[This book review was published in the Spring/Summer 2015 issue of The Journal of Social, Political and Economic Studies, pp. 129-139.]


Book Review


The Specter of Capital

Joseph Vogl (translators Joachim Redner and Robert Savage)

Stanford University Press, 2015


Various conceptions of innate order have been central to the evolving worldviews that have provided a coherent mental architecture during the successive epochs in the history of the West.  In The Specter of Capital, Joseph Vogl traces the development, and continuing evolution, of one of these conceptions in particular – the idea that a market economy is an orderly and just system.  He takes the reader back through a number of facets of modern thought, such as the influence of the Newtonian system of natural order on the view developed by Bernard Mandeville, Adam Smith and others that individuals’ pursuit of their self-interest would produce, instead of dog-eat-dog chaos, a self-regulating, productive and morally justified social and economic order.    

The Specter of Capital examines the idea of an orderly market system in intelligent, although not exhaustive, detail, and then proceeds to “deconstruct” it, arguing that the coherence isn’t really there.  “The world has become unreadable… Things in general are running out of control.”  Vogl has written a postmodernist critique, with deconstruction as his main theme.

Accordingly, a reader will find the book to have varied dimensions.  Depending upon the reader, these will seem valuable, instructive and intriguing; or, on the contrary, nihilistic and pretentious.  Let’s look at them one at a time:

With regard to the intellectual history, Vogl’s book provides an excellent summary, but to say this is not to say that his account supplies (or perhaps is intended to supply) anything original.  A good history of economic thought will give the same review of the thinking behind classical and neo-classical economics, and will supply considerably more detail than Vogl has aspired to.  It would have to be a history that is quite up to date, however, since Vogl is especially good in his description of the most recent economic thinking and market behavior that led to the world’s recent financial crisis. A number of recent books about the crisis are also very good on those subjects.

There will be several things to say about his deconstructionist theme that the market is not really a finely jeweled mechanism producing order and justice.  It will be helpful, however, to hold our discussion of those until we have noted the book’s stylistic dimension.  The esoterica that marks Vogl’s postmodernism will turn away a good many readers, and not without justification.  It will appeal, though, to the type of mind that revels in the abstruse.  There should hopefully be readers, too, who will read The Specter of Capital out of curiosity, hoping to sample the experience of diving into the sort of writing done in recent decades by the super-sophisticates of the intellectual world.  Such folks are numerous, and it’s good to be aware of them.

The entry for “postmodernism” in UrbanDictionary.com gives an audaciously irreverent and sarcastic capsule summary – which, for all that, captures the essence of the movement quite well.  It says that “…under thinkers like Derrida, Baudrillard, Foucault and Irigaray [it has] spread like cancer into at least the ‘soft’ sciences, if not further afield.  [It] works insidiously by establishing in the minds of the faithful that there are no ultimate truths in either the moral or a scientific sense, and dressing up b***s*** in flowery language… Unfortunately these matters are brought up in the midst of reams and reams of tendentious twaddle.” 

In this vein, we find Vogl talking a language known only to the initiates: “…the chrematistics of old acquires a new and privileged discursive space.”  And: a critique of political economy would “have to do away with the aporias admitted into the classical theories of economics” and will need to unmask “the estrangement processes encrypted in the value form, or [be known] for confronting the specter of exchange value and the metamorphosis of commodities with a critical ontology.”  Needless to say, it’s work to read this book, especially when unscrambling the “tendentious twaddle” reveals nuggets of pure nonsense, such as when Vogl writes of a “form of capitalism [that] dreams of oblivion” or that “steps into a wilderness at the heart of civilization, a realm where terroristic impulses are given free rein.”  One of the values of all this is that it puts one on guard against reacting with a reflexive anti-intellectualism.  The reader resisting that temptation and willing to press on will feel guilty if he doesn’t go again and again to Google for definitions of such words as “semiotic,” “theodicy,”, “aleatoric,” “chrematistics,” “entelechy,” “doxa,” and “peripeteia.”  “Capitalist oikodicy” is in Google only by way of its referring to Vogl’s book, since Vogl says he coined the word himself.

It is necessary to distinguish “the wheat from the chaff” when it comes to intellectual work cloaked in such heavy layers of terminology.  We live in a time when heretofore unimaginable strides are being made in countless fields both of theory and of applied technology.  Most, if not all, of these speak in their own vernacular.  One must suppose that is not necessarily out of pretentiousness, but because the technical language facilitates understanding and communication. At the same time, contemporary intellectual culture, especially in the social sciences, has been bathed for over a century in a neo-Scholasticism that brings to mind the intricacies, formalism and conformism indulged in by the medieval Schoolmen.  The language is designed to impress much more than to communicate, and often the thinking is so pedestrian that one wonders whether anything is being communicated at all.  “Proving the obvious” is the grist for many an academic paper.  Much of this is sheer careerism and “publish or perish” scrambling.  An abuse of an altogether different kind has come from the accretion of technical and mathematical, often brilliant, work in advanced economic thinking.  The “efficient market hypothesis,” “random walk theory,” the mathematical legitimizing of derivatives markets, the use of computers for nano-second fine-tuning of financial transactions – all of this and more amounted to advanced thinking, technically marvelous but lacking in wisdom, as we saw when world financial markets followed its cues to pile up trillions of dollars of risk.

We come now to the main substantive point made by Vogl’s book: the deconstruction that asserts the ultimate unknowability of economic reality.  Before we examine it, let’s see what Vogl has to say along these lines.  First, he points to the irrationality of the tidal wave of risk we have just mentioned: he suspects “that the world of finance economics is battered by the storm winds of events signifying the gravest possible danger.”  There is “disastrous speculative investment” carried on through “the manifest blindness of self-styled seers and speculators.”  So far as governments’ actions in response to the resulting crises are concerned, Vogl observes “a chronic lack of unity in the various practical and theoretical formulae for intervention….”

This amounts, he says, to a crisis for economics as a science.  “It seems appropriate to adopt a skeptical attitude towards all homogeneous economic models with systemic pretensions… The very form of economic knowledge as a science stands in doubt.”  He says “the world has become unreadable… Things in general are running out of control.”  There is “a dark and confused empiricism… [reflecting] the uncertainty about what economic reality really is.”  The result: “the long-overdue end to oikodicy” [as we’ve noted, his term for the theory that “the market economy itself assumes the role of providence in shaping a just social order”]. 

Two things are thus seen to come tumbling down.  One is economics as a viable social science.  The second is the overarching worldview that has lent coherence to the age of capitalism.  When deconstruction bursts the society’s faith in a rational economic system, that has broad social, cultural and political implications.

The Specter of Capital goes no farther than this deconstruction, with Vogl saying “it is certainly not our intention to offer a blueprint for the reconstruction of the present economic system, however necessary such a task may be.”  We are reminded of the mindset of the nineteenth century Russian nihilists, who sought to bring all existing social structures to smash.  As we mention the nihilists, we should recall, of course, that their negativism was accompanied by a vision (monstrously foolish, as it turned out) of a utopia that would rise out of the ashes.  Vogl’s omission of an alternative is significant, in that his deconstruction by no means tells the whole story.

What are we to think of all this?  Several points come to mind:

1.  Even though the postmodernist form of Vogl’s analysis adds little, his message about the irrationality and dangers of world finance is, for the most part although not entirely, on the mark.  Others have warned about this for several years, as we’ve seen in reviews that have appeared in these pages.[1]  In his 1997 book One World, Ready or Not, William Greider said “in this book, the central message takes the form of a reasoned warning: our wondrous machine, withal its great power and creativity, appears to be running out of control toward some sort of abyss.”  He cautioned not to be fooled by the razzle-dazzle of “mathematical beauty”: “The financial prices… can never be fully rational or scientific despite the dense analytical techniques… The financial markets… behave like crowds.”  He spoke of “the herd of investors.”  All of this was seconded by David M. Smick in his The World is Curved: Hidden Dangers to the Global Economy (2008).   Smick wrote of how “the raging ocean of capital, through the use of leverage, appears to know no limits.”  He referred to a “crazy ocean of global liquidity” with an “increased number of unknowns,” making it “unbelievably fragile” and “a house of cards.”  He, too, spoke of the “herd effect,” pointing out how “the global financial system… is vulnerable to a psychological herd effect that could wreak havoc with the industrialized world economies.”

The unpredictable effect of mass enthusiasm and mass panic was, in fact, the main determinant of American policy toward the financial crisis in 2007 and 2008.  Timothy Geithner, the U.S. Treasury Secretary, explains in his memoir Stress Test: Reflections on the Financial Crisis (2014)[2] that the prospect of bankers, investors and others being spooked by anything they considered surprising or unfavorable is what dictated his hyper-indulgent policies toward the bank bailouts and even toward the extraordinary (many say “obscene”) compensation that was being paid during, and in spite of, the crisis.

2.  We said above that Vogl’s message is “for the most part, but not entirely” correct.  A reason for this qualification is that the irrationality and chaos of which he speaks has at no times been the whole story.  Even during the Great Depression of the 1930s and the recent Great Recession, economic life proceeded with surprising regularity.  The vast array of contractual relationships continued.  People did not find it impossible to go to the grocery and department stores for the countless products there; when they turned on a faucet, water continued to flow; they went to the airport to catch a plane to go visit their grandchildren.  None of this would have been possible if everything had gone to smash, with no one being able to count on others, plan ahead or calculate profit and loss.  Life went on, and no amount of deconstruction can obliterate that reality.  It certainly should be acknowledged that major aspects of current economic thinking and of financial practice were shown to be foolhardy.  But that does not signal the end of microeconomics or of the market economy.  The question for economists now is how to pick up the pieces, sorting out what’s valid and what is not.

As we’ve seen, Vogl desisted from offering a “blueprint for economic reconstruction.”  That he considers a reconstruction possible has important implications.  It means that, even to him, the seemingly impenetrable irrationality to which he points is something that characterizes the current state of thought and of practice, but only that.  He holds the prospect open that other dispensations are possible.  Independently of Vogl, we have reason to envision a taming of the tsunami of global finance.  Greider sees ways to do this: “The first and simplest reform governments could undertake is a measure proposed more than fifteen years ago [i.e., in the early 1980s] by Yale economist James Tobin: impose a very slight transactions tax on all cross-border flows of capital.  Applied at major foreign-exchange centers, a small exit-and-entry toll would slow down the furious pace of global finance… Capital controls of a more focused nature could follow.”  Although the problem of tax havens is a small matter compared to the dangers of the international herd effect, it is interesting to note what he says about how easily they could be eliminated: “The Federal Reserve could eliminate the leakage from offshore banking centers in an instant, if it wished, simply by declaring that U.S. banks cannot accept transfers from them.”  Among the many reforms that can help, we might add the need to impose an “insurable interest” requirement on contracts (such as “credit default swaps”) that insure financial transactions.  Part of the enormous expansion of risk-taking prior to the Great Recession came from the law’s permitting the taking out of insurance by someone who had no ownership role whatsoever with regard to the transactions whose outcomes were being insured.  From what we’ve just seen, it is apparent that the problems aren’t really technical, but political. 

There are, however, reasons to believe such expedients, no matter how worthy, aren’t directed sufficiently toward the on-rushing change in economic realities.  The challenge goes far beyond financial herd effects, the venality of short-sighted risk-taking and profit-seeking, and the inanities of head-in-the-clouds economic theory.  In an age when non-labor-intensive technology is replacing remunerated employment, creating a vast pool of people competing for what’s left over and causing a widening gulf between those who derive income from the ownership of capital and those who don’t, a radical departure from our habitual ways of thinking is essential.  That is why this reviewer has proposed what he calls “a shared market economy,” where a competitive, innovative, dynamic economic system coincides with a distribution of the proceeds to the population at large.  This is too large a subject to explain adequately, so we will use the footnote here to refer our readers to a more complete exploration of it.[3]

3.  The “economic science” that Vogl’s deconstruction sets out to demolish is, in this reviewer’s opinion, a “science” that marked a wrong turn in the history of thought.  During the nineteenth century, economics narrowed itself into one of the disciplines of the then-rising social sciences.  The old “philosophy of political economy” was replaced by a preoccupation with economic model-building, mathematics and statistics. 

This would not have been a bad thing in itself, except for two things.  One was that the conceptual model of a well-ordered market economy became an ideological framework for an assortment of associated ideas that received wide acceptance because of their superficial plausibility, but that contain a number of flaws.  That ideology has been clung to adamantly by its defenders, who in their loyalty to it have at all times guarded it against attack from the Left, with the result that it remains a naïve apologia rather than a critically thought-out system.  This is not the place to examine those flaws in detail, and we must content ourselves with identifying the areas that most particularly need deeper analysis: the theory of the “transaction” or “act of exchange”; the assertion that wages are tied to productivity; the theory of property; and the insistence that Free Trade is always beneficial.  The linchpin of the ideology, providing it a seemingly incontestable legitimacy, is the idea that a market economy’s allocation of resources is necessarily optimum and the resulting distribution of income and wealth just.  Because it is so important, we will give it at least brief attention below.  A detailed discussion of all these items can be found in this reviewer’s chapter  “Critique of Important Market Concepts,” which is Chapter 14 of his book A Shared Market Economy (see footnote 3 here). 

It will be helpful to know that when this reviewer points out the flaws he is doing so not as a socialist critic of a market economy, but as someone who has long opposed socialism and championed the value of a free market.  If the flaws are analyzed perceptively, the result can be a much stronger intellectual foundation for economic freedom, although not necessarily one that can elicit the discipleship that is enjoyed by the highly platitudinous ideology now prevailing.

The other consequence of the narrowing of economics has been that its thinkers did not remain engaged in the task of formulating a much broader, well-rounded “philosophy of a free society.” With economics as a scientific discipline having taken the place of “political economy,” the world emerged from the nineteenth century without “classical liberalism” as one of the competing ideological systems.  Classical and neo-classical economics provided the free-market ideology of which we have spoken, but it is significant that classical liberalism is hardly thought of or written about today.  Instead, books, college courses, and even university departments are centered on “progressivism,” “socialism,” “communism,” “fascism,” (sometimes, but rarely) “conservatism,” “black studies,” “women’s studies,” “Latino studies,” and even most recently a discipline belligerently called “queer studies.”  The absence of classical liberalism stems from the turn economics took well over a century ago.

4.   We will conclude with the discussion we promised above of the “linchpin” of market ideology.  We might well think that as part of a convincing deconstruction of market theory Vogl would have dealt with the specifics of this himself.  The linchpin is the assertion that a market economy makes an optimum (by which it means the best) allocation of resources and that the resulting pattern of income, wealth and social status is for that reason just and equitable.  This insight was considered by the Austrian economist Ludwig von Mises, under whom this reviewer studied briefly almost sixty years ago, to be one of his most important contributions to liberal thought. 

Mises described a market economy as being run, in effect, by “consumer sovereignty.”  Entrepreneurs respond to what they anticipate consumers want, and  either flourish or fail according to how well they match the demand.  The entire chain of manufacture and supply leads in this way to “the consumer.”  The concept of consumer sovereignty led Mises, in turn, to the conclusion that the result was indeed optimum and just: "To assign to everybody his proper place in society is the task of the consumers."

It’s ironic that one of Mises’ important insights was that it was an invalid “holistic” argument to speak of “society” as though it were a conscious entity separate from the individuals who make it up.  The irony comes from his having himself employed a “holistic” notion when he spoke of “the consumers.”  We are forced to ask, “can ‘consumers,’ taken holistically, make a value judgment? Are they collectively a consciousness that can decide what is ‘best’?”  The answer, of course, is that they are not.  To say so is to engage in a material fallacy, one we may call “the fallacy of misplaced consciousness.”  The aggregate does not have a mind in itself, but is the sum of countless individual consumers, each making decisions about what is best in his own case.  From the perspective of each one of these individuals as an individual and even as a philosopher the person may or may not think the allocation of resources flowing from the total economy is the best possible.  It’s likely that few will find the dispensation ideal.

The Left, of course, has never agreed with Mises’ point.  What those who, to the contrary, support the free-market model can legitimately say is that “I support the allocation because it arises out of freedom.  I don't favor individual liberty and the act of voluntary exchange because they produce the best allocation of resources; rather, I favor the allocation of resources because it is the one produced by a free process.”

The idea that a market economy produces an optimum allocation, although fallacious, had at least a rough-hewn plausibility when the market resulted in prosperity for a broad middle class.  Even that plausibility is greatly reduced, if not removed altogether, as the new polarized capitalism ceases to serve the bulk of the population.   Because of this, it isn’t too much to say that market ideology needs to hark back to a broader classical liberalism and rethink how best to achieve the values of individual freedom it so greatly cherishes.


All of this has been relevant to our discussion of Vogl’s The Specter of Capital.   What we have just covered shows how intellectually inadequate his deconstruction is, despite the rococo esoterica in which he has dressed it.  He hasn’t “gotten down into the trenches” and grappled with the really difficult questions.   The book is worth reading for the reasons we stated earlier, at least for those not turned away by its pretentions, but we can hope that one reviewer’s opinion that it is “a brilliant book that is required reading” doesn’t catch on.  If it does, it will be just another demonstration of how the flame of verbal pyrotechnics attracts the moths of an altogether too superficial intellectual world.


Dwight D. Murphey








[1]  We did not review Greider’s book for its own sake, but have referred to it many times in our articles and reviews relating to the Great Recession.  The review of Smick’s book appeared in the Summer 2009 issue of this Journal, pp. 260-267.  It may be accessed free of charge at www.dwightmurphey-collectedwritings.info as Book Review 127 (i.e., BR127). 

[2]  See our book review article about Geithner’s memoir in this Journal’s Winter 2014 issue, pp. 494-521.  It appears in the website referred to in Footnote 1 here as Article 114 (i.e., A114).

[3]   See Dwight D. Murphey, A Shared Market Economy: A Classical Liberal Rethinks the Market System, which may be accessed free of charge on the web site named in Footnote 1.  A similar, though not identical, proposal is made in Peter Barnes’ With Liberty and Dividends for All: How to Save the Middle Class When Jobs Don’t Pay Enough, which was reviewed in this Journal’s Fall 2014 issue, pp. 376-386.  That review may be found on the above-mentioned web site as Book Review 178 (i.e., BR178).    It would be well to supplement these analyses by reading this reviewer’s article “Capitalism’s Deepening Crisis: The Imperative of Monetary Reconstruction,” published in the Fall 2011 issue of this Journal at pages 277-300.  It appears on the collected writings web site as Article 105 (i.e., A105).