I recalled it said about economics into my own words.
Here’s the relevant information from said article:
‘THE REASON THE natural and industrial resources of the world are not used to provide the abundance they are capable of producing is to be sought, not in the realm of technology, but in that of economics.
‘Economics is basically the study of what happens when wealth is exchanged — that is when it is either bartered for other wealth or bought and sold for money. It is not the study of the production and allocation of wealth as such, but the study of its exchange and how this affects decisions about production and allocation. Exchange is not to be confused with allocation.
‘Allocation (sometimes called distribution) is about the use which people make of the wealth they have produced: how much they consume immediately. How much they store for future consumption. How much they use to build up or renew their stock of tools and machines. “Allocation” is used here in preference to “distribution” because the latter has acquired other meanings which can cause confusion; it sometimes means transportation (which is really part of production)— but worse shops, which are exchange institutions, have taken to calling themselves the “distributive trade”.
‘In some past societies the amount and kind of wealth that was produced and allocated were decided according to some prearranged plan, even if this “plan” was just a set of tribal customs or some other unwritten code of social behaviour. Wealth was allocated directly for individual and communal use so that the sole aim of production could be said to have been direct allocation, or use.
‘In societies where the bulk of the wealth is exchanged after it has been produced (and before it is allocated) the production and allocation of wealth is no longer decided according to human plans or customs. The decisions are of course still made by people but within terms of reference outside of their control. Economics is the study of these terms of reference or, perhaps, of the laws or economic forces which come into operation once production for exchange becomes widespread.
(. . .)
‘An enterprise is an institution which seeks continually to increase the monetary value of its assets (the instruments of production, the raw materials, the stocks and the cash, including the wage fund, it controls.) The monetary value of these assets is sometimes called “capital”; hence “capitalism” as the name for the modern exchange economy.
(. . .)
‘Wealth production is no longer individual or local or national; it is social and worldwide. A single world society already exists but, because the workplaces of the world are controlled by enterprises, it takes the form of a world exchange economy.’
I thought I would check with the original German of what Luxemburg wrote and the situation is not that clear-cut. The word that the Australian translator translated as “economics” is Nationalökonomie which literally means “national economy”, the word then in use to mean fir instance the subject studied at university.
This was the word Engels and Marx had used in their early writings (1840s) and which they later called “political economy”. In fact in some translations Nationalökonomie which they used has been translated into English as “political economy”.
There is another German word Wirtschaft which can also be translated as “economics” and which Luxemburg also used. It is a sort of literal translation of the Greek word from which “economics” is derived, ie rules of house-keeping.
What Luxemburg said would disappear in socialism was Nationalökonomie, which is obvious in one sense as with capitalism would go the study of how it works (and ideological justifications for it).
There is also a German word Naturalwirtschaft used to describe an “economy” where money is not used.
From Raymond William’s Keywords (only as an aside, really):
“It is from rw oikos , Gk – household, with the familiar ending logy from logos – discourse, thence systematic study. Economy shares its reference, with the alternative ending nomy (cf. astronomy) from nomia , Gk – management and nomos , Gk – law. Economy had developed from its early sense of management of a household (C16) to political economy (from F, C16-C17) and to economics in its general modern sense from 1C18. Ecology (Haeckel’s ökologie) developed the sense of habitat (a noun for a characteristic living place from C18, from the form of the Latin verb ‘it lives’), and became the study of the relations of plants and animals with each other and with their habitat.”
(an interesting coupling with ecology, really)
I was also going to mention the ancient Greek word Οἰκονομικά (Economics), which is the title of a book written by Aristotle (or perhaps a student of his), but YMS beat me to it.
This book is about both market relations and non-market relations.
Yes, Aristotle draw a distinction between “economics” and “chrematistics”.
“From Ancient Greek χρῆμα (khrêma, “money”).”
“Chrematistics (from Greek: χρηματιστική), or the study of wealth or a particular theory of wealth as measured in money”
I think we can all agree that that’s inapplicable to socialism.
I think Karl Polanyi´s approach is relevant here. According to him, prior to capitalism, you couldn’t really talk in terms of such a thing as “the economy” – something that existed in some sort of stand-alone sense. Everything was mixed up – politics, culture, religion … and economics”.
The rise of capitalism marked what he called the “disembedding” of the economic domain. It came to be seen as something separate from the various other aspects of society and subject to its own generic laws of movement (the law of value etc). Adam Smith was the guy who first clearly articulated this view of the economy with his metaphor of the invisible hand of the market
Here´s a random link on Polanyi that I came across. Polanyi is quite an interesting thinker who has quite a lot of useful things to say that we could èrhaps tap into more
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