Page 39 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.80, # 1, 2023, pp. 35-53

Positing economic action in terms of man-matter and man-man relations, man is
essentially identified as the entity having capability to act autonomously thus dealing with
man and its society is not the same as dealing with physical processes involving inanimate
particles. Myriads of environmental factors pose obvious psychological constraints on
human behaviours in the process of choosing micro goals.

Lowe identifies two types of factors that create psychological constraints on
motivation and behaviour: dynamic and structural factors. Dynamic factors are
pressures that are either automatic, contrived, or institutional and affect expectations
directly. Structural factors, on the other hand, create barriers to economic motion and
affect expectations indirectly. Lowe discusses the decreasing resource mobility, which
consists of social mobility and technical mobility. Social mobility consists of degree
of competition, price and wage control, tariff, and banking policy etc.- and technical
mobility consists of the feature of industrial forms of production such as specificity
and indivisibility of capital. There has been outstanding decrease in the technical and
social mobility in the modern capitalism; however, this growing immobility is not the
only factor affecting the expectations in the modern times (Lowe 1965, p.64-66).

Lowe examines the traditional theory in three different historical periods namely the
“classical” stage i.e., industrial revolution, the “neoclassical” stage i.e., industrial
capitalism under laissez-faire and the modern stage i.e., organized capitalism. Lowe
finds the theoretical construct of ‘an economic man’ a genuine abstraction from the
experience of classical stage when the economic system was conditioned by external
pressures, such as mass poverty, competition and a puritan work ethic that created a
general climate favouring wealth accumulation (Hagemann and Kurz, 1990). Owing
to the highest social and technical mobility and least hindrances to market adjustments
in the classical age, expectations were stabilizing (Lowe 1976, p.69-71).

In the second phase of industrial capitalism under laissez-faire i.e., from middle of the
th
19 century, the neoclassical economics carried on the tradition of orthodox economic
theorizing based on the concept of utility maximization. The structural and
institutional complexity increased to high extent obstructing the social and technical
mobility while the neoclassical theorizing did not catch up with the ensuing change
and resorted to ad-hoc explanations while confronting the phenomena of business
cycles and other hard facts affecting the stabilizing expectations. The orthodox
reasoning was not able to integrate the changes in economic theorizing, while
vouching for inherent equilibrating tendencies, the orthodox theory tried to explain
digressions as special cases and this led economics to be divided into two non-
communicating separate compartments, equilibrium analysis and theory of economic
development (Lowe 1965, p.73-75).

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