Claudio Gutierrez
As we have seen, the operatively important concept in an attempt to build a definition of economics is "substitution" or "alternative uses". I want to say some final words before leaving the topic of formalism about the function of that concept as an instrument of prediction. Prediction is the result of the logical operation of induction. But induction in the ordinary sense is based on the non formal assumption of regularity of nature, e.g., on a transcendent belief in the idea that nature was constructed following some divine blueprint. Economic induction rests on a similar yet different assumption: regularity of man and belief in the pervading influence or persistence of economic plans. Now, economic plans are no blueprints. There is a basic difference between an economic plan and a blueprint: the importance of curves in economic calculations. Resources, one could say, are assumed as given for every point in the curve. But the strategic element is the motion up and down the curve, which is dependent on the concept not of "givenness" but of "alternative realization," the concept of substitution itself. Generality of prediction is all-important in economics as in any other science. But this economic generality is generality through disjunction rather than generality through conjunction as in the common understanding of the principle of induction. The force of economic induction or prediction must lie in the fact that there exists a formal method of solving general problems of "alternative realization" (equilibrium analysis) and that people do tend to employ it, consciously or unconsciously, and with different degrees of success. Economic calculation must provide an answer for wide ranges of possible alternative situations, not simply for multiple single instances.
This can only mean that "substitution" is the key term in economic analysis. If one does not
realize this, one is in danger of being led into thinking, apart from the literalistic temptation, that
all problems are already solved when the economist begins his work, having only a sociologist's
job to justify his call (LOWE 65, pp. 18-26).
Curves, not points, are the fundamental economic "entities"; functions rather than magnitudes.
This does not mean, though, that substitution functions must be thought of as being all definite,
infinitely determined in both directions. On the contrary, one has to allow for the fact that most
of the time our only clear interest is to commit ourselves the least we can, trying only to assure
the maximum command upon the universal medium of substitution, whatever it may be in the
concrete case. The universal desirability of the token of purchasing power, the most typical case
of economic situation, seems thus to be the practical way in which we can expect to have
functions–economic plans–at all. This is so, of course, because of our great lack of knowledge
about the future states of the world around us and also about our future–and present–needs and
desires. This is a general fact not necessarily connected with concupiscence or drive for
unlimited
power on the part of man, but rather rooted in our weakness and ignorance, and in the fear of
what the future could have in store for us. Our modal goal, to borrow Lowe's expression,
responds in the last analysis not so much to the question of how much I desire anything relative
to
all other things: rather it responds to the more indeterminate question of how much I desire
things
relative to those goods–in general, purchasing power–which commit me the least and assure the
maximum freedom for continuous future choice. It is freedom to choose rather than the things
we
choose which proves to be the determinant factor in regard to alternative generality.