1998 article, originally published in The handbook of economic methodology, edited by John Davis, Wade Hands and Uskali Mäki, Cheltenham: Edward Elgar, pp. 103–7.

(For its abstract see the Abstracts of all chapters, p. 2.)

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Of the main philosophical traditions, the dialectical has been only modestly influential in the economics methodology. With few exceptions, the applications of dialectics to economics are restricted to scholars who have in some way been influenced by the work of Marx (1818–1883). There is, however, no a priori reason why a dialectical method should be restricted to a Marxian orientation.

The dialectical method, in the modern sense, derives from the work of Hegel (1770–1831) who aimed at critically synthesising rationalism and empiricism. Both rationalism and empiricism conceive the world in terms of a subject–object or thought–reality dualism, and both reduce the foundation of knowledge to one of these poles. Hegel’s project was to transcend the one-sidedness of these philosophies; that is, to overcome them without losing sight of them. This aim Hegel shares with Kant (1724–1804). However, the latter’s philosophy is considered insufficient, in that it does not overcome dualism: it separates the form from the content of knowledge, it poses a conceptual apriorism and it postulates a ‘thing in itself’ which we cannot know.

Today, dialectics is in fact a family name for a variety of strands, as are rationalism and empiricism. Two main strands are historical dialectic and systematic dialectic. The first applies to the study of society and its philosophy, arts and science – or, more specifically, an economy and its economics – in their historical emergence. Popular accounts of dialectics often stress this first strand, owing to the two circumstances that Marx is often introduced by way of an historical materialist view of society (see the entry ‘Marx’s Method’),¹ Hegel by way of his work on the philosophy of history (Hegel 1837). (Note that this dialectic also figures prominently in Popper’s depiction of Hegel and Marx.) In what follows I emphasise the systematic dialectics. The primary sources for this dialectic are Hegel’s two works on logic (see particularly Hegel 1817). Below I merely highlight a few elements of it in so far as they relate to some of the problems that face the mainstream philosophy of economics.

I start by outlining an economic example, so as to bring to the fore some of the issues that systematic dialectics aims to deal with. Consider a simple model of investment (I), which is dependent on consumption (C), the money supply (M) and government expenditure on education (G). So we have I = aC + bM + cG. Suppose that the model is made operational, and particular values for the parameters a, b and c are estimated. A relevant question would then be: are these variables equally ‘important’? In the usual economic models approach this would be answered by pointing out their quantitative difference, by the size of the variables times their parameters. But a prior question is: can a qualitative order of significance be assigned to these variables? Then at least one such ascription would be in terms of their necessity or their contingency with respect to the economic system that we are theorising. Suppose that qualitative analysis has shown that both consumption and banking are necessary to investment – that is, they are a condition of the existence of investment – whereas we could still have investment without government expenditure on education. Then the latter’s qualitative importance would not be reflected in its quantitative significance. Although the government expenditure may thus quantitatively codetermine the level of investment, the question would be: to what extent does this determine the concept of investment – that is, what investment is conceived as something that is systematically interconnected with other phenomena?

Although these and similar questions seem very relevant to our theorising as regards the economy and society, they appear difficult to answer within the discourse of a mainstream economics framework. The main problem is that, in contradistinction to systematic dialectics, it lacks a systemic hierarchy of determinations. More specifically, first, it lacks systematically related conceptual layers or levels of abstraction: once defined within an argument, a concept retains its meaning – it is fixed and cannot be developed (although concepts may change over the history of a discourse). For the dialectician, on the other hand, definitions are merely useful as an initial starting point; processes of reconceptualisation are the kernel of a dialectical argument. Second, it lacks the notion of a system as determined by interconnected necessary entities, as opposed to merely contingent aspects, that is, necessary to the very existence of the system as a self-reproducing entity as a whole. Indeed, one aim of dialectical research is to differentiate the necessary from the contingent. Here the notions of ‘system’ and ‘whole’ depend much on our perspective. While the aim is to widen the perspective from all possible angles – that is, those necessary to the object of inquiry – we may still want to restrict the analysis pro tempore to more narrow points of view (the jargon for which is ‘a moment’), as long as we are explicitly aware of the ties of these to greater wholes. (Cf. Ollman 1993.)

In general, a systematic-dialectical presentation (Darstellung) can be characterised as a movement from an abstract-universal starting point to the concrete-empirical, gradually concretising the starting point in successive stages, thus ultimately aiming to grasp the empirical phenomena in their systemic interconnectedness. We cannot fruitfully proceed from the starting point by immediately subsuming single empirical phenomena – things, human relations, processes and so on – as particulars under this universal since this provides merely empty truth. Such subsumption might indicate what these phenomena have in common, but not what, if anything, unites them systemically: how they are interconnected. Further, it is the difference between phenomena which determines them; but this difference also fails to say what, if anything, unites them systemically. As long as we have not specified both differentiation and unification of related phenomena, we have provided no concrete determination. It is this double determination (difference in unity) that systematic dialectics seeks. As Hegel expresses it, “The truth of the differentiated is its being in unity. And only through this movement is the unity truly concrete.” At the starting point: “difference is still sunk in the unity, not yet set forth as different” (Hegel 1833, p. 83). I will briefly expand on the starting point and the way to proceed from it.

For any dialectical presentation the starting point, or point of entry, is crucial (as it is for any theory). The starting point of its presentation is a universal, all-embracing abstract concept which is proposed as rendering the comprehension of the object totality (in Hegel’s Logic, the ubiquitous starting point is “being”). Such an all-embracing concept seems in a way hopelessly true (everything is a being). So why seek more when we have the all-embracing concept in our hand? Notwithstanding that we have posited a putatively all-embracing concept, we clearly need to seek more concrete content.

Further reflection reveals that such a concept does not represent the truth in its full, mundane richness. Remaining at the same all-embracing level of abstraction (‘flatly’, as in a conventional economic model), the category from which we started is seen to contain its negation or its opposite, a category contrary to it (“nothing” at the beginning of Hegel’s Logic). But this differing contrast is equally hopelessly omnipotent and true: insufficient. This apparent negative result may have a positive outcome if we find a category uniting as well as concretising both of our earlier concepts (“becoming” at the beginning of Hegel’s Logic).

In either case (negation and concretisation) opposed concepts are applied to the same entity, and in this specific sense Hegel calls these opposites ‘contradictions’. It is the purpose of the dialectical presentation to resolve the contradiction (opposition) from which we start (“the essence of philosophy consists precisely in resolving the contradiction of the Understanding” – Hegel 1833, p. 71).

Next to the differentiation of the systemically necessary from the contingent, negation and concretisation are two important principles that drive the dialectical presentation forward towards ever more empirically concrete levels so as to arrive at the concrete comprehension of the object of inquiry. Thus the presentation moves forward by the transcendence of contradiction and by providing the ever more concrete grounds – the conditions of existence – of the earlier determination. This forward movement does not ignore the earlier determination, rather, it overcomes the opposite moments (identity–difference, universal–particular) of the earlier determination, so as to posit them at a conceptually more concrete level: the ground provides the unity of the opposed moments. But, at the same time, that is a further, more concrete determination of the difference, a difference previously posited only in itself (an sich, potentially, implicitly) as it now appears. So the differences that were previously not set forth as such now come into existence (that is, a more concrete existence, yet still abstract in the sense of not being fully developed). The ground at this new level itself then gains momentum; it is itself an abstract existent showing the contradiction that it cannot exist for itself (für sich, actually), whence the presentation has to move on in order to ground it in its turn, so as to provide its conditions of existence (Hegel 1817, §120–4; 1833, pp. 81–3). And so on, until the presentation claims to have reached the stage where it comprehends the existent as actual, as actuality (Wirklichkeit), in the sense that its conditions of existence have now been determined such that it is indeed actual, concrete, self-sufficient or endogenous existence, which requires no external or exogenous determinants for its systemic reproduction. (Note that, in many mainstream economic models, some of the essential determinants are treated as exogenous.)

By having reconstituted the empirical ‘facts’ which were at the base of the initial inquiry, the dialectical presentation then is a conceptualisation of the concrete in successive steps (levels of abstraction) ultimately gaining full comprehension. If successful, the presentation is able to grasp the concrete as an interconnected self-sufficient system (and ideally it is also a self-determining system).

Returning to our earlier economic model example, one category of mainstream economic models (‘rationalist’) is indeed devised for conceptual exploration. However, the aim here is the exploration of the implications of (axiomatic) definitions: they are not devised for an internal conceptually layered development, even less so in the perspective of systemic necessity (interconnection) or contingency. The other category of models (‘empirical’) is generally not devised to set up an empirically concrete self-sufficient system. The ‘endogeneity’ or the ‘exogeneity’ of variables does not pertain to their systemic necessity or contingency.

This article ends with a few remarks on a controversial issue: Hegel’s idealism (see for example, Norman 1976, ch. 6; Forster 1993). It was said at the beginning of this article that Hegel’s dialectic aims to transcend the subject–object dualism of both rationalism and empiricism. Dualisms and oppositions, consequently, play a major role in his dialectic. Hegel often refers to dualisms and oppositions in terms of contradictions.

From the point of view of mainstream methodology (rationalist or empiricist), it is tempting either to see Hegel advancing a rationalist logic or to see him describing oppositions in empirical reality. From the point of view of rationalism, it is the interdependence of opposed concepts (such as buyer and seller, or truth and error) that is highlighted: they necessarily form a unity in the sense that one concept can have no existence without the other (the concept of buyer just by itself would then be a contradiction). From the point of view of empiricism, real entities in conflict are characterised by interdependent opposed concepts (master–slave, bourgeoisie–proletariat); again, the one entity can have no real existence without the other (when there are no subjects, there are no kings). Even if (one of) these two senses of opposition may make sense to many, Hegel holds that the two can be shown to be the same: the activity of consciousness posits the object of knowledge as an object of knowledge. Since he develops this insight from the Idea as a union of subjectivity and objectivity, his philosophy is termed ‘Absolute Idealism’.

Reader’s guide. Hegel (1817) is the primary source for systematic dialectics: most difficult, yet most fruitful. Hegel (1812) covers the same structure in more detail. Hegel (1833) is a somewhat easier primary source; pages 53–86 of the English translation provide a nice gist of Hegel’s logic. Norman (1976) provides a lucid critical introduction to Hegel’s thought in 125 pages (recommended). Forster (1993) introduces Hegel’s method in 40 pages. Ollman (1993) is a lucid account of how the dialectical method may be deployed in practice, first at an introductory and then at a more advanced level. The book finishes with a number of illuminating case studies. Reuten and Williams (1989), Part One, pp. 3–49, sets out a systematic-dialectical method; the other parts apply this to the capitalist economy, state and economic policy. Smith (1990) provides a systematic-dialectical account of Marx’s Capital; Chapter 1 gives a good outline of Hegel’s dialectical method; Chapter 3 sets out Hegelian, objections to Marx’s Capital.