Assignment Master Thesis (25EC)
Program Research Master Social Sciences
Student David Kempel
Student number
10256628
Title The myth of modern economics
Words 13067
Supervisor Dr. Amade M 'charek Second Reader Dr. Gerben Nooteboom Submission August|2013
The myth of modern economics: the theological
construct of economic productivity as the gospel
of the third-way
Abstract
When the modern era is not seen as characterized by science it is often seen as related to the economic. This dominance of the economic carries with it a certain rationality reaching into many parts of life with its aim of optimizing money profits. This paper attempts to reclaim rationality from the branch that claims it the most by unmasking economic calculation as a mistaken symbol for perfect rationality and showing how it is justified with reference to a mystical definition of technological progress. The paper traces the historical roots from Adam Smith as a founding forefather of economic rationality who incorporated both the calculative and the technological into the symbol of the economic. This insight becomes crucial when the calculative comes out as failing by leaving behind a residual from a mathematical model which, in turn, is re-conceptualized and explained with reference to the same mystical underpinnings as were cause of it. This failure, it is argued, refrains from undermining economic rationality because the calculative is redeemed in the name of technological progress. This process also plays out in politics where a mystical vision of technological progress is accepted into opposition politics and here used to justify the redemption of the market-economy; ultimately the whole edifice of economic rationality. This insight can help orient politics, philosophy, and science wishing to take back rationality from the dominance of economics.
Introduction: reclaiming rationality
Among the defining characteristics of the modern age is the rational economy. The modern economy is often seen as the source of productive capabilities and as a rational and calculative system. Academic economics is arguably the social science discipline with the most credibility as a science (Backhouse 2002:313) and the arguments of economists, such as Adam Smith, are among the most popular. In the media, we are used to hearing economists talk about how 'it will effect the economy'. Politicians talk about what they will do 'about the economy'. And who have not, in these years of recession, talked about how 'it is going with the economy'. This way of addressing the economic fashions the image of a bounded and self-contained arena; it makes us used to an image of the economy as embodying the essence and nature of the economic.
This dominance of the economic carries with it a certain rationality reaching into many other parts of life such as politics, culture, technology,
philosophy, science, and so on. As Gabriele Tarde observed, early academic economics, instead of broadening out their definition to deal with these issues, generalized their reductionism to everything (Latour and Lépinay 2009:10-3). This meant that the economic rationality of always optimizing output came to lurk as an 'imperialist' explanation for all things. For example, in academic economics it has long been fashionable to talk about opportunity costs (Matyas 1985:36, Mankiw 2011:261). The idea that every second of your life, when judged in relation to all alternative opportunities, could be optimized according to the utility gained – or the utility cost of not doing the alternative activity in that second. The question is: what is the purpose and context for optimization to begin with? In the economic rationality the purpose is to optimize money profits (Weber 1995[1920]:6-7) as calculated on the basis of prices. Though, rationality can be conceptualized in different ways and it is a shame that economics alone should own it.
With this paper I wish to reclaim rationality from the branch that claims it the most. I will argue that economic rationality is actually irrational and mystic in important regards. More specifically, I will investigate the calculative element and inquire to its rationality as an idea and as a science in order to prosecute the claim that it can be seen as irrational, or mystical.
In terms of method, I approach the analysis from a hermeneutic, interpretive, perspective (e.g. Weber 1920). This means looking at the history and influence of ideas within a delimited field of investigation. More specifically, I investigate the history of ideas through an institutional perspective (e.g. Mumford 1970) which sees the different systems of the political, the economic, the technological, and the cultural as intertwined in an institutional meshwork. The institutional is a network geared towards a certain unique historical socio-moral constellation; this Mumford calls the idolum. The idolum is the spirit, “all the philosophies, fantasies, rationalizations, projections, images, and opinions in terms of which people pattern their behavior” (Mumford 1922:13 in Novak 1987:163). Mumford suggests to research symbolic activities as the force of history which makes the gearing of the socio-moral constellation. This will help focus on how entities assert influence on the network and avoid getting bogged down in whether something is material or ideational according to pre-defined standards. In extension of this interpretive approach, the paper presents research into the science of economic theory. Here I take clue from science studies in opening the black-box of the theoretical concept of productivity in economics. A black-box is a routinization of a theoretical body. As Latour and Woolgar writes, “[o]nce a large number of arguments have become incorporated into a black box, the cost of raising alternatives to them becomes prohibitive” (1986:242 in Law 2004:34). By looking into how economic theory works it is possible to elucidate on what basis it finds justification as a science and in turn lower the cost of raising alternatives. In final, I will apply language and tone as a method (Clark 2003) following the Deleuzean tradition (e.g. Deleuze and Guattari 1987) in which form and content are inseparable and the style of writing can influence the message. I use this insight methodologically to supplement the investigation with a delirious track of analyzing using theological language. This language
can help show the surprising similarity between modern concepts and mystical theology.
The paper is structured as following. The first section provides the intellectual backdrop and a theoretical discussion highlighting a view on modern economic rationality as founded on the symbols of calculativeness and the machine. The second section reviews and analyzes the philosophy of Adam Smith with the aim of understanding how his concept of the invisible hand rests on a metaphysics of the mystical market-machine: the shared theological underpinning to the modern economy. In the third section, I open the black-box of economic theory to develop the notion of economic productivity. This concept integrates how the theory, for one part, derives from the mystical assumptions of the market-machine while, for the other part, justifies the failure of these assumptions with reference to technological progress. The fourth and final section investigates how economic productivity has a parallel in the political where productivity and politics come to rest on mystical grounds; where opposition politics mistakenly takes on economic rationality by justifying its status as technological progress.
The myth of modern economics as rational
When the modern era is not seen as characterized by science (Latour 1993) it is often seen as related to the economic. One prominent view is to highlight the advent of 'free' exchange under the capitalist mode of production (Marx 1867). A related view is the notion of increased calculative-rationality as a foundation for modern economics: the iron cage of rationality, capitalism, “the most fateful power of modern life” (Weber 1995[1920]:6). Here I analyze the economic as a distinct realm which is intertwined with the scientific and the political, all of which share their connection to modernity as the grand idolum of our time. The economic plays a defining role in the modern project as the architect of prices, as the accountant of the socio-moral constellation. Though, as I started with, economic rationality stretches into so many realms of life with its aim of optimizing money profits. The details of economic rationality are found in the calculative aspect and also, as I will argue, in the myth of the machine with its optimistic image of technological progress. As the later sections will show, this interpretation helps understand why economic rationality survives the failure of the calculative market by redeeming itself in the name of technological progress. In that, the machine may constitute an even more fateful power of modern life.
In this first section the intellectual backdrop for seeing modern concepts as theological is presented. Then I discuss and critique the notion that the calculative represents the only parameter for rationality, and I explain the notion of a corpus mysticum as the equivalent of a black-box in which elements are given a mystical status. Finally, the alternative machine rationality is argued to be a central underpinning to economic rationality.
Modern concepts as theology
ascent of reason and individual freedom in the West over the last four centuries. In the popular image the period is seen as an enlightenment that awakened the potential of humanity and radically broke with a medieval religious theology (Lampert-Weissig 2010:2-3). This notion is echoed in mainstream scholarly history writing. For example, in his book The Making of Modern Europe 1648-1780 historian Geoffrey Treasure does point to the influence of religious theology (2003:74-101), though he settles on the depiction that “European man emerged in some ways recognizably ‘modern’ … the confident assertion of a new kind of authority. Essentially secular, it derived its strength from faith in reason and research” (2003:xii). Many intellectuals have questioned this account as misleading in conveying the impression of a rational-secular machine discovered by Western intellectuals which enabled, and still enables, the regime of modernity to justify its metaphysical order as highly rational (Marx 1867, Luxembourg 1913, Schmitt 1922, Mumford 1970, Latour 1993, Schwarzkopf 2012).
The connections between rational concepts and religious influences in the West have been studied by many scholars (e.g. Weber 1920, Schmitt 1922, Latour 1993, Asad 2003). The political theorist Carl Schmitt argued that modern political concepts often draw from religious backgrounds both for reasons of historical coincidence but also due to their “systematic structure” relying on a theological infrastructure for legitimacy (Schmitt 2005[1922]:36). As concepts travel through history we may witness an erasing of the medieval religious influence or, at least, an intensification of the rational, methodical justifications for them. If so, they tend to have become rational-secular and now appear as if “underpinned by … methodical necessities” which are rational and orderly instead of “the theistic God” who is mysterious and unreachably religious (Schmitt 2005[1922]:39). With this we can see concepts as more rational-secular or more mystical.
Importantly, it is not only in the realm of politics but also in economics that our contemporary conceptual world rests on theological legitimacy. Max Weber in his famous thesis argued that the Protestant ethic of ascetic work fostered capital accumulation for the purpose of re-investment (1995[1920]:115). For Weber, the purpose of re-investment has become secular and rational. Inversely, Stefan Schwarzkopf argues that consumption and choice rest on a mystical underpinning and “provides a clandestine spring of political-theological legitimacy that renders global consumer capitalism unassailable in its status” (Schwarzkopf 2011:109). As Schwarzkopf then documents, the consumer concept is indeed build from a theology consisting of three elements: the Calvinist accountable Self, the Protestant emphasis on individual testimony, and the Deist faith in a rational creator-God (Schwarzkopf 2012:283). The point is that secular looking activities such as prudent finance or wild shopping are justified with respect to a more overarching and historical constellation of values where traces of religious theology abound.
Calculative irrationality
paper makes in trying to reclaim rationality from economics. While Weber sees the economic achieving some kind of rationality existing in itself, the iron cage. I argue with Schwarzkopf that the rationality of the economic is “a project which to its very core is imprinted by the theological concepts” (2012:292). In other words, there are still some mystical influences in the underpinnings legitimizing the rationality of the modern economy. In Schwarzkopf's work (2011, 2012) the notion of the consumer as a sovereign is researched and critiqued for disguising its mystical roots. With this notion he touches upon something crucial about the modern economy: the illegitimate presumptions of the economic as perfectly worldly and rational. In stark contrast to the orthodoxy of economics, that has consumers and markets as unquestionable elements of its ontology, Schwarzkopf argues, “to believe that the market makes us sovereigns is an illegitimate self-delusion” (2011:122). To put this in terms of rationality: when we act on the worldly, rational market we think of ourselves as rational and calculative. While this is rational in the calculative sense it can also be seen as irrational, or mystical, when analyzed in detail. In sum, the calculative is not the only parameter of rationality and may come out as outright irrational in some instances.
Since Schwarzkopf has covered the consumer in detail I instead pick up on a supplementary strain of theology that relates to the economy as a system, or as a type of rationality. As he notes, “it was first theological concepts which helped justify and legitimize the idea that markets could act as ordering mechanism” (2012:292 – emphasis added). The view on the economy as a system, in addition to the view on it as consumer-based, deserves its own comprehensive investigation. In this regard, I firstly see the economic as characterized by its systemic function of calculation - while I later see the economic as also characterized by technological progress. As Weber argued, the rationality of economics is related to the calculative element (1995[1920]:6-7). And the calculative is characteristic of activity that seeks to predict and achieve the best outcome by calculation weighing the means against the end (ibid:46). Though, the aspect of the calculative which makes it more rational compared to non-calculated activity is not the only parameter of rationality. Since both the desire to achieve certain aims and the oft used measure for the value of aims, prices, are influenced by the economy as a system, or as a socio-moral constellation, the calculation may be irrational on account of its aim or on the basis of its data. For example, if a calculation shows money profits but also destruction of flora and fauna it may arguably be irrational judged by another parameter of rationality. Likewise, if prices on weapons are lower than those on books then prices may arguably be set irrationally. This is not to dispense with Weber's notion of rationality as a sociological concept but to underscore that rationality in calculation is rational partly on a surface level where the calculation is based on the prices, or values, of the socio-moral constellation. The argument is plainly that the socio-moral constellation as dominated by the logic of modern economics, or capitalism, is partly irrational and hence calculations too are possibly irrational. This challenges the calculative and posits its irrational aspects in order to question the ground for its justification.
Importantly, we must also understand how the calculative becomes a symbol of the rational in modern economics. Here, the issue of whether calculation actually leads to a more rational outcome becomes less important in that the irrational calculation seems rational simply by reference to the reputation of the calculative method. Not only the elements of calculation in terms of prices and profits but also the process of calculation in terms of the method and theory is part of the image fashioning modern economics as rational. That is to say that the science of modern economics plays a role in legitimizing it as a rational order. Though, the science is often hidden away in a black-box in which the actual details are obscured and every element instead attain an equivalent degree of legitimacy.
I use the concept of a modern corpus mysticum to connect the black-boxing of science with the tension between mystical and secular. A supposed rational-secular order that conceives of itself as a radical break with all mystical backwardness cannot justify itself by reference mostly to a mystical theology without being illegitimate in this respect. If it is the case that a concept rests on a crucial infrastructure of mystical theology but is legitimized as a rational-secular order we may speak of the creation of a modern corpus mysticum, “the spiritual representation … from which” the modern “body politic derives the legitimacy of its decision-making” (Schwarzkopf 2011:110). A corpus mysticum is a mystical body of legitimacy that gives to each of its elements a homogenous status and protects their standing as legitimate under its general headline. A corpus mysticum rests on a mystical theological infrastructure and in that can be preached with no basis in rational-secular sciences or jurisprudence and simply by reference to the church of the deity, the God. A modern corpus mysticum is thus a contradictory constellation that by any modernist account is illegitimate due to its mystical designation of its elements. Understanding how economic rationality can be seen as part of such a corpus mysticum helps elucidate the irrational aspect of the modern economy.
The machine-theology
As I see it, a pertinent perspective on the modern corpus mysticum has been described in the oft overlooked but important contribution made by the polymath Lewis Mumford (for secondary literature see Novak 1987, Casillo 1992, Long 2002, Swer 2003, Green 2006). Mumford defines how science and technology are part of modern economics by seeing that a symbol for the perfect and righteous achievement of all knowledge underpins calculation. The machine ideal of a perfect universe justifies 'scientific' research as a rationality in itself that can harm nothing; in that it gives all calculative activity, here with stress on the methodical in it, the appearance of rational progress simply by reference to its overarching headline of the machine.
In his two volume The Myth of the Machine (1967, 1970) Mumford argues that modern technological civilization is the intensification of one of the earliest, most powerful ideas: the myth of the machine. He develops the argument on basis of broad scoped historical research. He discusses theological influences from natural theology, the idea that the world is like a mechanical
watch (1970:89), the Christian perfection of the individualized Self (ibid:198), and earth as man's property (ibid:173). To these he adds several machine theological elements: astronomical predictability (ibid:28-36), Galileo's empirical-objective testimony (ibid:57-65) and the consequent fetish of “objective public knowledge” (ibid:92), the Cartesian sterilization of mind (ibid:81), Hobbes absolute sovereign (ibid:98-102), and Francis Bacon's vision of corporate science (ibid:105-29). As he puts it, “a set of metaphysical abstractions laid the groundwork for a technological civilization, in which the machine in the latest of its many incarnations would in time become the 'Supreme Power', an object of religious adoration and worship” (Mumford 1970:70).
Religious worship of the machine as the supreme force and form of life is the dogma of the machine-theology; the source of spiritual legitimacy that underpins the machine as the ultimate purpose of being. To define it properly: the idea that the machine represents the perfect form of life. The machine is in linear stasis and only oriented towards its pre-programmed purpose. In contrast, an intelligent organism is born, grows, decays, and dies. Mumford writes:
[T]he main assumptions of post-sixteenth-century science … had all been formulated, if only crudely, by the Egyptians, Babylonians [etc] … before the separate shards were dug up again and pieced together (…) a moment came – a moment prolonged perhaps for two centuries – when these valuable insights interacted and coalesced … into a single system of power and organization: … the depersonalized mechanical world picture. That diagram, so widely applied in technics … was then mistaken for reality itself. In turn, purely mechanical forms were superimposed upon every manifestation of life, thereby suppressing many of the most essential characteristics of organisms, personalities, and human communities (1970:37).
In this paper, the machine is meant to symbolize an element in the socio-moral constellation of the modern economy, which so far has gone mostly unnoticed. For example, Melinda Cooper makes a resonating argument about management of the unknown as a strategy of power - not in relief of human suffering but in order to gain advantage. Though, there is no machine or other institution behind her intuition of “a power of all possible worlds” (Cooper 2011:184). The economy that Mumford perceives is an economy where the type of rationality and socio-moralistic value are influenced by the machine as a symbol. In sum, in addition to a calculative side of economic rationality we also see a machine side to it.
More concretely, we can see the machine working as a systematic underpinning to the modern economy in the symbols of productivity and technological progress. The symbols work to make the calculative appear rational by homogeneously justifying every element in the calculation with reference to the overarching symbol of rational progress. To be sure, the argument is radical in postulating that what appears rational may actually be mystic.
products are evaluated and choices are made in a process which is connected to feelings of identity and belonging in the world. Here Mumford stingingly comments, “[o]ur contemporaries are already so conditioned to accept technological 'progress' as absolute and irresistible, however … damaging its results, that they accept the latest offering … with a smiling consent, particularly if the equipment is accompanied by a 'scientific' explanation and seems technologically an 'advanced' type” (1970:286). In other words, we fetishize, “endowing … objects or entities with … mysterious … powers” (Harvey 2003:3), technological progress as something purely rational and in that solidify the image of the rational calculative in the process of consuming. Mumford is not alone in seeing some of our consumption as irrational. As Frankfurt School members Adorno and Horkhiemer wrote, “[t]hat the difference between the models of Chrysler and General Motors is fundamentally illusory is known by any child, who is fascinated by that very difference. The advantages and disadvantages debated by enthusiasts serve only to perpetuate the appearance of competition and choice” (2002[1944]:97). The common sentiment is that our consumption choices are much less rational than usually assumed in the situation of choosing. We are instead persuaded by our desires to imbue more and newer choices with a value in itself, a value that transcends simply by effect of its election into a category that has been successfully branded as 'of an advanced type'.
The above illustrates the idea of unquestioned accept of technological progress. The corpus mysticum of technological progress: a mystical but unquestionable grace of God available to every member in the congregation of the church. This, I argue, is central to the legitimacy of the modern economy as it provides a clandestine spring of legitimacy to the calculative method no matter its actual scientific content. Thus, in addition to seeing only the calculative as characteristic we need to consider also technological progress, and more broadly the machine, as a necessary underpinning to the rationality of the modern economy.
Adam Smith and the mystical theology of the market-machine
The idea of that divine Being, whose benevolence and wisdom have, from all eternity, contrived and conducted the immense machine of the universe, so as at all times to produce the greatest possible quantity of happiness, is certainly of all the objects of human contemplation by far the most sublime (Smith 1976[1759]:236).
Strangely omitted from Mumford's analysis is the connection between the machine-theology and the idea of the free market. Perhaps it is because Mumford wrote before the ascent of so-called neoliberalism and before neoclassical economics, with its preference for free-market analysis, became the dominant branch of academic economics. Modern economics has many faces but the laissez-faire of Adam Smith, crystallized in the concept of the invisible
hand, is undoubtedly among the most influential.
Here I will show how the machine symbol is a crucial part of modern economics and in that how it provides legitimacy to the calculative aspect, which is seen in the ideal of free markets. So closely related are the machine-theology and free market fundamentalism that they together constitute a certain shared aspect of modern economics. A theology of these two interrelated elements: a mystical market-machine. The overlaps between the machine-theology and Smith's free market are so striking that the connection firmly positions Smith within Mumford's narrative. But more importantly, it introduces Mumford's heterodox economics as a seminal contribution to the study of the modern era. Not only is this a proper reading of the religious theological hinterland to modern economics. In addition, the symbol of the machine as an alternative underpinning to economic rationality will, later in the analysis, allow us to grasp the subsequent historical development in which the calculative must be redeemed in the name of productivity; as a result sanctified as the gospel of what is supposedly its political opposition.
Adam Smith was a moral theorist as much as an economist. By looking at his moral theory it is possible to understand the underlying philosophy-theology on which he proposed his famous concept. The aim is not to analyze his economic thinking as such but to apply an ethnographic-historical method to make clear that he developed a shared theology of the market-machine. Smith embedded his notion of the benign and divine self-interest in a social-moral framework, where he saw that “the system of perfect liberty cannot be entrusted to the economy” (Bonefeld 2012:8): But the appropriation of the term by modern economics ignores these considerations and employs the term as a seemingly secularized law of nature.
The theology of the invisible hand
The argument invoked with the invisible hand is that free agents optimize the benefits for society by following their own interests. Smith only mentioned the invisible hand three times in his writings. As the quote from Wealth of Nations famously goes, “he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention” (Smith 1977[1776]:456). The economic idea that unhindered self-interest would provide the best outcome for society was not new to classical political-economists (Haney 1911:159), a forerunner discipline to 'formal' economics. While Lewis Haney, in his History of Economic Thought from 1911, makes it clear that self-interest is a major component in Smith's work, Haney is not in his review referring to the metaphor of the invisible hand (1911:158-189). The term itself was not in use before the 20th century (Rothschild 1994:319) and not popularized before Jacob Viner, in a now classical 1927 article, posited the invisible hand as one of several metaphors invoked by Smith to designate divine Providence, or God (Viner 1927:202). In 1931 we find reference to “Adam Smith's famous doctrine of the 'invisible hand' “ (Teare 1931:610), but the metaphor is not used in the well -known free-market justification Road to Serfdom (von Hayek 1994), the road being planning. When the famous free-market crusader Milton Friedman
co-published his Free to Choose in 1980, interestingly, all that was left of Smith was the invisible hand. As they demonstratively write, “Smith's flash of genius was his recognition that the prices that emerged from voluntary transactions … could coordinate the activity of millions of people” (Friedman and Friedman 1980:13). There is no doubt that the economic meaning of the term was representative of Smith's purely economic theory. Though, the important question is “whether or not Smith’s order holds up in the absence of a theological infrastructure“ (Hill 2001:3) that has been replaced, as I will argue, by the seemingly secular-rational price-mechanism and the inner light of the consumer-owner sovereign?
It is uncontroversial that to Smith and his contemporaries “it was a divine hand” (Oslington 2012:430). Smith's writing is influenced by the spiritual trends of his time. For the Scottish enlightenment thinkers this was Deism, the idea that there is a rational creator which has “ordained Nature to operate” and so “to know the laws of Nature is to know the decrees of God’s will” (Hill 2001:5). This Deism was characterized by the general Calvinist trend of transforming religion into an individualized 'Inner light' (Weber 1995[1920]:97, Treasure 2003:88-9) and more explicitly by the notion of a creator-God, a demiruge that created the rational universe (Schwarzkopf 2012:285). Such a theology affords the idea of a divine blueprint that is transmitted through the 'sacred heart' of humanity. With this constellation of rational-divine Providence working through human action Smith could “re-introduce God into the workings of the socio-economic machinery” (ibid:287-8). Instead of an external divine judge, Smith envisioned a divine machine installed in humanity. As he writes, “[our moral faculties] were plainly intended to be the governing principles of human nature, the rules which they prescribe are to be regarded as the commands and laws of the Deity, promulgated by those vicegerents which he has thus set up within us” (Smith 1976[1759]:165). Hence, the invisible hand is divine but is not the hand of God, it is instead the hand of the calculative human with the God-machine in the heart. A foundation for the holiness of the consumer-owner, a forerunner of the business-firm.
The deity envisioned by Smith is the creator of a regular and perfect machine-universe. In an attempt to modernize rather than erase God (Hill 2001:11) Smith designated as the rightful object of admiration the “perfection of the great system of the universe” (Smith 1976[1759]:277). That means it is not the ability to create utility and pleasure by itself that justifies the invisible hand. Instead, it is the beauty of the workings of the machine towards ever more precise purposefulness we should revere. As Smith explains, “it is the ingenious and artful adjustment of those means to the end for which they were intended, that is the principal source of … admiration” (ibid:183). In other words, the machine that the deity created is a basis for moral life. This vision drew on ideas from the scientific natural theology of Isaac Newton which envisioned the deity as the metaphorical maker of a mechanical watch (Oslington 2012:433, Hill 2001:10, Mumford 1970:89). The mechanical watch symbolized the new machine-God of regularity (Mumford 1934:12-8) that came in the shape of human action - as a pocket watch carried close to the heart. Smith coupled this machine-theology with his free-market fundamentalism to argue that
hindrances are of almost immoral character. “We take pleasure in beholding the perfection of so beautiful and grand a system, and we are uneasy till we remove any obstruction that can in the least disturb or encumber the regularity of its motions” (Smith 1976[1759]:185). The rational, moral and consequently happy life should be lived according to the most sublime, “the order, the regular and harmonious movement of the system, the machine or oeconomy” (Smith
1976[1759]:183). As this illustrates, Smith certainly considered as near-equivalents the machine and the oeconomy. Both in the natural theology of the mechanical watchmaker and in Smith's Deist faith is a machine-theology lucidly influencing his argumentation to the degree that the machine and the market seem almost indistinguishable.
From the above it is clear that Smith's thinking to a large extend rested upon a religious theological infrastructure to render it meaningful. Firstly, the account of morals favors design over evolution (Hill 2001:17-9) implying that without a demiurge, a non-contingent creator-deity, there is no foothold for Smith's otherwise detailed discussions of moral situations. And secondly, while introducing the individualized God into his economics gave it a scent of terrestrial calculativeness it was only by implementation of the divine blueprint, the perfect mechanical watch, that humanity achieved rational happiness. These two arguments both strongly suggest that Smith's philosophy draws on a mystical-religious theology and less on methodical necessities of secular rationality.
The cleansing of the term
With this speedy pass through of Adam Smith I tentatively contribute to the list of scholars critiquing the secularization of Smith's theory (e.g. Schwarzkopf 2012, Oslington 2012, Bonefeld 2012, Vivenza 2005, Hill 2001 Macfie 1971, Viner 1927). I have aligned with some of these scholars in pointing to a critical infrastructure building on Deism, the individualized God of the post-Reformation, and the machine-universe of natural theology as fundamental to the mystical theology underlying the notion of the invisible hand. The calculative in his theory is doubtless working through the individual market actor but the basis for calculation lies with the machine universe and the deity.
This arguably pushes the interpretation of Adam Smith much further than the usual attacks on his economics (Veblen 1899, Luxemburg 2003[1913]:35-47). In this light, the apologetic readings of Adam Smith must be reappraised as a cleansing of the term for its embedded socio-moralistic content (Bonefeld 2012). For example, it has been suggested that the religious tone is a case of tactical rhetoric (Kristol 1980:204), and that the term is in conflict with his overall framework and thus an ironic metaphor on part of Smith (Rothschild 1994). Aforementioned Milton Friedman (1980) has no such intellectual concerns and readily deploys the term to mean perfectly competitive markets. In the above I have demonstrated that such interpretations are misleading; they should instead be seen as part of the cleansing of the invisible hand which makes it appear as a secular-rational argument applicable in a modern political agenda.
To illustrate the sharpness with which the term is utilized as a secular technique with only a momentarily whiff of the original theological luggage we can look at how the term is used in widely read microeconomics textbooks. Graduating from courses using textbooks like these usually requires the correct calculation of a mathematical model and hence discourages critical questioning of the theoretical hinterland. The renowned economics textbook author Gregory Mankiw introduces his book as such: “Adam Smith made the most famous observation in all of economics: Households and firms interacting in markets act as if they are guided by an 'invisible hand' that leads them to desirable market outcomes” (2011:11). In a most gross misrepresentation, authors Taylor and Weerapana fashion Smith as an empirical social scientist and the invisible hand as something from theoretical mathematics. They write:
This is an old but true story, going back to before the field of economics even existed … He [Smith] was particularly fascinated by how the economy, consisting of the interaction of millions of people pursuing their own interests, worked … he quit his teaching job at the university and traveled; he interviewed businesspeople; he visited factories; he talked to workers … he invented the field of economics … His deepest insight, among many deep insights, is called the invisible hand theorem (2010:176).
In these representative excerpts the invisible hand is depicted as a secular phenomenon stemming from the immanent potential in humanity to calculate and hence equilibriate markets through the price-mechanism. Any theological reference to a deity is downplayed - except in the form of consumers and owners (Schwartzkopf 2011, 2012) and the price-mechanism (Veblen 2001[1921]:19-33). The original formulation of the invisible hand necessitated the non-contingent demiurge as the primal organizer but this was replaced with the calculative consumer-owner and the price-mechanism as impetus for calculation. The replacement fostered the concept of economic calculation as rational and secular while, as shown, it still derived from a mystical theology counting the machine.
The theological construct of economic productivity
The theological construct of economic productivity refers to the self-image visible from the symbols used by modern economics, here production economics. The notion is developed to evidence how technological progress comes to justify the calculative method when the calculative fails on account of deriving from a mystical theology. When this happens it is redeemed by election to the body of technological progress as a part of science. I will take from the conclusion of the foregoing section and show that the mystical theology is taken over with the adjustments necessitated by the practical weakness of using the perfect market as a secular-rational concept in studies of technological progress. More specifically, I argue that the theological construct of economic productivity
directly embodies the sacred price-mechanism; it complements the consumer-owner with the business-firm as a rational optimizer. In order to research contemporary use of productivity theory I draw on science studies to open the black-box of the most prominent measure and theory: total-factor productivity. This illustrates that modern economics must denounce the perfectness of the calculative when it is concretely operationalized in scientific, mathematical models. Crucially, the construct of economic productivity can afford this 'reform' because the theological underpinnings to modern economics include an alternative justification in the form of the machine; the modern corpus mysticum of technological progress. This corpus mysticum endows the failed calculations with the appearance of rationality in the guise of the legitimacy of a perfect science, the machine.
In this section, I first analyze the old part of the theological construct of economic productivity as it has developed through marginal productivity-theory and the price-mechanism. This old part can trace its lineage directly to the market-machine and this evidences the mystical roots of the theology. Then I investigate the new part of the theological construct via the prominent measure and theory of total-factor productivity. This will elucidate the process in which the machine compensates for the weaknesses of the purely calculative by taking over as the righteous deity that redeems the calculative as a subsidiary to itself. The old part of the theology: marginal productivity-theory
I take as a starting point the invention of utility-value theory. This is accredited economists Walras, Jevons, and Menger who started the marginal revolution seeking to establish economics as a scientific discipline and replacing its value theory (e.g. Matyas 1985, Birken 1988 Haney 1911:448-75). The utility-value theory argues that the real value of something is determined by the value given to it in consumption. The production value is irrelevant. According to Matyas the reformulation was necessary since the production-value theory increasingly threatened the capitalist hegemony (1985:17-8). More importantly, the movement effaced any idea of production and replaced it with business-firms as the perfect optimizers and the price-mechanism as a secularized prophet. The supporters of the movement “broke away from production as a starting-point and started instead from the side of consumption and wants.” Importantly, they expected “a rise in social welfare … from the optimal allocation of the available resources” (ibid:16). This proposition is in direct descent from the market-machine as it imagines a magical, optimal point of allocation relative to the calculable God given quantity of resources.
The argument about optimal allocation naturally rests on the existence of conditions of optimality. In the marginal revolution, these were beginning to be seen in firms operating under the pressure of a free market. While the movement had erased production as the base of value, it still had to account for production. What became the leading theory, marginal productivity-theory, was developed by John Bates Clark (Matyas 1985:98, Bichler and Nitzan 2000:70-1, Leonard 2003). Clark focused on the firms as seen as consumers of production factors, i.e. labor, land, capital. The idea of marginalism in utility-value theory is
that the value of the last consumed unit determines the value of the full set of preceding units (see standard economics textbooks e.g. Mankiw 2011:264-5). To take the example of a firm: the point where the average output per unit of input begins to decrease, imagine the top of a bell-curve, is the point where the marginal product is at its optimal limit. The point where one less or one more would reduce the total product. All factors considered, “[t]his point is called the technical maximum” (Matyas 1985:75). With this theory, which could be inscribed in a very real looking graph and model, marginal productivity-theory created the objective public knowledge that imagined it a property of firms to perfectly optimize in every situation.
Bates Clark went further and formulated this principle as a theory of income distribution - where the sinful, the doomed, and the excommunicated only get what they deserve. He famously stated that “the distribution of the income of society is controlled by a natural law, and that this law, if it worked without friction, would give to every agent of production the amount of wealth which that agent creates” (Clark 1899:v in Leonard 2003:523). Every effort is perfectly rewarded in wealth. In light of Clark's Protestant background (Dewey 2008:800) we can easily link his theory with the well -known “doctrine of predestination” (Weber 1995[1920]:94) which was so large a part of the theology justifying the economic spirit (ibid:118). What Clark saw as a law of nature could as easily be interpreted as a theological dogma.
Clark imagines evolutionary competition will foster this distribution, the cleansed invisible hand, embodied now in competing firms: in “the law of survival of productive methods and efficient managers” (Clark 1913:297 in Leonard 2003:524). The competition argument is empirically intuitive, while its acclaimed scientific credentials stemming from the evolutionist angle are doubtful. Mumford notes that the evolutionist argument in the narrowest sense is misleading. When it comes to human development, he argues, natural selection is combined with intelligent, “cultural selection” (Mumford 1970:203). That is, selection in terms of, for example, cooperation or aesthetics. The idea of competition as the manifestation of natural selection, then, overlooks this intelligent part of evolution and thereby narrows the notion of evolution to an abstract equilibrium (ibid).
Delegating the perfectness of the market-machine to competing business-firms was, like in the case of Adam Smith, not an erasing of God but a modernization of God. The technical maximum could certainly be evidenced in the very worldly guise of a concrete model with defined variables and empirical data to go with it. Though, everything behind the numbers and the assumptions of the model have a clearly mystical-religious base. While it was historically justified to investigate business-firms as the captains of production, it was mystical to believe unconditionally in the sanctified economic equilibrium: as a grace of God that will come to the salvation of the earthly through the teachings of calculating the technical maximum in the church of optimizing business-firms – to save the predestined from hell. Clark's theory of fair distribution by the unhindered machine is so strongly related to the idea of a perfect universe that it certainly can be called mystical. This theory about the economy is so clearly inadequate that even the machine-happy futurist Alvin Toffler distances
himself and calls it “an interpersonal supply-and-demand machine” (Toffler 1990:31).
The emphasis on business-firms helped to imagine the conditions for optimality, without which marginal productivity-theory would be unable to sustain its conclusions because they would be ever vulnerable to alternative views on what is optimal. This can be seen as an extension of the consumer-owner, the calculative hand of the human with the God-machine, to the new deity of the optimizing business-firms. This illuminates how marginal productivity-theory rests on an infrastructure derived from the market-machine. The marginal revolution also sought an increasing scientific and mathematical output from economics; in this it was part of establishing the price-mechanism as a seemingly rational-secular order. While the movement brought back subjectivity it quickly had to re-purge it by defining utility as the market price. Utilitarianism as a social theory could never include the real range of differences behind peoples' motivations (Hollis 1994:140-1). The problem is simple: to what extend is there a one-to-one relationship between behavior and desire? In other words, the purged subjectivity comes back in the form of a shackle that prevents any further qualifications. That is because the problem with separating the rational and the unconscious, the so-called cognitive versus non-cognitive, can never be solved - as acknowledged by its own science (Overgaard and Grünbaum 2012). A solution is then to under-theorize the problem by taking the nearest proxy of 'real' utility: the money price. This was too readily accepted in extension of the aim of quantifying the discipline. The 1854 book by utility-theorist forerunner Gossen was said to be “an attempt to put economics on an exact, mathematical basis,” and ultimately “to measure absolute quantities of satisfaction” (Haney 1911:451). As the mathematical side of economics intensified from the 1930s onwards (Backhouse 2010:99-104), the need for applicable data added to the practice of taking utility as the equal of its price. This technical side was unfolding in parallel with a philosophical-theological development that universalized utility in the form of the market price. This included the trader-philosophers of the early marketing industry (Schwarzkopf 2012:289-292). Also important was the development among “late nineteenth-century jurists,” who forced by this development, “turned to 'market value' as the measure of [firms and capital]” (Maurer 1999:368). In addition, the struggle to moralize the financial sphere and especially price indexes was central in legitimizing the idea that prices express a perfect equilibrium (de Goede 2005:87-120). And symptomatically, marginal productivity-theory invented the term “economic imputation” to refer to the 'calculation' of the underlying value from nothing but the price (Matyas 1985:35) - thereby giving a technical, rational sound to what is plainly a theological deduction.
The price-mechanism is becoming more and more firmly engrained into our modern institutional network. Here I have shown that the trend outlined with the cleansing of the concept of the invisible hand is visible in production economics as well. The narrative presented the mathematical, technical side where prices are easily available as data but without much nuance, and it presented a philosophical moralizing of prices to make them seem fair. In turn,
the price-mechanism stands as a transcendental truth that only deviates if manipulated, deceived, by the devil. Economic theories have a poor grasp on prices and its near-relative: money. And as a consequence no theory have predicted prices with anything of the competence expected from a science. In this light, it is not unreasonable to draw a connection from faith in prices, as a cultural thing and as scientific data, to the mystical theology.
The two strains analyzed above are lucidly related to the market-machine. As I argue, its characteristics are incorporated into the theology of economic productivity with little of the claimed demystification of the economic. The old part of the theological construct of economic productivity rests on business-firms as unqualified optimizers and the image of transcendental prices. These come together to provide the elements of which a notion of conditions for optimality can be formed theoretically and empirically. The new part of the theological construct redeems the calculative free market because practical weaknesses in the operationalization phase compromise its legitimacy as secular-rational. Instead, economic productivity turned to the dogma of the machine and in that found an alternative but equally powerful underpinning to rational justification for economic productivity.
The new part of the theology: total-factor productivity
With the constraints imposed by total war in the 1940s the elite learned to appreciate productivity analysis (Backhouse 2002:237-68). The insights from marginalism were especially useful in performing linear-programming optimizations (ibid), i.e. optimize under known, linear conditions, as part of the administrative war effort. Though, since marginalism had neglected production all it conceptually had left was the notion of a perfect price-mechanism and optimizing business-firms. The most prominent measure of productivity today rests on these foundations to a critical degree, though, the perfectness of the market had to be sacrificed as a source of legitimacy when it turned out not to work under rational scrutiny. There are two well acknowledged competing types of models of measuring productivity. The first types are called partial measures. These are simply output divided by input, for example, GDP/
working-hours gives the
measure labor-productivity. The second types are called total- or multi-factor measures. These total-factor productivity measures are the most prominent and have received the most attention in the literature (Nadiri 1970:1138, Hickman 1992:4-10, US Bureau of Labor Statistics 2002:2-4, Federal Reserve Bank of Boston 2004, Coelli, Rao, O'Donnel, and Battese 2005:3, Gordon 2004:9).
According to the literature, total-factor productivity measures have the advantage of disentangling the contribution from several factors of production. The disadvantages are increased difficulty in finding the right data and in producing comparable measures (Nadiri 1970:1138-40). The most advanced model that is achieving some standardization in use is called the KLEMS. These letters indicate that the model take into account capital, labor, energy, material, and services as production factors, thus the model can be written as such:
GDP/
KLEMS (Hickman 1992:4-5, Federal Reserve Bank of Boston 2004:6-7).
concept it is necessary to know the intuition behind the key problematic here: how do we know what each factor contributes? The general intuition is that we calculate an expected reality and from that compare to actual reality. This expected reality is called a production function (e.g. Hickman 1992:4-5, Mankiw 263-5,377-80). The intuition is then to assume, as Nadiri states, that “the aggregate production function exists and is specified accurately” (1970:1141). The production function is arrived at through techniques that weigh and make different data sets comparable (US Bureau of Labor Statistics 2002:2-4). It must make several assumptions, or informed simplifications. It must decide whether returns are increasing with scale, or in other words, the overall direction of output as related to growth in output (Coelli et. al. 2005:4, 12-6). It needs to decide about the homogeneity between data points, e.g. whether an industry is comparable in terms of cost structures (Henry and Milner 2005:11). And importantly, it also has to decide on the marginal product of factors. That is, how much each factor deserves to get. In the production function this is given the label 'elasticity' (e.g. Coelli et. al. 2005:16) – as yet another example of the technically sounding language that saturates economics. As Hickman so tellingly puts it, “[o]n the assumption of … perfectly competitive markets for products and factors, the latter are paid their marginal products and the output elasticities in production, which are equal to the factor shares in the value of output, may be estimated from data on the latter” (1992:5). The elasticity indicator is based on historical data and informed estimates but nonetheless assumed to be correctly calculated once the model is used to compute a productivity measure. In sum, it is through the production function that we know what labor or capital contribute to output. It is notable that, as is clear from the above, the making of a production function entails numerous subjective and non-perfect assumptions. These assumptions must necessarily be accepted as such because they are contestable among experts, as indicated by the ongoing debate on the topic (e.g. Henry and Milner 2005:13, Edwards 1998).
In extension of unsettled scientific questions, several economists found that much of the productivity increase since 1945 could not be explained by their production functions (for review see Gordon 2004:90-3). Some extra output was left unaccounted for. This left-over, the difference between expected input contributions and actual output, is sometimes called the Solow residual because it is the residual in Robert Solow's growth model (Solow 1957, Nadiri 1970:1138, Hickman 1992:5,29). First here enters total-factor productivity as a concept: it is this residual that has become known as total-factor productivity. This because economics re-conceptualizes the residual from the model as technological progress. The logic is that the mismatch between production function and actual output, since each factor has received its share, must be the combined effect of the total factors (Nadiri 1970:1140-1, Federal Reserve Bank of Boston 2004:6-7). As one of the more clear sighted neoclassical production economists remarks, “habits … have led to the association of advances in total factor productivity with technical change” (Gordon 2004:91). That means, the most prominent measure of productivity is a residual from a mathematical model. These details are forgotten once the number circulates as an empirical
fact and productivity is seen as the ultimate solution to political-economy. The redemption of the calculative
This interesting case of total-factor productivity is meant to illustrate, on the one hand, the mystical-religious infrastructure of the theological construct of economic productivity and, on the other hand, its ability to downplay the calculative and emphasize the technological instead.
The attraction of total-factor productivity is that it indicates the unusual, unexpected according to historical data and, hopefully, sober enough estimates. It is not an unreasonable term to latch onto: the indicator for what we cannot measure, the residual. Nonetheless, the residual ultimately stems from the failure to approach the economy through marginal productivity-theory and prices; ultimately from trying to apply these arguments through a calculative rationality. Here the purely calculative fails in that the aim of and the data used as basis for the calculation are compromised by their failure to correspond to the expected reality. Or put otherwise, this means it is not possible to achieve the aim purely through calculation. If deviations from predictions are so systematic that they can acquire a theoretical life of their own, and the correspondence with empirical data is so weak within an already empiricist tradition, then either the original method or theory, or both, should have been scratched long ago.
Though, importantly, this did not prevent the calculative from persisting in this task. Instead, a new avenue of research including much more calculation was magically invented. Crucially, this new research did not amend the issues that led to the failure but simply incorporated them as basic assumptions: all factors of production still received a defined and fair share of income, and prices were still representative of reality. This illustrates how the increased calculativeness of modern economic activity, if it is to be represented by quantitative economic research, is clearly no more rational than any other mystical ritual. The model and method certainly appear rational with all their rigid mathematics and statistics providing unquestionable and definitive numbers. Though, the assumptions behind them are dogma with mystical roots of their existence: a condition of a transcendental point of optimality as a basic assumption and prices as the definitive reality of value.
As we have seen, the economic theory of productivity is not including any detailed knowledge on technology or production processes. Instead, the theory simply follows the dogma that competition between business-firms leads to technical maximum and equilibrium in all markets. It was simply overlooked that the focus of the theory was a result of the practical weaknesses in the assumptions themselves. On this basis, the advice for increasing productivity has two prongs. “[T]wo major sets of factors have been suggested as the determinants of factor productivity: the technical characteristics of the production process [technology] and the movement of the relative factor prices [wages]” (Nadiri 1970:1141). The first refers to technological progress, the second means wages. The most widely given advice then consists in suggesting that exposure to competition will force business-firms to adopt new technology
and force labor to moderate wage demands (Görg, Greenaway, and Kneller 2005:1-4, Hooper 1992:255-6).
This is no more demystifying than Smith's invisible hand or Clark's marginal productivity-theory. On the contrary, the theoretical attempt to grasp productivity is absurdly mystical. It suggests that unhindered competition will ignite the optimal machine in the business-firm and lead to technological progress. Completely forgotten is the issue of the failure of the calculative and the assumptions of a free market as well as the re-conceptualization of a residual, figuratively and literally, of this failure into the most prominent measure of productivity. If the legitimacy of economic rationality could spring from only the calculative it is doubtful that it would survive this embarrassment.
The crucial insight is that the market can be redeemed because technological progress takes center-stage in the sacrament of the ecclesia. Because the calculative is justified with reference to technological progress. This mathematical residual is only important because the socio-moral constellation is geared towards seeing it conceptualized as technological progress. This, I argue, is facilitated by the theological hinterland of the machine here working to unconditionally legitimize everything in the corpus mysticum of technological progress. Any phenomenon passing as technological progress could potentially contribute to total-factor productivity. Productivity is completely mystical. Nothing seems to illuminate this better than the remarkable systematic of the concept total-factor productivity: it simply refers to everything not measured by defined variables – whatever you can think of. This is indeed a mystical and homogeneous body of legitimacy, a corpus mysticum, in a most concrete example. Productivity is everything blessed, the only church of salvation, and the only alternative to lower wages.
In this academic peculiarity it is clear how the modern economy is cast as rational-secular. The rationalness of its ordering is bolstered through the circulation of this productivity measure which comes about as a result of rational-looking calculation given this appearance of rationality by the corpus mysticum of technological progress.
It is namely because it derives legitimacy from a mystical body that we must think of it as a theological construct. In sum, the theological construct of economic productivity includes business-firms and prices as the theoretical background to calculable optimality; it also includes the rescue of calculation, when failing empirically, by ascribing to it membership in the church of technological progress.
At this point, the theological construct of economic productivity perhaps looks less significant. This, I argue, is not so if seen methodologically as a historical event symbolically equivalent to other moments where modern economics has experienced critical failure in a test of supposed rationality while every time re-awakening under a mystical theology. The 1987 financial-derivatives market crash (MacKenzie 2006:184-200), the 1998 bust and rescue of Long Term Capital Management, a money manager group founded by Nobel-prize winners in economics (MacKenzie 2007, de Goede 2005:125-43), and the 2007 financial crisis (Crotty 2009, Wray 2009) come to mind as examples. In that light, economic productivity is a more subtle event of failure
illustrating and amplifying the intellectual drift in the institutional gearing towards justifying the calculative, even when failing, by reference to technological progress in general. This, it should be noted, also applies to the many centers of calculation that emerge as part of modern civilization in realms of science (Latour 1987:235-279) and importantly also in governance and politics (Foucault 1991).
However fragile economic productivity might seem as a delimited trajectory within a single field of academia the theology will come to rule over night and day through a political gospel that replaces politics with productivity and mistakes the market with the economy and the machine for God.
Productivity as the gospel of the third-way
In the foregoing section I analyzed economic productivity within academic economics. The theology simultaneously develops a grand political parallel in which the symbol stands for something broader and more diffuse but still preaches from the mystical gospel of technological progress; ultimately the religion of the market-machine. The embryonic peculiarity with economic productivity, the justification of the market by reference to technological progress, turns into a full blown pathology when the economy-skeptic political program, the left-wing, misapprehends as the forsake of the economy only the redemption of the market and the glorification of the machine. In a reform of left-wing politics its spokespersons embrace the modern economy on the condition of castigating “the unequal growth, the raw capital power” (Thorning-Schmidt in Redington 2007:234). But the reform mistakes the disavowal of the market with a rejection of economic rationality and too hastily adopts the whole edifice of the modern economy under justification from the corpus mysticum of technological progress. This means the potential for opposition politics is obscured.
In this section, I first present a recent policy decision in the form of a governmental commission on enhancing economic productivity in order to illustrate a situation where social-democratic politics embraces the modern economy without any substantial reform, which otherwise is among its stated goals. Secondly, in order to understand why this decision was possible I research the political thinking of the leader of the social-democratic party Mrs. Helle Thorning-Schmidt. Here I find two related entities, resonating with those related to total-factor productivity, in the form the denunciation of the calculative market and the embrace of the technological machine. Finally, I investigate the symbols of productivity in the thinking of the spokesperson. This illustrates how politics is legitimized as apolitical by reference to technological progress as a corpus mysticum and the technical maximum achievable in business-firms. In that, it is argued that opposition politics is misconceiving the productive forces of the modern economy and hence obscures its own potential for supporting alternatives.
Productivity policy in the third-way
The current Danish center-left government and its leader together form an interesting case since Thorning-Schmidt is the spokesperson for one of the most recent third-way political constellations (Hutcheson 2012:338, Kosiara-Pedersen 2012) in a region often said to be at the core of social democratic politics (Esping-Andersen 1990:52, Baldwin 1989). It came to power after 10 years of popular right leaning government and was elected on a theme of left-wing issues such as road-pricing and social security. The government has gone back on some of these promises by, for example, lowering corporate taxation from 25% to 22% as part of the policy plan called Growth-planDK (VækstplanDK 2013:7). Though, this is partly because the social-democratic party had to form coalition with a more right-leaning social-liberal party (Kosiara-Pedersen 2012:422).
Looking at the concrete political decision to establish a productivity commission will illustrate how this third-way government applies the term of productivity in its politics. In 2012 the government appointed a 'Productivity Commission' with the task of identifying obstacles to and solutions for increasing productivity (Productivity Commission 2013a:2-3). The commission is working on a firmly orthodox economic background. This is interesting because the outlook and aim of the commission exactly are areas where the politicians could have made a difference. The commission favors partial measures over total-factor measures, due to calculation and comparability issues (2013b:22). Though, the initial report concludes that productivity seems to be best achieved by increasing total-factor productivity (2013b:84). Other general factors of productivity are the result of competition (Productivity Commission 2013c:19-24), good quality of capital (Productivity Commission 2013b:87), and high quality of human capital (ibid:93). Also mentioned is the two-pronged alternative for increasing productivity by either cutting wages or implementing new technology. The first option, though, is seen as undesirable and not considered a justified route to productivity (2013a:7). In the first advice oriented report, “Competition, Internationalization, and Regulation”, the commission suggests a number of concrete initiatives. The list of these advices includes: liberalizing sectors, removing regulation, bringing regulation up to 'best practice', standardizing regulation, removing tariffs, and, not without irony, appointing further commissions (2013c:11). In general, the commission is guided by the notion that competition is the surest way to increase productivity. All ideas are meant to facilitate the competition machine and has little to do with technological intricacies or production processes. Nonetheless, every idea is legitimized by reference to increasing productivity and technological progress. The thinking of a spokesperson of the third-way
When launching the idea of a productivity commission the Prime Minister stated that it should look into “how we can strengthen productivity across the board” (Thorning-Schmidt in Kristeligt Dagblad 2012). In order to grasp what is understood by productivity and why the concept is implemented through a commission accepting everything about modern economics I here investigate
