Of the three stylized classifications of social organization offered by Smith in the Wealth of Nations (exchange relationships, charity, and command-and-control-style power), Smith primarily analyzes economic growth (and political economy generally) in terms of free market "equilibria"(and the impact of state action/collusive group behavior) on that equilibria, rather than the possibility that we might form other sorts of productive arrangements. The implications are profound -- what might we have missed, over the past 250 years, had Adam Smith suggested that we might do something else - and do it not because it's the "right" thing to do, but because we're naturally rigged to do so?
I want to comment here on a single point that was brought up - that, in the context of exchange relationships, modern economists view themselves as "Lockeans" rather than "Hobbesians." For example, Prof. Delong writes:
I don't know if I agree that Hobbes can be written off so completely within economic thought - If the various human relationships stylized by Smith as exchange, charity, and command-and-conrol can be understood as standing on a sliding scale (and I do think there is evidence for this in Smith's text - e.g., his reference to the collusion of guilds, differential bargaining power between entrepreneurs and workers, corporations, etc., all of which incorporate elements of command-and-control within exchange relationships), then economics begins to incorporate elements of Hobbes.As I wrote back in 2012, your average economist is not a "Hobbesian" believing that humans are motivated by self-interest, but rather a "Lockeian", respecting others and their spheres of autonomy and eager to enter into reciprocal gift-exchange relationships, both one-offs mediated by cash alone and longer-run ones as well:First, your standard economist is not "Hobbesian". He does not enter a butcher's shop only when armed cap-a-pie and only with armed guards, fearing--as a Hobbesian would--that the butcher will not sell him meat for money but will rather:*knock him unconscious, * take his money, * slaughter him, * smoke him, and * sell him as long pig.A Hobbesian does not buy and sell goods and services in mutually-beneficial Pareto-improving exchange relationships. A Hobbesian finds the biggest bad-ass in the neighborhood, and swears liege homage to that bad-ass in return for that bad-ass's promising not to kill him.Your standard economist is, rather, a "Lockeian"--presumes that there is an underlying order of property and ownership that is largely self-enforcing, that requires only a "night watchman" to keep it stable and secure.Now it is true that your standard economist is a largely-unreflective Lockeian: does not inquire why one trades rather than takes, affects the tough-guy pose that it is only the repeated-game nature of economic interactions that keep us from always winding up in the bad cell of the prisoner's dilemma, and adopts the reductio that humans are narrowly self-interested only in material acquisition (in order to strengthen the case that the social apparatus of voluntary market exchange produces good outcomes--to make the point that even private vices produce public benefits if they are constrained by the market). But that the standard economist is a largely-unreflective Lockeian does not mean that they are a Hobbesian.
Under a Hobbesian viewpoint, people use the power they find to hand to get what they want. Sometimes all the "power" they have is to convince another an exchange is in their self interest. Sometimes...more is available. It's just that within organized political bodies (unlike Hobbes' state of nature) robbery is not *always* the smartest option. Nevertheless, human beings, with their self interest being what it is, sill seek "power after power" using the tools available, making a judgment call about what kind of power can best be used to accomplish their aims. Indeed, Hobbes postulated the very formation of a state based on rationality - his absolute monarch was the product of his own kind of cost-benefit analysis: we get more from agreeing to a police state than from battling it out among ourselves. The "rule of reason" suggests that we do so. So, there is no reason to expect that, under Hobbes' line of thinking, we wouldn't (shouldn't) make the same kind of calculation on a more micro scale. Regardless, we still, in Hobbes' state, put locks on our doors -- in the event someone still think it's worth the risk to steal from us. And I haven't noticed recently that anyone is removing the deadbolts from their apartment doors here in Manhattan.
It's thus not obvious that non (physically) violent exchange enters a realm different from what Hobbes would anticipate. In other words -- if we can understand "power" as including, among other things, our ability to acquire an item that someone else wants and to convince them that exchange is beneficial, then Hobbes slips in quite easily in, for example, situations of unequal bargaining power.
One (of several) problems we now see within economics, I'd argue, is that economists fail to recognize just how very Hobbesian they are. If they called a duck a duck, they would recognize that certain "anticompetitive" behavior (such as, for example, the kind vindicated by Schumpeter, i.e., price fixing, long term contracts, buying up of patents, etc) is not just a manifestation of Smithian/Lockean exchange, but also mixed up with social and market power. That is Hobbes.
To say it is not Hobbes, I suspect, may work to prevent an honest discussion about what our world really looks like and whether it is something we really want. We start thinking in terms that presume a background of equal exchange, autonomy, and liberty. But last I checked, equal exchange, autonomy, and liberty -- in so far as we actually have them -- only came about after hundreds of years of bloody revolution. To assume them away seems an egregious error in thinking.
The overall point is very well summarized in John Weeks' new book, The Irreconcilable Inconsistencies of Neoclassical Macroeconomics: A False Paradigm:
Or, perhaps, by the inestimable John Kenneth Galbraith:In the European Middle Ages the dogmas of the Catholic Church enforced daunting barriers to scientific inquiry. The pernicious effect of neoclassical economics is worse. It is a virus of the mind. Once implanted in the mental processes, it systematically destroys the ability to conduct rational thought. Its intellectual method does not reveal underlying truths and relationships. Quite the contrary, it renders the complexities of life into ahistorical trivia obscured by cabalistic mathematics.The Social nature of human existence is rejected by the neoclassicals in favor of the absurdity that each person is an isolated individual, stripped of the inter-personal responsibility that makes people human. ‘Individuals’ are driven by pure personal greed, defined as ‘rational’ behavior. This irresponsible greed allegedly results in the general welfare. It is difficult to imagine a doctrine more flagrantly in the interest of the rich. (pp. 2–3)
In wielding power – in making economics a non-political subject – neoclassical theory destroys the relation of economics to the real world. In that world, power is decisive in what happens. And the problems of that world are increasing both in number and in the depth of their social affliction. In consequence, neoclassical and neo-Keynesian economics regulates its players to the social sidelines. They either call no plays or use the wrong ones. To change the metaphor, they manipulate levers to which no machinery is attached. (John Kenneth Galbraith, Annals of an Abiding Liberal, (New American Library, New York 1980)(Thanks to Wesley Marshall for pulling these quotes)
