Saturday, 16 October 2010

Lonergan's economics and laissez-faire

“Lonergan found seriously wanting, as universally valid advice, the policy of laissez-faire for government (conventionally linked with the names of Marshall and Walras, even though this may never have been the explicit intention of either) and thrift and enterprise for individuals. For Lonergan this policy was based on assumptions of equilibrium theory that did not integrate a grasp of diverse and highly contingent equilibria appropriate to different phases of an expanding economy. Thus, the presupposition of the automatic movement of the market toward equilibrium tended concretely to result in liberal capitalism’s exploitation and oppression of the workers that Marshall, too, wanted to resolve through economic intelligence. As Lonergan stressed repeatedly, thrift and enterprise are the correct behaviour when an economy is undergoing the vast widening and deepening of capital formation. As soon as capital formation levels off, and a new phase of widening and deepening the standard of living ought to begin, raising workers’ wages and extension of their credit balances, for instance, might be more responsible courses of action than thrift and enterprise.” [Frederick G. Lawrence, Patrick H. Byrne, Charles C. Helfing, Jr., “Editor’s Introduction,” Bernard Lonergan, Macroeconomic Dynamics: An Essay in Circulation Analysis, Collected Works of Bernard Lonergan 15 (Toronto: University of Toronto Press, 1999) xlvii-xlviii.] 

So: not blanket laissez-faire, but: the concrete players in the economy are the individuals; strategic advice is given by the practical economist; the government's role is to lay down the rules of the game, and to make sure they are obeyed. 

The advice recommended: thrift and enterprise during a surplus expansion; benevolence during a basic expansion. An anti-egalitarian distribution of income during a surplus expansion to ensure that the savings rate increases; an egalitarian shift during a basic expansion to ensure that the expansion takes place or continues to take place. 

Again: maximization of profit cannot be the ruling mantra. The anti-egalitarian distribution is valid only for the surplus expansion, and the pure surplus income of the rich is meant not for their own comfort and pleasure, but for reinvestment. This distribution has to come to an end, in favour of a more egalitarian distribution, otherwise the basic expansion will not take off or continue. 

No comments:

Post a Comment