Contextual economics
from Neva Goodwin
Starting in the early 1990s I have worked with a number of great colleagues to develop a full alternative that we call contextual economics. The name comes from our conviction that an economic system can only be understood when it is seen to operate within a social/psychological context that includes values, ethics, norms, motivations, culture, politics, institutions, and history; and a biophysical context that includes the natural world as well as the built environment.
The starting point for our contextual economics textbooks is an inquiry into goals: What are the appropriate goals for an economy? And, relatedly: What are the appropriate goals for the discipline of economics? Contextual economics emphasizes that most traditionally understood economic goals – efficiency, maximizing production or consumption, earning money – are best understood as intermediate goals, that is, means to other ends. The relevant final goals might include, for example, the satisfaction of basic physical needs (e.g., for food, water and temperature regulation; happiness (including a good balance of comfort and stimulation); self-respect and the respect of others; self-actualization and a sense of meaning; fairness in the distribution of life possibilities; freedom; democracy and participation; and a natural environment that supports healthy human life. These may be summarized as well-being. The scope of consideration is all humans, in the present and in the future, and regardless of the extent of their involvement in market transactions.
In defining the economy, contextual economics adds to the traditional trio of “production, consumption and exchange” a critical fourth function: resource maintenance. This includes upkeep of manufactured capital, maintenance and enhancement of a healthy stock of natural capital, and many of the kinds of work listed above as most essential for human survival and well-being. It may be that it was because this work is so often performed by women that resource maintenance has not previously been included in the list of essential economic functions; indeed, it was a leading feminist economist, Julie Nelson, who, as a collaborator on contextual economics textbooks, introduced this concept.
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Real-World Economics Review Blog 
Since when were economists philosopher kings telling society what its values should be and how to achieve them? Keynes compared them with dentists, hunble functionaries who tell you how to look after one small part of the person. You don’t go to a dentist to cure your cancer or save your soul. Economists study those relationships where there is a commercial element, usually where money is involved. . They are not great at theorising even about those, though they know more facts about them than other people. What qualifies them to look at anything else? A general study of society and its purpose requires contributions from many disciplines. It is bizarre that people critical of economics and economists should want to extend their purview to all aspects of society.
Resource maintenance has been studied by economists to the extent that people pay for it and ignored when they don’t. They will have to pay more for it in future and it will naturally figure more and more in economic studies
Very important remark! Since when were economists philosopher kings telling society what its values should be and how to achieve them?
Let us see what Neva Goodwin wrote:
Goodwin seems to be considering that an economy has a goal. There are a kind of category mistakes in it. Efficiency, maximizing production or consumption, earning money: those are goals of individual participants in an economy and not the goal or aim of the economy. An economy is the large complex system that comprises various kind of agents such as firms, consumers, investors, entrepreneurs, law enforcement agents, etc. It goes with various kind of interactions such as exchange, production, choice of product designs, choice of production techniques, investment, introduction of new institutions and laws, etc. The economics studies how this complex system works (or how and why it does not work conveniently).
Rather than being a dentist, an economist should be a mechanics who knows how this complex system works (although he or she rarely succeeds to repair it).
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There are many ways to obscure the truth when we hide implicit moral and ethical value judgements behind ideology. It matters not whether that ideology is justified by the obscurantism of religious fundamentalism, or the obscurantist conceit of a secular materialism that as embodied in the scientism that obscures through the pretense of “standing aside” or being above the moral, ethical, and policy questions of our times because they are engaged in a ” dispassionate search for timeless truth.” These are useless economists who frequently hide behind the pretense of being objective or value free while all along preaching their own moral and ethical values in their ideology that hides within it implicit value judgements about human nature, society, and the nature of science itself.
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The only logical fallacy lies with Shiozawa’s mistaking the abstract for the concrete; the Fallacy of Misplaced Concreteness. Shiozawa’s unexamined implicit philosophical presuppositions blind him to the fact that there is no category error in Goodwin’s reasoning, but rather the error lies in Shiozawa’s obscurantist definition of science and economics which ultimately lie in his reification of reality; i.e., diverse economies, both local and global, that are the intentional creations of human beings in that they establish, based upon morals, ethics, and value judgements the social institutions and frameworks within which markets exist. The legal foundations are ultimately underpinned by moral, ethical, and philosophical assumptions. So to are our institutions. Shiozawa seeks to obscure all of this with the pretense of the abstraction of “complexity” and timeless search for the microfoundations of economics.
Gerald’s meretricious pretense wants us to pretend that the field of economics and its Nobel Prize winning Oracles of Science have not played a significant role in shaping normative policy questions with life and death consequences. One can reasonably argue they shouldn’t have such influence over normative questions, and correct that normative questions require “contributions from many disciplines,” but a motivated misrepresentation if the evidence to pretend they haven’t in the past and don’t even now engage in such normative policy questions, frequently claiming to do so in the name of science, with consequences that determine who lives or dies. One needs to only look at Shiozawa’s frequent bogeyman of state intervention (i.e., antiquarian conservative parroting of Hayek) comments on RWER to see economic ideology (see Kwak on state intervention and economism) masquerading as science.
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Naomi Oreskes and Erik M. Conway are the authors of Merchants of Doubt that documents the history of how corporations (big oil) followed the same play book used by the big tobacco to undermine and cloud the science that showed tobacco caused cancer. They used so-called “conservative” neoliberal scientists and economists who adhered to an ideology of market fundamentalism to spread misleading propaganda to the American public to prevent any meaningful political action on either issue. They now have a new book out devoted to this very history writ large: The Big Myth: How American Business Taught Us to Loathe Government and Love the Free Market. Indeed, it is pure pretense to pretend economists have not been active in spreading neoliberal propaganda about the so-called “free market.”
The followings are two comments I made recently. Readers will easily see what I aim at.
A comment to “Life expectancy vs. health expenditure” on May 24, 2022:
A comment to “In economics value-neutrality is an illusion” on May, 18, 2022:
The worldview of the obscurantist conception of economics is one rooted the conceit of the false premise of being engaged in dispassionate search for timeless truth standing aloof from policy questions and human needs.
If economic history is the history of wealth and its distribution; if political history is the history of governments and state formation; if military history is the history of armies and war; if environmental history is the history of human interactions with nature; cultural history is, quite simply, the history of stories, their origins, transmission, and significance in time.
Understanding your post for America requires we look into American cultural history. American anthropologist Franz Boas gives an objective and useful view of culture, which he describes as a way of life or “the ways people inhabiting a common geographic area … do things… the ways they think and feel about things.” Around the same time, in Germany, social scientists were developing similar ideas of culture as “the totality of ideas in a society, popular, as well as scholarly, low as well as a high culture.” Since then, various philosophers, anthropologists, linguists, and sociologists, both in Europe and in America, have qualified the term with notions of “high culture,” “folk culture,” “mass culture,” and “popular culture,” the latter two born with the advent of mechanical reproduction in the 19th century. We also have references to national cultures or regional cultures as well as more recent uses of the word that refer to various forms of human difference, like gay culture, Jewish culture, black culture, and diasporic and transnational cultures.
Historians of culture rely upon surviving evidence to capture the less tangible, less quantifiable aspects of the human past, the expression of meaning, values, symbols, ideas, knowledge, and ideology, as packaged within cultural texts that are then preserved within archives curated by experts in classified realms of knowledge. These disparate materials are the stuff of cultural history, the “texts” through which culture is created and transmitted. The stories embedded within these texts are often fictional, but not always. Maps and newspapers, for example, tell stories, even though they purport to present factual representations of the world, either through the science of cartography or through journalistic standards of truth and objectivity. Yet the human propensity for bias, often unconscious, shapes newspaper content, either through editorial decisions to cover certain stories and not others or through a reporter’s choice of words that carry implicit values and assumptions. Like newspapers, maps can lie and distort. Cartography, as it took shape during the period that marked the thrust of European expansion, often diminished the size of other continents relative to Europe, or it demarcated imagined boundaries between rival nations and empires.
Cultural historians do not presume easy distinctions between fact and fiction; they see the potential for human bias in all cultural texts (including their own scholarship), and they consider the ways in which such bias subverts or supports the status quo. While they rely upon factual (archival) evidence to support their claims, they are less interested in facts and more focused on their interpretation by diverse social groups. It is a fact of American history, for example, that 14 to 15 million Africans and their descendants were enslaved between 1609 and 1865, but the radically different interpretations of that fact, as embodied within a wide variety of cultural texts, from Sojourner Truth’s Ain’t I a Woman? (1851) to Hollywood’s rendition of Gone With the Wind (1939) to the silhouette cutouts of the twenty-first-century artist Kara Walker, fuel the very debates that animate cultural history.
With this in mind, let us consider aspects of US culture that may help us understand better recent happenings.
In the young nation several notions and ideas about America and Americans were common that continue to animate Americans today.
America is considered a restless society by most Americans in 1840. All observers agreed that Americans worked harder, ate faster, moved around more, and relaxed less than Europeans. In America, Tocqueville wrote, … a man builds a house in which to spend his old age, and he sells it before the roof is on; he plants a garden, and lets it just as the trees’ are coming into bearing; he brings a field into tillage, and leaves other men to gather the crops; he embraces a profession and gives it up; he settles in a place, which he soon afterwards leaves, to carry his changeable longings elsewhere. Nothing seemed finished in this raw republic. “Improvement,” both personal and collective, was a national preoccupation. Americans were confirmed tinkerers, whether dealing with machines or institutions. They were on the move, in transit, going from somewhere to somewhere. They were obsessed with speed and impatient of delay. The symbol of the young republic might have been the locomotive that never ceased to move, or the steamboat that moved people and goods up and down the American rivers-and that frequently blew up.
Also, in 1840 most considered America a commercial society. Twenty-five years after the War of 1812 ended America was primarily a business society, materialistic and practical. By the 1820’s the ‘businessman’ already occupied a key position in American society, and the trading spirit permeated American life. Every American was, declared the editor of Andrew Bradford’s American Magazine, in one sense a trader. The physician traded his “benevolent care,” the lawyer his “ingenious tongue,” the clergyman “his prayers.” One principle motivated the commercial classes, another explained, that enabled them to enrich the country as well as themselves: Whether it be called avarice or the love of money, or the desire of gain, or the lust of wealth, or whether it be softened to the ear under the more guarded terms, prudence, natural affection, diligence in business, or the conscientious improvement of time and talents – it is still money-making which constitutes the great business of our people – it is the use of money which controls and regulates everything. But even the severest critics of America usually agreed that there was nothing mean spirited or sordid in this ‘heroic pursuit of wealth.’ The prosperous men (and today women) who followed the success code laid down by Benjamin Franklin (who by this time had become a patron saint) assumed the honors and the responsibilities that went with wealth. Public opinion condoned the drive to be rich, but it also regarded money as an “engine” of benevolence rather than as a good in itself. Many of the merchants, like the public spirited Abbott Lawrence of Boston, actively supported humanitarian and cultural enterprises and were “even munificent in their donations.” One difference today is less effort at munificence.
As a complex society America was also taken as idealist. In spite of their insistence on the practical and the useful and their almost universal contempt for the theoretical and the visionary, Americans were susceptible to every kind of evangelical appeal. They responded emotionally to causes. Temperance, world peace, national politics, the Greek Revolution, Hungarian independence, public schools, financial or even dietary panaceas, often distracted the solid citizen from their humdrum activities. “Causes” released dammed-up emotions. This was the time of missionary crusades to the Pacific Islands and Africa and Asia, of religious revivals in frontier canebrakes, of abolitionist martyrs, of new religions and cults, of pseudo-science and strange delusions. Remarking on the “fanatical and almost wild spiritualism” found in America Tocqueville surmised that religious enthusiasm naturally expressed itself in a society “exclusively bent upon the pursuit of material objects.” A people who made a virtue of common sense, he believed, were likely to display emotional excess whenever they switched abruptly from material preoccupations to spiritual yearnings. Then they were prone to “burst the bonds of matter by which they are restrained” and “soar impetuously towards Heaven.” Between 1820 and 1850, the American people attempted a number of such flights. The latest flights today are labeled Q-anon and MAGA.
In our government [declared an orator in 1840], we recognize only individuals, at least among whites; and in social life, the constant effort to do away with the castes produced by difference of fortune, education, and taste. The motto upon the flag of America should be ‘Every man for himself.’ Such is the spirit of our land, as seen in our institutions, in our literature, in our religious condition, in our political contests. Democracy meant (to many, if not to all) not only political but social equality. To paraphrase Tocqueville again, men pounced “upon equality as booty” and clung to it “as some precious treasure” they feared to lose. They shunned menial occupations, however well paid, and stoutly resisted any idea or action that might tend to decrease their social prestige. Yet even as patriots gave lip-service to equality, some Americans saw in the rush to the professions and the declining status of the laboring classes the evidences of a caste spirit. The increase in the number of factory workers, as the industrial revolution got under way, and the growth of an urban population weakened republican simplicity and intensified social distinctions. By the late 1830’s, a flexible yet well-defined social hierarchy had developed in the commercial Northeast and Northwest, as well as in the more class-conscious South.
Distinctions in this socially fluid period depended pretty much on wealth. Although it is impossible to chart the fine distinctions of rank and reputability, successful business leaders and lawyers with good reason occupied the top rungs of society. Clergy, physicians, and teachers, too, if they were accepted and patronized by the influential, might claim similar status. But below this privileged group stood the bulk of the population, ranging from the moderately well-to-do down to the lowest-paid. Class lines, to be sure, were flexible. No insuperable barriers prevented the mechanic or the clerk or the farmer – referred to in the press as the “bone and sinew” of the republic – from rising into the elite. Each white citizen remained equal before the law, no class demanded special respect from another, and people of all degrees mingled indiscriminately in business. In spite of artificial distinctions, there was little servility among whites. Almost everyone had some stake in the society, and despite the fears of conservatives the American people embarked on no wildly revolutionary course. Events since the Revolution had only confirmed their faith in material prosperity, religion, private property, and the home. Wrapped up in their daily affairs, and schooled to accept the ideas and prejudices of the majority, the citizen usually abided by the “empty phantom of public opinion,” which was “strong enough to chill innovators and to keep them silent and at a respectful distance.”
Although the pre-Civil War era has been popularly regarded as the heyday of rampant individualism, and although the triumphant and self-propelled hero was held up as a model by contemporary writers and too many historians, the period was also a time of cooperation or of “association.” The achievements of the single man have come to overshadow the accomplishments of the group in our folklore, but when Tocqueville visited America he was immensely impressed by the fact that “the most democratic country on the face of the earth … carried to the highest perfection the art of pursuing in common the object of their common desires.” For the American to pool resources, both material and intellectual, and to throw in their lot with the community in which they worked and lived, simply seemed the most sensible thing to do at the time. A society of “lone wolves” would not have survived. Businessmen joined together to organize banks and insurance companies, or to protect themselves against the competition of foreign merchants. Poor people in the cities sometimes pooled their money to buy up fuel supplies when prices were low. Citizens, hungry for culture, set up mutual improvement clubs, and immigrants formed aid organizations with their own countrymen. Charitable, reform, fraternal, and benefit organizations sprang up naturally in a democracy where there was no fixed ruling class with a tradition of social responsibility to supervise civic undertakings. Associations like these not only satisfied the need for fellowship, but they also gave the individual a sense of belonging to something.
Although some people came together to make frank protests against selfish individualism, most Americans saw no contradiction between their personal ambitions and community welfare. As a newspaper correspondent pointed out in 1834: In a republic, the prosperity of the country is so intimately blended with that of each individual citizen … a citizen may pursue their individual benefit in connection with high consideration of their country’s good, without laying themselves under any imputation of a want of patriotism, or acting under purely selfish motives.
Another defended associations by pointing out that “Many can accomplish what one cannot.” But they added this qualification: “We mean to receive as much as we give, and we ask others to join us on that principle.”
Dear Ken Zimmerman,
is this the very place you wanted to post this long comment? I cannot find how it is related to Neva Goodwin’s article or any of comments here.
Just doing my bit to help economists get past economics and their usual backup, psychologism.