Conceptualizing Capitalism: Institutions, Evolution, Future
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Conceptualizing Capitalism: Institutions, Evolution, Future
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Overview
A few centuries ago, capitalism set in motion an explosion of economic productivity. Markets and private property had existed for millennia, but what other key institutions fostered capitalism’s relatively recent emergence?
With Conceptualizing Capitalism, Geoffrey M. Hodgson offers readers a more precise conceptual framework. Drawing on a new theoretical approach called legal institutionalism, Hodgson establishes that the most important factor in the emergence of capitalism is the constitutive role of law and the state. While private property and markets are central to capitalism, they depend upon the development of an effective legal framework. Applying this approach to the emergence of capitalism in eighteenth-century Europe, Hodgson identifies the key institutional developments that coincided with its rise. That analysis enables him to counter the widespread view that capitalism is a natural and inevitable outcome of human societies, showing instead that it is a relatively recent phenomenon, contingent upon a special form of state that protects private property and enforces contracts. The book also considers what this more precise conceptual framework can tell us about the possible future of capitalism in the twenty-first century.
“Remarkable and highly original.” —Ugo Pagano, University of Siena and Central European University, author of Work and Welfare in Economic Theory
“Broad, thoughtful, and highly literate.” —Richard Nelson, Columbia University, author of An Evolutionary Theory of Economic Change
“Carefully-argued and ultimately convincing.” —Bruce Caldwell, Duke University, co-author of Hayek: A Life 1899-1950
“A magnum opus.” —Wolfgang Streeck, emeritus director, Max Planck Institute for the Study of Societies, author of How Will Capitalism End?
“Groundbreaking.” —LSE Review
Product Details
| ISBN-13: | 9780226168142 |
|---|---|
| Publisher: | University of Chicago Press |
| Publication date: | 12/22/2022 |
| Sold by: | Barnes & Noble |
| Format: | eBook |
| Pages: | 506 |
| File size: | 1 MB |
About the Author
Read an Excerpt
Conceptualizing Capitalism
Institutions, Evolution, Future
By Geoffrey M. Hodgson
The University of Chicago Press
Copyright © 2015 The University of ChicagoAll rights reserved.
ISBN: 978-0-226-16814-2
CHAPTER 1
Distilling the Essence
If names are not right, words are misused. When words are misused, affairs go wrong. When affairs go wrong, courtesy and music droop, law and justice fail. And when law and justice fail them, a people can move neither hand nor foot. — Confucius, Analects (ca. 400 BC)
A definition is an account that signifies the essence. — Aristotle, Topica (ca. 350 BC)
By this it appears how necessary it is for any man that aspires to true Knowledge, to examine the Definitions of former Authors; and either to correct them, where they are negligently set down; or to make them himself. For the errors of Definitions multiply themselves, according as the reckoning proceeds; and lead men into absurdities, which at last they see, but cannot avoid, without reckoning anew from the beginning; in which lies the foundation of their errors. — Thomas Hobbes, Leviathan (1651)
This book is about capitalism and understanding the type of real-world entity to which the word capitalism most usefully should refer. Given this project, definitions are unavoidable. Like it or not, we must seek some precision with words, to help us dissect reality with sharp concepts of the mind. A definition must identify key essential features of the type it defines. It cannot simply be a description of the entity or group of entities. Definitions demarcate different types: they are not mere lists of attributes. Identifying what is and what is not essential is tricky. We never reach fixed and final statements that are devoid of ambiguity or the need for further refinement. But we must first understand what an act of definition means: definition must be defined.
Definitions are not mere wordplay. Questions of the form, "What is the meaning of X?" are not confined to philosophers. Comprehending the meaning of a word is often tied up with the understanding of real phenomena; the search for understanding drives scientific inquiry. For example, questions concerning the nature and meaning of gravity drove both the Newtonian and the Einsteinian Scientific Revolutions in physics. Scientists must first establish an agreed rough understanding of the phenomenon they are investigating. Then they try to focus on the problem, using a definition as a means of demarcation. They sometimes change this definition. Definitions matter at every stage. Science is driven in part by a search for meaning.
Some readers may wonder whether a philosophical discussion of definitions is any use. Others will accuse me of the cardinal sin of "essentialism," mock my naivety, and go their own way. I urge them to stay. I argue that much "antiessentialism" is mistaken and that it has created damaging confusion for the social sciences. I am not alone in this view. I further argue that — despite their neglect in the social sciences — definitions are vital for all science.
To identify capitalism we need to make explicit the features that distinguish it from other social formations. If this is agreed and the reader is not interested in the philosophical arguments, then he or she might skip sections 1.1 and 1.2 of this chapter and proceed to section 1.3, with its crucial facts about the explosion of productive activity around 1800. But, if the reader is interested in my defense of at least one version of essentialism, then read on.
Antiessentialism has been used as an excuse for avoiding precise definitions. But shared meanings are necessary for communication and mutual understanding. The more abstract and complex the discourse, the more serious this problem becomes. Even "antiessentialists" or "antirealists" must use words carefully and attempt to communicate intended meanings. Absolute precision, like absolute cleanliness, is impossible; but that does not imply that we should abandon our duties of linguistic housekeeping or personal hygiene.
1.1. Anti-Antiessentialism
The term essentialism was allegedly invented by the leading philosophers Karl Popper and Willem van Orman Quine (Wilkins 2012), but they used it in contrasting and challengeable ways. Quine (1960, 1966) faulted essentialism on the grounds that, if we considered a single entity, it was generally difficult and often impossible to disentangle essential from accidental attributes. A person is characterized by features that others do not possess — such as blue eyes — so they are accidental for humans as a whole but not for the individual concerned. Among other problems in his account, Douglas B. Rasmussen (1984) pointed out that Quine had shifted the discussion of essences from Aristotle's species or kinds to a single individual. This was a key error; it is only when we address species or kinds that the distinction between essential and accidental features becomes sufficiently meaningful.
Popper (1945, 1963, 1972) criticized essentialism, but he gave it a different meaning. For him, essentialism was not about identification but about explanation. Hence, Popper (1945, 25ff.) critiqued methodological essentialism. Later Popper (1963, 103–4) wrote: "The essentialist doctrine I am contesting is solely the doctrine that science aims at ultimate explanation; that is to say, an explanation which (essentially, or by its very nature) cannot be further explained, and which is in no need of further explanation." But this is not the version of essentialism defended here, which involves the assertion of the existence and meaningfulness of essences. Popper (1963, 104) himself went on to say that his criticism "does not aim at establishing the non-existence of essences." So in this vital respect his view does not conflict with that proposed here. Popper was attacking a view of science rather than the notion of essence.
Another apparent challenge to essentialism derives from the American pragmatist tradition, stretching from Charles Sanders Peirce (1878, 1923), through John Dewey (1929), to Richard Rorty (1979). Peirce and Dewey criticized claims that essences are always knowable. But sophisticated essentialists would not uphold that they are. Furthermore, both Peirce and Dewey embrace forms of realism or naturalism, which would typically imply some commitment to types or kinds of entities.
The version of essentialism adopted here involves the claim that essences are meaningful and real. For any kind of entity there is a set of characteristics that all entities of that kind must possess for it to be that kind of thing; if it does not possess them, it will be another kind of thing. This should not be confused with foundationalism, which is the view that all knowledge can be grounded on some foundation such as reason, sensation, or experience. Essentialism here is an ontological doctrine; foundationalism concerns epistemology. Likewise, essentialism here has nothing to do with correspondence or spectator theories of truth, which are also epistemological doctrines.
Dewey and Rorty rejected correspondence theories of truth as well as foundationalism. When Rorty rejected essentialism, it too was given a peculiar meaning, related to the linguistic and political themes of his work. Consequently, the authors and arguments cited above do not undermine the kind of essentialism adopted here. The notion of essences, in the Aristotelian sense of referring to kinds, is preserved. Influential philosophers such as Saul Kripke (1972) and Hilary Putnam (1975) have restored the reputation of essentialism, claiming that it is the task of a science to investigate the essential properties of the types of entity that it may address.
We should not ignore the role of the French in all this. Writing in 1957, the philosopher Roland Barthes explored in his Mythologies how words can be used to assert particular values and become instruments of power for the media and the bourgeoisie. Fair enough. But then Barthes (1972, 75) went too far and condemned "this disease of thinking in essences." The fact that words can be instruments of power does not mean that we can or should abandon words. Social scientists have a duty to use words as precisely as possible. Inquiry is a social process. To carry out an investigation we have to communicate and refer to objects of analysis. This is not a disease. It is a vital part of science, without which it dies.
In his For Marx, Louis Althusser (1969) developed the concept of overdetermination, which roughly means that a single observed effect is simultaneously determined by multiple different causes, where fewer of them might be enough to account for the phenomenon. Althusser linked this to the Marxist idea of contradiction. Overdetermination signified internal, conflicting forces within a complex whole. Several Althusserians then argued that to focus on relatively few essential features was mistaken. Some went further, claiming that any account of an essence is a mistake. As far as I am aware, Althusser himself did not take that step, but he inspired others such as James Tomlinson (1982), Ernesto Laclau and Chantal Mouffe (1985), Barry Hindess (1987), and Stephen A. Resnick and Richard D. Wolff (1987) to move in this direction.
It is indeed necessary to understand a complex entity such as capitalism in terms of structurally dissimilar — or "contradictory" — elements. Because multiple varied elements are part of the system, it is necessary to understand it in terms of these dissimilar parts. But that begs a number of further questions, which I shall address later. Crucially, despite claims to the contrary, Althusser's concept of overdetermination does not counter the need or possibility of describing essences.
Considering the essence and meaning of a market, Hindess (1987, 149) wrote: "To write of essentialism in this context is to say that the market is analyzed in terms of an essence or inner principle which produces necessary effects by the mere fact of its presence." In a forensic response, John O'Neill (1998, 10) regarded this as "a caricature of what it is to say that an entity has an essence." Instead of "necessary effects," an essence involves dispositions: "It does not follow that these dispositions are always exhibited. ... The criticisms are aimed at a position that nobody holds." O'Neill (1998, 2001) emphasized that essence precedes discovery, that many essential properties are dispositional properties that are actualized only in certain circumstances, and that some essential properties depend on others. O'Neill (1998, 9) explained: "The essential properties of an entity of a particular kind are those properties of the object that it must have if it is to be an object of that kind. Accidental properties of an entity of a particular kind are those properties it has, but could lack and still be an entity of that kind." O'Neill also countered claims that Ludwig Wittgenstein (1960) criticized essential properties. After a detailed examination of Wittgenstein's text, O'Neill (1998, 14) concluded: "The legitimate conclusion to be drawn from Wittgenstein's discussion is that one cannot assume in advance that there must be a set of essential properties shared by all entities that fall under some concept, not that there are no essential properties of objects."
But that was not the end of the story. By the 1980s essentialism had become a global term of abuse among anthropologists, feminists, and many others. It became a catchall word for many varied sins, including biological reductionism, economic reductionism, the notion of knowledge as representation, the imposition of Western values on other cultures, and overgeneralizations concerning gender differences (Fuss 1989; Nussbaum 1992; Assiter 1996; Sayer 1997). But essentialism does not itself imply that the (human) essence is biological, cultural, or economic. The essence of a kind can be social, biological, physical, chemical, ideational, or whatever, including often a combination of these: it all depends on the nature of that kind. Finally, claiming that essences exist does not imply that knowledge is representation: ontological and epistemological claims are different in character.
The rise of social constructivism led to further antiessentialist rhetoric. After declaring her own antiessentialism in An Introduction to Social Constructivism, Vivien Burr (1995, 4) explained: "Since the social world, including ourselves as people, is the product of social processes, it follows that there cannot be any given, determined nature to the world or people." But this does not follow. The social world — like anything else — is clearly the product of processes, but we cannot infer from this that it lacks any "given" or "determined" nature. The fact that a thing is created, or in movement, does not mean that it lacks an essence. Burr continued: "There are no 'essences' inside things or people that make them what they are." First, an essence is a property, and it is not strictly "inside" the entity. Second, if things lack factors "that make them what they are," then how can we account for their existence? Third, the defining properties of a type are generally insufficient to constitute that type or "make them what they are." Mass and structure help make things "what they are." But these are not necessarily defining properties. Burr also depicts essentialism as involving the view that persons have "some definable and discoverable nature, whether given by biology or by the environment." Essentialists believe that there is such a thing as human nature that helps define the essence of being human. But, contrary to Burr, essentialism does not imply that essences are always discoverable.
In the 1980s, antiessentialist rhetoric swept through several areas of inquiry, impairing social theory and its reputation. As Martha Nussbaum (1992) noted with concrete examples, antiessentialism joined forces with normative cultural relativism (where one culture is deemed to be as good or as bad as any other) even to defend traditional but harmful practices in the developing world. As Diana Fuss (1989) jested, an obsession with antiessentialism has become the "essence" of social theory. Fuss (1989, xi) further wrote: "Few [other] words in the vocabulary of contemporary critical theory are so persistently maligned, so little interrogated, and so predictably summoned as a term of infallible critique." But she too was obliged to describe herself as an antiessentialist. It had become a necessary shibboleth.
1.2. Essentialism without the Natural State Model
Another perceived attack on essentialism derived from interpretations of "population thinking" in evolutionary theory. The leading philosopher of biology, Ernst Mayr (1963, 1976, 1982, 1988), argued that one of Charles Darwin's (1859) greatest achievements was population thinking. This surpassed the alleged "typological essentialism" or "typologism" of Plato or others, where variety in a population is ignored to concentrate instead on an average, typical, or representative individual that served as a surrogate for the whole species. By contrast, in population thinking, variation is all important. Variation is a key feature of any species; it is the evolutionary fuel for natural selection. Consequently, the essence of any species cannot be understood without encompassing that variation.
Population thinking is relevant for economics as well as biology. When addressing an industry or economy, economists sometimes use simplifying notions such as the representative firm or the representative individual. But this simplification suppresses the variety in the population, which can account for distinct dynamics and serve as the fuel of evolutionary change (Metcalfe 1988; Nelson 1991; Kirman 1992; Hodgson 1993).
Does population thinking amount to a rejection of essentialism? David Hull (1965) — who studied under Popper — thought so. Mayr (1982, 38) himself cited Popper on essentialism and rejected any conception of "a limited number of fixed and unchanging forms ... or essences." But a commitment to essences does not itself imply that forms are fixed or unchanging. Mayr's population thinking does not imply a general rejection of the notion of essence. We should not in this regard be misled by his critique of what he described as "typological essentialism."
(Continues...)
Excerpted from Conceptualizing Capitalism by Geoffrey M. Hodgson. Copyright © 2015 The University of Chicago. Excerpted by permission of The University of Chicago Press.
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Table of Contents
Preface
Introduction
Part I. Discovering Capitalism
Chapter 1. Distilling the Essence
Chapter 2. Social Structure and Individual Motivation
Chapter 3. Law and the State
Chapter 4. Property, Possession, and Contract
Chapter 5. Commodity Exchange and Markets
Chapter 6. Money and Finance
Chapter 7. Meanings of Capital
Chapter 8. Firms and Corporations
Chapter 9. Labor and Employment
Chapter 10. A Definition of Capitalism
Part II. Capitalism and Beyond
Chapter 11. Conceptualizing Production
Chapter 12. Socialism, Capitalism, and the State
Chapter 13. How Does Capitalism Evolve?
Chapter 14. The Future of Global Capitalism
Chapter 15. Addressing Inequality
Chapter 16. After Capitalism?
Glossary
References
Index