Instabilities in the Web of Contracts: Deflation, Inflation and Anacyclosis

Hi everyone, today we’d like to recommend a great 30 min talk Axel Leijonhufvud gave at INET’s 2012 “Paradigm Lost” Conference in Berlin (thanks to Charlotte Bruun for reminding us of his work!).

The way he describes the 2 forms of instability the web of contracts at the heart of western civilization (which is based upon the private/public law – dialectic): deflation and inflation, and the dilemmas politicians face when trying to intervene, comes close to a rudimentary theory of some of the economic roots of anacyclosis.

What is anacylosis? It is a pattern of history well known in the history of republican thinkers (from Plato and Aristotle to Polybios, Cicero and Machiavelli): the cycle of more centralized, authoritarian and more decentralized, democratic forms of government in western civilization, of which we are witnessing another round right before our eyes during the democratic recession which is in full swing world wide. From our perspective, it is directly rooted in one of the fundamental conflicts of western civilization: the conflict between the principles of private and public law (free contract/consent vs. authoritative legislation/command), and the inherent instability of an unregulated private law (property and contract) based, monetary “free market” economy.

Katharina Pistor has voiced similar intuitions more from the perspective of a lawyer in her short (9 p.) 2013 paper, “The State, the Market and the Rule of Law” (and in her “Legal Theory of Finance” paper).  Neither Axel nor Katharina, however, draw a connection to the historical pattern and theory of anacyclosis, because they take a systematic perspective only, not doing large scale and long term historically comparative analysis.

From our perspective, the legal, economic and comparative historical perspectives must be integrated to achieve a realistic understanding of western civilization, its historical patterns and its present state & situation in Europe – that is the core of the research program we are developing:

 

Thinkers like Axel Leijonhufvud, Katharina Pistor, and Polybios are all important contributors to this integrative and clarifying work, culminating in Level 5 of our analysis (see above): Long Cycles – discovering larger scale historical patterns of western civilization that repeat with variations.

If you like what we do and it makes sense to you, you probably will enjoy their contributions to better understanding the anacyclosis pattern and the democratic recession we are experiencing now in the aftermath of the 2008 crisis:

Axel Leijonhufvud: Debt, Inflation and Austerity (video, 30min talk)

Katharina Pistor: The State, the Market and the Rule of Law (9 p.)

The Institute for Anacyclosis: The Crisis (2 p.)