Complexity Oikonomia and Political Economy

ecological complexity 3 (2006) 369–381

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Complexity, oikonomı´a and political economy Andri W. Stahel * Ca´tedra UNESCO en Tecnologı´a, Desarrollo Sostenible, Desequilibrios y Cambio Global de la UPC (UNESCO Chair in Technology, Sustainable Development, Imbalances and Global Change of the Polytechnic University of Catalonia), C/ Emancipacio` 8, 6e` 1r, 08017 Barcelona, Spain

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abstract

Published on line 12 March 2007

Building on Aristotle’s distinction between oikonomı´a (‘the art of household management’) and chrematistics (khre-matistike´, ‘the art of acquisition’) and the associated difference between use-

Keywords:

value and exchange-value based economic processes this paper critically discusses modern

Aristotle’s economic theory

economics by employing system theory insights. It is argued that the constitution of modern

Economics

economics has been, at the political and ideological level, strongly associated to the rise of

Chrematistics

capitalist free-market economy, while at the methodological level it is based on the Newtonian

Complexity theory

ideals of formal elegance and simplicity of models. These Newtonian ideals in turn underpin

Free-market

the universal claim of modern economics’ theories and the presumption of causal relations

Value theory

between objects that respond in a fully determinable mechanical way to outside stimuli. Discussing the link between modern economics methodological claims at one hand and its political/ideological legitimization of the free-market institutional arrangement of the economic process at the other, in the final part of this paper both modern economics and the freemarket dynamics are discussed from the perspective of dynamic complex system’s theory. # 2007 Elsevier B.V. All rights reserved.

‘‘Hence some persons are led to believe that making money is the object of household management and the whole idea of their lives is that they ought either to increase their money without limit, or at any rate not to lose it. The origin of this disposition in men is that they are intent upon living only and not upon living well; and, as their desires are unlimited they also desire that the means of gratifying them should be without limit’’ Aristotle (1967).

1.

Introduction

In what Karl Polanyi defined as ‘‘probably the most prophetic pointer ever made in the realm of the social sciences’’ and

‘‘certainly still the best analysis of the subject we possess’’ (Polanyi, 1944: 53–54), Aristotle (1967) in the introductory chapter of his Politics distinguished between oikonomı´a (‘the art of household management’) and chrematistics (khre-matistike´, ‘the art of acquisition’).1 Arguing about the difference between use- and exchange-value associated to commodities, Aristotle (1967) further distinguished between two different kinds of chrematistics: one subordinated to use-value logic and thus the oikonomia (providing households with the necessary usevalues which were not provided internally, in exchange for those they produced in excess) and another form, which Aristotle rightly saw as secondary from a logical and historical point of view, concerned the ‘art of money-making’— accumulation of exchange-values by means of commerce.

* Tel.: +34 934187987. E-mail addresses: [email protected], [email protected]. 1

We used the more commonly used translations of both terms. Particularly, we use ‘art’ for what Aristotle used to refer to as te´khne, that is: a certain kind of skill won by experience, which does not dissociates technical expertise from ethics and aesthetics. It means craftsmanship in a sense which has greatly been lost in our modern times and thereby defies translation. Once ‘technical’ in modern times acquired an instrumental connotation, we rather stick to the notion of ‘art’ which is closer to the Greek idea. 1476-945X/$ – see front matter # 2007 Elsevier B.V. All rights reserved. doi:10.1016/j.ecocom.2007.02.011

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According to him (1967: 41–42), it is at this point, once converted to an end in itself, that chrematistics becomes something ‘unnatural’ and alien to the ‘art of living well’. . . As he argued, ‘‘when the use of coin had once been discovered, out of the barter of necessary articles arose the other art of money-making, namely retail trade; which was at first probably a simple matter, but became more complicated as soon as men learned by experience whence and by what exchanges the greatest profit might be made. Originating in the use of coin, the art of money-making is generally thought to be chiefly concerned with it, and to be the art which produces wealth and money, having to consider how they may be accumulated. Indeed, wealth is assumed by many to be only a quantity of coin, because the art of money-making and retail trade are concerned with coin. Others maintain that coined money is a mere sham, a thing not natural, but conventional only, which would have no value or use for any other purpose of daily life if another commodity were substituted by the users. And, indeed, he who is rich in coin may often be in want of necessary food. But how can that be wealth of which a man may have a great abundance and perish with hunger, like Midas in the fable whose insatiable prayer turned everything that was set before him into gold?’’ (Aristotle, 1967: 42–43). Thereby, Aristotle’s oikonomy – centred on the reproduction of use-values – encompassed all those ‘instruments’ which are available to households in order to acquire different usevalues in order to ‘live and live well’. Its practice and study included agriculture, crafts, hunting and gathering, mining and even warfare – as a way to provide slaves for the households. Chrematistics – ‘the art of acquisition’ – was seen as an integral part of the oikonomy too, but only as long as it remained subordinated to the former use-value logic. But once the ‘art of money-making’ as an end in itself was established, this kind of chrematistics was no longer instrumental to the oikonomy and thus was considered external to it (Fig. 1). As Marx would interpret Aristotle – and by the same token define modern capitalist society – ‘‘in C–M–C [Commodity– Money–Commodity], selling in order to buy, in which use value and therefore the satisfaction of needs is the ultimate purpose, there is nothing in the form itself that directly requires its repetition once the process has taken place. The commodity is exchanged by means of money for another commodity, which now drops out of circulation as use value.

Fig. 1 – Chrematistics external to the oikonomy.

With this the movement has come to an end. In M–C–M [Money–Commodity–Money], by contrast, the very form of the movement implies that no end is at hand: the end of the movement already contains the principle and the driving force of its resumption. For since money, abstract wealth, exchange value is the starting-point of the movement and its multiplication is the purpose, since the result and the starting-point are qualitatively the same’’ (Marx, 1987: 19). Thereby for a capitalist, as ‘‘the conscious vehicle of this process (. . .), to increase the amount of value he possesses appears thus as his sole purpose (. . .) and only in so far as it appears as his sole driving motive is he a capitalist’’ (Marx, 1987: 19). Notwithstanding, if we retain Aristotle’s definitions, the circulation of money as capital – as an end in itself – is largely external to the oikonomic process and has to be considered an ‘improper’ (in the Aristotelian sense) form of generating wealth. As he stated – anticipating the analysis of modern capitalist ethics – ‘‘some men turn every quality or art into a means of making money; this they believe to be the end, and to the promotion of the end all things must contribute (. . .). The source of the confusion is the near connection between the two kinds of money-making; in either the instrument (i.e. wealth) is the same, although the use is different, and so they pass into one another; for each is the use of a same property, but with a difference: accumulation is the end in the one case, but there is a further end in the other (. . .). Thus we have considered the art of money-making which is unnecessary, and why men want it; and also the necessary art of moneymaking, which we have seen to be different from the other, and to be a natural part of the art of managing a household’’ (Aristotle, 1967: 45, 44 and 45, respectively).

2.

Modern economics

More than two millennia after Aristotle, Adam Smith inaugurated modern economics by publishing in 1776 his seminal An Inquiry into the Origins and Cause of the Wealth of Nations. Although recognizing – in line with Aristotle – that ‘‘every man is rich or poor according to the degree in which he can afford to enjoy the necessaries, conveniencies, and amusements of human life’’ (Smith, 1961: 34) – thus equating wealth to a sum of available use-values and not to the amount of exchange-values accumulated – Smith and those who followed him would devote their analytical skills inquiring into the origins and nature of exchange-value and the market price formation process. Smith justified this change in focus by stating that ‘‘after the division of labour has once thoroughly taken place, it is but a very small part of these [necessaries, conveniencies and amusements of human life] with which a man’s own labour can supply him. The far greater part of them he must derive from the labour of other people, and he must be rich or poor according to the quantity of that labour which he can command, or which he can afford to purchase’’ (Smith, 1961: 34). In this way, the modern notion of wealth – of being ‘rich’ or ‘poor’ according to monetary incomes and/or tradable assets possessed by individuals or nations – was born. How to foster use-values (re)production and achieve ‘the art of living and living well’ was supplanted by ‘an inquiry into the origins and

ecological complexity 3 (2006) 369–381

cause of exchange-value/prices dynamics’ as the central focus of economic inquiry. This narrowing of its focus to monetary and quantifiable aspects of the economic process, furthermore, allowed economics to structure itself methodologically according to the paradigm of the ‘hard sciences’ and, particularly, Newtonian physics. This was achieved in successive steps. First, by opposing the physiocrats’ claim that Nature is the real origin of a produit net, and by focusing instead on ‘human productive labour’ as the sole source of value, eocsystem’s dynamics, organic growth factors and qualitative change undergone by living systems as essential dimensions of the (re)production of use-values beyond human chrematistic’s capitalisation process were ignored. Interesting enough, Smith in his famous example of the relative value of deer and otters, argued that only the time needed to chase them and bring their dead bodies to the market had to be considered in order to explain their relative market-value. Had he focused on their use-value instead, he could easily have seen that the bulk of their value is given by their biological growth process within the broader ecosystem’s dynamics and not by the time taken to kill them. The properties which make these animals useful to us humans are mostly the fruit of a far-from equilibrium (re)organization process which happens within an irreversible systemic time-frame (Stahel, 2002: 273–278). The hunter’s labour is only the last – and very minor – link from a long biological and environmental history, from which ordered structures such as ‘deer’ and ‘otters’ emerged in the first place. Far from-equilibrium thermodynamics, biology and ecology, not chrematistics, are the primary sources of their availability or scarcity, leading to greater or lesser labour needed to hunt them and, thereby, differentiated market prices in the context of a capitalist economic process. Indeed, once extinct, there is no ‘human productive labour’ which manages to produce exchange-values in the form of deer and otters out of the British woods in the first place.2 Already Marx drew a clear distinction between the physical and the commercial dimension of any commodity stating that ‘‘the use-values, coat, linen, and c., i.e., the bodies of commodities, are combinations of two elements – matter and labour. If we take away useful labour expended upon them, a material substratum is always left, which is furnished by Nature without the help of man (. . .). We see, then, that labour is not the only source of material wealth, of use-values produced by labour. As William Petty puts it, labour is the father and the earth is the mother’’ (Marx, 1967: 43).

2

It is an interesting puzzle to guess why Smith choose this example, while Quesnay would state the opposite thesis based on an example taken from the shoe manufacturing whereby natural skins are handcrafted into shoes. . . While Nature is clearly a fundamental actor for the (re)production process of wild species (and thus the chase activity), it is much harder to disregard the shoemaker’s labour and skills and to consider it a simple ‘transformation’, a commercial ‘trade between equals’ which adds no value at all to the final product, as Quesnay would do in order to ‘prove’ that Nature is the sole source of a surplus value. Clearly, Smith’s examples fits the physiocrat’s thesis much better than Quesnay’s and vice versa. In both cases we can clearly see examples of ‘empirical evidence’ being informed by a previous theoretical framework, more than the other way round.

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But in the following paragraphs, Marx’s attention is soon drawn to the labour process and the way different labour times or intensities translate into different magnitudes of exchange-value, ignoring ‘Mother Nature’s’ contribution. He justified this move by stating that ‘‘with the exception of the extractive industries in which the material for labour is provided immediately by Nature, such as mining, hunting, fishing, and agriculture (so far the latter is confined in breaking up virgin soil), all branches of industry manipulate raw material, objects already filtered through labour, already products of labour (. . .). Animals and plants, which we are accustomed to consider as products of Nature, are, in their present form, not only products of, say last year’s labour, but the gradual transformation continued through many generations, under man’s superintendence, and by means of its labour’’ (Marx, 1967: 181). But here, Marx already seems to forget the ‘material substratum’ like DNA or the plants’ and animals’ organic growth process which we owe primarily to Mother Earth’s autonomous workings and not to the labour of past human generations. Within economics, ‘Nature’s’ contribution was reduced to a differentiated rent, given by those (re)produced use-values which could be monopolized by private ownership of its sources and converted into commodities. In David Ricardo’s words, ‘‘no one would pay for the use of land, when there was an abundant quantity not yet appropriated, and, therefore, at the disposal of whosoever might chose to cultivate it. On the common principle of supply and demand, no rent could be paid for such land, for the reason stated why nothing is given for the use of air and water, or for any other of the gifts of nature which exist in boundless quantity. With a given quantity of materials, and with the assistance of the pressure of the atmosphere, and the elasticity of steam, engines may perform work, and abridge human labour to a very great extent; but no charge is made for the use of these natural aids, because they are inexhaustible, and at every man’s disposal’’ (Ricardo, 1970, 69). And, since ‘no one would pay for it’, these questions did not enter into economics reduced to chrematistics or the study of the chrematistic dimension of the economic process. However, as we see today from the perspective of ecological economics, Nature’s dynamics are far from being just a minor part of the economic process. Those ecosystem services translated into prices in the form of rent (or ‘natural’ usevalues converted into exchange-values) represent, in fact, only a very minor part of Nature’s contribution to the economic process. Although difficult to measure (and certainly impossible to quantify in their complex ramifications and differentiated spatial and temporal time scales) (Stahel, 1999, 2005), they form a vital part of the medium and long-term dynamic of the economic process. It is true that, at least in the short run, the impending exhaustion of fossil fuels or wild fishing stocks, does not necessarily affect the prospects for exchange-value reproduction in these sectors. Often the opposite occurs. As long as ecosystem services only translate into exchange-values as differentiated rent, the higher costs of fishing or mining increase the overall exchange-value turnover. Once resources start becoming depleted, more ‘human labour’ is needed to produce a given commodity and, thereby, the higher the

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reproduced level of exchange-values. And for those industries that still have access to easily accessible natural sources, like those devoted to extracting Saudi Arabian oil or fishing in still bountiful seas, the ‘natural rent’ actually increases with the higher cost of less efficient capital. Thus, compared to those industries devoted to making their living from getting oil from the Canadian oil sands reserves, Saudi Arabian industries benefit from a huge rent. As Ricardo already stated, the rent of the first capital (which monopolizes the access to the most productive ecosystem) increases as further natural domains become chrematistically exploited by others. Thereby, Smith’s famous otter and deer became more valuable in exchangevalue terms in the exact proportion by which over-hunting and their natural habitat destruction reduced their existence in the British countryside. Here, as in many cases, exchange-values follow an opposite path to use-values: the oikonomy performs very badly, while the chrematistic process may thrive. As Daly (1998: 22) suggested referring to ‘Lauderdale’s Paradox’, the increase in exchange-values – or ‘private riches’, defined as ‘‘all that man desires (. . .) which exists in a degree of scarcity’’ – may be a reflex of the depletion of ‘public wealth’ or ‘‘all that man desires that is useful or delightful to him’’ but exists without supply restrictions. Once scarce, public wealth becomes private riches and gain increasingly in their exchange-value, although their aggregate use-value is diminishing. Translating all different qualities into a common quantitative denominator, within economics ‘natural rent’ expressed in exchange-value terms became, in fact, a convenient black-box hiding the complex and multidimensional biophysical and sociocultural dynamics which sustains and nurtures the human economic process. The next big simplification came by restrictively defining ‘human productive labour’ as the one associated to exchangevalue (that is, wage labour) and not any human productive activity aimed at generating use-values in general. The way in which wealth in the form of culture, knowledge, childraising, reciprocal support, social identity, security, etc., is (re)produced within the family structure, communities and social networks, was ignored altogether, as long as it happened outside the market. It ignores, too, what Illich termed ‘shadow work’, which comprises all the unpaid human productive activities done at a personal, familiar and community level (like going to work, cooking, informal education, self-care, etc.), which are needed in order to allow a labourer to sell his labour on the market in the first place. As Illich argued, although no price is associated with it, this ‘shadow work’ is a fundamental part of the economic process and central to the re-production of the supposed commodity ‘labour’ (Illich and Cayley, 1992: 156; Illich, 1981). Moreover, this restrictively defined ‘productive labour’ was reduced to a purely abstract notion of ‘simple labour’, measurable in ‘working hours’ irrespectively of its particular qualities. All ‘labours’ were, thus, reduced to a common denominator once, according to Smith, ‘‘in his ordinary state of health, strength and spirits; in the ordinary degree of his skills and dexterity, he [the labourer] must always lay down the same portion of his ease, his liberty, and his happiness’’ (Smith, 1961: 37). The notion of labour seen in purely quantitative terms would be further developed by economists, leading Marx to define the ‘socially necessary labour’ as a

purely abstract average of all different labours needed to produce a given commodity in a given historical and environmental context. Presented in purely negative terms – as an unpleasant mechanical, unskilled and homogeneous activity, measurable in homogeneous clock-hours – or as an abstract average, labour looses its cultural and social meaning in the eyes of modern economics. Measured in exchange-value terms, its sole motivating factors is seen to be the chrematistic logic of maximizing earnings for a minimum labour time. Thereby the social, cultural and individual factors which go beyond the chrematistic maximising calculus and which gave meaning to human labour in non-capitalist societies (and even within capitalism) could be ignored by economists once labelled as ‘irrational’. ‘Time is money’ was already a central element of Benjamin Franklin’s ‘capitalist spirit’. Within modern economics, it became its leitmotif once the ‘opportunity cost of time’ started to be calculated; by the associated earnings any ‘economic agent’ could have in a given time-span and which he has to renounce if he ‘idles around’, ‘goes to the cinema’ or ‘dies prematurely because of environmental contamination’ (examples given by Franklin, 1993; Stiglitz and Walsh, 2002; Summers, 1992, respectively, arguing how time – and thus the value of a human life – should be measured in monetary terms, according to the potential or actual earnings of the bearer of this life). Notwithstanding, even if depicted in purely quantitative terms, already Ricardo pointed to the fact that human labour is not always homogeneous and that there is a creative time which cannot be translated into clock-time. ‘‘There are some commodities [like ‘rare statues and pictures, scarce books and coins, wines of peculiar quality’] the value of which is determined by their scarcity alone’’ (Ricardo, 1970: 12). This points to a unique and unrepeatable creative act which cannot be summed-up under the label ‘simple labour’. Notwithstanding, once again simplicity was restored by stating that ‘‘these commodities, however, form a very small part of the mass of commodities daily exchanged in the market. By far the greatest part of those goods which are the objects of desire, are procured by labour; and they may be multiplied, not in one country alone, but in many, almost without any assignable limit, if we are disposed to bestow the labour necessary to obtain them’’ (ibid.: 12). As in the case of the ecological basis of human wealth (summed-up as ‘land rent’), this creative human labour would be considered solely ‘in bulk’, as a differentiated rent which arises as long as its fruits can be monopolized by private ownership. Be it Marx’s relative surplus-value – which arises when a productivity gain due to innovation allows individual capitalists to produce the same amount of exchange-values with less labour, or be it Schumpeter’s entrepreneur’s profit – which holds as long as innovations do not become widespread, the inquiry into the nonlinear and qualitative dimension of human creative labour were ignored; only the way in which new production and distribution forms crystallize into differentiated exchange-values surpluses by means of existing monopolistic positions were considered (Marx, 1967; Schumpeter, 2004). Although innovations may spread into ‘normal’ economic life and be adopted by other producers, standardized and

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carried out ‘almost without any assignable limit’, there are continuously new innovations being introduced, disrupting the previous economic (as well as social and environmental) equilibrium. Technological change and the increasing importance of ‘intellectual capital’ – particularly within contemporary ‘knowledge or information society’ – cannot be simply ignored or hidden behind a ‘simple labour’ label. Nor can we look only to its chrematistic manifestation (that is, ‘extraordinary surplus-value’ or ‘the entrepreneur’s profit’) in order to try to understand modern economic dynamics. The innovation process pertains to a qualitative, creative time which cannot be measured in clock-time’s ‘working hours’ (Stahel, 2002: 265–325). As in the case of Nature’s dialectics, here too simplicity was achieved by simply ignoring the complex socio-cultural, institutional and technological dynamics underlying the economic ‘creative/destruction’ process. With the emergence in the second half of the XIX century of the neoclassical framework and its paradigmatic consolidation and hegemony within economics in the XX century, a further blow to complexity and the final reduction of economics to chrematistics has been achieved. In the first place, politics would be brushed aside from economics altogether by the notion of ‘positive economics’ and the depiction of economics as a neutral ‘tool box’. Different class interests, cultures and subjectivities would be homogenised by the notion of ‘economic agent’ behaving in a purely rational way, irrespectively of class, gender or cultural background. . . Ignoring the classic emphasis on the political dimension of the distribution process – whereby there is always a social struggle around the historically specific definition of the ‘subsistence level’ and thus real wages – the neoclassic economists got rid of politics and the notion of competing class interests by defining ‘factors of production’s remuneration’ according to their ‘marginal productivity’, reducing to a common denominator human beings, Nature, tools and machines. Be it the capitalist owner of the company, the white-collar executive, the blue-collar labourer on the production line or the consumer in the supermarket, all ‘economic agents’ are seen to behave in the same mechanical way, ‘maximizing benefits or utility’ and ‘minimizing their costs or sufferings’. Differentiated earnings are seen as an objective matter of differentiated marginal productivities and not the outcome of a political struggle concerning the distribution of social product. Finally, by ignoring the classical distinction between value and prices (and Marx’s philosophical distinction between ‘appearance’ – the way exchange-values are translated into prices in each concrete market – and the underlying ‘essence’ which governs this process), wealth would be reduced to its monetary manifestation. ‘Value’ became equated not only to ‘exchange-value’, but directly to market prices. Things, people, nations and societies are ‘valuable’ or ‘rich’ according to monetary indicators as GDP and no longer as a function of their ability to ‘enjoy de conveniences and amenities of life’. . . As a final blow to complexity within economics, the use and abuse of the neoclassical ceteris paribus condition allowed getting rid – at the theoretical level – of the interdependent and ever-changing social, political, cultural and ecological dimensions of the economic process. Assuming ‘everything else

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being unchanged’ and by assuming causal lineal relations between variables, economics could mirror mechanical physics, thus becoming a mathematical model-building and model-solving exercise. But unlike physics, where the insights and predictions derived from abstract models sooner or later were contrasted to empirical observations, within economics the very complex and dynamic nature of the actual economic process precluded empirical (Popperian) falsification. The easy way out has always been to attribute the incongruence of reality and the formal model to ‘external factors’ and the impossibility of getting ‘laboratory conditions’ in order to test any economic theory. In a very defensive, paradigm preserving (Kuhnian) way, the main core of most economic theories could thus be preserved, in spite of contradictory empirical indications. Moreover, entering the normative dimension, abstract models were continuously rescued from refutation by presenting them as the way the world would behave and equilibrium would be achieved if only the main assumptions of the model – like free-market competition, no political, cultural or irrational interferences, perfect information, etc. – were respected in reality. In face of the balanced dynamics depicted in the model, it is the fuzzy reality with its political, irrational and ‘inefficient’ interferences on the smooth functioning of the market which has to be changed, not the other way around. Potential refutations of theory are thereby converted into normative policy recommendations, reinforcing in a quiet subtle way economics’ political and ideological role. Instead of by content, economics became defined by form, by the manipulation of a given set of ‘allowed’ methodological procedures and a strict delimitation of its field of inquiry. As Dobb put it, ‘‘this conception of pure economist’s role has, naturally, been furthered by the vogue of mathematical methods and forms of statements in economics, to the point even of purifying the subject of notions, elements or relations incapable of being quantified and expressed in an equational system’’ (Dobb, 1973: 4). In the same line, Balug observed that although ‘‘economists have always regarded the core of their subject as ‘science’, in the modern sense of the word’’ in ‘‘practice, they frequently lost sight of this scientific objective and the history of economics is certainly replete with tautological definitions and theories so formulated as to defy all efforts at falsification’’ (Blaug, 1988: 697). Mirroring the Newtonian paradigm of formal elegance and simplicity, universal claims for its theories, strong mathematization, presumption of predictability and causal relations between objects which respond in a fully determinable mechanical way to outside stimuli, as Georgescu-Roegen stated, ‘‘economics, in the way this discipline is now generally professed, is mechanistic in the same strong sense in which we generally believe only Classical mechanics to be’’ (Georgescu-Roegen, 1971, p. 1). In the meantime, as is well known, Newtonian physics core assumptions have been challenged by modern quantum theory, Einstein’s relativity, classical and the far-fromequilibrium thermodynamics. The discoveries, among others, of indeterminacy, discontinuities, nonlinear relations, nonseparability of the ‘object’ and the ‘observer’, the inexistence of a final ‘atomic’ building-block at the quantum level, the

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interdependency between time-space, matter and energy at the macro-level or the study of self-organizing complex systems with their internal irreversible time within modern thermodynamics, have all represented blows to the Newtonian dream of a stable, fully knowable and determined Universe. Nevertheless, economics appears unaffected by the turmoil within its paradigmatic model. A quick look at any macro or microeconomics textbook or at present day economics journals shows us the surviving Newtonian paradigm. We need only have a quick look at a standard Demand X Supply diagram to see the continuing presence of Newtonian presumptions. Little in the world of science looks as simple, straightforward, elegant and analytically promising. Relating prices with quantities and producers with consumers, a world of equilibrium and balance is represented. Based on this diagram, economists manage to study nearly everything, from employment to migration patterns, wages, incomes, price dynamics and even, as some economists dared, to use it as an analytical tool to explain the number of wanted children in a family or the preferred target for criminal gangs. However, as any text-book will show, a standard demand function is defined as3 D ¼ f ðP; Ps ; Pc ; Pe ; r; Ts and Pr; I; Y; NÞ; while the supply function is given by4 S ¼ gðP; Tc; Pi ; Ps ; Pc ; Pe ; r; Tx and Su; I; M; F; GÞ: In order to make this multidimensional model operational, all these variables – except quantity and prices, considered as endogenous – are postulated as unchanging by means of the ceteris paribus assumption. Notwithstanding the fact that all these variables are neither unchanging, nor independent nor truly exogenous. They are, in fact, central features of the economic dialectics and behind each one of them we can find complexity lurking. ‘Future expected prices’ leads us to the realm of psychology, game theory and chaos theory once we realize how individual expectations affect and are affected by other’s expectations; tastes and preferences lead us to the realm of human needs theory, culture, identity and the way symbolical meaning is (re)produced within society in what Baudrillard (1972) termed the ‘Political Economy of the Sign’. Interest rates have to do not only with banking and private and state finances, but with national and global geopolitics, institutions and, again, human expectations. ‘Information’ has to do with the interdependent dimensions of human cognition and subjectivity as well as the existing information technologies, scale, alienating factors, language and culture. Income has to do with the market dynamics, institutional settings,

relative powers of competing interests and particular historical realities, and so on for all these variables. These variables are clearly context dependent. If we consider that each of them affects the relative shape and position of the demand and supply curves, their dynamic behaviour is crucial to understand even chrematistics and they cannot simply be considered in bulk as exogenous variables. In order to understand the economic process we certainly need to take into account these variables (to a lesser or higher degree), although sacrificing simplicity and the formal elegance of the model. . .‘Eppur si muove’, Galileo’s famous (supposed) saying while leaving the inquisition room, could be easily used today not as a critique of medieval theology, but as a critique of modern economics’ faith on the ceteris paribus condition, allowing its abstract model-building practice. To summarize, as Blaug concluded his analysis, ‘‘within neoclassic economics, all the growth-producing factors, such as expansion of wants, population growth, technical change and even the passage of time itself, were placed in the box of ceteris paribus. The remaining system of endogenous variables was then shown to have a unique steady-state solution (. . .). The entire procedure was justified by the short-run purpose of the analysis, although this did not prevent excursions into welfare economics involving long-run considerations. The endogenous variables manipulated in neoclassical models were frequently incapable of being observed, even in principle, and most of the theorems that emerged from the analysis likewise failed to be empirically meaningful (. . .). In addition, the rules for legitimately treating certain variables in the model as exogenous – they must be independent of the endogenous variables in the model, or related to them in a unidirectional manner, and they must be independent of each other – were constantly violated (. . .). The standard excuse for treating variables as exogenous that clearly are not exogenous is analytical tractability and expository convenience. For a whole range of practical problems, it is in fact a very good excuse. But the temptation to read more significance into the analysis than is inherent in the procedures is irresistible, and most neoclassical writers succumbed to it. Ambitious propositions about the desirability of perfect competition were laid down with insufficient scruple (. . .). The besetting methodological vice of neoclassical economics was the illegitimate use of microstatic theorems, derived from ‘timeless’ models (. . .) to predict the historical sequence of events in the real world (. . .). Since economic activity takes place in time, can any ‘timeless’ economic theory even hope to predict anything? (Blaug, 1988: 699–701). One now famous and illustrative example of where this kind of methodological approach can lead is found in the fate of the Black–Scholes formula: pffiffiffi C ¼ SNðdÞ  Lert Nðd  s TÞ;

3 Product price, P; price of substitutes, Ps; price of complements, Pc; future expected prices of the good, Pe; interest rate, r; tastes and preferences, Ts and Pr; information, I; income Y and population N. 4 Product price, P; technology, Tc; price of inputs, Pi; price of substitutes – in production – Ps; price of complements – in production – Pc; future expected prices, Pe; interest rate, r; taxes or subsidies, Tx and Su; information, I; market size, M; number of firms, F; goals of the firm, G.

where d¼

lnðS=LÞ þ tðr þ s 2 =2Þ pffiffiffi ; s T

This formula was derived by economists Myron Scholes, Robert Merton, and the late Fischer Black. It predicts how

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much a call option is worth at any given time and earned Scholes and Merton the 1997 Nobel Prize in Economics since ‘‘their innovative work in the early 1970s, which solved a longstanding problem in financial economics, has provided us with completely new ways of dealing with financial risk, both in theory and in practice’’ (The Royal Swedish Academy of Sciences, 1997: 1). The formula had a big impact within economics, as well as the financial markets. Even before being published, option traders simply programmed the Black–Scholes formula into their calculators or bought ready-made software and, by pressing a few buttons, they could find the exact price of any option at any time as well as determinate the ideal ‘risk-free’ investment portfolio. Zvi Bodie likens the impact of its discovery to that of the structure of DNA. Both gave birth to new fields of immense practical importance: genetic engineering on the one hand and, on the other, financial engineering (Bodie and Merton, 2000). In any case, it ‘‘has contributed substantially to the rapid growth of markets for derivatives in the last two decades’’ (The Royal Swedish Academy of Sciences, 1997: 1). In 1994, both Merton and Scholes, were hired by John Meriwether, a famed Salomon Brothers bond trader, who assembled an all-star team of traders and academics in an attempt to create a fund that would profit from the combination of the academics’ quantitative models and the traders’ market judgement and execution capabilities. Financial engineering could thus be applied in practice, counting on the financial backing of many large investment banks and sophisticated investors who invested $1.3 billion at inception of this new fund called Long-Term Capital Management (LTCM). Everything seemed to go fine: Scholes and Merton got their Nobel prize and early 1998 the portfolio under LTCM’s control amounted to well over $100 billion, although their net asset value was only about some $4 billion. It had become a major supplier of index volatility to investment banks, was active in mortgage-backed securities and was dabbling in emerging markets such as Russia. But after the Russian financial crisis in August, the fund received a severe blow and in early September its equity dropped to $2.3 billion. The behaviour of the markets ceased to be ‘normal’ and strange results appeared. . . ‘‘Although their models told them that they shouldn’t expect to lose more than 50 million or so on any given day, they began to lose 100 million and more day after day after day till finally there was one day, 4 days after Russia defaulted, when they dropped half a billion dollars, 500 million in a single day’’ (Lowenstein, in BBC2, 1999). On September 22, LTCM’s equity had dropped to $600 million and at the end of this month, after having lost substantial amounts of the investors’ equity capital and teetering on the brink of default, it had to be rescued by a $3.5 billion rescue package from leading investment and commercial banks, orchestrated by the US Federal Reserve, in order to avoid a major crisis in the world financial system. As Maurice Ash notes, this crisis is not unrelated to the ‘secretiveness and sheer incomprehensibility to all but a tiny group of initiates’ of the formula that gave birth to this financial hubris. ‘‘It is now forty years since (. . .) Peter Winch showed in The Idea of Progress that an inquiry into society can be pursued only in the language in which that society itself is

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conducted (or which could be intelligibly derived therefrom).’’ Manifestly, this precludes the imposition of any explanation of social behaviour derived from logic outside it, and above all the imposition of any universal theory or ideology or any formula (. . .). Nobody, of course, paid any attention to such ideas, and certainly not the economists. Their new found powers of measurement were making them the arbiters of society – just as physics (pre-quantum mechanics) was the arbiter of the natural world (. . .). The board of LTCM thought it could play God with the market. This is what happens when you try to speak a private language. The truth of whatever you say is not verifiable except by reason of your own assertion of it. In practice, however, even if one holds a conversation with oneself – as we all constantly do – one must use public language to do so. Should we nevertheless persist in the construction of an inner world, the outcome can only be, at worst, madness of one kind or another, or sheer folly’’ (Ash, 1999: 36 and 37).

3.

Economics and the modern world

As Prigogine suggests, modern science forgot the ancient alchemical device ‘‘ignis mutat res (. . .) chemical bodies are the creatures of fire, of the irreversible becoming’’ (Prigogine and Stengers, 1996: 266). Instead, scientific knowledge was based on cold objectivity and distance from the ‘hot’ world with its contradictions and irreversible dialectics. While modern scientist were supposed to detach themselves from their subjective preferences, emotions and ethical values, maintaining an ‘objective’ distance from their research subject – at the public arena, as Marx and Engels famously stated in their Communist Manifesto and Berman (1995) made the leitmotif of his analysis of modern society and culture, modern society would be erected under the sign of fire and change. ‘‘The bourgeoisie cannot exist without constantly revolutionizing the instruments of production, and with them the relations of production, and with them all the relations of society (. . .). Constant revolutionizing of production, uninterrupted disturbance of all social relations, everlasting uncertainty and agitation, distinguish the bourgeois epoch from all earlier ones (. . .). All fixed, fast-frozen relations, with their train of ancient and venerable prejudices and opinions, are swept away, all new formed ones become antiquated before they can ossify. All that is solid melts into air, all that is holy is profaned. . .’’ (Marx and Engels, 1997: 16–17). The economic reality inaugurated by the bourgeois revolutions of the 18th and 19th centuries stands, thus, in harsh contrast to the methodological and analytical tools which became established within modern science and, particularly, economics in order to study it. In face of a society whose market-competition based regulation process tends to ‘constantly revolutionize the means of production’ and thus society and even the biosphere at large, economics presents a simile of the Newtonian Universe in which money, goods and services flow in a balanced, hindrance free and eternal way within ‘the circular-flow model’. In face of the turbulences of 19th and early 20th century social and environmental history, economists were searching for simple and universal ‘General Equilibrium Models’ which, as for

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Laplace’s famous demon, would allow them to ‘‘condense into a single formula the movement of the greatest bodies of the universe and that of the lightest atom,’’ in order that ‘‘nothing could be uncertain and the future just like the past would be present before his eyes’’ (Laplace, 1995). From this perspective, it is maybe at the subjective ideological level that we have to look for the reasons for the adoption of the Newtonian paradigm by economists, in spite of its flagrant inability to explain the economic process. Prigogine and Stengers suggests that the adoption of the objectivity paradigm within science is strongly related to a need, at a personal level, to detach oneself from the vicissitudes of the world with its manifold contradictions (Prigogine and Stengers, 1996, particularly their quote from Einstein: 48–53). In the same vein, Berman showed how the modern mind has always been caught between the contradictory feelings of fascination/attraction and the horror/ rejection of the permanently moving and disrupting history which characterizes our modern world. This can be understood to have led, within modern culture and science, to the embracing of a blind faith in progress (whereby present crises and contradictions have to be accepted as necessary steps on the ongoing march towards a higher good and social order), or a romantic and idealized search for peace and harmony, placed whether in a pristine past or an utopian future (Berman, 1995). In either case, a crude simplification at the representative level replaces an ambivalent, contradictory and complex reality. And it is probably within economics that we can see, in the domain of science, one of the clearest rejections at a personal and theoretical level of coming to terms with the dialectics of history and of accepting its contradictory and irreversible dimensions. Since its inception, Adam Smith’s idea of an ‘invisible hand’ driving the whole process towards a common goal of common interest, peace and welfare, have been a central element in economics and its equilibrium models, legitimizing the emerging free-market based bourgeois led system. Bringing comfort in the face of the modern history’s turmoil, the economic process has been depicted as an ordered movement which ‘‘diffuses general benefit, and binds together, by one common tie of interest and intercourse, the universal society of nations through the civilized world’’ (Ricardo, 1963, p.70). As a moral philosopher, Smith was certainly aware of Aristotle’s critique of chrematistics, which persisted during the medieval era in the form of the Church’s condemnation and interdiction of usury and in the way in which, as Polanyi shows, except for our modern approach, the market and its underlying exchange-value logic has always been culturally and socially controlled. Smith, in his Theory of the Moral Sentiment, considered personal and social virtue as intimately related to and following clearly on from established ethical and moral principles as opposed to being some de-ontological automatic result of interchanging amoral behaviours within a free-market framework. Notwithstanding, in The Wealth of Nations, building on Mandeville’s ‘fable of the bees’ and his idea that individual vices may contribute to the collective good, Smith stated his famous principle of the ‘invisible hand’ which would channel individual chrematistic greed towards the collective good. Moral virtue could spring directly from the free functioning of the market, no longer needing an external

cultural framework guiding it since ‘‘it is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity but to their self-love, and never talk to them of our own necessities but of their advantages. (. . .) Each individual tries to employ his capital as close to his home as possible. (. . .) When he prefers the economic activity of his country instead of a foreign one, he only considers his own security, and when he directs the former one in order that his product represents the highest value, he only thinks of his own benefit. But in this case, as in many others, he is conducted by an ‘invisible hand’ to promote an end that do not entered in his intentions. (Smith, 1961: 18; 402). In the same vein, Ricardo argued that ‘‘experience, however, shows that the fancied or real insecurity of capital, when not under the immediate control of its owner, together with the natural disinclination which every man has to quit the country of his birth and connections, and intrust himself, with all his habits fixed to a strange government and new laws, check the emigration of capital. These feelings, which I should be sorry to see weakened, induce most men of property to be satisfied with a low rate of profits in their own country, rather than seek a more advantageous employment for their wealth in foreign nations. (. . .) Under a system of free commerce (. . .) this pursuit of individual advantage is admirably connected with the universal good of the whole’’ (Ricardo, 1963: 72 and 70, respectively. emphasis added). Although their reading of the ‘invisible hand’ promoting the home economy turned out to be false from today’s historical perspective, it has succeeded in legitimating, from a supposed ‘scientific perspective’, the expansion of freemarket mechanism by stating chrematistics being at the service of the oikonomy. Each individual guided by his chrematistic self-interest is thus seen to promote simultaneously his own and the collective welfare. Competition and contradiction turn out to be cooperation and commoninterest, and chrematistics is seen as an instrument of the oikonomy. (Fig. 2). In that sense, a closer look at Ricardo’s trade theory presents many elements to exemplify Blaug’s proposition that ‘‘when certain theories become the scientific ideas which rule their epoch for good ‘internal reasons’, there are often ideological reasons which render the theory pleasant for the

Fig. 2 – Chrematistics an instrument of the oikonomy.

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created interests and attractive for the common men’’ (Blaug: 843). Following a standard procedure within economics, Ricardo starts his theory imagining a hypothetical case, ‘If Portugal had. . .’ and than he goes on imagining two countries – England and Portugal – producing two different goods – wine and textiles – first in autarky and later on specializing each one in one good – Portugal on wines, England on textiles. He builds up his argument postulating that there are different productivities of labour as well between sectors, as between countries. In a generous way – being a Brit – he supposes Portugal to be more efficient than England in both sectors, although relatively much more efficient in the wine sector.5 Once the model had been defined, it could easily be shown, from a static comparative perspective, that both countries would be better off with trade and economic specialization and that it is ‘‘this principle which determinates that wine shall be made in France and Portugal, that corn shall be grown in America and Poland, and that hardware and other goods shall be manufactured in England’’ (Ibid.: 70–71). Interesting enough, he makes his case based on the hypothetical-deductive logic, taking his proof from his abstract model, not from actual reality. However, there is an historical equivalent to the model which sheds some light on the consequences of trade specialization between Portugal and England. In 1703 Portugal and England signed the Methuen Treaty in Lisbon. This was a commercial treaty which established that English textiles would be accepted in Portugal and that the Portuguese wines would be preferred in England, by paying only two thirds of the rates settled with the French. This made Portugal attractive to British wine producing capitals – converting the Oporto hinterland into an important wine producing region – while, at the same time, fostering the British taste for ‘Port Wine’ which started to be exported in increasing quantities to the UK. At the same time, it opened the Portuguese market to British textiles, ensuring that, unlike other mainland European countries, Portugal did not undergo the second wave industrial revolution, and failed to establish its own autochthonous industry in the face of competing British imports. To blame the Methuen Treaty for all these later socioeconomic developments would certainly be over-simplistic. But certainly a lot could be written about the economic and political effects of this commercial treatise, how it deepened Portugal’s historical economic and political dependency vis-a`vis Britain, and how, thereby, Brazilian gold and colonial wealth helped to finance the British industrial revolution and not a Portuguese one. And it is, probably, this underlying story which made Ricardo’s theory ‘particularly pleasant for the created interests’ and, at the same time explained to the common Briton why he was drinking Portuguese port wine with the earnings of his textile activity. Similar readings could be done for the 20th century Heckscher-Ohlin trade models (which present Ricardo’s idea in a formally more sophisticated manner) and which explained why the international division of labour – some 5

He supposed that Portugal needed the labour of 80 and 90 men/ year to produce wine and cloths, respectively, while in the UK, 120 and 100 men/year were supposed to be needed for the same task (Ricardo, 1963: 71).

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countries, the central ones, specializing on industrial goods, others sticking to agriculture and primary goods – was supposed to be in the interest of all. It was only under the theoretical umbrella of the United Nations’ Economic Commission for Latin America and the Caribbean’s (ECLAC) alternative ‘dependency theory’ – pointing to the ‘historical trend of diminishing terms of trade’ between the primary and the secondary sectors – that an industrialization process under strong protectionism and state intervention was backed in countries like Me´xico, Brazil or Korea, replacing the ‘invisible hand’ by a very visible one. Significantly, ECLAC’s theorists such as the Argentinean Raul Prebish and the Brazilian Celso Furtado, started with an empirical fact (‘the diminishing returns’ experienced by the primary goods exporting countries) and created theories aimed at explaining this fact and not the other way round. At the same time, generating intense debate at both the theoretical and political level, they would support the Argentinean and Brazilian – among other developing countries – industrialization efforts, challenging policy recommendations derived from conventional neoclassical trade theories. Here, as elsewhere, the theoretical models of economics, although apparently far from the actual historical reality, are very close to practical political interests. As Dobb argued, ‘‘whatever one might be led to expect a priori, the history of political economy from its inception makes abundantly clear how closely (and even consciously) the formation of economic theory was linked with the formation and advocacy of policy. Although the doctrines of the classical school were very abstract (. . .), they were related very closely to practical issues of their day’’ (Dobb, 1973: 22). Similarly, Blaug concluded that ‘‘the history of economics reveals that economists are as prone as anyone else to mistake chaff for wheat and to claim possession of the truth when all they possess are intricate series of definitions or value judgements disguised as scientific rule. There is no way of becoming fully aware of this tendency except by studying the history of economics. To be sure, modern economics provides an abundance of empty theories parading as scientific predictions or policy recommendation carrying concealed value premises’’ (Blaug, 1988: 711). This close relation between economic theory and political interests should not be surprising, since in the modern world the free market has become the main institution ordering the economic, social and thus ecological order, and whatever is said in this realm and, moreover, presented with the authority of an ‘objective scientific knowledge’, is of the foremost political and ideological relevance, leaving us having to consider modern economics both from the theoretical and ideological perspective as an attribute of the economic systems it justifies.

4. Free-Market, complexity and the oikonomic process As Polanyi showed, ‘‘the civilization of the 19th century was unique precisely in that it centred on a definite institutional mechanism. (. . .) The key to the institutional system of the nineteenth century lay in the laws governing market

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economy. (. . .) It was this innovation which gave rise to a specific civilization. (. . .) While history and ethnography knows of various kinds of economies, most of them comprising the institution of markets, they know of no economy prior to our own, even approximately controlled and regulated by markets. (. . .) The principle of use and that of gain was the key to the utterly different civilization the outlines of which Aristotle accurately forecast two thousand years before its advent out of the bare rudiments of a market economy available to him. (Polanyi, 1944: 4, 3, 44 and 54, respectively). Now, what can be said about this institutional mechanism from the perspective of complexity theory? As we saw, the answers to this question is by no means neutral. If, as Polanyi suggests, modern history’s political struggle can be read as the consequence of the struggle between those who want to expand and those who try to restrain the domains covered by the free-market mechanism, an assessment of the virtues and vices of the market regulation mechanism are of primary political and historical relevance. At a first glimpse, the free-market mechanism evokes the potentialities of self-organizing systems. It mirrors the ability of a decentralised ‘market anarchy’ to bring forth order out of chaos. From Boolean functions and networks, up to ant colonies or ecosystems, everywhere order is seen to arise at the higher level out from local, decentralized interactions between a sufficient number of elements within dynamic, open systems. It is, thus, tempting to see the institution of free markets, in which different agents interact at different levels in a decentralized way, as the right framework to bring forth a flexible and resilient system, leading Kauffman to suggest that ‘‘the mutualism of the biosphere, where advantages of trade exist, find its mirror in economic systems, where advantage of trade exist in the vast web of goods and services’’ (Kauffman, 1996: 217). A rapid overview of the market-based modern economic development process seems to confirm that modern economic process is, indeed, a dynamic and flexible one. At the same time, increasingly likelier, the ‘flap of a butterfly’s wings’ in Wall Street may unleash a financial tornado in Tokyo or Frankfurt’. . . The dynamism of modern economy and society is undeniable. Notwithstanding, we should not forget that this dynamism is based on and manifests itself mainly in its own internal chrematistic terms. Boosted by the chrematistic’s progressive and infinite accumulation drive, new commodities are constantly being created and (re)produced, and new social and ecological domains are brought under the chrematistic exchange-value logic (O’Connor, 1992 and Stahel, 1999). But this does not imply an equal dynamism at the oikonomic level, in the ‘art of living well’. Quite to the contrary, in many cases, as our present day sustainability crisis seems to indicate, a negative correlation between these two dimensions seems to hold. Confronted with the contradictions brought fort by its own dynamics, the system displays an enormous flexibility and ability to neutralize them by means of translating them into its own chrematistic terms. In this way, just to name a few cases, the social unrest of the 19th century gave way, in the central economies, to the Welfare-State with its huge consumer demand laying the groundwork for the chrematistic growth in

production of the post-war era, after converting the politicised ‘united proletariat’ into a individualised and fragmented affluent consumers. The ecological and cultural critique of the ‘materialistic’ and ‘capitalistic’ post-war era in the sixties was rapidly absorbed within new markets, creating opportunities for the entertainment industry and a range of alternative cultural products, in the same way as the ‘new age’ movement has been progressively converted into ‘new markets’ for New Age industries and gurus. Along the same lines, the present-day ecological crisis simultaneously opens new markets for all kind of ‘eco-industries’ which make their living within the chrematistic market by offering recycling and decontamination services, and giving rise to labelling agencies, bio-products industries and myriad NGO communities. Finally, at least in the short and medium-term, the ‘risk society’ (Beck, 1986) represents not a threat, but new market opportunities for the ‘security industry’. What is important to retain from these examples is that the system’s extreme dynamism at the exchange-value level does not necessarily means an equal increase in welfare at the usevalue level. Complex systems are not structured the same way across all levels and the qualitative differences between the use and exchange value systems are an example. As we saw, these are not equivalent. For instances, Keynes famously suggested that ‘‘if the Treasury were to fill old bottles with banknotes, bury them at suitable depths in disused coal mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on the well-tried principle of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for the leases of the notebearing territory), there need be no more unemployment and, with the help of the repercussions, the real income of the community, and its capital wealth also would probably become a great deal greater than it actually is’’ (Keynes, 1936: 129). Here the author clearly considers wealth (‘capital wealth’) in chrematistic terms, whilst it may be dubious to consider mining into rubbish for money-filled bottles as an integral part of the ‘art of living well’ practice. Before him, Adam Smith noted – but did not pursue its consequences for economic theory – that ‘‘things which have the greatest value in use have frequently little or no value in exchange; and on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water: but it will purchase scarce any thing (. . .). A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it’’ (Smith, 1961: 32–33). Although he doesn’t consider the subjective and culturespecific value both goods may have in terms of identity, social status, etc., Smith’s water-diamond paradox does point to an essential aspect of this relationship between use and exchange values: if economic wealth is to be measured by the ability to have access to the instruments necessary to ‘enjoy the necessaries, conveniences, and amusements of human life’, these are not measured by their aggregate exchange-value, but by their use-values. As we saw with Aristotle, it is certainly dubious to call disgraced King Midas a rich person while he was starving. We find a similar situation with increasing cancer rates due to environmental contamination, which nonetheless increase the overall chrematistic

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turnover within the health and related industries, but certainly not our collective wealth. In the same line it may be argued that the often heard claim for a ‘right to work’ or ‘need to curb unemployment’ misreads the crucial point from the oikonomic perspective which is the need to access usevalues (be it by means of chrematistics or not) in sufficient quantities and in a social just way. Not job-creating policies by burying money-filled bottles or an increase in military spending, but the reproduction of use-values (be it by means of human wage-labour or not) and social and political mechanism to ensure an equal redistribution of these usevalues and thereby the means to establish a balanced social order and wealth at the individual and collective level. Right from the start, the subjective and cultural dimension of usevalues points to the contradictory character of a society which devotes an important part of its energy and resources to generating ‘wants’ by means of advertising and marketing, thereby generating non-satisfied needs – i.e., poverty – while, at the same time, sees itself devoted to a crusade against ‘poverty’ at the global scale and a reduction in resources consumption in order to attains sustainability (Stahel, 2002). From the oikonomic perspective, Illich’s (1973) forced obsolescence – whereby new commodities deplete the value of older ones generating new poverties – does not make much sense. But it does from a chrematistic perspective. It is the pressure of chrematistic’s progressive drive which may explain why some of our most creative minds devote themselves to foster the consumption drive of the already over-feed central elites whilst depicting the immense majority of the world’s population as ‘poor’, straining the ‘art of living and living well’ at all levels. In fact, often, chrematistics occurs at the expense of the ‘art of living and living well’ since ‘more’ becomes the opposite of ‘better’. For example we may understand voluntary austerity – keeping our possessions within limits – instead of being driven by our consumer culture to desire what we don’t have, to be an integral and fundamental part of ‘the art of living and living well’. It provides us with more free time to enjoy our social relations and to share our non-commodified commons while, at the same time, helping to preserve our environment’s ability to (re)generate its myriad of ‘free’ use-values. The distinction becomes even more important when we consider that for the relatively well-off of our present day affluent societies, it is time and not goods which are in short supply. In fact, already having crossed the threshold of over-accumulation, rather than increasing our well being, new goods are adding to our stress, confusion and difficulties to ‘‘know what one wants, to decide what one does not want, and to cherish what one has’’ (Sachs, 1999: 16). Our modern economic system is based precisely on a roleinversion by which chrematistics goes from a means-to-anend to became an end in itself. If, as Aristotle argued, chrematistics is secondary to oikonomy both from a logical and from a historical point of view, then within our modern world, as we saw with Polanyi, instead of the economic system being absorbed by the wider social system, it is the society as a whole which had to be restructured into a ‘market society’ in order to allow for the smooth functioning of the marketcompetition based economic process. In language of complexity, we may say that the current system is begin driven from

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the passenger seat: that is to say the logic of the secondary, dependant system of chrematistics is being allow to dictate the organisational structure of the primary meta-system of oikonomy. Sub-systems are, by their nature, likely to have more simplistic or elegant governing dynamics, because they are less complex and we find this patter in the comparative simplicity of chrematistic and the demand/supply dynamics which characterize our market-based development process when compared to the multiple and interdependent ecological, social, cultural, inter-subjective and political dimensions which constitute the oikonomic dialectics. If we presume that Aristotle’s distinction and his identification of chrematistics as the secondary, dependant system are still valid, then a complexity based view on the ecological economic problems discussed here thus far suggests that our current system of neoclassical justifications for free-market systems may actually be running backwards. For the liberal credo on the virtuous of the free-market regulation mechanism, as Kenneth Lux argued, ‘‘Adam Smith left out just one little word – a word which has made a world of difference. (. . .) That word is only. What Adam Smith ought to have said is, ‘‘it is not only from the benevolence (. . .). Smith’s sanctioning of self-interest without any qualifying or restraining force completely eliminated the moral problem in human action’’ (Lux, 1990: 87–89, quoted in Jennings, 2005: 7). By assuming a direct (and complete) relationship between the chrematistic logic at the market level and well being at the social and environmental one, Aristotle’s subordination of chrematistic logic to the oikonomic one was removed. Smith was surely aware of the social and environmental turmoil brought about by the industrial revolution and the emergence of the capitalist market economy. As Marx (1967, Chapter 10) discussed in detail, the British Parliament (1863) had to establish several inquiries into the huge social, sanitary and ecological costs brought about by conversion of the baker’s guild system into a capitalist one. This transition clearly contradicted Smith’s pristine claim that the ‘invisible hand’ would drive the baker’s self-interest entirely towards the collective good. Indeed, as Sachs (1986) argued, a central dimension of the market ‘efficiency’ is the drive to ‘externalize and socialize the social and ecological costs’ while, at the same time, to ‘internalize and privatize chrematistic benefits’. Thereby, the invisible hand not only promotes fresh baked bread early in the morning, but social and ecological costs, as well as a tendency towards monopolist practice, if left unrestrained. In practice, thus, there have always been a constant need to generate social and environmental protections laws restraining the entrepreneurs’ chrematistic self-interest. As Polanyi (1944) reminds us, even in our modern world, the free market has always remained a utopia, since long before its full expression social, environmental and even economic imbalances lead to political reactions and controls. As we know from systems theory, emergent properties mean higher degrees of freedom and the establishment of new organizational domains. When we pass from one system level to a higher one, new organizational laws emerge. Anchored on physics and chemistry, life opens a new domain for the organization of matter and energy, in the same way as culture opens new horizons for the organization of biological life and

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language inaugurates new ways of culture (Maturana and Varela, 1998; Morin, 1977). New degrees of organizational freedom mean that a higher level’s logic (in this case the oikonomy in Aristotle’s sense) cannot be reduced to the lower level’s one (in this case chrematistics). Life’s autopoietic process overcomes the tendency towards irreversible degradation and uniformity which characterises closed, passive systems as stated by the third law of thermodynamics, generating higher diversity and complexity. In the same way, cultural information transcends biological information, allowing for a more flexible and adaptable intergenerational information transfer based on culture and learning, adding a further dimension to biological genetics and hormone based information transfer, opening new domains for organizational freedom and complexity of living beings. Similarly, language made human culture selfreflective, leading to a further degree of freedom, flexibility and adaptability of human behaviour. The autopoietic features of living organisms allow them to establish far-from equilibrium balances and to dissipate their internal disorder not in spite of but, as Prigogine showed, because of the second law of thermodynamics, while the essential openness of this process leads to new, varying and more complex systems. Here, as Ravetz and Funtowicz put it, ‘‘no single perspective from within a subsystem of fewer dimensions can fully encompass the reality of the whole system’’ (Funtowicz and Ravetz, 1994: 575). We cannot understand or reduce human culture and language to the laws governing chemistry (although they play their role therein), in the same way as oikonomy seen as ‘the art of living and living well’ cannot be reduced to the logic of chrematistics. There is no magic ‘invisible hand’, but politics, culture, ethics and aesthetics which may (or may not. . .) subordinate economic marketbased competition and monetary profit-seeking to the goals of human well being and social and ecological unfolding. In this way, economy is Political in a way the founding fathers of Political Economy could not even grasp. It is not only a matter of social conflict around the distribution of socially produced exchange-values. It is also a matter of disputing and defining the concepts we use to describe and explain the objectives of the economic process, from the presumption of the ‘invisible hand’ all the way across to defining the very meaning of the ‘good life’. This meaning, which is the final arbiter of the oikonomic process, is necessarily socially and culturally constructed. It is not something that can be left to the ‘invisible hand’ to decide. It’s definition has profound material consequences for the oikonomic logic we employ and the associated chrematistic actions that must derive their meaning from it, not the other way round. Cultural ethic, aesthetics and political considerations are, thus, a central and unavoidable part of the ‘art of living and living well’ and should, thus, remain the cornerstone of any oikonomic inquiry. Human socioeconomic processes, as an extension of biological life processes, remain means to an end: the culturally defined and physically realized (re)creation of human welfare. Thereby we cannot ignore geology, biology, ecology or agronomy when conducting economic analyses – this is the profound insight presented by ecological economics. However, based on the above arguments, we may extend this position even further; to say that we also cannot ignore

psychology, sociology, politics, cultural studies, ethics and aesthetics as fundamental dimensions of the value (re)production process. Here, oikonomics (to differentiate it from ‘economics’) can also be understood as complexity discourses, where the multidimensional interdependent levels, emergent properties or historical irreversibility of oikonomy’s and chrematistics’ dialectics can be considered. We need to recognize the impossibility (both in theory and practice) of reducing oikonomy to chrematistics. From the higher perspective of the oikonomic logic, there are always ecological and social limits which have to be respected at the individual and collective level in order to sustain a ‘good life’. There is no place for disconnected, individualistic, consumer oriented and hedonistic short-termism of the Nike ‘just do it’ kind of ethics, nor for a formalist blind faith in the elegance of the invisible hand presumption. Instead, we need to invest political, artistic, intellectual and social time and effort into choosing what will be our social and ecological guiding wisdoms – including, if necessary, choosing to restrain our chrematistic accumulation drive at the individual and collective level. ‘The art of living and living well’ is all about choice based on the wise identification and respect of the ecological, social and individual constraints which constitute the very essence of ethics and aesthetics. Like every art, it needs time, skills and inspiration in order to make the right choices and achieve the right balances. Like every art, it does not turn its back to complexity, multidimensionality, transience and contradiction which are the essence of life. And, as such, of the oikonomic process.

Acknowledgements Special thanks are due to Dr. Katrhine N. Farrel and Dr. Mark Lutes for their thoughtful comments and reading of previous drafts of this paper. The author alone is to blame for the remaining shortcomings it may bear.

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