the subject of economics itself has its own unique political/ethical principle, which is to increase the wealth of individuals which can be accomplished by maximising the physical productivity level of individuals and their communities. This objective of increasing the wealth through the productivity maximisation aims at making individuals living in the world happy while keeping their living environment sustainable.
This implies maximising the sum of individuals' pleasures while minimising the sum of individuals' pains while securing the cultural and humane living standard of all individuals including the least fortunate member of their communities. By means of this regard, the true successors of (the classical/mainstream) economics ought to be only the two streams, Marxian economics and Keynesian economics (The modern mainstream economics).
The basis of logic of Marxian economics purely
refers to the classical economics while attempting to diversify the
income distribution by altering the whole economic and political
infrastructure to retrieve the power monopolised by the minority ruling
class to deserve the majority class of individuals. In addition, Marxian
theory condemns the market economy where individuals trade their goods
and services with their free will with little or no cohesive political
control because the powerful ruling class elites easily leverages to
exploit the rest majority. Then, it also puts emphasis on the intense
political philosophical theory of the majority individuals' revolution
against the powerful ruling class as the complementary to this economic
theory.
On the other hand, Keynesian economics added macro
economic perspectives of economics on the top of the micro perspectives
of economics covered by the classical economics. Rather than altering
the infrastructure claimed by Marxian theory, Keynesian theory suggests
reforming the existing system while remaining the market economy which
enables individuals to voluntarily optimise their distribution and
desire. It attempts to gradually adjust the flow by providing the
market participants with incentives of diversifying their income
distribution without suppressing free will of all individuals.
When
it deviates from this fundamental ethical principle of economics, it
does not fulfil the condition to be an appropriate subject of economics.
Of course, economics involves processes on the way to achieve its
principle. It needs to research to maximise the financial profit of a
particular individual or corporation. It should be considered as a
means of the process inside the whole system of economics rather than
the end itself.
Hayekian theory attractive as well as useful as a
political philosophy using economic policies for those small government
adovocates against any tendency inducing a totalitarian state. However,
the statement used in Hayek' publications is often normative unlike
mainstream economics. It also ignores macroeconomics rather than
offering a substituting theory. The example is that the business cycle
is believed to be stabilised without any intervention in a modern
economy by ignoring the phenomenon that the business cycle instability
is perpetuated by neglecting an implementation of a macroeconomic
policy.
The monetarists such as Friedman and Fisher is not so
different from Keynesian economics that both Monetarists and Keynesians
agree with each other for needing macroeconomic policy interventions
according to the business cycle condition. They frequently disagree with
each other for the degree of this intervention and which macroeconomic
policy tools are more effective than the others. Perhaps, the notable
difference between them is their view on individuals' rationality:
Keynesians are more sceptical about the rationality of individuals who
are often prone to various irrational exuberance whereas Monetarists
claim for rational expectation in individuals' economic activities. All
in all, Monetarist theory can be seen as a derivation of Keynesian
rather than a detached one.
At the time of Adam Smith
establishing the new academic subject called economics, the market
liberalisation inducing the intervention into the market was meaningful
to fulfil the aforementioned ethical objective. The contemporary United
Kingdom was dominated by mercantilism holding an excess market control
by a limited number of oligarchy, which disrupted the economic growth as
a whole and suppressed majority individuals' income gain and happiness.
Therefore, the free market movement was considered as the reasonable
weapon to fight against this negative intervention policy to the
aforementioned ethical principle.
Moreover, that contemporary
world economy was less complex than nowadays so that the contingent
effect of the business cycle instability among regions was insignificant
compared to the world economy from the 20th century onward. At
contemporary market, the competition level was so high that there were
enough rooms for potential developments in all over the fields. Then,
freer market induced the freer individuals and more opportunities for
economic agents to compete so that both the economic stagnation and the
price inflation could be mitigated just by freeing the market.
By
contrast, since the 20th century, both the power influence of big
corporations and the contingency effects of regional economies to the
world economy have expanded. The monopolistic power of these corporate
tycoons take advantage of their economy of scale which only a handful of
economic agents may duplicate to compete against.. Almost all the
economic activities of individuals and their communities are furthermore
interrelated to each other nowadays than the past, and the scale of
economic activities have come too big to be self-corrected to stabilise
their business cycles.
There is a severe obstacle for unifying these two big schools of economics Marxian and Keynesian into one. Some Keynesians from the political left wing have approached Marxists to integrate together to establish a new economic theory deserving the majority of individuals in this world. However, Marxists have staunchly rejected Keynesians' offer because of their resistance against the modern mainstream economics which is still based on the market oriented theoretical principle.
These is a strong fundamental dogma which Marxists have never compromised in. This is their belief in the invincible value of labour. Marxism condemns the market economy because they insist that it will never be able to scale the appropriate reward for the value of labour of the majority working class individuals because the market economy is manipulated by those owning the means of production, the elite capitalist class individuals. Because of the asymmetric power balance of these two classes, there is no fair equilibrium state derived from the market economy according to Marxism.
Therefore, Marxism insists on the alternative economic model which positively plans to provide all the individuals with their fair rewards according to their value of existence. In history, one big experiment of Marxism established the central governmental planning by the working class representatives. These old Marxists believed that the command economy centrally planned by the autocratic government functions to deserve for all individuals when the guardians representing the hope of the majority individuals take over instead of the old ruling class oppressors.
Nevertheless, these guardians became the new ruling class exploiting the rest others with a higher oppressive intensity than the capitalist class regime. The critical failure of this old Marxism is the lack of free spontaneous interactions of individuals' trades, other activities, and freedom of speech and will. Even though there is an asymmetric power balance of individuals' bargaining power, the majority of individuals still hold some freedom to protest in the market economy. By contrast, the old Marxism underestimates the changing mid of individuals once starting to hold the control power of the autocratic government commanding a centrally planned economy.
New factions of Marxism propose some other alternative without a forcible command-ship of both economy and politics for redistributing resources. At the same time, the problem of Marxian claim for radical redistribution is not only about their command planning but also the nature of resource scarcity with the infinite human desires in the real world. Marxian aspiration of redistribution might be feasible to accomplish in the post scarcity world enabling all individuals to be satisfied with what they have already obtained and are able to access. By contrast, the problem of scarcity is still extremely hard to solve nowadays.
There is a phenomenon called the prisoner's dilemma, theorised by a mathematical economist John Nash, which indicates that the best equilibrium point can be the least achievable state while the point deriving an undesirable outcome is far more likely to occur when more than one of individuals interact. For example, if there are two individuals and two resources existing where these two individuals cannot communicate to cooperate together and both individuals are rational in the sense of maximising their own gain.
The best case scenario is that both individuals cooperate together to share the resources. At the same time, if one betrays the others, this individual betraying the other maximises the gains while the other loses out. This converse situation happens when the other betrays this individual instead. Due to the fear of the possibility of losing out, they are likely to betray the others for not only their own gain but also their fear of losing out. In consequence, both betray each other despite not only their consequential aggregate loss but also their haunting resentment against each other.
In the natural human world, when someone takes a control over their political and social structure for the sake of diversifying the economy, it ends up with betraying the other due to both their own short term selfish desire and fear and distrust of the others. This is something many Marxists repent for the failure of the old Marxism in practice based on the command economy conducted by the autocracy ruled by the guardians. Perhaps, Marxian economics should be applied without relying on the command economics, and should not be implemented as only one dogma like a religion. Marxian theory may prevail after transforming it to be more flexibly adapted to the real life analysis without worshipping it as the religious dogma like many Marxist believers tend to do.
At the same time, the prisoner's dilemma is a non-negligible phenomenon in not only the command economy fully controlling the distribution but also the market economy without any positive correction for sake of ethics and sustainability. Both John Maynard Keynes and John Nash realised this problem of the market economy without a positive planning. In particular, when the economy of scale for each industry grows and the system interference becomes more complex, the market becomes less trustable to self-correct its own business cycle.
When an economy is in a bubble (economic growth overheat inducing a sudden economic burst at some point), all economic agents should start restricting both consumption and investment to calm the excess growth to maintain the sustainability. At the same time, there is a chance of gaining a substantially high profit by not restricting their activities while the others lose out for not doing it. This factor discourages the others to calm their market activities down due to both their fear of losing out and desire of securing their profit. This eventually perpetuates this economic bubble of the market which eventually induces both the environmental catastrophe and the sudden market collapse.
When an economy is in a recession, at least more than a half of economic agents in this market should become more confident to reactivate their spending and investment activities in order to stimulate the economy. At the same time, most of them are unsure that how many of the others are confident enough to reactivate their activities and nobody knows exactly when and how their economy can recover. At the time of recession, many of individuals from privileged, average, relatively mediocre, and unfortunate backgrounds are unconfident and in despair because the whole macro level atmosphere is in a downturn mode. If only less than a half of individuals in the market become active in consumption and investment more than the others, they unfortunately lose out more than the others because of the stagnated market multiplier. Then, most of economic agents postpone reactivating them despite their reluctance perpetuates the recession which will eventually leads to the depression.
Marx and Keynes came to the different theoretical conclusion while both seemed to aspire for an identical goal. Marx accused the market base economy which he called capitalism and claimed for the revolution completely altering the economic system as the infrastructure of politics and social orders. Keynes also accused the market base economy but not willing to replace it with another while claiming for the reformation of it.
Even Marx admitted that the transformation to capitalism from an older social structure such as feudalism was a necessary process of the evolution of humans and the world in the past. The mistake of Marx was describing the historical evolutional step is discrete (not gradual) with a conduct of radical and often violent revolutionary transformation. By contrast, the transformation of human' life and their surrounding environment seems to be more gradually evolving than what Marx described. Keynes admitted that what Marx called capitalism has advantages for not only the ruling elites but also the rest majority despite the aforementioned disadvantage.
Up to several centuries ago, Marx's view of the world and societal evolution which were discrete, sudden, and often violent was true. By contrast, the pace of the world and societal evolution nowadays are so fast and diverse that there is no longer a discrete historical point of change across times, places, and human-individuals. This is not saying what Marx aspired was wrong. Even Jean Paul Sartre, being converted to a self-proclaimed Marxist in his later carrier, pointed out that Marx's theoretical work of economics was incomplete meanwhile he was attracted to what Marx attempted to establish.
The most remarkable success of Keynes is providing economics with the flexibility. Instead of sticking to a dogma, economic theories can be flexibly modified to gradually reform it fitting in with the most feasible and optimum state at each time period with various experiments without a risky drastic alteration. Those who accuse Keynes often ignore how much Keynes thought highly of the flexibility because these accusers tend to falsely equate Keynesian theory to a dogmatic one as the old Marxism. Keynes himself actually said "When the facts change, I change my mind. What do you do, sir?”".
