Presented at REBELLIOUS MACROECONOMICS: MARX, KEYNES & CROTTY A conference in honor of James Crotty. Methodology and Radical Political Economics

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1 Methodology and Radical Political Economics Martin H. Wolfson October 2007 RESEARCH INSTITUTE POLITICAL ECONOMY Gordon Hall 418 North Pleasant Street Amherst, MA Presented at REBELLIOUS MACROECONOMICS: MARX, KEYNES & CROTTY A conference in honor of James Crotty Phone: Fax: peri@econs.umass.edu

2 Methodology and Radical Political Economics Martin H. Wolfson Department of Economics and Policy Studies University of Notre Dame Notre Dame, IN Prepared for the Conference in honor of Jim Crotty University of Massachusetts at Amherst October 19-20, 2007

3 Methodology and Radical Political Economics by Martin H. Wolfson 1. Introduction Radical political economics has always encompassed a wide variety of economic theories and perspectives. In fact, printed in each issue of the Review of Radical Political Economics is the following statement: "As the journal of the Union for Radical Political Economics, the Review publishes innovative research in political economy broadly defined as including, but not confined to, Marxian economics, post-keynesian economics, Sraffian economics, feminist economics, and radical institutional economics." Given the broad purview of radical political economics, the question arises: do the various theories that make up radical political economics have some methodological coherence, or are they disjoint B united in their opposition to neoclassical economics, but with theoretical assumptions, principles and methods, i.e., methodologies, that are incompatible with each other? The argument of this paper is that there is coherence. 1 In particular, there is an emerging heterodox macroeconomic framework that builds upon the perspectives of Karl Marx, John Maynard Keynes, and institutionalists like Wesley Clair Mitchell. 2 A leader in the development of this framework is James R. Crotty. Throughout his career, Crotty has investigated, and sought an integration of, Marxian, Keynesian, and institutionalist perspectives. In particular, Crotty's contributions have been to 1) combine principles from the three perspectives into an integrated framework, 2) deepen our understanding of the three perspectives by indicating how they are more complementary than typically understood, and, 3) extend the basic principles to provide a coherent understanding of the current

4 2 global economy. In the next section of the paper, key assumptions and principles of the Marxian, Keynesian, and institutional perspectives, which form the building blocks for the new framework, will be discussed. In the third section, Crotty's contributions to combining, deepening, and extending these perspectives into a new framework will be addressed. Finally, the fourth section concludes with a statement of the new methodological framework. 2. Building Blocks: Marx, Keynes, and Mitchell Below are the building blocks, or starting points, for the new heterodox macroeconomic framework. They are basic methodological assumptions and principles from Marx, Keynes, and Mitchell. They are often taken to be representative of three separate theories, with little or no convergence Karl Marx 1) Historical Materialism This basic philosophical perspective of Marx's has been the subject of numerous books, articles, and treatises. At the risk of oversimplification, I take it to mean two basic concepts. First, people's "material conditions," especially the social relations of production (the relationships people enter into in the process of production), have an important influence on the ideas, culture, religion, politics, and other aspects of the "superstructure" of society. This materialist point of view should be distinguished from determinism, which claims that the material conditions determine the superstructure, and from the view that the superstructure has no effect or influence on the material conditions. An important implication of Marx's materialist philosophy is that one needs to make a "concrete analysis of concrete conditions," i.e.,

5 3 thoroughly investigate the reality one is trying to explain. Second, historical analysis is an essential component of the Marxian perspective. One cannot understand current reality without analyzing the historical forces that have brought the present into being. 2) Dialectical contradiction The process that propels history forward is the working out of the contradictory relationship between two opposing forces. These opposing forces have different interests and are always in struggle with each other. This perspective has two important and related implications. First, the change that results from contradictions is endogenous. It is internal to the contradictory relationship being analyzed. Second, there is no permanent equilibrium. The two opposing forces within a contradiction can arrive at a temporary equilibrium, which is best understood as stabilization at a moment in time. But because the two forces continue to be in contradiction with one another, struggle will continue that will eventually disrupt that temporary equilibrium. This is not to say that exogenous events cannot play a role in Marxian analysis. But Marx's concept of dialectical contradiction rules out the neoclassical view of equilibrium as a permanent end point that can be disrupted only by exogenous "shocks." 3) Class conflict In Marx's analysis, the fundamental contradiction in capitalist society is between capital and labor. The historical working out of the contradiction between these two opposing forces is the key to understanding the dynamics of a capitalist economy.

6 4 Also important are intra-class conflicts, such as those between industrial and financial capital, among capitalist firms competing with each other, and also among segments of the working class. 4) Theory of the state In capitalist society the dominant class, i.e., the capitalist class, has a dominant influence on the "state," taken to be the apparatus of government broadly conceived: the legislative and executive branches, the courts, police, military, etc. Many Marxists view the state as a "contested terrain," in which labor can vie for influence, but in which the capitalist class usually dominates because of instrumental and structural influences. Because of its income and wealth, the capitalist class can influence the levers, or "instruments" of state power. For example, representatives of the capitalist class can be appointed or elected to positions of power, and their lobbyists can influence decisions. Also, capitalists hold a central structural position within a capitalist economy. They hire and fire workers and make decisions about the expansion of production and investment. Even governments sympathetic to labor are influenced by the powerful role capitalists play in a capitalist economy. 5) Evolution of economic systems Marx analyzed a progression of economic systems, from simple commodity production, slavery, feudalism, to capitalism. He predicted that capitalism would be replaced by socialism. In the contradiction between capital and labor, labor would become dominant and would change the institutional structures defining capitalism to those compatible with a socialist system. Aiding this transition would be the contradiction between the forces of production (such as plant

7 5 and equipment, technology, and human skills and abilities) and the social relations of production. Marx thought that capitalist social relations would increasingly become obstacles to further growth of the forces of production, and would be transformed. Despite continuing controversies about Marx's prediction of socialism, his theory that class struggle, and the contradiction between the forces and social relations of production, would lead to a new institutional structure is a key building block of the new macroeconomic framework, as discussed below John Maynard Keynes 1) Fundamental uncertainty Nobel laureate Niels Bohr said Ait is difficult to make predictions, especially about the future.@ As Keynes stressed, about much of the future, we simply do not know. Note that this is much different from the neoclassical concept of risk, which enables one to know all possible future events and establish a probability for each. 2) Financial crises and speculation Because of fundamental uncertainty, financial markets are subject to crises and speculation. Herd behavior leads to euphoric booms and sudden panic, when the optimistic expectations that fueled the boom are not fulfilled Wesley Clair Mitchell 1) Endogenous business cycle Mitchell, the founder of the National Bureau of Economic Research, was a leading institutional economist of the early twentieth century. He pioneered quantitative research on the business cycle. Based on his research, he hypothesized an endogenous business cycle with

8 6 various stages, such as recovery, expansion, crisis, panic, and depression. Mitchell's business cycle is endogenous in the sense that it traces a process of cumulative change in which one stage of the cycle is transformed into the next. 2) Institutional methods Mitchell's methods were both quantitative and institutional. He accumulated data on hundreds of data series and then analyzed the data inductively to create his theoretical concepts. He focused on quantitative data. Other institutionalists have used other methods, such as surveys, participant-observer techniques, pattern models, historical analysis, etc. But like all institutionalists, he understood that a concrete, detailed investigation of institutional conditions was a necessary element to the understanding of social reality. 3. Crotty's Contributions James R. Crotty starts with the basic building blocks from Marx, Keynes, and Mitchell, but extends them by combining, deepening, and extending the basic theories Combining Mitchell and Marx: Class conflict and the business cycle Crotty, with co-author Raford Boddy [1974, 1975], viewed Mitchell's endogenous business cycle through the lens of class conflict. Mitchell, using data from business cycles in the early twentieth century, observed an increase in labor costs and a decline in labor productivity towards the end of the business-cycle expansion, with a resultant negative effect on profits and investment. Boddy and Crotty, analyzing the business cycles of the early post-world War II period, observed similar trends but interpreted them in the context of Marx's "wage-squeeze" crisis theory. In Marx's theory [1967, chapter 25], the wage squeeze is due to a depletion of the

9 7 industrial reserve army (the unemployed) and thus an increase in the bargaining power of labor. Boddy and Crotty extend Marx's theory by viewing capital's reaction in the context of macroeconomic policy and Marx's theory of the state. In the business cycles that Boddy and Crotty investigated, the Federal Reserve raised interest rates, which slowed economic activity and helped to replenish the reserve army. It thus intervened on the side of capital to reduce the power of labor and the wage squeeze on profits. In addition, in their analysis Boddy and Crotty employed the approach of both Marx and Mitchell: the institutional investigation of concrete conditions Adding Keynes: Financial crises and speculation Boddy and Crotty's analysis of the business cycle, carried out in the 1970s, focused primarily on real variables. As time went on, it became clear that the financial system played a significant role in the dynamics of the business cycle and needed to be incorporated into the macroeconomic framework. Post Keynesians had stressed the neglect by neoclassical economists of Keynes's theory of fundamental uncertainty. But if the future was unknowable, how could decisions that implied knowledge of the future be made? By incorporating Keynes's ideas about conventions, herd behavior, and conditional stability, Crotty [1994] demonstrated how fundamental uncertainty could be an essential part of a coherent macrotheory and an integral part of business-cycle analysis. Those who need to make a decision, but who do not know the future, would fall back on "conventional wisdom," what most people thought most other people thought. Often the conventional wisdom was that the future would be like the past. Speculative booms could

10 8 develop, as financial market participants projected an optimistic scenario far into the future. Even market professionals would invest because they thought everyone else would be investing. But because these conventions were not based on any firm knowledge of the future (which was impossible), they were liable to be quickly rejected at the first sign of trouble. Financial market participants could quickly head for the exits and initiate a financial crisis Deepening our understanding of Marx: Finance and the business cycle Most discussions by radical political economists in the 1970s of Marxian crisis theory considered only real variables. The assumption was that Marx saw crises originating in the real sector, in the sphere of production. So if one wanted to combine the real and financial sectors of the economy in a more comprehensive business-cycle theory, it would be necessary to go beyond Marx by incorporating insights from Keynes. However, in an insightful analysis in the mid-1980s, Crotty [1985, 1987] argued that the limitation of Marx's crisis theory to the sphere of production was a misunderstanding of Marx's methodology. Crotty's argument was that Marx treated production and circulation as a unified whole and did not give production a logical priority over circulation. Crotty's interpretation of Marx's argument is that a crisis comes about as a result of the interaction of both the real and financial sectors. Once money is used as a means of payment (to repay debts), contractual commitments on debt can escalate over the course of the business-cycle expansion. Problems with profitability make it difficult to repay these debts. It is the interaction of profitability problems with the high level debt repayment commitments that causes the crisis. Thus Crotty's analysis shows that Marx analyzed both the real and financial sectors, and that a heterodox macroeconomic framework is strengthened by incorporating the analyses of

11 9 both Marx and Keynes on financial crises and instability Extending institutional analysis: Stages of capitalism The increased attention to financial variables in the 1980s was not a coincidence. More attention was paid to these variables because financial problems and crises became more prominent. Radical political economics, and others, devoted increasing attention to changes in the U.S. and global economies over the course of the post-world War II period. It became clear that institutional changes had occurred that had led to a qualitatively different stage of capitalism. These qualitatively different stages of capitalism were characterized by changes in how the macroeconomy operated and how macrotheory was to be interpreted (more on that below). Thus radical political economists had to adopt an institutional methodology if they were to comprehend the changes in the economy and adopt a relevant macrotheory. A number of theories of stages of capitalism exist. Baran and Sweezy's Monopoly Capital [1966] is one; the social structure of accumulation theory by David Gordon and his coauthors [Gordon, Edwards, and Reich; 1982] is another. But Crotty [2002] is a leader in analyzing the post-world War II stages of capitalism as a transition from a "Golden Age" to a stage characterized as "Global Neoliberalism." 3.5. Deepening our understanding of Keynes: Keynes's institutional methodology Neoclassical economics views Keynes's General Theory [1936] as a timeless analysis of capitalism as an economic system. Even some radical political economists view it in this way. But, as Crotty [1990] demonstrates, Keynes's analysis in the General Theory applied only to the specific institutional structures that existed in early twentieth-century capitalism. Keynes

12 10 thought that the different institutional conditions of the nineteenth century constituted a different stage of capitalism with different economic characteristics. Keynes, according to Crotty, saw a "heroic" entrepreneur in the nineteenth century, one who viewed investing as a way of life and plowed back the firm's profits into investment without regard to cost-benefit analysis. Accompanying the heroic entrepreneur was the Victorian rentier class that was content to put its savings into long-term bonds and preferred stock (not common stock) for long-term income rather than short-term capital gains. Under these conditions, longterm real investment was encouraged. In contrast, in the twentieth century institutional conditions were significantly different. Inflation following World War I undermined the rentier class, firms began to rely much more on external equity financing, and owners became increasingly distinct from managers. Under these conditions, the speculation and instability of investment described by Keynes in the General Theory became the norm. The important points to note, at this point, are the centrality of institutional analysis to the emergent heterodox macroeconomic framework, and the ease with which Keynes's analysis falls within the institutionalist perspective Extending institutional analysis: Macrotheory differs across stages of capitalism The significance of stages of capitalism for a heterodox macroeconomic framework is that the behavior of economic actors and the nature of macro policy differ across different stages, and thus the relevant macrotheory does as well. In a series of articles, Crotty has systematically investigated this process. In particular, he has explored the behavior of industrial and financial corporations, the nature of macro policy, and the characteristics of economic and financial crises.

13 11 1) The behavior of industrial and financial corporations Crotty [1993] cites Marx's distinction between "fraternal" and "fratricidal" modes of competition. Under these two modes of competition, investment behavior by industrial corporations differs. Fraternal competition leads to "corespective" behavior and investment that is primarily capital widening (expanding the scale of investment incorporating current technology). In contrast, fratricidal competition leads to "coercive" investment that emphasizes capital deepening (investment incorporating new technology that has the potential to undermine the value of the existing capital stock). Crotty applies this analysis to the corespective Golden Age and the competitive neoliberal era. He describes some additional characteristics of corporate behavior under neoliberalism: "Disrupting organizational structure and routine, firing workers, slashing wages, closing (or slaughtering) nonamortized plants, attacking unions, taking on debt levels previously considered to be intolerably dangerous" [Crotty, 1993: 19]. He notes that these behaviors are risky tactics. They did not characterize corporate behavior during the corespective Golden Age; they are adopted in the neoliberal era only because of the pressure of fratricidal competition. The changed corporate behavior has important implications for the global economy. Crotty [2000, 2003a] concludes that this behavior (coercive investment, attacking labor, etc.) under neoliberalism has led to both chronic excess aggregate supply and chronically inadequate global aggregate demand. This inability of aggregate demand and supply to equilibrate, an impossibility in neoclassical analysis, is explained by Crotty [2000: 367] as the interaction of demand and supply effects in a vicious cycle: "The more competitive pressures develop, the more they force firms to cut wages, smash unions, substitute low for high wage labor, and

14 12 pressure governments to cut spending and generate budget surpluses. But these actions constrain global aggregate demand even more tightly, creating yet stronger competitive intensity." Deregulated financial markets in the neoliberal era have also been subject to increased competitive pressures. This has led them to become increasingly speculative and to take on increasing risk, a process that thus far has enabled financial corporations to report increased profits [Crotty, 2007]. However, financial markets have put additional pressure on nonfinancial corporations. Crotty [2003b] analyzes the shift in financial markets from "patient" finance to impatient financial markets. He points out that financial markets under neoliberalism have forced a portfolio conception onto nonfinancial corporate behavior: corporate assets must continually be restructured to maximize the corporation's stock price. Moreover, the pay structure of corporate management has shifted: instead of being rewarded according to the long-term success of the firm, corporate manager compensation is now much more firmly tied to the corporate short-term stock price. This has led to what Crotty [2003b: 271] calls the "'neoliberal paradox': financial markets demand that corporations achieve ever higher profits, while product markets make this result impossible to achieve." He concludes that this impossible situation led to the increase in financial accounting fraud that was observed in the late 1990s. 2) The nature of macro policy The change from the Golden Age to the neoliberal stages of capitalism has had implications for the nature of macroeconomic policies. Crotty [2003a] describes a number of changes in macro policy under neoliberalism, all of which have contributed to the problem of

15 13 chronically inadequate aggregate demand growth. Monetary policy has become decidedly more oriented to an anti-inflation stance. The deregulation of financial markets has enabled financial corporations to use capital flight to punish countries that do not adopt the corporations' preferred high interest-rate, low-inflation monetary policies. Fiscal policy has also become increasingly restrictive. Crotty notes that large cuts in the social safety net and an aversion to fiscal deficits have characterized fiscal policy under neoliberalism. Restrictive monetary and fiscal policies have been enforced on many countries by the International Monetary Fund's austerity policies. Crotty estimates that 40% of the world's population, living in 55 countries, has been subject to such policies. Also, financial deregulation and liberalization, and the IMF's dominant role, have forced many countries to abandon policies that regulated the macroeconomy, such as capital controls and state regulation of credit allocation. 3) The character of economic and financial crises In a series of articles on the Asian financial crisis (such as Crotty and Dymski, 1998), Crotty and his co-authors explain the connection between increasing international financial crises and the neoliberal model. The defining elements of the neoliberal model B deregulation, privatization, and liberalization B have led to heightened capital mobility, widespread speculation, and increasing financial crises. It is perhaps no accident that we observe both increasing financial crises and chronically inadequate aggregate demand in the neoliberal era. Both likely can be linked to some of the

16 14 corporate behavior discussed earlier: firing workers, slashing wages, and attacking unions. These strategies, along with tax cuts that favor the wealthy, and a whole host of government and corporate policies, have dramatically increased income and wealth inequality. And has John Kenneth Galbraith [1988: xiv] so colorfully reminds us, "what well-rewarded people regularly do with extra cash" is to "sluice funds into the stock market" and other financial investments. Falling wages and weakened unions, along with increasing inequality and financial capital mobility, have resulted in chronic underconsumption problems and increasing financial speculation and financial crises. The conditions that led to the wage-squeeze economic crises in the Golden Age have changed, and so have the nature of economic and financial crises in the neoliberal era. 3 Although Crotty has not yet revisited this issue in the context of his 1970s papers with Raford Boddy, it may well be on his agenda Extending Marx: Historical change in the capitalist global economy The idea of stages of capitalism obviously raises the issue: how does one stage of capitalism transform into the next? What is the process of historical change? Here is where Marx's concepts of class struggle and contradiction between the forces of production and the social relations of production come into play. Crotty [2002] shows that a similar analysis can be used to analyze the transition from the Golden Age to neoliberalism. Although the Golden Age constituted a settled institutional structure, the ongoing contradictions of a capitalist society (between capital and labor, between industrial and financial capital, among capitalist firms, etc.) changed the economic environment. Crotty [2002] discusses rising inflation, increased trade competition, balance of payments deficits, etc. These changes in the economic environment put pressure on the existing institutional structure of the

17 15 Golden Age, such as the Bretton Woods monetary system. Eventually the old institutions could no longer function. A crisis ensued, and the old institutions were dismantled. What would be the new institutional structure to be created? Crotty [2002] explains that the new institutional structure, neoliberalism, was not inevitable. Neoliberal institutions were created because they were the deliberate choice of "elites" (capital) and because the capitalist class had the power to enforce its choice. Here the basic concepts of Marx are extended to apply to the historical change that transforms one stage of capitalism into another. 4. Methodology and Radical Political Economics What, then, are the methodological principles that constitute the emergent heterodox macroeconomic framework? Below is a summary of the main points that emerge from the review of Crotty's contributions Contradictions, class conflict, endogenous change, and the business cycle The working out of the main contradictions of capitalism, particularly the class conflict between capital and labor, provide the impetus for endogenous change in the capitalist economy. In particular, class conflict (and intra-class contradictions) strongly influence the dynamics of the business cycle Fundamental uncertainty, financial crises, and speculation Macroeconomic activity takes place under conditions of fundamental uncertainty. Speculation and financial crises are an outcome of decision-making under fundamental uncertainty and the interaction of real and financial developments Institutional conditions and stages of capitalism The macroeconomy behaves differently under different institutional conditions, in

18 16 particular the different institutional conditions that characterize different stages of capitalism. The behavior of industrial and financial corporations, macroeconomic policy, even the dynamics of the business cycle and the nature of economic and financial crises, have changed as the institutional conditions of the Golden Age were replaced by those of neoliberalism Historical change and possibilities for the future Historical change takes place as economic changes, driven by the contradictions of capitalism, erode, or come up against, the institutional structure. A crisis takes place as the old institutional structure is swept away. The new institutional structure that takes its place, whether a new stage of capitalism or a new economic system, depends on the relative balance of power between the economic classes. The emergent heterodox macroeconomic framework depends on an integration of principles from Marx, Keynes, and institutionalists like Mitchell. To that new framework, Jim Crotty's contribution is significant. His analysis is leading the way forward to a new methodology for radical political economics.

19 References Baran, Paul A., and Paul S. Sweezy Monopoly Capital. New York: Monthly Review Press. Boddy, Raford, and James R. Crotty "Class Conflict, Keynesian Policies, and the Business Cycle," Monthly Review, 26 (5), pp "Class Conflict and Macropolicy: The Political Business Cycle," Review of Radical Political Economics, 7 (1), pp Crotty, James R "The Centrality of Money, Credit and Financial Intermediation in Marx's Crisis Theory." In S. Resnick and R. Wolff, eds., Rethinking Marxism: Essays in Honor of Harry Magdoff and Paul Sweezy. New York: Autonomedia, pp "The Role of Money and Finance in Marx's Crisis Theory." In R. Cherry, et. al., eds., The Imperiled Economy, Volume 1. New York: Union for Radical Political Economics "Keynes on the Stages of Development of the Capitalist Economy: The Institutionalist Foundation of Keynes's Methodology." Journal of Economic Issues, 24 (3), pp "Rethinking Marxian Investment Theory: Keynes-Minsky Instability, Competitive Regime Shifts and Coerced Investment," Review of Radical Political Economics, 25(1), pp "Are Keynesian Uncertainty and Macrotheory Incompatible? Conventional Decision Making, Institutional Structures and Conditional Stability in Keynesian Macromodels." In G. Dymski and R. Pollin, eds., New Perspectives in Monetary Macroeconomics: Explorations in the Tradition of Hyman Minsky. Ann Arbor: Univ. of

20 18 Michigan Press, pp "Structural Contradictions of the Global Neoliberal Regime." Review of Radical Political Economics, 32 (3), pp "Trading State-Led Prosperity for Market-Led Stagnation: From the Golden Age to Global Neoliberalism." In G. Dymski and D. Isenberg, eds., Seeking Shelter on the Pacific Rim: Financial Globalization, Social Change, and the Housing Market. Armonk, NY: M.E. Sharpe, Inc., pp a. "Structural Contradictions of Current Capitalism: A Keynes-Marx-Schumpeter Analysis." In J. Ghosh and C.P. Chandrashekar, eds., Work and Well-Being in the Age of Finance. New Delhi: Tulika Books, pp b. "The Neoliberal Paradox: The Impact of Destructive Product Market Competition and Impatient Finance on Nonfinancial Corporations in the Neoliberal Era." Review of Radical Political Economics 35 (3), pp "If Financial Market Competition is so Intense, Why are Financial Firm Profits so High? Reflections on the Current 'Golden Age' of Finance." A paper prepared for a conference on "Financialization: in retrospect and prospect," sponsored by the IWGF, University of Manchester, London, February and Gary Dymski "Can the Global Neoliberal Regime Survive Victory in Asia? The Political Economy of the Asian Crisis." International Papers in Political Economy, 5 (2), pp Galbraith, John Kenneth The Great Crash: Boston: Houghton Mifflin Co. Gordon, David M., Richard Edwards, and Michael Reich Segmented Work: Divided

21 19 Workers. New York: Cambridge University Press. Keynes, John Maynard The General Theory of Employment, Interest, and Money. New York: Harcourt, Brace, and World. Kotz, David M "Crisis Tendencies in Two Regimes: A Comparison of Regulated and Neoliberal Capitalism in the U.S." A paper presented at a panel on "Reconstituted Social Structures of Accumulation: Macroeconomics, Profits, Finance, and Performance" at the Union for Radical Political Economics sessions at the Allied Social Science Associations annual conference in Chicago, January 6, Marx, Karl Capital, Volume 1. New York: International Publishers. Wolfson, Martin H AInstitutional Analysis of Financial Crises,@ in Amitava Krishna Dutt and Kenneth P. Jameson, eds., Crossing the Mainstream: Methodological and Ethical Issues in Economics. Notre Dame, IN: University of Notre Dame Press, pp "Neoliberalism and the Social Structure of Accumulation." Review of Radical Political Economics 35 (3), pp

22 Notes 1.This paper concentrates on methodological assumptions and principles. For a discussion of institutional methods, see Wolfson [2001]. 2.Two characteristics of this framework should be mentioned. First, it does not reduce all theories within radical political economics to a common set of assumptions. Although there are various theories within neoclassical economics, such as New Keynesian economics or new classical macroeconomics, all of these theories are based on the same basic assumptions of individual rational agents maximizing under constraints. The framework discussed here does not claim that all theories within radical political economics are derived from the same assumption set. Rather, it claims that there are important aspects of various theories that can be combined in a coherent way to create a framework with greater explanatory power. Second, the framework does not encompass all of radical political economics. For example, important aspects of gender and race emphasized by radical political economists are not included. Nonetheless, the framework is an important step in the development of an integrated radical political economic analysis that can function as an alternative to neoclassical economics. 3.For more on this issue, see Wolfson [2003] and Kotz [2007].