Review Essay: Some retro thoughts in production and geopolitical economics (From Retroeconomics to Sanctionomics: Essays on Unconventional Economics)

Author: Ruifeng Teng

DOI: https://doi.org/10.61362/KRAC4102 

PDF: Ke Rui Academy Book Review From Retroeconomics to Sanctionomics.pdf

The book From Retroeconomics to Sanctionomics: Essays on unconventional economics contains Professor Vladimer Papava’s critical insights on economics. Thanks to my colleagues Wu, Zhang and Lyu for their translations, I have had the opportunity to read this book. Several economic thinkers I follow (notably Dani Rodrik and James K. Galbraith) have already offered their brief remarks. As they observe, this book is a wide-ranging collection that reveals the acuity and rich insights (both theoretically and practically) of Professor Papava as a leading economist from transition countries.

Broadly organized by topic, the book includes a range of issues: crises of economic methodology, factors of production, post‑communist economies, globalization, heterodox economics, geopolitics and geoeconomics, and sanctions, thereby demonstrating the author's considerable theoretical vision. Although the book seems to lack a concise conceptual framework or a unified set of theoretical tools for analyzing these diversified topics, it is united by a profound central problématique: a sustained critique of the narrow perspectives and methodology of neoclassical economics. This kind of critique is illuminating for both economists and policy makers.

In this book review, due to my limited knowledge, I concentrate on the limited chapters of the economic theory and methodology—particularly those concerning factor‑of‑production theory. Other essays on post‑communist economies, globalization, the 2008 financial and 2020 COVID crises, and the shadow economy will be discussed and supplemented by my colleagues.

1. On information and production factor theory

I appreciate Papava's keen attention to the factor‑of‑production theory in the Essay 2. I strongly agree that this essay strikes at the heart of neoclassical economic theory. The clarifications regarding whether information and government capacity should be regarded as factors of production respectively are especially valuable. The author begins by addressing the common misconception that information itself is a factor of production, and identifies two conceptual sources of this misconception.

As Papava mentioned, people often overlook that "information" lacks a theoretically reasonable form of factor payments and conflate the concepts of "factor" and "resource". Notably, information—like energy and matter—is undeniably a key resource in production, but it differs from labor, land, capital, and entrepreneurship ability as a production factor. Information does not directly enter production as a separate factor, but it is embodied in factors like labor, capital, and entrepreneurship. The payment to information is in practice captured through payments to those factors. This kind of distinction is necessary, since it clarifies that growth accounting focused on factors of production is not the same thing as production process description with productive resources.

As a reader, I am particularly interested in whether data—distinct from information—might be qualified as a factor of production in the age of Artificial Intelligence (if we provided a feasible practice way to pay a distinct factor payment to data). In Contemporary China, there is already vigorous empirical and policy work on data ownership confirmation and pricing that treats data as a factor. Although I have expressed some skepticism about these works, I remain curious about the theoretical plausibility and future prospects of treating data as an independent production factor.

Even we concede that data cannot be treated as a single production factor independently, an important corollary question may arise: should the data produced by citizens be classified as capital factor or as labor factor? Different scholars may have differing opinions on this question. Some treat data as a new form of capital (e.g., Pentland et al., 2021); others hold the view that we should treat it as a labor‑like factor (Weyl & Posner, 2018; Arrieta‑Ibarra et al., 2018). This divergence really matters: a troubling possibility is that citizens' labor‑generated data will be appropriated by large tech firms—practically a form of data feudalism—and be deployed as capital to entrench asymmetric information and power. This question deserves the attention of economists because it bears on how we conceive the creative role of people and data in the economy and social welfare in the AI era. The essays in this volume provide useful starting points for us to clarify the production factor and imagine this kind of coming debate.

Additionally, I would like to discuss a related point as a supplement to this topic. Even if we do not label information a separate factor, we should conceive of production as a process grounded in matter and energy that organizes information and order (Beinhocker, 2006; Hodgson, 2015). As Boulding (1966) and Leijonhufvud (1986) have implied, the conventional production‑function metaphor is mechanistic and dated—akin to a fixed recipe—neglecting how economies organize knowledge and information. In other words, future economics should recover production theories and promote a paradigm renaissance framed by knowledge and information metaphors (Marshall, 1890), thereby bringing knowledge and information to the center of production theory.

2. On Government and production factor theory

Subsequently, Papava carefully argued that governmental economic ability should be regarded as a factor of production, which seems largely persuasive. A historical back-look at neoclassical production theory shows that economists often readily include labor, and capital—and sometimes also land and entrepreneurial talent—while often overlook government capacity. I often wonder why this negligence happens. If entrepreneurship can be regarded a production factor, why not government capacity? I would argue, this micro‑centric production view which focused on firm production processes, has missed the government factor as a macro‑level source of order and growth. Actually, recent advances in new political economy, including some great work at the Nobel Prize level, indicate a reappraisal of this negligence. When we explain cross‑country level growth differences by different political institutions or government quality, we are implicitly treating policy‑level capacities as key sources of global economic growth.

In most countries—especially successful late‑developing countries—governments are deeply involved in economic value creation via activities such as infrastructure provision, industrial policy, and macroeconomic management. Firms and entrepreneurs discover information and opportunities at the micro level; governments provide macroeconomic order and public goods. If neoclassical models could be allowed for neglecting government in a micro production function, it is harder to justify ignoring government in macro growth accounting. While most economists acknowledge government's great importance, the economists have yet to widely incorporate governmental economic ability as a distinct factor in growth‑accounting frameworks (Perhaps such an attempt is still brewing, or it has not yet been recognized by mainstream economics despite being proposed?).

Applying the professor Papava's criterion on production factor—any production factor has to have a theoretically proven appropriate factor payment—may support the plausibility of government capacity as a factor. Governmental services, whether political or economic aspects, are not costless. The political order and economic rights that underlie market activity entail costs, and economic freedom or welfare state also depends on public provisioning ultimately financed by taxation (Holmes & Sunstein, 1999). Thus, unlike the resources the author previously classifies as mere inputs, government capacity has its reasonableness as a factor of production.

I totally agree with the above argument, but I still want to raise an unclear question about whether we should and can distinguish narrowly defined "government's economic ability" from governmental capacity. Empirically, governmental capability relevant to the economy aspects includes enforcing economic rules, building welfare states, and implementing macro and industrial policy (they may also have their failures). In the digital era, it increasingly encompasses coordination of innovation and technological competition; these functions prevent disorder and waste in the economy. However, other governmental capacities and governance activities—such as establishing stable institutions, defense, and property and contract enforcement—also promote economic development. In growth accounting, would focusing only on the government's economic ability understate the contribution of governing political institutions and the rule of law? As political‑economic problems grow more complex in the era of deglobalization, governments' multifaceted actions will affect economic growth. Can we sufficiently distinguish government economic ability from government capacity to measure their separate contributions to economic growth? This is an important empirical and conceptual challenge for this approach.

On geoeconomics and economic sanctions

In my view, the attention to geo‑economics and economic sanctions is also a prescient highlight of the book. It seems related to the author's practical experience in post‑Soviet transition and the keen sense to the blind spots of the mainstream economics. Rooted in the balance‑of‑power perspective of modern Europe (Hume, 1752), classical political economy reflected an 18th to 19th century interstate order, and thus lacked sufficient attention to global hegemony and complex geopolitical conflict. This tendency has been brought to neoclassical economics. In neoclassical economics, the lack of suitable mathematical tools and data has driven the issues of power and conflict to the periphery of economics between roughly 1950 and 2010, leaving mainstream economists with a thin toolkit for addressing hegemony and geopolitical economy strife. Outside of a small amount of work in new political economy, antitrust, and game theory, it appears that few subfields of economics place the interaction between political and economic power at the center of the stage. International economics—the field that ought to address geopolitical economy conflicts—has concentrated on relatively specific technical issues in both international trade and finance, while the market is often assumed to lack geopolitical friction and the state is often assumed to be based on maximizing economic efficiency and social welfare. These limitations and deviations undoubtedly make the analysis of geopolitical economy power interaction long absent in international economics.

Yet in the 2020s, hegemonic countries have increasingly wielded their economic power via special purpose aid, sanctions, export controls, tariffs, and technology blockades—forcing the global economy to confront complex conflicts. Beyond political or economic coercion, recent conflicts (Russia–Ukraine War, crises in the Middle East, and the disputes over Venezuela and Greenland brought by the Trump Administration) have seen hegemonic powers deploy overt political and military instruments—often more rapidly than expected. Economic integration has been weaponized and the neoliberal international economic order that sustained globalization has thus frayed. Under these changes, how to build secure regional economic orders that shield economic activity from geopolitical shocks, and how middle and small economies should position themselves, are urgent questions for maintaining global economic security and resilience (Carney, 2026).

What can economics contribute to these issues? As some essays in the book demonstrate, geoeconomics and the economics of sanctions broaden the boundaries of our discipline and respond directly to increasing concerns about contemporary economic security. I agree with the author that unconventional economics can offer important insights to mainstream economics here. Economists can enrich game‑theoretic models of economic power, analyze the formation of economic alliances and defense coordination, evaluate the economic consequences of violent conflict, technology blockades, and other coercive measures, thereby limiting the external costs from the abuse of hegemonic powers.

Summary

To sum up, this book includes a wide‑ranging critique on the limitations of the neoclassical economic theory and related policies, and does so with sufficient depth on methodological and theoretical aspects. It raises a set of realistic questions of theoretical and has its practical importance—not just for transition and emerging economies, but also for economists of advanced economies. The author gives deserved attention to issues often relegated to the shadows of mainstream neoclassical economics—geopolitical conflict, shadow economies, and the like. We should synthesize these reflections to build new economic theories capable of guiding and coordinating national policies in an era of global transformation. I therefore recommend this book to readers concerned with the limits of economics and contemporary policy failures, and I look forward to my colleagues' continued comments with the other essays in this book, to rethink the current moment.

References

Arrieta-Ibarra, I., Goff, L., Jiménez-Hernández, D., Lanier, J., & Weyl, E. G. (2018, May). Should we treat data as labor? Moving beyond “free”. In AEA Papers and Proceedings (Vol. 108, pp. 38-42). 2014 Broadway, Suite 305, Nashville, TN 37203: American Economic Association.

Beinhocker, E. D. (2006). The Origin of Wealth: Evolution, Complexity, and the Radical Remaking of Economics. New York: Random House.

Boulding, K. E. (1966). The economics of knowledge and the knowledge of economics. The American Economic Review, 56(1/2), 1-13.

Hodgson, G. M. (2015). Conceptualizing Capitalism: Institutions, Evolution, Future. University of Chicago Press.

Holmes, S., & Sunstein, C. R. (2000). The cost of rights: why liberty depends on taxes. WW Norton & Company.

Hume, D. (1994). Hume: Political Essays. Cambridge University Press.(Original work 1752)

Leijonhufvud, S. A. B. (1986). Capitalism and the Factory System. In Economic as a Process: Essays in the New Institutional Economics (pp. 203-224). Cambridge university press.

Marshall, A. (1920). Principles of Economics (8th ed.). Macmillan. (Original work 1890)

Papava, V. (2024). From Retroeconomics to Sanctionomics: Essays on Unconventional Economics. [EBook]. iUniverse.

Pentland, A., Lipton, A., & Hardjono, T. (2021). Building the new economy: Data as capital. MIT Press.

Posner, E., & Weyl, E. (2018). Radical markets: Uprooting capitalism and democracy for a just society. Princeton University Press.