Economics in the Shadows of Darwin and Marx: Essays on Institutional and Evolutionary Themes

Published by EH.NET (March 2008)

Geoffrey M. Hodgson, Economics in the Shadows of Darwin and Marx: Essays on Institutional and Evolutionary Themes. Cheltenham, UK: Edward Elgar, 2006. viii + 265 pp. $100 (cloth), ISBN: 1-84542-497-2.

Reviewed for EH.NET by Gary Mongiovi, Department of Economics and Finance, St John’s University.

Charles Darwin and Karl Marx, each in his own way, radically transformed our understanding of human history. Marx developed a powerful theory of how economic systems change over time. But Darwin’s theory of natural selection has become the preferred metaphor of social scientists who want to understand how institutions emerge, take root and evolve. One recent example of this “evolutionary turn” is the hypothesis put forth by Gregory Clark in A Farewell to Alms (Princeton University Press, 2007), that England’s industrialization in the early nineteenth century can be explained by the high fertility of the medieval nobility, who, through a process of natural or cultural selection, infused the country’s population with traits conducive to economic growth. In another recent book, Niall Ferguson draws upon Darwinian principles to account for, and justify, the modern financial system (see The Evolution of Financial Services , Oliver Wyman, 2007). In the book under review, Geoffrey M. Hodgson, Research Professor in Business Studies at the University of Hertfordshire, argues in the same vein that Darwin rather than Marx provides the appropriate model for making sense of socio-economic change.

Marx read On the Origin of Species in late 1860. His initial reaction was positive; he wrote to Ferdinand Lassalle in January 1861 that “Darwin’s work is most important and suits my purpose in that it provides a basis in natural science for the historical class struggle” (K. Marx and F. Engels, Collected Works, Vol. 41, p. 246; International Publishers, 1985). But Marx’s enthusiasm began to wane as soon as it dawned on him how much Darwin owed to Malthus. In June 1862 Marx commented to Engels that “Darwin rediscovers among the beasts and plants, the society of England with its divisions of labour, competition, opening up of new markets, ‘inventions,’ and Malthusian ‘struggle for existence.’ It is Hobbes’ bellum omnium contra omnes …” (Collected Works, Vol. 41, p. 381). Marx anticipated that reactionaries would appeal to Darwin’s theory as “a conclusive reason for human society never to emancipate itself from its bestiality” (Collected Works, Vol. 43, p. 217). By 1866, Marx was championing Pierre Tr?maux’s Origine et Transformations de l’Homme et des autres ?tres (Paris, 1865) ? now justly forgotten ? as a “significant advance over Darwin.” For Marx, Tr?maux’s great improvement was that he placed progress at the center of his conception of evolution, whereas “Darwin regards [progress] as purely accidental …” (Collected Works, Vol. 42, p. 304).

Marx’s endorsement of Tr?maux over Darwin was a serious lapse in judgment. But the misstep is explained by the affinities between Tr?maux’s theory and Marx’s project to expose a set of forces that drive socio-economic development. Opposition to this idea that history has a “logic” is at the heart of Hodgson’s coolness toward Marx. Whereas Darwin recognized that biological systems are open ? subject to external forces like climate change or species migration ? Marx, Hodgson charges, explains capitalism’s historical trajectory almost entirely in terms of internal mechanisms. Hodgson further contends that Marx ascribes to these mechanisms a teleological character that is incompatible with the open-endedness of Darwinian evolution: they propel the system toward collapse, and set the stage for the next phase of human history, socialism. In biological systems, new traits originate as random mutations, and proliferate if they confer some survival advantage on an organism or population in the prevailing environmental conditions; these new traits may in turn react back on the natural environment. Because the biological system is open, and its constituent elements interact with one another in complex ways, the outcome of the process is not susceptible of prediction: there is no determinate end-point. In this respect, Darwin’s perspective is closer than Marx’s to the “old institutionalist” tradition that has inspired Hodgson’s work over the past two decades.

Hodgson wrongly asserts that Marxism overlooks the indispensable social functions of customs and institutions as repositories of collective knowledge. Marx knew that institutions evolve as solutions to problems that individuals and groups encounter in going about their business; in his account of how capitalism develops, custom is a crucial element of the superstructure that reinforces the underlying economic basis of society. Marx saw also that institutions exhibit inertia: they persist long after the circumstances that gave rise to them have disappeared. As often as not, the new institutions themselves helped to bring about the transformation of the material conditions of society. This disjunction between institutions and the evolving mode of production, Marx hypothesized, generates tensions, or contradictions, that lead eventually to the withering of old institutions and their replacement by new ones: a socio-economic system is pushed forward through history by the tensions generated by the production relations which form the system’s institutional core. Hodgson does not consider whether this bold hypothesis is a fruitful way to approach the analysis of socio-economic change; he simply dismisses it as “teleological” and moves on.

Social Darwinists like Herbert Spencer, William Graham Sumner and, in our own day, Charles Murray maintain that natural selection accounts for the misery that market economies inflict on large numbers of people: the poor are poor because they are inferior or unfit in some objective sense. This is not an application of a metaphor, but a claim about actual social and biological processes. Though its environmental niche is small, Social Darwinism, now generally regarded as morally repugnant and empirically vacuous, poses something of a difficulty for anyone who wants to argue that the theory of evolution provides an apt template for the explanation of social processes. In Chapter 3 Hodgson rescues Darwinism from this ditch. He points out that the term “Social Darwinism” was rarely used before the mid-1920s, and when it was used it was usually deployed by progressives against free-market fundamentalists. We learn also that the writers conventionally labeled Social Darwinists were in fact not genuine Darwinians. But the misapplication of allegedly Darwinian ideas in support of “an ethics of rapacity and greed” (p. 47; the words belong to the sociologist Erville Woods) ? a development that, as we have noted, Marx foresaw ? led to a reaction among social scientists, particularly sociologists, who sought to purge their disciplines of all traces of biological causality. Talcott Parsons plays a malign role in Hodgson’s story. Parsons, who wanted to carve out a secure and influential professional niche for sociology, strategically broadened the definition of Social Darwinism to encompass “anyone who applied biological ideas in the social sciences” (p. 54). He then distorted the views of those who fell within the definition, demonized the distorted views, and erected a barrier between the social sciences and biology.

Hodgson makes a persuasive case that the history of the term “Social Darwinism,” in particular its transformation into an epithet, contributed to the disappearance of biological reasoning from the social sciences. But a few loose ends remain. For a start, Hodgson doesn’t explain why Parsons thought a full-throttle attack on Social Darwinism would advance the professional interests of sociologists. Nor is it clear how Veblen and the American institutionalists fit into the argument. They recognized the evolutionary character of social phenomena, were never tarred with the Social Darwinist brush, and were an influential presence in American economics into the 1950s, long after Parson’s crusade had succeeded in marginalizing the ideas of Spencer and Sumner. The near-demise the Veblenian tradition owes little to the assault on biological approaches that Hodgson describes. In economics the dominant metaphors had, from early on, been drawn mainly from physics. The institutionalists showed that a “biological” outlook might be more appropriate for understanding a large class of human activities; but they were swimming against the current.

In Chapter 4 Hodgson elaborates his critique of Marx. The charge that Marx’s theory is teleological is here connected to another criticism ? that he lacks an adequate theory of human agency, of why people behave as they do. While a Marxian theory of agency would be useful to have (and a good deal of work, ignored by Hodgson, has been done in that direction), the fact that Marx did not himself provide one doesn’t invalidate his general approach. Marx was primarily interested in how the system as a whole reproduces and evolves, and at that level of analysis, some degree of abstraction about individual behavior is not only permissible but necessary. To be sure, class interests and material conditions do not compel people to behave in ways that bring about some inevitable path of social development. Marx knew this, even if he was confident that capitalism would eventually collapse under the weight of its internal contradictions. He knew too, though, that those material conditions have ramifications for what people believe about the world, for how they make choices, and consequently for how society evolves. Hodgson’s remarks on these matters were initially made in 2001, as the opening contribution to a debate with Alex Callinicos, whose rebuttal, presented here as the second part of the chapter, makes short work of Hodgson’s caricature of Marx’s views.

The book loses its thematic focus after Part 1. Readers looking to find direct engagement with the ideas of Darwin and Marx can put the book aside once they have gotten through Chapter 4. Darwin recedes into the background, and Marx receives no attention at all after Chapter 6. This is not to say that the remaining sections of the book lack interest.

In Part 2 Hodgson scores some hits against the critical realist school. He begins by dismantling the claim often made by critical realists that their methodological tenets support an emancipatory left-of-center politics. He then moves on in Chapter 6 to critique several concrete analytical applications of critical realism ? its utilization in defense of Marx’s theory of the tendency of the profit rate to fall; and the attempt to explain Britain’s late-twentieth century industrial decline as the result of trade union resistance to technological change and workplace reorganization. In these chapters Hodgson delivers a penetrating dissection of critical realism’s vulnerabilities, though the effect is marred by the occasional cheap shot, as when he writes that critical realism “is a means for Marxist academics to make political postures while simultaneously earning their crust doing serious academic work” (p. 93).

Chapter 7 is an insightful assessment of “The Problem of Formalism in Economics.” Hodgson identifies two extreme positions on mathematical formalism: (1) rejection of formalism out-of-hand, a view which is close to the critical realist stance; and (2) the treatment of formalism, in itself, as the criterion of scientific legitimacy, without due regard to whether the formal techniques utilized in a particular argument cast light on the real world ? an attitude that is all too evident in modern economics. Hodgson advocates a middle-of-the-road approach: formalism can be useful if we are attentive to the interpretative context in which any given formal model is developed and applied. This sensible view, however, then raises the question, left unaddressed by Hodgson, of what other criteria are necessary to gauge the usefulness of a model.

The third part of the book is concerned mainly with taxonomic issues: how are institutions, habits, rules, routines, customs and norms different from one another, and how are they connected? Much of the ground covered here is familiar, and there is a good deal of hair-splitting on display. These chapters flunk the MEGO test (“My Eyes Glazed Over”).

Hodgson has less to say than one might expect about how new institutions originate, or why they take this or that particular form. Marx provides a potential answer to such questions, but Hodgson consigned Marx to the dustbin of history in Part 1, and wants to leave him there. When, in Chapter 10, Hodgson does take a stab at the problem of how institutions and rules come into existence, his analysis lets us down. With coauthor Thorbj?rn Knudsen, he approaches the issue via a technical exercise that has become common in the new institutionalist literature, a game-theoretic computer simulation aimed at showing how a particular rule ? in this case, the convention about whether cars are to be driven on the left or right side of the road ? might emerge from the undirected choices of atomistic agents. It is a curious exercise for Hodgson to undertake because it seems to be fundamentally at odds with the “old institutionalist” injunction not to treat social actors as atomistic entities. If institutions really do matter, our default setting ought to be skepticism toward any attempt to explain even a simple rule in terms of a model that abstracts from social and political context. Hodgson’s simulation results undermine the view that habits must be grounded in given individual preferences; but I’m not sure we need this sort of analysis to tell us there’s something fishy about the crude reductionism of utility-maximization models. That the convention under examination involves no issue of conflict also limits its interest.

The book’s central message is that “Explanations of socio-economic phenomena [ought not to be] reduced … to individuals [or] to institutions alone” (p. 201). Few would disagree. In elaborating this message, Hodgson overstates the differences between his own methodological approach and Marx’s; herein lies the book’s principal flaw. Hodgson presents Darwin and Marx as mutually exclusive alternatives, when they are in many respects complementary to one another. Darwinian evolution is indeed “random” in a way that Marx’s capitalist dynamics are not. There’s a good reason for this. Social systems are different from biological systems, and the Darwinian metaphor can carry us only so far. One has the impression that Hodgson wants to shield institutionalism from being tarnished by too close an association with Marxism. Yet his perceptive and careful reflections on social transformation would be considerably enriched by a more liberal assimilation of Marxian insights.

Gary Mongiovi teaches economics at St John’s University. He and Steve Pressman co-edit The Review of Political Economy.