ABSTRACT
This chapter discusses Polanyi’s analysis of the emergence of modern economic theory by considering the two levels: the historical sequence of events that shaped theories and the meta-analysis of these events. The aim is to examine how we can recreate a historical and qualitative approach to understanding “the process of social change”, which is the goal of Polanyi in The Great Transformation. Complex emergent circumstances – Polanyi argues – are often misunderstood by contemporaries. The process of social change affects different classes in different ways. Theories developed in response to these changes often do not correctly identify the causal factors contributing to the social changes; then, they fail to mitigate or minimize the adverse effects of these changes. Policies to deal with changes are crafted in the light of wrong theories, as well as in alignment with the relative powers of different social classes. According to Polanyi, for example, the Speenhamland Law, by creating the misunderstanding that the poor relief damaged the production process, had a powerful influence upon the development of modern economic theory. Unlike the mathematical and quantitative approach of modern economics that seeks universal laws which govern all societies. Polanyi’s unpacks the ways in which modern theories are shaped by now-forgotten history and gives us analytical templates for a qualitative and historical analysis – an alternative to the rational calculation of human behavior of modern economics.
