I’ve Been Thinking, or, A Proposed Taxonomy of Economic Ideologies

My previous discussion about whether or not we classical liberals should use the term “free market” as opposed to “capitalism” has made me think a little more about how we classify economic ideologies (not real world economic systems or the practical results of the implementation of any economic ideology).

The Nolan Chart classifies actual economic systems according to their real world level of state control. But, take for instance Proudhon-style Free-Market Anarchism (i.e. Mutualism). This ideology would, like classical liberalism, have a low “Statism” rank. Yet there are many differences between Mutualism and Classical Liberalism (for one, the former accepts the Labor Theory of Value).

I am suggesting a way to classify various economic ideologies that can at least come close to accepting these differences. Note that, unlike the Nolan Chart, this form of classification applies only to economic ideologies (and takes no position on social matters).

Yes, this too is an imprecise taxonomy, but I think it helps demystify some things.

On the Y-Axis, we have a measure of Institutionalism vs. Anti-Institutionalism, or what Virginia Postrel would call Stasisism vs. Dynamism. This axis refers to the character of the entities formed in the society to conduct economic affairs.

An Institutionalist (or Stasisist) believes that economic entities should be institutions. They should have a defined structure and heirarchy that is not defied. They conduct economic matters in established ways. Structural change is much more gradual in this kind of economy. Examples of this kind of economy include;

1) State Socialism (where all economic decisions were made by the State (an institution))
2) The managed corporate behemoths of 50’s America like IBM and General Motors
3) The Zaibatsu economies of Japan
4) The domestic (but not the international) economies of Singapore and Hong Kong
5) Mercantilism

An Anti-Institutionalist (or Dynamist) believes that economic entities should not be institutions. They should be flexible entities, flatter heirarchies are seen as desirable, and experimentation and novelty should be encouraged. This kind of economy has very significant levels of structural change. Examples of this are;

1) Joseph Schumpeter’s “Creative Destruction”
2) Silicon Valley during its early years
3) Most free-market proponents are dynamists, including Rand and Hayek
4) Most forms of Anarchism, especially Free Market Anarchism
5) Much opposition to “big corporations,” on the occasion when it is actually backed by intellectual substance, exhibits this attitude.

On the X-Axis, we have a measure of an ideology’s appraisal of whom the primary benefactor of an economy is; the State or private enterprises. Note that this is not a measure of how laissez-faire the ideology is; rather it is a measure of whether or not, according to the ideology, the State is the hero of the economy or whether private businesses are. This axis is about the ideology’s narrative of the State or private entities.

It should be clarified that this does not measure who “creates the most wealth” and nor does it necessitate that one side is benign and the other side is Hitler. It is quite possible to see this axis as the “least worst” out of the private sector or the State.

On the “pro-State” or “anti-Private” side you have people that argue that the ultimate protagonist (or at least, least monstrous entity) of the economy is the State. For instance, State Socialism sees the State as the defender of the working class against the exploitation of big business.

On the “pro-Private” or “anti-State” side you have people who argue that the ultimate protagonist of the economy (or at least, least monstrous entity) of the economy is the private sector. Classical Liberalism is an example of this.

Combining these two axes gives four quadrants:

1) Stasisist/Pro-State or Anti-Private
2) Stasisist/Pro-Private or Anti-State
3) Dynamist/Pro-State or Anti-Private
4) Dynamist/Pro-Private or Anti-State

Quadrant 1 is where both State Socialism, Fascism and Nazism fit. Whilst Fascism and Nazism tolerated private ownership, the State had de facto control.

Quadrant 2 is where “Free market” Conservatism fits. This ideology likes large corporate institutions and corporate bureaucracy. Economic stability is prized. Most modern “business-friendly regulation”-type ideologies fit here as well, and arguably so does Keynesianism and Social Democracy (even if both have less benign views of the private sector; they’d be closer to the middle on the X axis). Taken to its logical extreme, this ideology becomes Corporate Statism, or “what is good for General Motors is good for America.”

Schumpeter railed against this ideology. It is anti-entrepreneurial and anti-innovative. Arguably, Hong Kong, Singapore and Japan are examples of this in terms of their domestic economies.

Quadrant 3 is a tough one because the State, by definition, is an institution. Thus, a dynamist cannot be a statist. This quadrant might possibly include dynamists that are anti-private (if not necessarily pro-State), which means that modern American “liberalism” and anti-free-market forms of Anarchism might possibly fit here. It is arguable that Quadrant 3 is a selective form of Anti-Institutionalism, only disliking private profit-making institutions.

Quadrant 4 is where Classical Liberalism/Libertarianism and Free Market Anarchism fit. This quadrant is open to the Schumpeterian/Randian types of Entrepreneur, does not consider tradition sacred (although it might in many cases consider it instrumentally useful), and is essentially where the regular readers of this blog should hopefully feel comfortable.

I am by no means proposing this ideology taxonomy is perfect. But I hope it helps stimulate some thinking on the subject.

12 thoughts on “I’ve Been Thinking, or, A Proposed Taxonomy of Economic Ideologies

  1. Terje,

    No problem. I checked out the document to see how John placed the page break in; will use page breaks in the future.

  2. I think that a dualistic relationship between pro-state and pro-private isn’t that helpful. This taxonomy results in category 3, which is almost logically non-existence. It also fails to see the distinction between pro-business anarchism and mutualist types of anarchism that are as sceptical of the capitalist class as they are of the state.

  3. Shem,

    You are correct. I never claimed this was a perfect taxonomy, but you point out a genuine flaw in it.

    There will obviously be difficulties in boiling down economic ideologies to two dimensions.

    I think a third axis, if one were to be added, might be some form of “economic theory of value” axis (since the primary difference between Mutualism and Rothbard-style Market Anarchism is one of Labour Theory of Value vs. Subjective Theory of Value), but that might create logically contradictory or nonexistent categories as well.

  4. I think Category 3 would describe Fascism, which left Companies in private hands, and which encouraged cartels, and wanted to regulate and guide capitalist companies without the tedium of directly controlling them. This describes the current Chinese regime, where they have a guided capitalism.

  5. I think a forking taxonomy rather than multiple axis better suits the picture.

    The initial divide is between Stasisist and Dynamist, but within the Stasisist section the divide is along pro-State and anti-State lines whereas on the Dynamist side there is a different dividing factor- perhaps the Theory of Value you posit.

    Much as you divide mammals into placental, monotreme and marsupial but don’t try and use those same categories for reptiles.

  6. Nuke,

    Category 3 cannot describe fascism because fascists are stasisists. They believe in entrenched institutions and heirarchialism, and in many cases they are pining for a “lost golden age” of the past and thus don’t want to let the future unfold.

    China is a classic example of a Stasisist/Institutionalist economy because the most powerful companies are usually run by “acquaintances” of powerful Statesmen (or relatives etc). I’d consider China a category 2.

    Shem,

    Thanks very much for your suggestion. I like it very much. We could probably use a double-sided X-Axis to reflect that, i.e. “for positive values of Y, the X-Axis means this, for negative values of Y, the X-Axis means that.”

    Actually, maybe the second axis could refer to economic theory of value instead. Dynamist/Objective = Mutualism. Dynamist/Subjective = Anarcho-Capitalism. Stasisist/Objective = State Socialism, Mercantilism, Theocratic State, possibly Anarcho-Primitivism. Stasisist/Subjective = Corporate State, Mixed Economy, Keynesianism, possibly Social Democracy.

  7. To me the matter seems to boil down to the idea that we really have to ask ourselves whether corporate affairs and entities are handled in such a way as to be an authentic expression of freedom-of-association. The laws built up over the last couple of centuries are not neutral on this point.

    For example when the attitude is taken that the shareholder, if he doesn’t like managers enriching themselves, ought to simply sell the shares …. this attitude, widespread that it is, seems to imply that the corporations are not really a very good expression of freedom of association. Since under freedom of association the shareholders are the bosses. The company is owned by them. If the company is not acting like it is owned by the shareholder, then its hard to see how its artificial person status is even justified.

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