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Political Economy and the Economization of Politics

by John B. Cobb, Jr.


I am using the term political economy to refer to a body of thought in which the economic order is considered to be a part of a larger order, such that the purposes it serves are values affirmed in that wider order. Modern economics initially developed as political economy, indeed, as a branch of moral philosophy. Through the nineteenth century, most of the discussion of economic issues had this wider context. Even in the twentieth century, as long as Marxism presented itself as a serious alternative, this context could not be avoided altogether.

Nevertheless, during the twentieth century, practitioners of economics as an academic discipline, especially in the English-language world, have moved away from political economy. They have wanted to separate their discipline from the humanities, including history, and to establish it as a science modeled on the physical sciences. This has meant that it has taken increasingly mathematical form.

In large part this has been an expression of the general tendency of the academic world. Disciplines strive for precision, and this moves them away from emphasis on ever disputable presuppositions. Disciplines strive for universality, and that cuts away from interest in the concete cultural, social, historical situations to which they are applied. Disciplines strive for objectivity, and that moves them away from explicit attention to values and purposes. Disciplines strive for autonomy, and that means that they formulate definite boundaries over against other disciplines and develop their own methodologies to deal with what lies within these boundaries.

These tendencies can be found even in the humanities, including history. But they are especially strong in the social studies which strive to be social sciences. The difference between economics and other social "sciences" is that it has been remarkably successful in realizing its goals. It is for this reason that a Nobel prize is awarded, within the social sciences, only in economics.

There are significant consequences following from the success of economics in becoming a mathematical science. Since mathematics is understood to be independent of contingent facts, a science couched in mathematical terms understands itself to be radically ahistorical. Those socialized into this system of thought believe that their teachings have universal validity.

Lawrence Summers is a quite typical spokesperson for this understanding. For a number of years he was chief economist of the World Bank. In that capacity he spoke at an international Bank meeting in India. He said that whenever someone begins a conversation with him by saying that economics does not work in his country in the same way, he knows that the speaker is about to say something dumb. The laws of economics work like the laws of engineering --- the same everywhere.

No economist would say that the particular situation in a country where policies are to be implemented should be ignored altogether. But attending to these particularities falls outside the discipline of economics. Also, few economists would say that the goods with which their discipline deals are the only goods to be considered. But the economist, qua economist, ignores these conditions and these other values.

Economists who ignore these conditions and values may be very modest about their claims. They may assert that they offer their science in the service of others whose job it is to consider all aspects of the situation and determine what goals are to be pursued. Economists may then advise with respect to how those goals can be attained most efficiently so far as the economy is the relevant means of attaining them. There will, of course, be many goals the pursuit of which is relatively independent of the issues on which economists are trained to speak.

When economics works in this way, it becomes a subordinate discipline to political economy or to politics in general. In this ideal situation, policy makers are equipped to engage in the discussion of overall goals and values for the society and turn for help to the specialists whose advice they need. These specialists will not advise with respect to general policy, only with respect to its implementation in the areas of their expertise.

A truly healthy society might be able to work in this way, but it must be recognized that ours is not now such a society. This is partly because of the nature of our educational system. Formerly, when the liberal arts college was the major form of higher education, and when it understood its mission as the prepartion of leaders for society, there was some chance of such health. But now education in our society works against it. The sort of wisdom about values and overall goals that would be required of policy makers is not encouraged in our universities. There one is trained to think in narrower channels. The more advanced the studies, the narrower the channel becomes. If policy makers are not primarily informed by one or another of the university specialties, they must fall back on folk wisdom, popular religion, or economic interests, whether of those they represent or simply their own.

There are elements of good sense in folk wisdom and popular religion, and what health remains in the body politic depends on this. Some concern for personal liberty and social order is present in these traditions. They enforce a sense of fairness and fair play. They also support some concern for preserving the natural environment. In the United States they commit us to the separation of church and state.

But this remains a fragile basis for national life. Especially in a country in which folk wisdom and popular religion have diverse cultural sources, the appeal to these is often highly divisive, as today over issues of abortion and homosexuality and religious practices in the schools. Precisely the separation of church and state to which all are committed points to the need of a nonsectarian basis for policy formation.

This means that policy makers are often shaped by economic interests. In the ideal case, they seek the economic wellbeing of all peoples, or at least of the American public generally. Too often, their efforts are to gain economic advantages for their own constituencies even at the expense of others. And in all too frequent instances, the policy maker is influenced chiefly by personal economic benefits. The expense of elections forces this consideration to the forefront for many who would prefer to act in less distorted ways.

This determination of voting patterns in Congress by economic concerns is one major part of what I mean by the economization of politics. This has gone a long way. Although religious pressure groups are able to influence policy makers to act in ways that are in harmony with the values of particular religious communities, this plays a secondary role in relation to most public issues. Economics plays the most determinative role.

The noblest form the influence of economics can take is in favor of broad economic gains. This is the publicly stated goal of most actions, and the real goal of many. But how are economic gains understood?

If the discipline of economics were still understood as political economy, there would be an academically-educated community to which policy makers could turn for guidance, one which would reflect on the role of the economy in a larger context. But there is no such community. Economics has become a specialized, a-historical science, ready to offer help to those who, on some other ground, determine goals and directions. Yet it is this community to which policy-makers turn to guide them on the one shared goal -- the improvement of the economy. This means that goals and values, largely assumed inside the discipline of economics, become operative as the goals of policy makers.

Consider, for example, the goal of efficiency. In a broader context we would understand that efficiency is to be measured in relation to some goal other than itself. We may be efficient in the use of natural resources, or in the generation of a law-abiding public, or in reaching consensus among antagonistic groups, or in moving toward a more egalitarian society.

But the efficiency that has dominated economics has been in the production of goods by human labor. Economists have studied how less labor can produce more goods. They have found that reliance on free markets is the best way to achieve such efficiency and that the larger the market the greater the efficiency. Hence, those who turn to economists for guidance in policy formation, are encouraged to reduce government interference in markets and the role of national borders in restricting the market.

Deriving basic values and policies from assumptions built into the science of economics is a second aspect of the economization of politics. Today, these values shape the public debate and policy of most industrialized countries and have been imposed on many others through the structural adjustment required by the International Monetary Fund and the World Bank.

There have, at times, been tensions between these two types of economization of politics. Some of the businesses that have put large sums into the campaigns of congressmen and presidents, as well as labor generally, have suffered from the movement toward free trade that is supported by economic ideology. It is interesting to see that under both Democratic and Republican leadership, the ideology has been more determinative than these groups. They have been described as "special interests" against whose insidious effects broader-visioned politicians must struggle for the good of all.

Of course, this victory would not have occurred had there not also been business and financial interests that stood to gain greatly from reducing barriers to trade and to the free movement of capital around the world. Today the tension within the business community has been greatly reduced since those businesses that depended on protection have generally collapsed or moved out of the country. Today professional economists and leaders of business and finance usually speak with a single voice in celebrating the ever fuller globalization of the economy.

That the major function of governments is to create a favorable context for economic activity is now almost a truism. This may or may not include providing a safety net for those who do not succeed in the market. It certainly includes educating people so that they can meet the labor requirements of the market. Governments are also required to maintain order and insure that the rules needed by the market are followed. And they are expected to provide the infrastructure needed for transportation and trade.

The reversal from the first half of this century is striking. Then it was assumed that the economic sector served the nation alongside the relatively independent educational, scientific, religious, legal, and other sectors. The goals were established by political leadership, and this both supported the various sectors of society and also restricted them in ways suitable to the national well-being. Although noone questioned the importance of the economy, those who argued that it was the all-determinative force to which all others should be subordinated were typically condemned as Marxists. Even with Marxists, the ideal was that the economy that should control all things should be understood as political economy rather than a science separated from reflection on the political life of the nation.

Within the university, of course, economics does not have the hegemony it has gained in public-policy formation. This can be a source of hope for those who object to the economization of politics. Perhaps governments will one day turn to political theorists, sociologists, or anthropologists for guidance instead of, or in addition to, economists. This would allow a richer set of considerations to shape policy. There are, however, no signs of movement in that direction at present.

The one segment of the university other than the department of economics to which government sometimes turns is the physical sciences. Folk wisdom and popular religious values have been awakened to the threat to the Earth of the unrestrained activities of the industrial age. This is concretized by the direct experience of pollution and the resulting health problems. Economists tend to belittle these concerns, chiefly because they fall outside of their discipline. But popular feeling supposes that physical scientists have relevant knowledge here.

Some are moved by their concern with the health of the Earth to want to subordinate the economy to its maintenance. But this is regarded as an extremist position. Some compromise between the independent goals of economic growth and saving the Earth is required. Thus far the compromise has taken the form of a modest modification of the aim at economic growth. It is now acknowledged that this growth should be "sustainable". It is clear that the economization of politics has not been significantly reduced. Nevertheless, we now have one constituency that is disposed to challenge it.


I have recently become aware of an important illustration of the increasing hegemony of the dominant economic theory in the public policy of the United States. It expresses the victory of economic theory over political common sense. And its consequences for our common life are sweeping.

Viewing matters in primarily political terms it is natural to favor full employment. To allow all those who want productive work to find it is helpful to them, reduces the incentive to socially destructive behavior, and seems to lead to greater prosperity of all.

But the dominant school of economic thinking favors at least five per cent unemployment. The purpose is to prevent inflation. The arguments for this policy are quite understandable.

First, if there are few people available for work, employers will be pushed to make their jobs more attractive in order to compete for labor. This is likely to include higher wages, which is called by the Federal Reserve Board wage inflation. Higher wages will lead to higher prices for the goods produced.

Second, the unemployed are on the whole less productive than those with jobs. That is why they have not succeeded in the competition for work. When they are employed, the average level of productivity will decline, so that production per unit will cost the company more. It will have to raise prices.

In the first two decades after World War II the US government followed the policies that made sense politically. Ford revived these policies briefly as did Kennedy. But since that time, the policies called for by standard economic thinking have prevailed. This illustrates the economization of politics of which I am speaking.

There is more to this illustration. From a Whiteheadian perspective all academic disciplines are involved in the fallacy of misplaced concreteness. They tend to regard their models and theories developed from a limited set of data in the actual world as having a value and truth that can then be applied to that world. They tend to try to make the events in the real world fit their theories rather than studying those events with true open-mindedness. This seems to be true in this case.

A few students of the economy approach it from a different perspective. They employ systems theory and look at the data more open-endedly. Their conclusion is that in the actual world low unemployment and low inflation have often co-existed, and that policies designed to check inflation have often proved inflationary. They argue that there are circumstances under which reducing unemployment is inflationary and others in which it is not. They take these historical data into account in the development of their theories. The policies they recommend are supportive of the political goal of minimal unemployment.

The nature and power of socialization into academic disciplines is illustrated by the response of the dominant economic community. They largely exclude those who dispute the standard theory from the discussion. These have extreme difficulty is getting a hearing for their arguments.

This exclusion from the discussion continues in spite of the fact that current events follow their predictions. Currently unemployment is declining with no inflationary consequences. One would think that political leaders, if not economists, would be interested in a theory whose predictive power is superior. But this is not the case.

For most economists, on the other hand, the current situation is unexpected and appears anomolous. They seek special explanations, but at the same time, they express concern that inflationary pressures, while invisible on the surface, are building up in the economy. They warn about any further reduction of unemployment.

The economization of our politics can be illustrated also by the fact that the decision about how to respond to this situation is not in the hands of politicians. It has been given over to the Federal Reserve Board, and this board has been insulated from pressure either from Congress or from the administration. Its members are persons who are expert in the world of finance. That they are for the most part bankers no doubt accents their concern about inflation. But they are fully supported by the dominant economic theory in which they no doubt genuinely believe.

Why, then, has the Federal Reserve Board not yet acted to raise interest rates, since the theory on which it operates now calls for this? We can only speculate. But I suggest four reasons for hesitation.

First, the total absence in the statistics of support for the theory may be an inhibiting factor.

Second, raising interest rates so as to "cool" the economy and increase unemployment would also cause a sharp decline in the prices of bonds and stocks. This would hurt many people, including banks.

Third, the cooling of the economy would probably put an end to the budget surpluses over which the nation now celebrates.

Fourth, the blatant contradiction between the interest in moving people from welfare to work and intentionally increasing unemployment could hardly be kept from public view.

My speculations indicate my belief that even the Federal Reserve Board cannot be completely insulated from political considerations. But even now the Board makes it clear that despite the apparent success of a policy of low interest rates, it will not lower them further. And we will see how long the Board delays the further application of the theory to which it subscribes despite the contrary historical evidence.


The intention thus far has been to be descriptive. A Whiteheadian knows that there is no neutral, non-evaluative description. Certainly this one is not. The selection of "facts" to report and the language in which they are reported are determined by values. Indeed, the "facts" I have reported are value-laden. They are about choices of values. The way I have told the story certainly reflects my distress at what has happened. To me it is so blatantly inappropriate to subordinate all other values to the economic that I cannot talk about this without emotion. Furthermore, in my view the refusal to study historical facts when they conflict with theory illustrates the worst features of academic disciplines.

The value judgments that have shaped my description are derivable from many sources. In my case they are derived primarily from my Christian faith. But part of the attraction of Whitehead for me is that he clarifies questions of value and their relation to fact, and strongly supports the subordination of economic values to larger purposes. In what follows I shall limit myself to a Whiteheadian account of why we should work for change, even though arguments, often similar ones, could be generated from other sources.

Three assumptions built into the dominant theories of professional economists are contrary to Whiteheadian understanding. First, human beings are understood, for purposes of economics, to aim at the acquisition of the goods and services they desire for as little labor as requisite. This is understood to be rational behavior, and if people are not behaving "rationally" economists encourage them to do so.

When economists are accused of advocating selfishness, many deny this. If the goods and services individuals desire are for people other than themselves, they have no objection. The point is that people should be free to express their desires in the market without restrictions. In fact, nevertheless, most economic thought assumes that people are seeking their personal advantage. And it is often pointed out that, when individuals all seek their individual gain, the whole group benefits, because production increases and prices are reduced.

There can be little doubt that behavior in the market approximates the economist's understanding of rationality. Shoppers seek to get the best buys they can. Producers try to produce what shoppers most want and compete with one another to attract shoppers with low prices.

On the side of work, the fit is less perfect. Although many people prefer more pay for less work, they are also influenced by other considerations. Many seek some kind of personal fulfillment in their work; some are prepared to work far more hours for less pay if they are convinced that what they are working for is worthwhile. Convenience, safety, physical comfort, and relations with other employees and with bosses are among the factors that enter into job selection. Elements such as these complicate the application of the economist's basic model to job selection. But they do not render the model irrelevant.

Those who study the actual cultures of businesses also find that much else is operative besides the pursuit of profits. Within these cultures there is often concern for the quality of personal relationships among those who work for the business and with customers. There is a desire that the business contribute positively to the community. Integrity may be a high value. Nevertheless, here again, the economist's model is far from irrelevant. Profits are crucial to the survival of the business, and the aim at profits shapes a great many of the decisions of the business.

The problem, then, is not mainly with the model as it operates in interpreting market behavior. There it has proved brilliantly successful. The problem is with supposing that the implications it generates should be applied to the real world in which markets are only one part of the whole of social life. For most people, there are other goals in life besides acquiring goods and services.

A second problem is in holding that the supreme goal is enabling individuals to satisfy as many of their desires as possible regardless of what these are for. Economists argue that it is not their business, or the business of the public, to prefer one set of desired goods over others. If people prefer pronography to art, that is what they should have, and that is what the market will supply them. If people want nicotine, it is the job of the market to provide it just as freely as milk.

A third problem is the view that because there is no basis for judging among values beyond the strength of desire expressed in market bidding, one cannot favor the meeting of one person's desires over another's. This means that those with money dominate the decision as to what the market will supply. It means that a third car for a rich family is of equal importance with food on the table of the poor.

A Whiteheadian must disagree with conclusions such as these. Values cannot be identified with what is desired, and society cannot accept the market alone as the basis for deciding which desires should be fulfilled. In fact no society does this. All societies express their collective values by favoring some desires over others. It is hard to imagine an educational system that does not express such valuing. But as economic thinking becomes more and more dominant, this social valuing is often on the defensive. This is especially true because in our pluralistic society, the values supported so often seem to be those that one group is imposing on others.

Whitehead offers us a more objective way of assessing values. This is not the place to develop his complex value theory as worked out in Part V of Adventures of Ideas, but we can say that every occasion aims at the realization of some value in its own immediacy and at the contribution of value to future occasions. The value realized is a structure of feelings, and a more complex structure, inclusive of contrasting feelings, is richer than a simpler one. It has greater intensity or strength of beauty. For society to judge that its educational system should encourage children to attain the ability to synthesize greater diversity of data into coherent wholes is not arbitrary.

The emphasis on feelings may seem to direct attention away from the material goods that dominate the concerns of the economist. It should not. Feelings are largely bodily feelings. Being well-fed, well-clothed, and well-housed are extremely important contributions to these bodily feelings. When one is hungry or cold it is difficult to enjoy the rich values that are available to those who can take for granted that needs at this level are met. But beyond a certain point, when basic needs are well met, other feelings assume greater importance.

Partly for this reason, it is not arbitrary to believe that additional resources in the hands of the poor add more to the total value realized in society than do the same resources in the hands of those who already have plenty. Other things being equal, a policy that increases the income of a poor family by $1000 is better than one that increases the income of a rich family by that amount. The market's tendency to concentrate wealth in fewer and fewer hands should be countered by redistributive policies.

A second assumption of ecoomic science is that, for purposes of economics, people can be adequately understood as separate individuals. Of course, these individuals may choose to use their resources to relate to others. An economist need not, in this sense, deny the value of community. But its value is to be determined by how much separate individuals are willing to pay for it.

Economics arose in the same context as modern political theory. In a similar way, this posited individuals who may or may not decide to pay the price of personal liberty in order to achieve political order. The political theory assumed that people benefit so much from that order that it is rational for them to enter into contractual agreements that sacrifice considerable personal freedom. In contrast, economic theory argues that there is no need for sacrifice. The contractual relations that contribute to the good functioning of the market and the enrichment of the whole group require no restriction on personal freedom.

For a Whiteheadian, the individualism underlying both political and economic theory misrepresents the human situation. Our personhood is already a function of our immersion in community. We are members of one another. What we desire is largely a function of the community that forms us. What values we can realize depend for the most part on the health of that community.

Whitehead emphasizes equally that we are not mere products of community. In each moment we are not only shaped by community, but also transcend it and participate in shaping it. But we are persons-in-community rather than separated individuals.

Unfortunately, in the formative period of modern economics theory, thinkers took community for granted. It did not enter into their theoretical reflections. As a result, the judgments to which that theory gives rise place no value on community. The policies that have followed from those judgments have been systematically destructive of community.

The policies that would follow from a better understanding of human beings would seek the wellbeing of individuals primarily through supporting the health and wellbeing of the communities that form them. This health and wellbeing includes and requires the freedom of all their members, but it does not focus on this freedom apart from their belonging to the community.

A third assumption of modern economic science is that the natural environment is a given to which no attention need be paid. At the time economics developed, natural resources were globally abundant. Their local scarcity was a function of the difficulty of bringing them to markets. As wealth grew, more resources could be obtained. Scarcities were always relative scarcities.

Economists also saw that if a particular type of resource grew scarce, the same need could be met in another way. Plastics could be substituted for scarce metals. Or as land grew scarce, technology could make smaller bits of land produce more products. The market handled this well. Scarcity raises prices, and this encourages technology to find better ways of using what is still available or finding substitutes. The economic theory, therefore, could ignore natural resources, and, indeed, nature itself.

Because economic theory had no place for nature, economists have been slow to recognize that some scarcities are absolute. This is especially true of "sinks" for disposal of pollutants. When human activity was small in relation to the natural environment, pollution was local. Now that it is large, it is global. Technology can help in dealing with this, but the economists' faith that it can solve such problems is misplaced. The problem of global warming, for example, cannot be left to the market, with its stimulation of technological advance, to resolve.

Similarly, lack of separate attention to nature has meant that it is treated only under the head of capital or commodities. The intrinsic character of natural things is neglected as is their value. Left to itself the market tends to cause the extinction of many species. Technology cannot replace these. Also economic theory gives no grounds for any concern about the suffering of nonhuman creatures. Only human desires count. If human desires are better satisfied when suffering is inflicted on other creatures, then, from the economic persective, that is the way to go.

Viewing reality through Whiteheadian spectacles leads to very different judgments. Human existence is continuous with the rest of the natural world. It has special and distinctive characteristics and extaordinary value, but this does not discount the intrinsic value in other things. We are called to balance the contribution of other things to us and the value they have in themselves. Close attention to the natural world is called for, and especially to the consequences for it of human actions. Extreme caution is required before making changes that may prove damaging and irreversible.


My judgment as a Whiteheadian is that the economization of politics is extremely damaging to human society and the natural world, and that it will, if the process continues, be disastrous. It can be countered in part by inner reforms within economic theory. But all academic disciplines abstract from the actual world in such ways that they are not qualified to provide the overview for the formation of public policy. Our task as Whiteheadians is to oppose the hegemony of any academic discipline, and today that means particularly the hegemony of economics.



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