Economics and politics as two distinct spheres of human activity

Unlike the mission of the natural sciences, though, the mission of political economy was finite, by definition. If the purpose was to isolate the economy from the intervening hand of political rulers, it follows that once that purpose was achieved political economy would no longer have reason to exist. Independent of each other, economics and politics could now be studied and analysed separately, as two distinct spheres of human activity.

The surplus can't be explained by the economy

But that was easier said than done. As it turned out, political economy cannot self-destruct – and for a reason that, paradoxically, lies in its very purpose.

The explanation is simple enough. Conceived of independently of politics, the economy is a closed system. It has its own units of labour time and commodities; it has its own structure of inputs and outputs; and it comes with a theory that fully explains the level of production, consumption and relative prices. This self-contained description, though, holds only for a stationary economy. But capitalism is anything but stationary. As political economists themselves emphasize, capitalism is a growing system. It generates an everincreasing ‘surplus’ – an output that is over and above what is necessary to merely reproduce society at a given level of production and consumption. And this ever-growing surplus creates a huge theoretical problem: it cannot be fully explained by the economy alone.

How does the surplus accumulate?

How big is the surplus? Who ends up getting it? How does it accumulate? How does it impact the functioning of capitalism? These are questions which ‘pure’ economics cannot answer. The only way to address them is to bring conflict and power back into the picture – that is, to reintegrate politics and economics – which brings us right back to where we started.

Political economy can never achieve its ultimate purpose. It cannot make economics separate from politics simply because the very questions economics seek to answer are inherently political. [11]

Theory without empirical verification

Initially, few political economists realized this logical impossibility. Most remained convinced that economics and accumulation could be – and eventually would be – separated from politics and power. This theoretical conviction was greatly facilitated by the paucity of social statistics and limited empirical analysis. The early political economists did not feel compelled to empirically define and measure their pure economic concepts. And since they rarely subjected their concepts to empirical verification, they remained oblivious to the methodological time bombs buried in those concepts.

The above paragraph is not a reprimand. Until the mid-nineteenth century, European societies, including Great Britain, were still predominately agricultural, highly fractured and, consequently, lacking a clear sense of their totality. There was no common yardstick. The universal metre was measured in the late eighteenth century, but the metric system was yet to be enforced, with France alone still boasting no less than 250,000 different weights and measures (Alder 2002). Macro concepts that today we take for granted – such as ‘national aggregate’, ‘social average’, ‘industrial sector’, and the ‘total capital stock’ – were just beginning to emerge. It is true that the mechanical–scientific revolution introduced various laws of conservation, replacing religious miracles with clear, finite boundaries. It is also true that these natural laws and boundaries started to find their way into social theory. But the actual process of estimating aggregate statistics, collating national data and measuring sectoral averages was still very much in its infancy [12].

No tools for methodological social inquiry

The above paragraph is not a reprimand. Until the mid-nineteenth century, European societies, including Great Britain, were still predominately agricultural, highly fractured and, consequently, lacking a clear sense of their totality. There was no common yardstick. The universal metre was measured in the late eighteenth century, but the metric system was yet to be enforced, with France alone still boasting no less than 250,000 different weights and measures (Alder 2002). Macro concepts that today we take for granted – such as ‘national aggregate’, ‘social average’, ‘industrial sector’, and the ‘total capital stock’ – were just beginning to emerge. It is true that the mechanical–scientific revolution introduced various laws of conservation, replacing religious miracles with clear, finite boundaries. It is also true that these natural laws and boundaries started to find their way into social theory. But the actual process of estimating aggregate statistics, collating national data and measuring sectoral averages was still very much in its infancy [12].

Pure theory

Most nineteenth-century political economists – as well as their chief critic, Karl Marx – had little or no knowledge of the macro facts. There is little wonder that their discussion of surplus and capital was largely theoretical. And, at the time, few theorists thought something was missing. The very idea of ‘testing’ social theory with empirical evidence was not even on the radar screen.

In this social context, the notion that capital was a purely economic category hardly seemed problematic. With economics considered separable from politics, with aggregate concepts yet to be invented and diffused, and with the basic social data still to be created, it was possible to believe that capital was an objectively defined economic entity with a readily measurable quantity. There was really nothing to contest that belief.