Institutional economics and psychoanalysis: how can they collaborate for a better understanding of individual-society dynamics? Arturo hermann* may 2005

Some Problematic Issues in Veblen's Theory

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Some Problematic Issues in Veblen's Theory
Veblen's analysis raises many important questions which, due to their complexity, demand a more in-depth examination:

  1. One element of modern technology which Veblen considers paramount for reducing magic and ceremonial habits of thoughts is its supposed mechanical and "colourless" nature; in fact, in the presence of these characteristics, it is more difficult for individuals to impute magical and animistic traits to modern technology than to simpler instruments. However, we can observe that this mechanical character — which reminds us of the working rules of physical laws — is typical of any kind of technology. In fact, even in the use of the simplest instrument man has to consider its physical properties if he wants to use it effectively; and, with regard to the "colourless" character of modern technology, this is not an absolute trait, but, rather, a matter of human attribution that does not depend on the mechanical characteristics of the technology employed, but rests, at least in part, on the social and economic characteristics of the context in which it is employed. As a matter of fact, modern technology can be "colourful" and creative — for example, in the case of information and communications technology — whereas an old technology can be quite "colourless" and plain, as for an exploited worker in a poor agricultural setting. The "colour" we attribute to technology depends on what technology represents for us, which, in turn, depends on the complex interplay between individual and collective values and motivations; that is, it depends on the "colour" of our spiritual life and on the characteristics of the institutional and socio-economic framework (ISEF8) considered. Furthermore, we can observe — in accordance with important psychological and psychoanalytic research — that, to the person, imputing a symbolic meaning to his or her work instruments does not necessarily imply an "irrational and primitive" psychological process, since it constitutes an expression of his or her relational and affective spheres; that is, it represents a symbolic and important expression of person's social links. Of course, the typical contents of these imputations may vary in different cultures and may also be the expression of psychological conflicts, but such variations concern only the contents of these attributions and not the process of imputation as such.

  1. Veblen seems to regard the spiritual life or "the free movement of human spirit" at odds with the logic of the machine process, but this supposed dichotomy raises many problems: what is the meaning of spiritual life? In Veblen's analysis, spiritual life seems sometimes to be synonymous with "irrational and primitive behaviour"; for instance, in the quoted passage, he lumps under the same heading of "spiritual life" concepts as diverse as magic, occult science, telepathy, spiritualism, vitalism, pragmatism. These concepts are in some cases not only diverse but — we believe — quite antithetical, as for instance between magic, occultism and telepathy, on one hand, and spiritualism, vitalism, pragmatism9 on the other.

  2. But now, let us assume that, following Veblen's reasoning, the machine process fully exerts its effect and thus the more primitive habits of thoughts and life will be gradually displaced; in this case will individuals lose their spiritual life in the sense that they will act in a "rational", machine-like way? In Veblen's analysis these fundamental questions are left unanswered, even though they assume great importance for the understanding of his theory. In fact, if we suppose that, following Veblen's analysis, in our society the main purposes of the working of the machine process are mainly related to the principles of "conspicuous consumption" and "pecuniary gain" — that is, to principles chiefly based on habits of thoughts and life, coming from primitive stages of life, having their roots in propensions at cross-purposes with workmanship and parental bent — the logical consequence of a successful functioning, in Veblen's terms, of the machine process would be a gradual reduction of conspicuous consumption, accompanied by a gradual substitution of the "productive" objective, related to "material serviceability", for the "pecuniary gain" objective, related to the dynamics of "exchange value", (cfr. in particular Veblen, 1919: 279-323; and also Veblen, 1904 and 1921). However, since in Veblen's analysis (in particular, 1899) conspicuous consumption is supposed to cover a substantial share of consumption in contemporary society, the results of a full operation of the machine process would be — skipping, for the sake of simplicity, the intermediate hypotheses — the following alternatives: i) a sharp re-organization of the production process oriented to matching the "true" needs of society; ii) otherwise, if such re-organization does not occur (or if it occurs with insufficient strength), this means that the "rationalizing effect" of the machine process has not worked strongly enough. Hence, such a result implies that the unfolding of the machine process has failed to instil more rational habits of thoughts and life.

  1. Each of these two alternatives opens a beehive of questions: i) in the first case, what are the implications of a sharp reduction of conspicuous consumption? Will man live in an industrious and pacific society of the kind Veblen hypothesized existing in the past, in which the only difference could be the widespread application of the machine process to the production of the truly necessary items? And which criteria will be adopted to make this selection, and, relatedly, how will we decide the time and resources to devote to scientific research, the research fields worth following and the social goals associated with them?. ii) In the second alternative, why do people need to pursue conspicuous consumption and the related "pecuniary objective" of economic action which, as we have seen, have their roots in instincts that are at cross-purposes with workmanship and parental bent? If modern society is considered as a deviation from an older pacific and natural stage of life, why do workmanship and parental bent instincts fail to assert themselves neatly in our society?

  1. Veblen does not address these problems directly. He tends to assume that, once upon a time, man lived in a pacific stage based on the full operation of workmanship and parental bent instincts; at a certain point, owing to the presence of external pressures (not clearly specified) related to the expansion of society, there occurred a progressive deviation from such a stage towards increasingly less genuine ways of thoughts and life which, by way of progressive habituation, asserted themselves as the ordinary way of living. However, this interpretation of human development meets with a problem: if people deviate increasingly from a pacific stage, this implies, as also asserted by Veblen, that the workmanship and parental bent instincts do not work strongly enough, maybe because of the presence of instincts at cross purposes with them which can assert themselves — through the process described by Veblen as "contamination of instincts" — as a response to external pressures. Now, considering that "external pressures" — whatever they may be — are likely to have, at least in part, a significant endogenous component, the consequence seems to be that this early stage was far less pacific and smooth than assumed by Veblen, resting, as it did, on an unstable equilibrium made up of conflicting instincts.

  1. Owing to this complexity, in Veblen's reconstruction of human development the role of technology is far from clear: in fact, if in Veblen's analysis, technological progress associated with the evolution of capitalism10 is deemed to be the main cause of deviation from a pacific stage of life, why just now should it begin to exert the opposite effect? For instance, considering our present-day stage of internet technology, it does seem that — after about a century of massive technological progress since Veblen's time — the problems envisaged by Veblen are still remarkably in the foreground: this happens because, as observed before, workmanship and parental bent instincts are more complex than usually assumed and, furthermore, present an evolutionary character; they are, at least in part, endogenously determined.

  1. One explanation for this problem may be that the rationalizing role Veblen attributed to technology seems to derive from his implicit assimilation — obviously, only for this purpose — of "instrumental rationality" to "substantive rationality": thus, more rational ways of producing (e.g., how to produce) are likely to entail more "rational" or adequate ways of life (e.g., what to produce). One reason for this belief could be found in the role Veblen attributed to the instinct of workmanship and to its link, outlined before, with the instinct of parental bent. In this sense — as far as we understand Veblen's reasoning — technological progress, by fostering the instinct of workmanship, would reinforce the instinct of parental bent as well. However, as shown by the studies quoted and by many others, the problem is that instrumental and substantive rationality are related but different concepts, and so an increase in the former cannot be simply considered as a proxy for the increase in the latter. In particular, one reason why reality is so complex may depend on the fact that the instinct of workmanship is a more far-reaching concept than explicitly supposed by Veblen. In fact, if we conceive such an instinct — as seems to be implied in Veblen's analysis — not only as a set of technical abilities but also as a general propension to intellectual and cognitive constructive activities and, furthermore, following Veblen, hypothesize a significant interrelation with parental bent instinct, it becomes evident, as we will see in the next point, that technological progress constitutes only an instrumental part of the manifold expressions of the instinct of workmanship. In this regard, our impression is that advances made in this direction are not due to an abstract "rationalizing" role of technology per se but to the kind of links that technological progress establishes with social and economic objectives and the related process of social valuing. This implies, as shown by many studies, that technological progress is not "neutral" as regards the attainment of these objectives and, therefore, does not follow a deterministic pattern out of its "immanent rationality", but is partly moulded by the characteristics of any given context, being, as it is, deeply embedded therein. In this regard, an increased ability to analyse social problems — an ability which can also benefit from progress in psychological and social sciences — could well be regarded as a genuine expression of the instinct of workmanship that is likely to have played a relevant role in social evolution.

  1. As also observed by Commons, one difficulty in Veblen's analysis resides in the lack of the concepts of social value and of reasonable value: that is, of the criteria to assess the difference between "what is going on" and "what ought to go on" (Tool, in Hodgson, Samuels and Tool, 1994, vol. I, p.406). Veblen tends to reduce this problem to the dichotomy between prejudices and genuine behaviour. But this distinction already implies an implicit social assessment of what a prejudice is and what a genuine behaviour is: and what are the foundations of such assessments? Ethical, psychological, economic, juridical, social? and what interrelations may intervene between them?

At the end of this outline we can say that Veblen has provided fundamental insights into the comprehension of the links existing between the economic, technological, social and psychological aspects of society by analyzing the relations existing between the pivotal concepts that describe these links—that is habits, instincts, evolution and technology.

In this sense, we would observe that some of our previous remarks, which highlighted a number of unclear points in Veblen's theory, do not reduce the validity of this theory but, rather, point out its great potential.

In fact, one of main source of these difficulties in Veblen's analysis may be found in the lack of any clear reference to psychological theories for developing his main arguments.

Indeed, in Veblen's analysis many important psychological concepts are implicit, and in this respect Veblen had great psychological intuitions. Examples may be found (i) in his analysis of habits of thoughts and life, which he tended to regard as the result of the internalization (mostly at an unconscious level) of collectively shared norms and values; (ii) in his concept of instinct, in which he grasps the importance of considering both emotions and intellect as the entities making up human personality; (iii) in his study of human development, by pointing out the importance of symbols and fantasies.
As we will see later, these concepts — which he considers in their interrelatedness in order to inquire into the forces lying behind the development of societies — present a striking parallel with many psychological and psychoanalytic concepts: for instance the role of internalization of norms and model of behaviour in child development, the complexity of instincts, the role of Freud's notion of "compulsion to repeat" and the importance of symbols and fantasies in individual and collective action.

However, even with the aid of a great intuition, one cannot go too far into social and economic analysis without a clear and explicit theoretical foundation of these concepts. In this respect, we believe that psychological and psychoanalytic concepts may help illuminate important points of Veblen's analysis.

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