Heterodox Economics Newsletter

Issue 274 January 11, 2021 web pdf Heterodox Economics Directory

What has happend on capitol hill last week can, in my humble view, be safely dubbed as a 'Polanyian moment'. In his famous Great Transformation Polanyi emphasized that the successive expansion of markets and the associated trend towards increasing commodification will eventually provoke 'countermovements' that – in some way or the other – stand ready to challenge the prevailing institutional and economic order. While for media commentators it might be surprising to see such a countermovement – especially such a scary version of it – rising in the US, which for some is an archetype for democratic governance, it is not at all surprising to a Polanyian observer. Indeed, this hypothetical figure would potentially have predicted such an upsurge exactly for the US, where the commodifcation of major dimensions of life & society, like labor, education, health and housing, has progressed further than in most other democratic countries.

Most of our mainstream colleagues will probably find the above argument obscure, at least because of the unfamiliar terms it employs, but probably also because of the long-term perspective this view implicitly takes. In my experience, mainstream economists often treat time as 'neutral' in the sense that they neglect the problem of socio-historical specifity as well as possibility of more long-term (cyclical) trends, which matters especially when the system operates quite slowly relative to the observers. This is not to deny, that our colleagues can say many smart things about how to consider time in a more narrow and more well-defined econometric setting, but most of these arguments operate on the a different level (although one should always mind the ergodic axiom ;-).

Aside from the role of time, also the concept of commodification is somewhat alien to our mainstream colleagues. In the conversations I had, the more open ones will try to rationalize your argument in their own theoretical terms. Typically this is achieved by combining some skill-biased technological change or Stolper-Samuelson-argument to envisage a situation of rising inequality, which is then complemented with relative income concerns or inequality aversion to arrive at a decrease in overall welfare. Although this reproduces a substantial fraction of the intended message, what get's lost in this story is that the expansion of markets is seen as something detrimental in the Polanyian account (although markets are not condemned per se), which is hard to accept, even for a short moment, if you are trained to equate the expansion of markets with an increase in overall efficiency & social welfare.

These experiences have taught me that inter-paradigmatic communication is often difficult to practice as it requires patience, mental flexibility and some knowledge on competing theoretical approaches on both sides. All too easily a gulf of understanding might emerge from such a constellation, even among mainstream authors: just think of the cold silence by which the economic mainstream treats Thomas Piketty's new book Capital and Ideology. While this book is surely contestable in some aspects (see e.g. here), Pikettys efforts to explicitly incorporate (a) a long-term historical view as well as (b) the Polanyian notions of commodification and social embeddedness seem laudable. At least to me, it is interesting and encouraging to see that some coherence between heterodox accounts and the perspectives of open-minded mainstream researchers can be established, especially when it comes to the 'big questions & challenges' of the 21st century.

All the best,


PS: Two posts below are closely related to the issues covered here: first, the ASE announcement in response to the capital hill events captures the gist of my conceptual argument in a more practical & applied tone. Second, the initiative Democratizing Work takes a more long-term view on these issues by proposing concrete reforms based on the idea of decommodifying work.

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