{"id":166102,"date":"2020-08-03T12:00:06","date_gmt":"2020-08-03T11:00:06","guid":{"rendered":"https:\/\/www.transcend.org\/tms\/?p=166102"},"modified":"2020-08-05T10:45:34","modified_gmt":"2020-08-05T09:45:34","slug":"a-solution-to-keynes-problem","status":"publish","type":"post","link":"https:\/\/www.transcend.org\/tms\/2020\/08\/a-solution-to-keynes-problem\/","title":{"rendered":"A Solution to Keynes\u00b4 Problem"},"content":{"rendered":"

Keynes\u2019 Problem <\/em><\/p><\/blockquote>\n

\u00b4Keynes\u00b4 Problem\u00b4 is the lack of sufficient business activity in a modern market society.\u00a0 It is an economic problem that morphs into any number of crucial political and social problems. \u00a0\u00a0People depend on business activity to provide essential goods, and to avoid catastrophic bads.\u00a0 The catastrophic bad that weighed most heavily on Keynes\u00b4 mind was the mass unemployment of the 1930s.\u00a0 \u00a0Today\u00b4s mass unemployment makes an appropriate time to reconsider his failure.<\/p>\n

Keynes\u00b4 problem can be defined more precisely, using his own words, as consisting of two complementary parts: (1) \u00b4…the drag on prosperity that can be exercised by an insufficiency of effective demand\u00b4[i]<\/a>; and (2) \u00b4\u2026there has been a chronic tendency throughout human history for the propensity to save to be stronger than the inducement to invest.\u00a0 This weakness of the inducement to invest has been at all times the key to the economic problem. \u00b4[ii]<\/a><\/p>\n

(Lack of sales) (1) leads to (lack of investment) (2) which leads to (no end of troubles) (3).\u00a0\u00a0 Investment will often be insufficient because it will often be rational to doubt that there would be sufficient sales<\/em> of the goods or services whose production the proposed investment would finance.\u00a0 To be sufficien<\/em>t to induce a rational investment<\/em>, sales would have to produce revenues returning the original investment itself, plus cover wage costs and all other costs of production, plus promise an attractive return to the investor combined with a minimal risk of loss.\u00a0\u00a0 The attractive return would have to exceed the return the investor could earn by simply leaving the same money in a bank gathering interest.<\/p>\n

Two bottom lines: \u00a0A modern market economy has more people than slots. \u00a0The investors call the shots.<\/p>\n

In most cases the investors or their agents determine what employment there will be and who will be employed; on Keynes\u2019 view they make these determinations after estimating the size of the market for their products.\u00a0\u00a0 The size of any market is always limited by what he called liquidity preference. For various reasons individuals, businesses, and public institutions prefer to take money out of circulation, keeping it instead of spending it.\u00a0 We take it to be true that not all money is spent and consequently not everybody is employed, even though liberals have scored some points in their unending efforts to discredit Keynes\u2019 theory.<\/p>\n

No end of troubles stems partly from the suffering and from the frequently anti-social and\/or self-destructive behaviour of people whose work finds no buyers willing to pay a decent price for it.\u00a0 They stem from the violence of the gangs and the violence of the police; from the violence of Pol Pot avenging injustice and from the violence of General Suharto imposing law and order.\u00a0\u00a0 Troubles stem from the subordination of all government policies \u2013and indeed of everything about our way of life in or out of government– to the overriding imperative to please investors.[iii]<\/a><\/p>\n

Keynes found no acceptable solution to Keynes\u00b4 problem.\u00a0 He did not claim to have found one.[iv]<\/a>\u00a0 He was of course aware of about a dozen countries that, in his time, did<\/em> achieve full employment in centrally planned command economies \u2013but he did not consider that route acceptable.<\/p>\n

If Keynes\u2019 problem could be well solved, there would be a future role in society, one with dignity and security, offering opportunities to satisfy each and every item in Abraham Maslow\u00b4s catalogue of human needs, waiting for every new-born pushing its head through its mother\u00b4s birth canal. \u00a0\u00a0The message communicated by the satisfaction of the new-born\u2019s first desire, to suck milk from its mother\u00b4s breast, \u00b4This is a secure world, you are welcome and safe here, \u00b4 would be a true message for more people more of the time.<\/p>\n

A Solution to Keynes\u2019 Problem <\/strong><\/p>\n

First we will outline a solution in general terms, beginning with some remarks on the philosophy of science that will permit us to avoid traps that thousands of brilliant people who have been working on this problem \u2013but failing to solve it\u2014have fallen into.\u00a0\u00a0 Our view is that the problem is inevitable given the individualistic social structure of western modernity, which has morphed into the legal structure of the global economy.\u00a0 Its solution requires a synthesis of the best of western modernity with the best of non-western and non-modern traditions.\u00a0 Culture shifts.<\/p>\n

Concerning the philosophy of science, I suggest \u2013tentatively in the Socratic spirit of philosophy\u2014 accepting Roy Bhaskar\u00b4s proposal to reframe economics, including Keynes, in terms of the causal powers<\/em> of social structures. <\/em>\u00a0They are the social science analogues of the causal powers of natural structures (such as those of molecules or cells).\u00a0 Natural structures ground explanation in the natural sciences. \u00a0Social structures<\/em> unlike natural structures have been created by humans.<\/p>\n

Nevertheless, the social sciences are also similar to the natural sciences: \u00a0\u00a0The structures retain their identities and causal powers; while diverse scholars such as Marx, von Hayek, Walras, Marshall, Orl\u00e9an and Keynes among economists; as well as diverse anthropologists, lawyers, ethicists, theologians and so on, like diverse natural scientists, talk about them in diverse ways.\u00a0 Reality is what it is for both the natural and the social sciences.\u00a0 But in the latter case, decisions about how to talk about social structures can facilitate constructing new understandings and beliefs, hence new practices, hence new cultural rules, new social structures, and new realities.<\/p>\n

Now we can express the claim:\u00a0 Keynes glimpsed but did not grasp, that his most important discoveries (1 and 2, insufficiency of demand, and weakness of the inducement to invest) and hence his explanation of the excess of people over slots, were about consequences<\/em> of social structures <\/em>that had been constituted <\/em>over the course of history by cultural rules<\/em>.<\/p>\n

This point is further elaborated in an ordinary article that is not part of this Editorial [Theoretical Note: John Maynard Keynes vs. Milton Friedman<\/a>].<\/p>\n

Andr\u00e9 Orl\u00e9an has phrased in especially insightful contemporary terms the central consequence of the currently dominant structure:<\/p>\n

Indeed, the commercial society does not know these bonds of solidarity existing between parents, neighbours or close relations, thanks to which, in traditional societies, each one can directly mobilize the assistance of the others to carry out his projects. To obtain something from others, in the commercial order, there are no other means than to arouse the others\u00b4 desire.[v]<\/strong><\/a>\u00a0 \u00a0<\/em><\/p><\/blockquote>\n

Thus in 2011, Orl\u00e9an updates Adam Smith\u00b4s famous words of 1776 asserting that to obtain our daily bread we never appeal to our<\/em> needs<\/em> or to our baker\u00b4s humanity<\/em>, but always<\/em> to his desires<\/em>. Orl\u00e9an continues:<\/p>\n

Our starting point<\/em> \u2013we insert: i.e. our way of talking about today\u00b4s dominant social structure – is market separation, that is, a world in which each individual is cut off from their means of existence. Only the power of value, invested in the monetary object, allows the existence of a social life under such auspices. It reunites separated individuals by building for them a common horizon, the desire for money, and a common language, that of accounts<\/em>.[vi]<\/a><\/p><\/blockquote>\n

And how can amended social structures rehumanize the dehumanized world Orl\u00e9an concisely describes? \u00a0\u00a0\u00a0We begin ao answer this question by endorsing Guy Standing\u00b4s proposal for a universal basic income (UBI), noting that Standing advocates transferring economic rents to fund meeting social needs.<\/em>[vii]<\/a>\u00a0 <\/em>\u00a0The general solution extends the principle of UBI.\u00a0 Wherever labour markets throw people out, good non-market livelihoods welcome them in. In many ways.[viii]<\/a>\u00a0 Many but not all non-market livelihoods are hybrid. They depend on sales.\u00a0 \u00a0Hence when sales decline they decline. \u00a0\u00a0\u00a0But their workers are not for sale. \u00a0They own their own tools, or hang out the shingle of a profession or craft, or form a coop.\u00a0 They are relatively safe from investors who call the shots.<\/p>\n

But to build societies really offering everyone secure opportunities to achieve the human flourishing charted by Abraham Maslow, Riane Eisler, Martha Nussbaum and others, we need culture shifts. Even to achieve a political climate where UBI and cooperatives can be strong and effective, we need culture shifts.\u00a0 To transform the social structures that make Keynes\u00b4 problem inevitable — with more people than slots– we need culture shifts.<\/p>\n

Culture Shifts\u00a0 <\/strong><\/p>\n

I have been suggesting that the reason why neither Keynes nor any economist has been able to solve Keynes\u00b4 problem is that it is not an economic problem.\u00a0\u00a0 The problem is the social structure that economics presupposes.\u00a0 A recent work of Tony Lawson provides a useful account of what a social structure is:\u00a0 a social structure consists of related<\/em> (i.e. you can\u00b4t be a landlord without a tenant etc.)\u00a0 material <\/em>(i.e. the position of landlord is about a material house, etc.) positions<\/em>, where each position is defined by the rights and duties<\/em> of the person who holds the position.[ix]<\/a>\u00a0 Lawson makes it easy to see that social structures, because they are about rights and duties, are about ethics and law.<\/p>\n

Today\u00b4s dysfunctional structures cannot be transformed into life-affirming win-win structures without transforming basic cultural <\/em>structures. To repeat:<\/p>\n

The excess of people over slots is a consequence of social structures that have been constituted over the course of history by cultural rules.<\/em><\/p><\/blockquote>\n

Culture is the womb of ethics and law, and therefore of structure.\u00a0 Culture is the capacity to adapt and pass on adaptations to new generations that made homo sapiens <\/em>the dominant species.\u00a0 See \u00a0Nancy Tanner, On Becoming Human<\/em>; James Boggs (The Culture Concept as Theory, in Context, an article in Current Anthropology<\/em>), and Douglas Porpora (Cultural Rules and Material Relations, an article in Social Theory<\/em>).<\/p>\n

Below are three ideas for unwinding the historical construction of three social structures; \u00a0three sets of cultural rules constituting \u00a0rights and duties of material positions– Contract, Property and What\u00b4s in it for me?\u2014selectively unwalking three trails that led us to where we are.<\/p>\n

Contract<\/em>. \u00a0\u00a0\u00a0\u00a0Walk from contract to status; selectively unwalking the trail from status to contract\u00a0 that according to Sir Henry Maine\u00b4s famous history of law first published in 1861 made us modern. \u00a0\u00a0\u00a0Every<\/em> victory for the human social rights is a victory for status<\/em>.\u00a0 To claim a human right, you\u00a0 do not need a willing seller or a willing buyer to contract with.\u00a0\u00a0 Selectively unwalking Maine\u00b4s path to modernity, social human rights affirm that because you have the status of being human, you have a right to education, housing, health care, and employment.\u00a0\u00a0 This was the argument Jean Dr\u00e8ze and his fellow activists in India used to win parliamentary approval of the world\u00b4s largest public employment program, the Mahatma Gandhi Rural Employment Guarantee.<\/p>\n

Property<\/em>.\u00a0 \u00a0Now unwalk part of another trail, \u00a0back to Saint Thomas Aquinas: Whatever you own is not yours alone; it also belongs to those in need whom you are able to aid with your surplus.[x]<\/a>\u00a0 This is the argument Pope Francis uses every day to reframe \u00b4gifts\u00b4 from the haves to the have-nots.\u00a0 They are not gifting but acts of stewardship.\u00a0 According to traditional church teachings, Christian and non-Christian, private ownership is a practical necessity, but so is sharing.\u00a0 Property is to be administered for the common good.dd<\/p>\n

What\u00b4s in it for me?\u00a0 (This popular expression is expressed more technically in modernity in the identification of rationality with maximizing the satisfaction of one\u00b4s preferences.)\u00a0\u00a0 Walk back another 1200 years to Paul the Apostle, a\u00a0 \u00a0tentmaker by trade. \u00a0After making enough tents to meet his own expenses, he deliberately made more tents for the purpose of creating a surplus to share with the weak.\u00a0 <\/em>(Acts 20: 30-35) Today many business leaders are following Paul.\u00a0 They understand that catastrophe has arrived . They understand that either we will align across sectors for the common good or humanity and the biosphere are doomed. \u00a0It is \u00b4in\u00b4 to be mission-driven.\u00a0 \u00a0\u00a0Even small family enterprises run charitable foundations that their businesses fund.\u00a0\u00a0 Scaling up what is already happening would solve component (2) of Keynes\u00b4 problem: what to do about the perennial tendency of savings to exceed investment?\u00a0 Answer:\u00a0 Recycle the surplus. Dedicate the savings that do not find rational uses in the real economy to meeting unmet social and ecological needs.[xi]<\/a><\/p>\n

Would you agree that the more the voluntary culture shift prevails, the easier it will be to redistribute wealth involuntarily through tax reforms like those advocated by Thomas Piketty?\u00a0 \u00a0\u00a0Whatever may be the methods employed to move today\u00b4s surpluses out of speculation, and into the meeting of unmet needs, success in doing so will keep money circulating.\u00a0 This will solve component (1) of Keynes\u2019 problem.\u00a0 There will be more sales because people on UBI and in non-market employment will spend too.\u00a0 UBI should not be a license to vegetate. It should be a launching pad for joining worthwhile dignified disciplined, fun and funded activities.\u00a0 \u00a0Don\u00b4t leave anybody high and dry, bored, and hungry, tempted to join a gang to have fun being bad!<\/p>\n

Homo sapiens<\/em> should transition to the day when humans will devote themselves to intrinsically worthwhile activities \u2013sports, music, science, philosophy, dance, religion, scholarship, gardening, yoga and so on\u2014while advanced technology produces more and better goods and services, and creates more surplus to transfer. \u00a0The number of slots will equal the number of people!<\/p>\n

NOTES:<\/strong><\/p>\n

[i]<\/a> John Maynard Keynes, General Theory <\/em>(London and New York: Macmillan, 1936), p. 33.<\/p>\n

[ii]<\/a> Ibid. Pp. 347-48.<\/p>\n

[iii]<\/a> See Jeffrey Winters, Power in Motion: Capital Mobility and the Indonesian State.<\/em><\/p>\n

[iv]<\/a> Keynes\u00b4 views are distinguished from others that later were called \u00b4Keynesian\u00b4 in Hyman Minsky, John Maynard Keynes.\u00a0 <\/em><\/p>\n

[v]<\/a> Andr\u00e9 Orl\u00e9an. L\u00b4Empire de la Valeur. <\/em>Paris: Seuil, 2011. p. 158.\u00a0 Our translation<\/p>\n

[vi]<\/a> Id, p.227<\/p>\n

[vii]<\/a> Guy Standing, Basic Income and How We Can Make It Happen.<\/strong><\/em> London: Penguin, 2017.<\/p>\n

[viii]<\/a> See https:\/\/transformadora.org\/en\/inici<\/a><\/p>\n

[ix]<\/a> Tony Lawson, The<\/em> Nature of Social Reality.\u00a0 <\/em>London: Routledge, 2019.\u00a0 Pp. 31-73, especially p. 61.<\/p>\n

[x]<\/a> Summa Theologica<\/em>, Second Part of the Second Part, Question 32, Article Five, reply to objection two.<\/p>\n

[xi]<\/a> https:\/\/www.weforum.org\/agenda\/2019\/12\/davos-manifesto-2020-the-universal-purpose-of-a-company-in-the-fourth-industrial-revolution\/<\/a><\/p>\n

_____________________________________________<\/em><\/p>\n

\"\"<\/a><\/em><\/p>\n

Prof. Howard Richards teaches in the EMBA program at the University of Cape Town.\u00a0 He is a member of the\u00a0TRANSCEND Network for Peace Development Environment<\/strong><\/a>. He was born in Pasadena, California but since 1966 has lived in Chile when not teaching in other places. Professor of Peace and Global Studies Emeritus, Earlham College, a school in Richmond Indiana affiliated with the Society of Friends (Quakers) known for its peace and social justice commitments. Undergraduate work at Yale.\u00a0 J.D. Stanford Law School, MA and PhD in Philosophy from UC Santa Barbara, Advanced Certificate in Education-Oxford,\u00a0Ph.D. in Educational Planning from University of Toronto. Books:\u00a0\u00a0<\/em>Dilemmas of Social Democracies\u00a0with Joanna Swanger,\u00a0<\/em>Gandhi and the Future of Economics\u00a0with Joanna Swanger,\u00a0<\/em>The Nurturing of Time Future, Understanding the Global Economy\u00a0(available in PDF on line),\u00a0<\/em>The Evaluation of Cultural Action,\u00a0Following Foucault: The Trail of the Fox (with Catherine Hoppers and Evelin Lindner),\u00a0(on Amazon as an e book), <\/em>Unbounded Organizing in Community (with Gavin Andersson, also on Amazon),\u00a0 <\/em>Rethinking Thinking\u00a0(with Catherine Hoppers),\u00a0\u00a0<\/em>Hacia otras Economias\u00a0co-edited with Raul Gonzalez,\u00a0<\/em>Solidaridad, Participacion, Transparencia: conversaciones sobre el socialismo en Rosario, Argentina.\u00a0Available free on the blogspot lahoradelaetica.<\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

Don\u00b4t leave anybody high and dry, bored, and hungry, tempted to join a gang to have fun being bad! Homo sapiens should transition to the day when humans will devote themselves to fun and funded intrinsically worthwhile activities \u2013sports, music, science, philosophy, dance, religion, scholarship, gardening, yoga and so on\u2014while advanced technology produces more and better goods and services, and creates more surplus to transfer.<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[31],"tags":[232,1461,699,120,1778,442,354,562,1495,487,307,380],"class_list":["post-166102","post","type-post","status-publish","format-standard","hentry","category-editorial","tag-capitalism","tag-civic-society","tag-civil-society","tag-conflict","tag-conflict-analysis","tag-conflict-transformation","tag-economics","tag-finance","tag-human-needs","tag-human-rights","tag-humanity","tag-solutions"],"_links":{"self":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/166102","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/comments?post=166102"}],"version-history":[{"count":0,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/posts\/166102\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/media?parent=166102"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/categories?post=166102"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.transcend.org\/tms\/wp-json\/wp\/v2\/tags?post=166102"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}