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We run this each year here at the Unbroken Window. I am really sure that this lesson is taught carefully and thoughfully throughout the academy. And I guess it’s some sort of capitalist conspiracy to print this story- we must have made it all up. I am asked from time to time by students if our department teaches “alternative theories of economics” instead of teaching about the “economics of capitalism.” Of course, in my first two classes, which are largely caricatured as capitalistic screeds by folks who have never spoken to me, e-mailed me, read anything I’ve written, or attended lectures, there is a pretty heavy dose of exposure to the standard and sometimes non-standard market criticisms. But let’s not have that fact get in the way of what folks wish to believe. What is interesting is the misunderstanding of what basic economics is and what the economic way of thinking is.

The economic problem derives from scarcity – there are more of us that want stuff than there is stuff available. All of modern and classical economic theory (and evidence) derives from that.

But I am told that I am supposed to teach “alternative views” and in particular Marxist Economics. What am I supposed to do? Tell students that this whole scarcity thing is a figment of my capitalist imagination? That the pain and suffering all of humanity suffered until the dawn of Industry was just our stupidity and ignorance? That “capitalism” was to blame for the global poverty that existed in the year 1168? And that the poverty in the world today is not because of scarcity but because there is actually plenty of stuff to go around, but greedy people just keep from sharing it? There is nothing “capitalistic” about this lesson – in fact capitalism, if you want to call it such, is an informal institutional arrangement that arises to deal with this scarcity problem. And when we teach about the institutions that are in place or have emerged to deal with the scarcity problem, at least in my classes, we discuss alternative ways to do it – their perceived benefits and the difficulties with them.

What shall I do? Do the folks asking for this not understand scarcity? Or the implications of it? Because what follows from learning that simple lesson are lessons on cost, value and pricing – where they come from, what they mean and when it all goes wrong. A cost is something that consumes resources. Value is subjective. Prices reflect the terms of trade, the amount of tradeoff one must make in order to obtain a scarce resource. That’s it. When I cover value and cost, I even explain Marxist perspectives on them and provide readings on them. But the Marxist labor theory of value is plain wrong – and not only do I point that out, but I demonstrate how both Smith and Ricardo (capitalists I suppose) both believed in versions of the labor theory of value (wrongly). Am I supposed to just teach students that I am making this up, that there is no point in doing analytics, and that the labor theory of value is somehow true? I was told by a student, once I pointed this out, that “yes, you actually do present the alternative thoughts, but you have an answer for all of them!” So, am I not supposed to? Would a student wander over to the Math department and demand alternative answers be given to the problem of arithmetic? Because the laws, yes LAWS, of scarcity and what is derived from that LAW, are pretty logical in much the same way as the laws of arithmetic are.

What IS up for debate is what we do in the face of such scarcity. But I make this entirely clear to my students, and those whose heads are not inserted 19 feet up their butts pretty clearly understand this. I make it abundantly clear when they are hearing things from me that deviate from the “logical conclusions of scarcity” and into the realm of “we have some collective choices to make about how to handle aspects of it.” Furthermore, if anyone stopped to reflect on what we do in an intermediate microeconomics course, they’d recognize the further absurdity of the arguments that we ought to teach Marxism. After demonstrating some basic analytical tools to students, the entire course is a course on “market failure” (see here for why that term is not helpful. In other words, we focus on what can go wrong when we rely on purely private incentives to handle the scarcity problem – including the economics of information, the economics of externalities and the economics of market power. We even spend a week or so questioning the rationality assumption and its necessity, as well as the implications of the idea of efficiency and where it falls short.

None of this is particularly “capitalistic,” nor do I think critics even have an understanding of what THEY mean when they use that term. Good economics is simple – it appreciates the tools of value, cost and pricing and we economists are evaluated based on our command over those tools. In job interviews we are not asked, “so, are you a capitalist?” In graduate school, we are not indoctrinated with any particular world view. We spend our five years understanding how the tools of value, cost and pricing impact decision-making in a wide-variety of settings. There is not even a silent conspiracy. If the critics of what we are doing in economics stopped to reflect on it, or read some survey work, they’d also realize that the median economist holds views closer to “theirs” than to “mine.” I am almost sure that over 50% of economists lean left of center. This is neither a feature nor a bug, but it should give pause to the idea that there is some kind of capitalistic conspiracy taking place in economics departments around the nation.

I find the “outrage” interesting in this regard as well. Do the same people run to the Biology departments and demand that they all teach Creationism? Do they demand “alternative views” of their favorite topics be taught and carefully evaluated? And when those views are presented, are they thoughtfully and accurately presented? I am sure that caricatures of voluntary exchange are not used – such as perhaps tossing around cartoons showing capitalists watching as non-paying fire-protection customers melt inside their burning homes. I am sure that when folks are discussing “the free market” they are not painting “us” as religious zealots who worship at the alter of greed and exploitation. I am sure of it. Because you know, I suppose the burning of people in buildings and I am definitely a big fan of exploitation – in fact my entire world view is based on that very premise! I”ve been outed!

There’s much more to say, but we must be on with it. But if we want to play in the playground with the big kids, then by all means let’s do it. Let’s take this May Day to reflect on what the Marxist world-view has actually done to people in history. I don’t care at all if folks “hearts were in the right place” (which is hugely debateable). I don’t care to hear that “it wasn’t really tried” – any capitalist would tell you exactly the same thing. So let’s compare the record of what happens in a private, property rights, voluntary exchange order (that IS capitalism, despite what the “critics” claim it is) to what occurs in a collective, non-property rights, involuntary directive order. So enjoy your dance around the Maypole today.  Here is the annual post, Mourning on May Day:

It is criminal and immoral to celebrate, on this day, the social and economic achievements of the Labor Movement. How can one be proud of the fact that those societies that pursued equality were forced to create a new class of individuals to “enforce it” leading to mass murder on a scale that has never been replicated in human history? In honor of the hundreds of millions who suffered under the crippling, despotic, oppressive regimes known as Communism, National Socialism, or Fascism, and to protect the liberties of all people who walk the earth today, the horror of the socialist regimes must not be forgotten.

Over 169 million human beings were killed at the hands of repressive governments in the 20th century.

I reprint here in full a review of Communism,  A History, by Richard Pipes.

Richard Pipes is arguably the world’s foremost experts on the history of the Soviet Union. An Emeritus Professor of History and the former director of the Russian Research Center at Harvard University, Prof. Pipes served as an advisor to President Reagan’s National Security Council in 1981 and 1982.  He is the author or co-author of roughly three dozen books. He describes his latest work, Communism, A History, as “an introduction to Communism, and, at the same time its obituary.” That this slim volume succeeds in doing full justice to its vast subject is the product of, and a tribute to, a lifetime of insightful scholarship.

The Ideal

In western thought, the notion of a “Golden Age” of complete social and economic equality is at least as old as Ancient Greece. In the supposed Golden Age, there was great abundance but no violence or conflict, because all property belonged to everyone. It is sometimes asserted that there was such a Golden Age at some point in the distant past. However, as  Prof. Pipes observes:

“… the ideal of a propertyless Golden Age is a myth-the fruit of longing rather than memory-because historians, archaeologists, and anthropologists concur that there never was a time or place when all productive assets were collectively owned. All living creatures, from the most primitive to the most advanced, in order to survive must enjoy access to food and, to secure such access, claim ownership of territory.”  During the aeons before humans settled down to pursue agriculture, when they lived primarily by hunting and gathering, kinship groups asserted exclusive access to their area, expelling or killing trespassers. Property claims intensified after transition to agriculture…because cultivation is arduous work and its fruits take time to mature.”

More importantly for the present discussion, such a condition of peace and contentment has been held out as an alluring prospect, whether as restoration of the lost and distant past, or as newly constructed perfection. Various philosophers and radical thinkers has toyed with the notion not only of abolishing private property but also that human beings are  malleable-that proper instruction and legislation could not only enable but compel people to be virtuous. However,  according to Professor Pipes, “Prior to the middle of the 19th Century, the ideal of equality was an aspiration that occasionally produced social violence, but lacked both a theory and a strategy.

The Program

What Karl Marx and his friend, supporter, and confidant Friedrich Engels offered was, according to the author, “a theory that purported to show why the kingdom of equality was not only desirable and feasible, but also inevitable. To advance this claim, they resorted to methods borrowed from the natural sciences, which had gained immense prestige in the 19th Century.”

We will not here indulge in an explication of Marxist “theory” in mind-numbing detail. Suffice it to say that Marx claimed that contests for “ownership of the means of production” was the determining force of history, that industrialization had created a new and dominant class conflict (between “capitalists” and “workers”), that competition between workers and the unemployed would drive down wages, and that competition among capitalists would drive down profits, leading to ever more severe crises of production and consumption.

Relations between employer and employee did become more tenuous and remote when people moved to urban areas to take up industrial pursuits. When most laborers worked the land, the landlords and their tenants had been essentially neighbors and long-term partners. This fact gave some resonance to Marx’s notions among actual workers and their advocates, which the earlier radical pronouncements of philosophers had never be able to find outside intellectual salons.

Marx and Engles’s theories were the basis of the program of the International Workingman’s Association, “The First International,” which they founded in 1864, and such theories remained a staple of Socialist political parties for the next hundred years or so, even as they were overtaken by events.

Few things predicted by Marxism proved to be correct.  For example, even well before Marx died, it was evident that, far from decreasing, the wages and living standards of workers were generally rising. That trend has continued up to the present. There were recurrent crises (business cycle contractions), but none brought a collapse leading to revolution.  Where there were revolutions, it was not in the most advanced, urban, industrial societies, but in very backward nations where a large majority remained on the land. These developments were explained away: they hadn’t happened yet, “Imperialism” enabled “capitalism” to extend it life,  etc.

However it was World War I, that produced the first incontrovertible evidence that Marxists had little understanding of human nature: they were ecstatic when the war broke out, because they believed that “workers” would everywhere refuse to become cannon fodder and unite to overthrow their “oppressors.”  Instead, urban workers  flocked  to the recruiting stations and elected socialist politicians were the most ardent supporters of tax levies and bond issues in support of their countries’ war efforts. Ever since, it has been manifestly apparent that the traditional affinities of language, religion, race, and nationality easily trump any feelings of “international worker solidarity.”

The Regime

Professor Pipes recounts the story of how the monstrous state purportedly founded on the ideals and programs of Marxism came to be. Moving within the relatively marginal and squabbling radical left-wing factions of the time, the Russian exile Lenin (born Vladimir Ulianov) developed his own idiosyncratic variants of Marxist theorizing. He concluded that a revolution spontaneously initiated by “workers” was an  impossiblity. Instead, he called for a tightly organized group to bring it about. Lenin implicitly concluded that they, in Professor Pipes’ words,  “of necessity had to be intellectuals…Indeed,” Pipes wryly observes, “only one solitary worker ever sat on the executive board of Lenin’s party, and he turned out to be a police spy.”

There was, in fact, no distinction between Socialism and Communism as political movements until Lenin reached this conclusion, rejecting democratic procedures in favor of the establishment of a “dictatorship of the proletariat.” Marx had believed that full communism would be preceded by a transitional phase, during which the old inequalites would be broken down. It was Lenin who labeled this  transition period as foreseen by Marx “socialism.” At about the same time, he changed the name of his party to “Communist” from “Social Democratic.”

The rapid sequence of events that brought Lenin to power has been often recounted and Prof. Pipes very ably does so again, stressing how Lenin’s ruthless single mindedness of purpose carried the day against his confused and hapless opponents. Summarizing, he notes:

“Viewing the Bolsheviks’ power seizure from the perspective of history, one can only marvel at their audacity… They saw in the overwhelming majority of Russia’s citizens-the bourgeoisie and the landowners as a matter of principle and most of the peasantry and intelligentsia as a matter of fact-class enemies of the industrial workers, whom they claimed to represent. These workers constituted a small proportion of Russia’s population‑at best 1 or 2 percent…This meant that the new regime had no alternative but to turn into a dictatorship-a dictatorship not of the proletariat but over the proletariat and all the other classes. The dictatorship, which in time evolved into a totalitarian regime, was thus necessitated by the very nature of the Bolshevik takeover. As long as they wanted to stay in power, the Communists had to rule despotically and violently; they could never afford to relax their authority The principle held true of every Communist regime that followed.

“Lenin realized this and felt no qualms about imposing a ruthless despotism. He defined “dictatorship” of any kind, including that of the “proletariat,” as “power that is limited by nothing, by no laws, that is restrained by absolutely no rules, that rests directly on coercion.”‘ He was quite prepared to resort to unlimited terror to destroy his opponents and cow the rest of the population… Violence total and merciless (one of his favorite adjectives) had to clear the ground for the new order.”

Professor Pipes continues with a concise narrative of Communist regimes in Russia and many other countries. Everywhere, violence and terror were essential to keeping all power firmly within the Communists’ grasp. However, the author concludes, “In advocating a regime resting on coercion, Lenin ignored [the fact that] the abstraction called “state” is made up of individuals who, whatever their historical mission, attend also to their private interests.”

So it was that violence and terror, which were designed to change human nature as well as preserve the regimes, were sometimes turned against the “new class” itself. Stalin’s  “show trials” in the 1930s, Mao’s “cultural revoultuon,” Pol Pot’s wholesale “cleansing” of the urban and educated population of Cambodia, and any number of other murderous campaigns and purges in Communist societies all failed to resolve this fundamental contradiction. In the final analysis, the author observes:

…Communism failed and is bound to fail for at least two reasons: one, that to enforce equality, its principal objective, it is necessary to create a coercive apparatus that demands privileges and thereby negates equality; and two, that ethnic and territorial loyalties, when in conflict with class allegiances, everywhere and at all times overwhelm them, dissolving Communism into nationalism…

Professor Pipe’s Communism is a very satisfying read. What it lacks is a discussion of why Communism retained its attraction in intellectual circles for so long, especially after it became manifest as perhaps the most despotic system in history and incapable of providing the material benefits it promised. That would be another story well worth recounting.

And it’s a story that is certainly not being written in the academy today. In fact, in my experience in higher education, bordering on 20 years, the attraction is far stronger today than at any point. I agree with my critics that we should be teaching more courses on comparative economic systems and the economics of Marxism – when the fallacious logic of Marxist theory gets a full airing, and the actual results of their horrific history are made more widely known, perhaps students will better appreciate exactly what they are learning elsewhere throughout the academy. It’s a huge failing of modern economists to have stopped teaching these things, along with History of Thought. For any thoughtful Marxist who ventures over to this site, I would recommend reading, “The Worldly Philosophers” which is a nice and highly readable History of Thought written by a Marxist Economist. I would note that he gives a fair and full airing to all views, characterizes them quite well, and comes to a pretty startling conclusion at the end. And it’s prominently featured on my Intro class reading list.

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