Posts Tagged ‘neoclassical’

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By his own account, Yanis Varoufakis is an “erratic Marxist.” He’s also, it appears, a committed critic of postmodernism.

In my previous discussion of Varoufakis’s interpretation of Marxism, I deliberately avoided mentioning his “pot shot” at postmodernism:

A Greek or a Portuguese or an Italian exit from the eurozone would soon lead to a fragmentation of European capitalism, yielding a seriously recessionary surplus region east of the Rhine and north of the Alps, while the rest of Europe is would be in the grip of vicious stagflation. Who do you think would benefit from this development? A progressive left, that will rise Phoenix-like from the ashes of Europe’s public institutions? Or the Golden Dawn Nazis, the assorted neofascists, the xenophobes and the spivs? I have absolutely no doubt as to which of the two will do best from a disintegration of the eurozone.

I, for one, am not prepared to blow fresh wind into the sails of this postmodern version of the 1930s.

But, as friends reminded me, I had forgotten (or repressed?) Varoufakis’s earlier attack on postmodernism, which he delivered in two reviews (or two versions of a review) of a book on postmodernism and economics.

As it turns out, I had a hand in the book in question, Postmodernism, Economics, and Knowledgewhich I edited with two close friends and comrades: Jack Amariglio and Stephen Cullenberg.

In the longer version of the review, which appeared in 2002 in the Journal of Economic Methodology [unfortunately gated], Varoufakis was actually quite complimentary about at least some aspects of the book.

Anyone interested in the postmodern stirrings of economic discourse should turn immediately to Post-Modernism, Economics and Knowledge, edited by S. Cullenberg, J. Amariglio and D. Ruccio (Routledge 2001). It explicates Postmodernity’s various strands succinctly and with sensitivity to the large retinue of meanings that the postmodern condition has acquired over the years. It comprises twenty-two taut, well-crafted chapters categorised in seven distinct parts blending nicely into one another. Of the contributors most are economists, albeit of a somewhat iconoclastic disposition, while three philosophers, one English professor and one anthropologist combine forces with them to offer the reader a delightful mixture of perspectives. Perhaps the book’s greatest asset is its clear, thoughtful introduction that gives the whole edifice its integrity, restrains the wayward tendencies of some contributors and whets the reader’s appetite.

But then, in the rest of the review, and especially in the shorter version published in The Post-Autistic Economics Review, Varoufakis spends most of his time attacking postmodernism, presumably to warn off “young dissidents” who are or might be attracted to the idea (“the task of the PAE movement must be to clear the way for radical criticism that avoids the postmodern trap as resolutely as it opposes economic autism”). His basic argument is that the postmodern critique of mainstream economics is doomed to failure, by first being absorbed into mainstream economics and then strengthening it (“Postmodernity unwittingly blows fresh wind in the sails of neoclassicism, the undisputed champion of the deconstructed human agent. While warning us correctly that new authoritarianisms will be born when we get caught up in our own rhetoric, it offers no resistance to the current authoritarianism of neoclassical economics and, more so, the socio-economic system that it serves”), supplemented by the all-too-common allusion that postmodernism is the easy way out (“the postmodern turn will be chosen by pseudo-dissidents whose prime interests lie in acquiring a chic image”).

And the alternative? Varoufakis proposes “an historically grounded understanding of how systematic patterns of power and economics are the joint products of the continual feedback between technological developments and evolving social formations” guided by “an unbending commitment to a rational transformation of society.”

Now, in the reminder of this comment I don’t want to offer a defense of our project of postmodern criticism (developed in that book or in other volumes, such as Postmodern Materialism and the Future of Marxist Theory and Postmodern Moments in Modern Economics). Suffice it to say, given our work on the journal Rethinking Marxism and our other Marxist associations, we’ve never been particularly sympathetic either to neoclassical economics or to capitalism. On the contrary.

What interests me more, given the current crises of capitalism and the predicament of the Left (whether in Greece, Spain, or the United States), are the terms with which we can formulate our critique. Varoufakis sees (or at least saw) a strict dichotomy: postmodern fragmentation or rational transformation. For me, there is no such dichotomy, at least if we allow that rationality is itself a contradictory discursive and social construction. If so, then the battle is between different rationalities, which of course have very different effects.

One rationality, embodied as much in the troika’s formula of austerity for Greece as in the lopsided economy recovery in the United States, is captured by neoclassical economics: everybody gets what they deserve, as long as free markets are unleashed on the world. The other rationality starts with the proposition that everyone should get what they deserve but they don’t—and can’t—within existing economic institutions. Those institutions—capitalist institutions—make “just deserts” impossible.

That idea, that there’s a clash of rationalities within the world today, is precisely an effect of the postmodern questioning of metanarratives. Postmodernism, in this sense, represents a critique of a singular (humanist) rationality, just as it serves to undermine the neoclassical claim of a monopoly on scientific knowledge (indeed, the scientism that animates much of economic theory, mainstream as well as heterodox), the presumption of causal hierarchies within economic analysis (again, both mainstream and heterodox), and much else.

My point is not to simply reverse Varoufakis’s claims, for example, by asserting that fragmentation, irrationality, disunity, and so on are necessarily progressive and that esssentialism, rationality, and unity are necessarily regressive. None of those moves is necessarily one or another, outside of a particular historical conjuncture.

And that’s the point, isn’t it? The effects of the moves that we make, the demands we hold up, the criticisms we formulate depend on a specific context, on what is taken to be the existing common sense and how best to disrupt that common sense. The fact is, modernism (at least in economics) has long been associated with a humanist, universal, scientistic set of claims, and part of the task of carrying out a ruthless criticism of mainstream economics is to challenge and deconstruct those claims (including the idea that such claims are even possible).

Is that all? No, of course not. In my view, the postmodern critique of mainstream economics needs to be supplemented by a Marxist critique. But, I want to be clear, it also goes in the other direction: that Marxist critique (traditionally formulated in terms of “laws of motion,” a hierarchy of base and superstructure, and so on) needs to be supplemented by postmodernism.

In the end, the Varoufakises of the world may disagree. However, what I believe we can come to some agreement on is the need to continue to criticize “the inexorable devaluation of political goods, the vulgar commodification of human bodies and values, the impossibility of conceptualising freedom-from-the-market, the depiction of Central Banks as ‘independent’ only when under the thumb of financial capital, the confusion of liberty with the freedom to exploit and to demean and, above all else, the portrayal of coercion as tâtonnement.”

In my view, both postmodernism and Marxism, each in their different ways, play useful roles in carrying out that critique.


Like the capital controversy of the 1960s, the current controversy over human capital pits neoclassical economics against its critics.

The capital controversy (also known as the Cambridge controversy, because it was staged between neoclassical economists at MIT, and thus of Cambridge, Massachusetts, and non-neoclassical economists at Cambridge University, and thus of Cambridge, England), which actually took place between the mid-1950s and mid-1970s, was narrowly about the internal consistency of neoclassical economics and more generally about the role of capital in economic theory. The basic idea is that, in a world of heterogeneous capital goods (e.g., a shovel and an automobile assembly-line), you need to know the price of capital (the interest rate or rate of return on capital) in order to determine the quantity of capital (i.e., in order to add up all those different kinds of physical capital). But, in neoclassical economics, you need to use the quantity of capital in order to determine the price of capital (via supply and demand in the “capital market”), which creates a fundamental problem for the neoclassical theory of capital.

Hence, Joan Robinson’s famous question, “What is capital?” To which neoclassical economists responded with gobbledy-gook. And so Robinson repeated her question, the neoclassicals withgobbledy-gook, and the controversy continued without resolution. Neoclassical economists, like Robert Solow, resorted to an aggregate production function (where the problem of heterogenous goods is simply defined away), while Robinson and the other anti-neoclassical economists on the other side of the pond entered into increasingly arcane areas of dispute, such as reswitching and capital-reversing.*

As I have long explained to students, the theory of capital is the most controversial topic in the history of economic thought because the theory of capital is the theory of profits—and therefore an answer to the question, do the capitalists deserve the profits they get?

The original capital controversy was never resolved. But now there’s a new capital controversy, a debate about human capital. It was launched by Branko Milanovic, based on Thomas Piketty’s refusal to include human capital in the other forms of capital he measures in his inquiry about the history and future prospects of wealth inequality.** Basically, Milanovic argues that labor is not a form of capital because labor involves a “doing” (work has to be performed in order for skills to be used and wages to be paid) while other forms of capital are characterized not by work but by nonwork, that is, ownership (financial capital generates a return based on owning some of financial claim, and no work is involved in making such a claim).

why is “human capital” such a disastrous turn of phrase? There are two reasons. First, it obfuscates the crucial difference between labor and capital by terminologically conflating the two. Labor now seems to be just a subspecies of capital. Second and more important, it leads to a perception — and sometimes to the argument used by insufficiently careful economists — that all individuals, whether owners of real capital or not, are basically capitalists. Even if you have human capital and I have financial capital, we are fundamentally the same. Entirely lost is the key distinction that for you to get an income from your human capital, you have to work. For me to get an income from my financial capital, I do not.

I’m with Milanovic on this. There is a fundamental difference between doing and owning, between doing labor and owning capital. But I also think the human capital controversy has even larger implications.

First, a bit of history: the idea of human capital was invented in the early 1960s by neoclassical economist Theodore Schultz [pdf] as part of a more general attack on Marxian-inspired notions of capital (capital that is connected to profits and therefore exploitation), an extension of Adam Smith’s theory of the causes of the wealth of nations (which now, Schultz argued, should include the accumulation of all prior investments in education, on-the-job training, health, migration, and other factors that increase individual productivity), and an attempt to depict all economic agents, including laborers, as capitalists (who “invest” in and “manage a portfolio” of skills and abilities). Human capital can thus be seen as, simultaneously, a blunting of the critical dimension of capital (broadening it to matters other than profits and thus a particular set of claims on the surplus) and a step in the creation of the neoliberal subject (who seeks a “return” on its “investments” in itself).

Second, the problems associated with the notion of human capital, which Piketty’s correctly does not include in his definition of wealth (since, for Piketty, “capital is defined as the sum total of nonhuman assets that can be owned and exchanged on some market”), also serve to undermine at least part of Piketty’s project. One of the elements missing from Piketty’s approach to capital as wealth is any kind of “doing.” It’s all about owning (of “real property” as well as of “financial and professional capital”), without any discussion of the labor that has to be performed in order to generate some kind of extra value and thus a return on capital.

And so, as it alway does in economics, it comes down to a theory of value. In neoclassical theory, all factors of production get, in the form of income, an amount equal to their marginal contributions to production. Everyone contributes and everyone, within free markets, gets their “just deserts.” In Piketty’s world, the owners of capital manage to capture a larger and larger portion of the national income if the rate of economic growth is less than the rate of return on capital (which exacerbates the already-unequal distribution of income, based largely on CEO salaries). In a Marxian world, capital is a social relationship that both generates a surplus (because “industrial capital” exploits “productive labor”) and represents a distributed claim on one or another portion of the surplus (in the form of “financial capital,” the ownership of land, and so on), based on the idea that the “doing” of labor occurs simultaneously—as both cause and effect—with the “owning” of capital. Three different theories of value and thus three very different theories of capital.

But it doesn’t stop there. In recent years, we have seen a dreary expansion of the idea of capital beyond even physical/financial capital and human capital. It now includes—in the hands of business professors, economists, and other social scientists—intellectual, organizational, social, and other forms of capital. Somehow, if they call it capital, they think it deserves to be taken more seriously.

As I see it, all these new forms of capital, like human capital, are ways of expanding Smith’s wealth of nations; they all seen as contributing to the production of more “stuff”—more use-values, the “immense accumulation of commodities.” But the expanding universe of capital also serves to hide the extent to which all that stuff, which is in reality socially produced, is then privately appropriated—leading to a growing gap between a tiny minority at the top and everyone else. In other words, it’s a pattern of private capitalist appropriation that creates a more and more unequal distribution of income and wealth.

The capital controversy will remain with us, then, as long as we refuse to solve the problem of capital.


*Avi J. Cohen and G. C. Harcourt [pdf] provide a useful overview of the capital controversy.

**Nick Rowe and Tim Worstall have since criticized Milanovic and his call to junk the notion of human capital, and he in turn has responded to their criticisms.


As Yanis Varoufakis, the new Greek finance minister, sticks his head into the mouth of the neoliberal euro lion, we’re learning all kinds of things about him, from his preferred mode of dress (no tie, untucked shirt. . .) and transportation (“muscular Yamaha motorcycle”) to his academic training (as a mathematician) and curriculum vitae (including teaching stints at various British universities, the University of Sydney, the University of Athens, and most recently the LBJ Graduate School of Public Affairs at the University of Texas, Austin).

We’re also now learning about how Varoufakis became an “erratic Marxist.”

The entire piece is worth a read but I was intrigued by a few key ideas: First, Varoufakis mentions the importance of Marx’s dialectical perspective, “where everything is pregnant with its opposite, and the eager eye with which Marx discerned the potential for change in what seemed to be the most unchanging of social structures.” That idea, which runs directly counter to mainstream economists’ focus on stasis, equilibrium, and the transhistorical nature of the “economic problem” of scarcity, is crucial for carrying out a critique of political economy and keeping alive the idea that another economic and social system is possible.

The second idea is the contradiction inherent in the capitalist commodification of labor. Unlike other commodities, such as oranges, labor is both treated as a homogeneous quantity (as labor power, the ability to work) that is available for sale (after a long historical process, and with a great deal of ongoing social effort) and comes at a price (the value of labor power) and, at the same time, resists commodification (because, as the value-creating activity of human beings, it can never be quantified in advance).

If workers and employers ever succeed in commodifying labour fully, capitalism will perish. This is an insight without which capitalism’s tendency to generate crises can never be fully grasped and, also, an insight that no one has access to without some exposure to Marx’s thought.

If capital ever succeeds in quantifying, and subsequently fully commodifying, labour, as it is constantly trying to, it will also squeeze that indeterminate, recalcitrant human freedom from within labour that allows for the generation of value. Marx’s brilliant insight into the essence of capitalist crises was precisely this: the greater capitalism’s success in turning labour into a commodity the less the value of each unit of output it generates, the lower the profit rate and, ultimately, the nearer the next recession of the economy as a system. The portrayal of human freedom as an economic category is unique in Marx, making possible a distinctively dramatic and analytically astute interpretation of capitalism’s propensity to snatch recession, even depression, from the jaws of growth.

When Marx was writing that labour is the living, form-giving fire; the transitoriness of things; their temporality; he was making the greatest contribution any economist has ever made to our understanding of the acute contradiction buried inside capitalism’s DNA. When he portrayed capital as a “… force we must submit to … it develops a cosmopolitan, universal energy which breaks through every limit and every bond and posts itself as the only policy, the only universality the only limit and the only bond”, he was highlighting the reality that labour can be purchased by liquid capital (ie money), in its commodity form, but that it will always carry with it a will hostile to the capitalist buyer. But Marx was not just making a psychological, philosophical or political statement. He was, rather, supplying a remarkable analysis of why the moment that labour (as an unquantifiable activity) sheds this hostility, it becomes sterile, incapable of producing value.

At a time when neoliberals have ensnared the majority in their theoretical tentacles, incessantly regurgitating the ideology of enhancing labour productivity in an effort to enhance competitiveness with a view to creating growth etc, Marx’s analysis offers a powerful antidote. Capital can never win in its struggle to turn labour into an infinitely elastic, mechanised input, without destroying itself. That is what neither the neoliberals nor the Keynesians will ever grasp. “If the whole class of the wage-labourer were to be annihilated by machinery”, wrote Marx “how terrible that would be for capital, which, without wage-labour, ceases to be capital!”

The third idea is the irony that it has fallen to the Left to save capitalism from itself and to build a modern state. The existing European elites (and, in my view, the elite in the United States) have failed to stem the tide and have allowed capitalism, in its ongoing crises and lopsided recoveries, to undermine democracy and the project of a unified Europe (and an inclusive United States)—although, of course, the Left cannot stop there. If it is going to play that role, it also needs to put additional issues on the table, such as the creation of economic democracy.

Europe’s elites are behaving today as if they understand neither the nature of the crisis that they are presiding over, nor its implications for the future of European civilisation. Atavistically, they are choosing to plunder the diminishing stocks of the weak and the dispossessed in order to plug the gaping holes of the financial sector, refusing to come to terms with the unsustainability of the task.

Yet with Europe’s elites deep in denial and disarray, the left must admit that we are just not ready to plug the chasm that a collapse of European capitalism would open up with a functioning socialist system. Our task should then be twofold. First, to put forward an analysis of the current state of play that non-Marxist, well meaning Europeans who have been lured by the sirens of neoliberalism, find insightful. Second, to follow this sound analysis up with proposals for stabilising Europe – for ending the downward spiral that, in the end, reinforces only the bigots.

Let me now conclude with two confessions. First, while I am happy to defend as genuinely radical the pursuit of a modest agenda for stabilising a system that I criticise, I shall not pretend to be enthusiastic about it. This may be what we must do, under the present circumstances, but I am sad that I shall probably not be around to see a more radical agenda being adopted.

All of those are important ideas, which have inspired Varoufakis and which the Left needs to discuss and debate. But, to my mind, the most intriguing idea is his mention—without a great deal of additional elaboration—of the fact that Marx was the “the scholar who elevated radical indeterminacy to its rightful place within political economics.” Theoretically, the idea of radical indeterminacy (or what others have called “overdetermination” and “aleatory materialism”) means resisting the temptation to formulate general laws and to focus instead on teasing out the contradictions of mainstream economics, carrying out conjunctural analyses, and establishing the basis of indeterminate outcomes. It also carries political implications: of arriving at provisional conclusions, making conditional pronouncements, and engaging—both sympathetically and critically—with other political forces on the Left.

Varoufakis likes to call himself an “erratic Marxist.” For me, those ideas are central to a tradition that can proudly call itself Marxist today.


The title of this post just happens to be the same as the title of one of my favorite economics textbooks: Contending Economic Theories: Neoclassical, Keynesian, and Marxian, by Richard D. Wolff and Stephen A. Resnick (with Yahya Madra).*

I sure wish the participants in the recent debate staged by the New York TimesAre Economists Overrated? had read that book. Aside from one or two minor exceptions (there are a couple of references to “mainstream economics”), all of the participants refer to economics in the singular—an approach that is focused exclusively on “efficiency,” “trade-offs,” “rational choice,” and “free markets.” That may be true of neoclassical economics but there are plenty of economic theories and groups of economists that have nothing to do with such an approach.

What all the participants in the debate miss is that economics is a field that encompasses a wide variety of theories and methodologies, including (to name but three) neoclassical, Keynesian, and Marxian economics. And there’s literally nothing that holds them all together—no core of ideas or viewpoints that they share. That’s why it makes no sense to refer to “what economists think” or “what economists say.” Or, for that matter, to ask the question “are economists overrated?”

Given the shared bias of the participants in the debate—and the hegemony of neoclassical economics in academic, research, and policy circles—the real question is, “are neoclassical economists overrated?” And the answer is surely yes. Neoclassical economists are overrated not only because they failed to predict the worst economic crisis since the First Great Depression (although their claims of superior predictive power should serve as their own petard), but also because their models contained not even the possibility that such a crash might occur and they certainly didn’t have much in the way of serious policy advice once the global economic system was at the brink of disaster. Or now, as the crises continue, in the United States and abroad.

And yet neoclassical economists continue to teach and conduct research and offer policy advice as if nothing serious had happened.

The question is, why? Certainly one reason is the superiority neoclassical economists attribute to themselves (as Marion Fourcade et al. have argued). But the other reason is because commentators overrate them, precisely by making neoclassical economics equivalent to all of economics. There are plenty of non-neoclassical approaches to economics, which offer very different theories of the economy and policy advice. And they’re certainly not overrated.

But you wouldn’t know that from reading the New York Times debate.


*My review of the book, “Contending Economic Theories: Which Side Are You On?” is scheduled to appear in the April 2015 issue of the journal Rethinking Marxism.


Do markets determine the unequal distribution of income under capitalism?* Well, yes and no.

The answer depends, of course, on the theory of income distribution one uses. Neoclassical economists focus exclusively on market exchanges and the idea that each factor of production (labor, capital, and land) receives a portion of total output in the form of income (wages, profits, or rent) according to its marginal contributions to production. In this sense, neoclassical economics represents a confirmation and celebration of capitalism’s “just deserts,” that is, everyone gets what they deserve.

Many other economists criticize this aspect of neoclassical theory and use an alternative approach. Stiglitz, for example, focuses on “rent-seeking” behavior—and therefore on the ways economic agents (such as those in the financial sector or CEOs) often rely on forms of power (political and/or economic) to secure more than their “just deserts.” Thus, for Stiglitz and others, the distribution of income is more unequal than it would be under perfect markets.

What about Marxian theory? It’s a bit different, in the sense that it relies on the assumptions similar to those of neoclassical theory while arriving at conclusions that are similar to those of the critics of the neoclassical theory of the distribution of income. The implication is that, even if and when markets are perfect (in the way neoclassical economists assume), the capitalist distribution of income violates the idea of “just deserts” (much in the way the critics argue).

Let me explain. Marx starts with the presumption that all markets operate much in the way the classical political economists then (and neoclassical economists today) presume. He then shows that even when all commodities exchange at their values and workers receive the value of their labor power (that is, no cheating), capitalists are able to appropriate a surplus-value (that is, there is exploitation). No special modifications of the presumption of perfect markets need to be made. As long as capitalists are able, after the exchange of money for the commodity labor power has taken place, to extract labor from labor power during the course of commodity production, there will be an extra value, a surplus-value, that capitalists are able to appropriate for doing nothing.

So, according to the Marxian theory of value, the distribution of income is determined partly by markets (workers receive the value of their labor power), partly outside of markets (capitalists appropriate surplus-value by extracting labor from labor power in production), and then partly once again in markets (the surplus-value is realized in the form of money if and when capitalists are able to sell the commodities that are produced).

But that’s only the first step. To make the analysis more concrete, Marx recognizes the fact that industrial capitalists don’t get to keep all the surplus-value they appropriate from their workers. They are forced to share their ill-gotten gains with others who help in various ways to secure the conditions of continued exploitation: other industrial capitalists (through competition within industries), financial capitalists (via an unequal exchange of money in the form of loans), the state (in the form of taxes), supervisors and managers (whose incomes represent distributions of the surplus-value), landlords (who are able to secure a portion of the surplus-value in the form of rent), and so on. The rest is kept as enterprise profits. Once again, then, the distribution of income is determined both inside and outside markets.

All of the preceding analysis is carried out under the assumption that all markets are perfect. Then, of course, at an even more concrete level, it is possible to introduce and explore the implications of all kinds of market imperfections, such as “political or economic power, rent-seeking, cronyism, imperfect information, monopolies,” which no doubt characterize contemporary capitalism.

The point is, the Marxian theory of the distribution of income identifies an unequal distribution of income that is endemic to capitalism—and thus a fundamental violation of the idea of “just deserts”—even if all markets operate according to the unrealistic assumptions of mainstream economists. And that intrinsically unequal distribution of income within capitalism (as determined both within and beyond markets) becomes even more unequal once we consider all the ways the mainstream assumptions about markets are violated on a daily basis within the kinds of capitalism we witness today.

Hence, my answer to the question, do markets determine the unequal distribution of income under capitalism? Well, yes (although not according to the neoclassical theory of marginal productivity) and no (since it is necessary to leave the sphere of exchange, the “very Eden of the innate rights of man,” and enter the realm of production in order to identify the existence of capitalist exploitation).


*This post is a response to Branko Milanovic’s summary of Joseph Stiglitz’s presentation at the recent American Economic Association/Allied Social Sciences meetings in Boston. According to Milanovic, Stiglitz divided theories of income distribution into two groups: market-based theories (such as neoclassical or marginal-productivity theory) and non-market theories (according to which incomes are “determined largely by exploitation, political or economic power, rent-seeking, cronyism, imperfect information, monopolies”).


It says a lot about contemporary mainstream economics that the focus, every year without fail, is on the “deadweight loss” of Christmas gift-giving—not on the manner in which Christmas commodities are produced.

This year, we’re offered another discussion of Joel Waldfogel’s famous article, “The Deadweight Loss of Christmas,” by Josh Barro, who explains that the real problem from a neoclassical perspective is not gift-giving per se, but “bad gifts.” And that problem can, of course, be solved with gift cards.

As I’ve written before, giving cash (or cash equivalents) doesn’t solve the problem of the gift.

Gift-giving is, in fact, complicated. But it’s no more complicated than any other form of exchange. They are all embedded in a complex set of social relations. And they are all characterized by inequality (whether measured in terms of labor or any other common element). Since equal exchange can’t be guaranteed under any circumstances, cash doesn’t solve the problem of the gift.

The only valid conclusion therefore is that, like the giving of gifts, the equality of capitalist commodity exchange is itself impossible.

But there are many other dimensions of the season neoclassical economists don’t even consider, like where and how all those Christmas decorations are produced.

As it turns out, workers in the 600 factories that make up the “Christmas Village” in Yiwu, China [ht: ja] produce some 60 percent of all the Christmas decorations in the world.

The “elves” that staff these factories are mainly migrant labourers, working 12 hours a day for a maximum of £200 to £300 a month – and it turns out they’re not entirely sure what Christmas is. . .

The beaming sales reps of Yiwu market couldn’t sound happier with their life sentence of eternal Christmastime. According to Cheng Yaping, co-founder of the Boyang Craft Factory, who runs a stall decked out like a miniature winter wonderland: “Sitting here every day, being able to look at all these beautiful decorations, is really great for your mood.”

It’s somehow unlikely that those on the other end of the production line, consigned to dipping snowflakes in red-swamped workshops for us to pick up at the checkout for 99p, feel quite the same way.

The thousands of Chinese workers who produce the world’s Christmas decorations are the ones who give up the most when, after exchanging their ability to work for a wage, perform surplus labor for their employers. That’s the real deadweight loss of this holiday.*


*And, as the BBC explains, of all the other major holidays in the West.

We’re told that by the end of September, Christmas manufacturing will have stopped, and the factory will have switched to making Easter and Valentine’s Day gifts and trinkets. After that, it’s Halloween decorations for the lucrative American market. Then, by late spring, it’s Christmas time again. As long as the world wants to celebrate whatever and whenever event it cares to choose, China will be there to be its ultimate party supplier.


The Koch brothers continue to use their enormous wealth to attempt to reshape the teaching of economics in U.S. colleges and universities.

The latest target is the University of Louisville [ht: db], where the Koch Foundation, in partnership with Papa John’s International CEO John Schnatter, are preparing a $6 million gift to the College of Business for the creation of a “center for free enterprise” to be led by BB&T Distinguished Professor in Free Enterprise Stephan Gohmann, who would have authority to approve anyone hired with the grant money.

The Koch brothers and their well-heeled partners are able to buy such influence, in part, because professors like Gohmann are willing to do their bidding.


It’s also the case that public colleges and universities are being undermined by their own states’ unwillingness to fund decent higher education for their citizens.

If the $6 million gift contract is approved and made available for review, it will continue the trend away from public funding of higher education and toward financing by private parties.

“If the people of Kentucky are worried about corporate influence distorting education, they must insist that the state reinvest in public higher education,” said Avery Kolers, a U of L philosophy professor. “For 15 years now, the state has been cutting budgets, leaving universities scrambling for any dollar they can find.

“The fact is, education is the only real path to long-term improvements in the quality of life of all Kentuckians,” he said. “Kentuckians who care about this need to demand a first-rate public higher education system and must insist that the state find a way to provide the public funding that makes it possible.”

The irony, of course, is that economics education in U.S. colleges and universities remains dominated by neoclassical economics, which celebrates a system based on individual choice, free markets, and private property. That’s the basic model taught to tens of thousands of students—both graduate and undergraduate—every year, with perhaps a few sessions on “market imperfections” toward the end of the course, when students are scrambling just to survive.

But apparently that’s not enough for the Kochs, Schnatters, and Gohmans of the world. I guess they want to make sure that even market imperfections are hidden from view—and what few market imperfections they do acknowledge can be blamed on unwarranted government intervention.

And, in the process, they—and the academic administrators who accept these gifts—are willing to undermine the kinds of open, critical inquiry that define what a university is.