Abstract
This study examines the system-deciding principle of economic rationality for its logical soundness and effects in global practice. Analysis demonstrates the fallacious structure of the underlying assumptions of homo economicus across theories and institutions, and explains how cumulative destruction of global economic, social, and ecological life systems follows from its life-blind mechanism. Higher-order concepts of life-capital, life-value efficiency, and life-good supply and demand are then defined to bring economic rationality into coherence with terrestrial and human life requirements.
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Notes
Dodge v Ford Motor Company (204 Michigan 459(1919) set the formal precedent where even Henry Ford could not deploy Ford profits to increase the employment and welfare of workers. The Supreme Court ruled in a judgement never since contested that “the lawful power of a corporation is organized for the profit of the stockholders.
For the absolutist inner logic of these ‘trade and investment’ treaties including NAFTA and the WTO, see McMurtry (2002, pp. 111–116).
Rawls (1971).
Gauthier (1986).
Pareto (1971/1906).
Sen (1977).
These standards are spelled out systematically in Value Wars, pp. 117–262.
Arrow (1963).
The concept of collective goods does not even exist in Paul Samuelson’s canonical ECONOMICS over 30 years, but where it is referred to in, for example, World Bank documents, its meaning is confined to market infrastructures.
This missing common life-ground of the economy is conceptualized here and elsewhere as “the civil commons”—all social constructs which enable universal access to life goods, including ecological services regulated to protect their reproduction. This ultimate principle of a real and sustainable economy does not exist in received doctrine. (See McMurtry, J., Philosophy and world problems. Oxford: Encyclopedia of Life Support Systems (EOLSS), UNESCO).
In the famous words of British Lord Chancellor Turlow (1731–1806), the corporation “lacks both a body to be kicked and a soul to be damned, they therefore do as they like”. In formal terms, the corporation can be exactly defined as follows: The corporation is a changing pool of money owners defined by a unitary legal goal of profit maximization for its shareholders and their non-liability for the corporation’s actions. It is also the sole right holder as “the investor” in transnational treaty legal mechanisms whose rules since 1988 govern the global market and whose articles exclude all labor and citizens rights, the corporation is the sole agent inducing obligations in contemporary international trade with a unilateral rights to sue governments for “loss of profit opportunity” through binding and punitive tribunals with powers of unlimited financial penalty. In domestic law, the private corporation writes its own charter of incorporation as distinct from its original reception of power by sovereign government conferral. Revealingly no substantive definition of the corporation or even recognition of its non-individual and non-human nature is recognized in economic textbooks. Rather the most ultimate ontological distinctions are erased in assumption of their equivalence. (See McMurtry, J., Reclaiming rationality and scientific method. Oxford: Encyclopedia of Life Support Systems (EOLSS), UNESCO).
Recall that the dilemma which the atomic choosers confront is whether to “defect” (confess), or not. If one confesses and the other remains silent, the one who turns coat goes free, and the one who remains in solidarity gets 10 years. If they turn on each other for self benefit, they get 5 years. If both remain silent, they each get a light sentence of 2 years or less.
See Woodhouse (2009) for an in-depth study which deploys the principles of the market model to track the repression of critical freedom of inquiry with in Canadian universities. For how CEO’s of corporations and universities in Canada collaborated in recommending university under-funding to government to force faculty into serving private market priorities, see Buchbinder and Newson (1991).
In Johnstone (1998), “entrepreneurship” is prescribed for all “institutions, departments, and individual faculty” to “improve education” and “benefit societies” without response to longstanding arguments of contradictions in principle between the nature of higher education and research and commercial models.
Allen (1995, p. 7).
Wealth of Nations, p. 84.
Wealth of Nations, p. 349.
Wealth of Nations, pp. 351–352.
Michalos (2008).
U.S. Trade Representative, Robert Zoellick, is quoted by Susan George, “Europe’s Harvest of Contamination, Le Monde Diplomatique, April 2003, p. 14.
Wealth of Nations, p. 351. While Smith is clear that the “mean rapacity and monopolizing spirit of merchants and manufacturers neither are or ought to be the masters of mankind” (p. 383), he is confident that the invisible hand will correct their greed by competition among them to provide the cheapest goods in order to sell them, the eternal precondition of profit. The natural law is of everyone’s self-interest maximization ensures it. “In every country it always is and must be the interest of the great body of people to buy whatever they want of those who sell it cheapest”, he says. It is “ridiculous to take any pains to prove it (p. 383, italics added). Thus the natural liberty of all in wants for more by less price paid operates through the market’s invisible hand to necessarily produce the best outcome for all or the common interest. This is the innermost ruling logic of almost 250 years of Western society’s global expansion—the necessity of self-maximizing individuals producing the optimal outcome via the free market. Karl Marx assumes it as given throughout Capital. Pareto proves it formally in doctrinal belief. The canonical contemporary economic theorists, Ken Arrow and Frank Hahn, state it in these modified terms: “the notion that a social system moved by independent actions in pursuit of different values is consistent with a final coherent state of balance ... is surely the most important intellectual contribution that economic thought has made to the general understanding of social processes” (italics added). Observe how the transition from a perfectly life-blind model to implicit claim of its universal generalizability as understanding of all human society in process is made by the most circumspect of neo-classical theorists.
Gauthier (1986, p. 93).
See footnote 14.
McMurtry (2004).
Hayek ( 1988). The passages cited here and below are located on pages 6–7, 74, and 130–131, respectively.
Hayek (1988, p. 74).
The life-coherence principle is systematically explained and applied in McMurtry “Reclaiming Rationality and Scientific Method”.
Life-value measure is explained in The Encyclopedia of Life Support Systems. See also the last section here.
In fact no economic function at all is required, and economic disfunction is enforced by blocking any regulation of otherwise toxic derivatives. Such occurred both before and after the 2008 financial meltdown in the US and, by its veto power, at the international level at the same time. For example, the Commodity Futures Modernization Act U.S. HR5660 specifically forbade any regulatory interference with derivatives before the financial meltdown and continued in force after it. Typically conceptualized in opposite positive terms as “Modernization”, the Act promotes the ruinous derivatives trading as solely benevolent—“to promote legal certainty, enhance competition, and reduce systemic risk in markets for over-the-counter derivatives, and for other purposes”. Immediate fabulous bonuses for sales of toxic financial commodities with no subtraction for fraud were not mentioned; nor regulated against after societies paid over $20 trillion to refloat the fraudulent financial system. Throughout we see that so long as more money returns are reaped immediately by sales—no matter what the toxic junk sold—the a priori conclusion is that the market is good.
See Cancer Stage and Web of Debt for documentation of the dyseconomic and predatory pattern. Current phenomena expressing the cumulative economic disorder are the near bankruptcy of the United States itself to pay the many trillions of dollars of public wealth to finance banks as well as ever greater tax-cuts to the very rich while slashing social programs (Social Security, Medicare, Medicaid, and publicly funded pensions) and life-support investments in carbon and pollution abatement by corresponding trillions—while in poignant synecdoche the highest contributor to the Republican Party is a vulture capital dealer. The underlying pattern is cross-cultural. Greece, “the cradle of democracy”, is plunged into bankruptcy simultaneously by the same invasive and non-productive financial forces as its industrial production falls over 30% in 2 years and youth unemployment escalates. We may observe that the financial forces of destruction which have bled economies dry in Latin America, Russia, and South-East Asia by “free capital flows” are now hollowing out the US, Britain and Europe.
A poignant illustration that arises as write is the case of the new “miracle economy” of India. Its idealization by aggregate money-value gains blinkers out all disconfirming facts of life ruin and deprivation—such as a quarter of a million suicides of farmers impoverished by globalization between 1995 and 2010, “the bottom 50% famished” with “836 million Indians living on less than 50 cents a day according to government report”, and the “cost of fuel, healthcare, education and producing food” increasing within the global market magic (reported by Jaideep Hardikar, “Bomb drops on Indian countryside, New Internationalist, March 2011). “24 billionaires with a combined worth a third of India’s gross domestic product” have meanwhile emerged.
Samuelson so defines ‘efficiency’ at the most general level in the Glossary of his standard text.
Superstition is understood as belief relying on highly selective evidence which ignores all wider counter examples to it.
See foonote 32.
I defer to Amartya Sen for this latter conception. In his “Rational Fools” article cited above, he describes the ruling economic rationality as that of a “social moron”.
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McMurtry, J. Behind Global System Collapse: The Life-Blind Structure of Economic Rationality. J Bus Ethics 108, 49–60 (2012). https://doi.org/10.1007/s10551-011-1086-4
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DOI: https://doi.org/10.1007/s10551-011-1086-4