Summary of the Great Transformation by Polanyi

{Short Link for THIS post: http://bit.ly/1tSE9pP ;  Published in Express Tribune on 27 April 2015}. Summary below has been updated to include an additional point — the double movement of Polanyi — on 3 September 2016

An earlier post by Madi provided an introduction to Polanyi’s classic work The Great Transformation. This book is crucial to understanding both HOW and WHY we need to re-structure economic education today. Unfortunately, the book is quite complex, a bit dry and technical at times, and consequently hard to follow. Although many leading economists have praised it, I did not see any glimmer of understanding of its central arguments anywhere in orthodox arena. Even among heterodox economists, it is not frequently mentioned or cited.

Mostly for the purposes of understanding it for myself, I set out to write a compact summary of the key arguments in the book. The central theme of the book is a historical description of the emergence of the market economy as a competitor to the traditional economy. The market economy won this battle, and ideologies supporting the market economy won the corresponding battle in the marketplace of ideas. I quote from the introduction of my article:

The market economy has become so widespread that it has become difficult for us to imagine societies where the market does not play a central role. Yet, for reasons to be clarified in this article, this is the need of the hour. The unregulated market has done tremendous damage to man, society and nature. Bold, imaginative steps to find alternative ways of organizing economic affairs in a society are essential to our collective survival.

Below is a revised and updated version of the ORIGINAL POST. This revision below include some new information, and also provides some clarification of some common confusions related to original post:
Continue reading Summary of the Great Transformation by Polanyi

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Three Goals for Pedagogical Change

While there exist many books, journals and forums discussing improved teaching of neoclassical theories, our goal at WEA Pedagogy blog is radically different. Our goal is to change the teaching of economics in ways that will help all human beings on this planet lead richer and fuller lives, and enable them to realize the potential for excellence possessed by all humans. We would like to eliminate hunger, poverty, economic oppression and injustice, and move towards greater equality in standards of living. We would like all children to have equal opportunities for education, and access to health care.
Is it possible to do this by changing the way we teach economics? Many people, including myself, believe that it is. Indeed, among the major props which support the current extremely oppressive global economic system are the wrong economic theories currently being taught at universities throughout the world. Below I discuss three major obstacles to creating positive changes posed by conventional economics theories. Each of these obstacles provides us with a pedagogical goal: we should change our teaching of economics so as to remove these obstacles.

See link for collections of articles on UNLEARNING ECONOMICS.

FIRST Obstacle to improvements: Normative Positive Distinction

In my paper entitled “The normative foundations of scarcity,” published in issue 61 of Real World Economics Review (download pdf) I have shown that even what is currently taken to be the fundamental defining concept of economics is deeply normative. This is an application of an argument of Hilary Putnam, who showed that facts and values can be entangled in such a way that it is impossible to separate the two. Only after we come to the understanding that economics is not an objective and value-free scientific endeavor, does it become possible to formulate a goal for teaching and studying economics.

ACTION PLAN 1: To remove this obstacle, we need to show that norms are everywhere involved in current economic thinking. An excellent textbook for this purpose is Hausman and MacPherson: Economic Analysis, Moral Philosophy, and  Public Policy. We should try to make this text the basis of a compulsory course everywhere that we can. Where we cannot change the syllabus, we should introduce this as an optional course and popularize it among teachers and students. In addition, we should learn how to bring out and highlight normative assumptions hidden within the framework of the economic theories we teach. My paper referenced earlier makes a start on this aspect. This will allow us to bring normative concepts into discussion in virtually all economics courses.

SECOND Obstacle to improved pedagogy: A-historical Methodology

Continue reading Three Goals for Pedagogical Change

Classic Books. The Great Transformation by Karl Polanyi

Karl Paul Polanyi (1886 – 1964)  is known for his opposition to traditional economic thought and his book, The Great Transformation.  The Great Transformation was written in the interwar years but not published until 1944. Polanyi is known for his opposition to the emerging Austrian school of formal economic method. Methodologically, the Austrian free-market group of economists, that included Ludwig von Mises, defended abstract quantitative economic models based on the assumption of Homo oeconomicus.  The associated policy recommendation fosters market liberalism. The “natural” free markets without state intervention would function efficiently.

Polanyi’s critic is oriented to the Homo oeconomicus – all-knowing self-interested decision maker that maximizes choices combining considerations of opportunity cost, marginal utility and price. His critique is also oriented to the free markets as a “natural” setting.

Indeed, Polanyi is remembered today on behalf of his cultural approach to economics which emphasized the way economies are historically embedded in society and culture. This view ran counter to mainstream economics but has been popular in anthropology, economic history, economic sociology and political science.

Full text: http://uncharted.org/frownland/books/Polanyi/POLANYI%20KARL%20-%20The%20Great%20Transformation%20-%20v.1.0.html