From Marx to Markets

The saying “If at age 20 you are not a Communist then you have no heart. If at age 30 you are not a Capitalist, then you have no brains” is sometimes attributed to Winston Churchill. However, a quick internet search reveals that this is apocryphal. This might be one of those sayings that contain so much wisdom that it cannot be attributed to one single person. Perhaps one day, it will also be attributed to Geoffrey M. Hodgson whose personal story perfectly exemplifies the saying.

From Marx to Markets: An Intellectual Odyssey is divided into two main parts: “Histories” and “Themes.” In the first part, Hodgson narrates his odyssey from a convinced communist to a sophisticated champion of markets. His story starts, as many stories do, with a strong conviction to fight oppression and exploitation. His youth was marked by political activism. His enthusiasm led him to seek in economics the tools for social change and to join the Labour party. Yet, economics transformed his passion for social revolution into disillusion with Marxism. The more Hodgson learned about the complications of human behavior and the limits of economic modeling, the more he grew skeptical about Marxists’ predictions. Yet, Hodgson’s “views on the possibility of prediction in economics shifted [once he] gave more attention to the possibility of unforeseen exogenous shocks and to the ubiquity of epistemic uncertainty” (p. 63). At the same time, the Soviet system was collapsing and, with it, the hope in state socialism. His odyssey belongs to a whole generation of economists who were driven by communist institutions to study the economy to transform society, but often realized, after learning how economic production works, the fatal flaws of Marxism, and that markets are the best hope to mitigate human suffering. This generation not only experienced the intellectual fall of communism, but also its material fall. A case in point is Samuel Bowles and Herbert Gintis (Democracy and Capitalism: Property, Community, and the Contradictions of Modern Social Thought, Basic Books, 1987) who also shifted away from Marxism by the end of the 1980s. A whole generation of scholars learned to change their minds according to theoretical inconsistencies and empirical evidence.

In “Themes,” Hodgson recapitulates the main “islands” of his intellectual odyssey. This section is a summary of the work of a lifetime. Hodgson recapitulates what he considers the areas of his main contributions: definitions in economics, evolutionary economics, institutions, liberal solidarity, and the new directions. The weakest dimension of the book is that this second part offers only a superficial treatment of a wide array of topics. Nevertheless, the goal of this section is not to offer a detailed treatment of complex subjects, or unobjectionable arguments in favor of a thesis. This part is to be read as a table of contents for a lifetime of work, as Hodgson’s personal reflection of his own contribution to the profession, of what he left behind so others can live their own odysseys. From a different angle, “Themes” can be read as a history of the transformation of economics as a discipline. Hodgson is certainly part of those economists who shaped the profession. 

From “Themes,” I would like to underline the section on institutional analysis, a topic in which Hodgson has particularly reshaped the discipline of economics together with Douglass North (Institutions, Institutional Change, and Economic Performance, Cambridge University Press, 1990) and Elinor Ostrom (Governing the Commons: The Evolution of Institutions for Collective Action, Cambridge University Press, 1990), especially in light of the 2024 Nobel Prize in economics awarded to Daron Acemoglu, Simon Johnson, and James A. Robinson for works like “The Colonial Origins of Comparative Development: An Empirical Investigation” (American Economic Review 91 (5): 1369–1401). Through the decades, economics has become a discipline that takes institutional analysis seriously. The section devoted to institutions serves as a good introduction to anyone who is interested in the way that institutions are fundamental for economic growth: from the importance of property rights, the relation between legal compliance and growth, and the role of firms to reduce transaction costs to the complexities of markets in the real world, the explanation of China’s economic growth, and the evolution of financial systems. As said, even if Hodgson is somewhat superficial in the complex topics that he addresses, this is a good introduction for those who start their adventure in institutional analysis.

I would like to underline two relevant topics for our socio-political context that run throughout the book and can easily go unnoticed: the importance of changing one’s mind and the epistemic importance of complexity and pluralism.

Politically polarized societies are characterized by praise for those who hold strong convictions and never change their minds. It is refreshing to remember that scholars (and people in general) can change their minds and dare to think better. Hodgson’s book is a good example that one can do it. It takes real self-confidence to accept (especially in public) that one was wrong, yet Hodgson explains step by step the problems with his youthful convictions, the economic teachings that slowly transformed his beliefs, and how he progressively changed his views. A good way to appreciate the particularities of Hodgson’s memoir is to compare it to Yoram Hazony’s Conservatism: A Rediscovery (Regnery Gateway, 2022). Despite being part of the same generation, these two influential scholars tell very different stories. It might be because they started from opposed ideological positions or because they come from different disciplines, but while Hodgson’s is a story of change and evolution, Hazony’s is one of persistence and uncompromising beliefs. In our context of political polarization, it is difficult to envision how defending one’s beliefs in the face of contrary views can lead to results other than conflict.

We can only hope that, while reading Hodgson’s book, readers remember what it feels like to change one’s convictions according to evidence and better arguments. Unfortunately, it might be the case that openness to change is a personality trait; at least, it seems to be the case for Hodgson who, since he was young, “disliked [the Marxist movement’s] dogmatism, fanaticism, and intolerance” (p. 54). If that is the case, it might be impossible to teach how to be open to change. It is easier to hold one’s ground and believe that one is winning the argument by not conceding an inch; “it is much easier to use a boo-word than to understand in depth an opposing view” (p. 59). But, again, that is the recipe for a fight. We ought to remember how to change our minds to not only approach truth but also approach each other. And giving examples of how we change our own minds, just like Hodgson does in this book, might be the only way to promote reconciliation.

Related to the importance of changing one’s mind is the perception of how many “minds” there can be; i.e., of how many positions there are. Most people (from those without a college degree to renowned scholars) accept, embrace, and somehow cherish the division between “left and right.” As if the whole array of political and economic ideas can be categorized in these two clearly opposed sides; as if there is a sort of geometry of ideology. In that respect, Hodgson’s title can be read as an adventure from Marx to Markets, from communism to capitalism, from, again, left to right. This is misleading. Hodgson’s sophisticated reasoning pushes him to escape familiar dichotomies. This is not an odyssey from communism to capitalism: the destination is more complicated. In his words, “as long as we keep thinking in binary terms, of a simplistic choice between maximal capitalism and maximal socialism, or free markets versus state control, the viable and successful alternative of liberal, social democratic capitalism will be neglected. No society can be organized through markets alone” (p. 250). More than the discovery of markets, what economics taught to Hodgson was the complexity of social organization. Thus, despite what the title and often Hodgson suggest, his real odyssey is one from social simplicity to social complexity. 

Personally, I also experienced Churchill’s apocryphal saying. While in high school, I was convinced that Marx was right about exploitation and the inevitability of a communist society. But the more I learned about economics, politics, and philosophy, the more I changed my mind. Even if I don’t belong to Hodgson’s generation, I feel that I was part of the same odyssey.