On Sat, Nov 6, 2010 at 12:07 AM, Mike Beggs <mikejbeggs at gmail.com> wrote:
> On Sat, Nov 6, 2010 at 12:27 AM, D. T. Cochrane <dtc at yorku.ca> wrote:
>
> Hi D. T.,
>
> Thanks for this - there's a lot I agree with in the perspective you
> put forward. But I think that all three of the major 'three
> rejections' you mention would get fairly wide support in the melange
> of post-Keynesianism, Marxism and institutionalism that makes up
> heterodox economics today. I understand the urge to go back to first
> principles and at some point anyone who wants to go beyond eclecticism
> has to do that for themselves or align with someone who has. My only
> concerns are that there's no point in building more unnecessary walls
> in an already balkanised, marginal field, and also no need to reinvent
> wheels and call them something different. Following from that, it's
> maybe more interesting to turn this into a discussion of the
> substantive issues - where there is quite a bit of common ground.
>
As eclecticism has, as you say, left the field of radical political economy 'balkanised' and 'marginal,' we may be ripe for a different approach. A new school of thought that draws on the history of radical political economy - a reason I've told Professor Nitzan that I do not like the ctrl-alt-del metaphor - but which approaches fundamental questions in a new way might be a better strategic approach. Beyond that, perhaps subordinating critical inquiry to strategy is one reason heterodoxy is in the state it is.
One of the things I most appreciate about the 'capital as power' (CasP) approach is that it is thoroughly empirical with a renewed emphasis on quantitative analysis. By returning to fundamental issues, such as the concept of value, N&B not only engage with the observable quantities of capitalism, they give it renewed meaning. Without a value concept, it is unclear what exactly we're talking about. This can also lead us to make use of problematic concepts without properly understanding the problems they create. For example, among those radical political economists that still engage in quantitative research, many make use of the concept of 'real GDP,' without questioning exactly what 'real GDP' measures.
I think your responses below are interesting and rich with details. I also think they tend to add to the claims that N&B make and none seem to undermine their radical, subjectivist conception of value or the research programme it motivates.
Thanks again, D.T. Cochrane
>
> > 1. rejection of dual-quantity theories of value
>
> > The first says that observable financial quantities cannot be explained
> by
> > some other unobservable quantities, abstract labour-time in the case of
> the
> > LToV.
>
> Yes - my view is that the structure of prices emerges from the
> interaction of a number of different factors and that's it's wrong to
> reduce them to a single factor. The quantification of all these
> qualitatively different factors happens through exchange for money,
> and there's no other single 'twin' determinant factor prior to
> exchange. And that's not to commit the cardinal sin (in Marxian
> circles) of 'exchange-determined' value - because the other factors
> involve strategic production for exchange, depending on technology,
> prior accumulation, class relations in production processes, prior
> distribution of income, consumption preferences and modes of
> competition...
>
> Ever since Sraffa at least Marxists have been dealing with rejections
> of dual theories of value - but you can take this view of value
> without necessarily taking a Sraffian line on the determination of
> relative prices. I think Marx himself puts forward a complex, almost
> Marshallian theory of relative price in Vol 3 of Capital, focusing
> heavily on the processes of competition.
>
> > 2. rejection of the duality between 'real' and 'nominal' spheres
>
> >The second says that we have no basis to proclaim some separation
> > between a real sphere of production and a nominal sphere of financial
> > representation. In part, this is because we have no way of quantify a
> > supposedly 'real sphere.' This creates problems for explanations of the
> > recent crisis on the basis of a so-called 'bubble.' Prices were
> supposedly
> > inflated; against what? What ought prices to have been? How can we tell?
>
> I think this is a point that is absolutely central to Marx's vision -
> that capital is nothing but money put into circulation in the
> strategic pursuit of more money. It's also fundamental to Keynes: as
> he puts it in the General Theory: "The division of Economics between
> the Theory of Value and Distribution on the one hand and the Theory of
> Money in the other is, I think, a false division... One of the objects
> of the foregoing chapters has been to escape from this double life and
> to bring the theory of prices as a whole back to close contact with
> the theory of value." [p. 293]
>
> In both visions, the system generating the structure of prices is
> utterly blind to any imposed framework distinguishing between a price
> level and relative prices - price is nothing but the relative price of
> each commodity to money. However, the fact that money is only wanted
> for exchange and as a liquid store of value does give the concept of
> 'real value' and a 'price level' some meaning. It will always face
> some form of the index number problem because it's not really 'there',
> generated by the system itself, it's always an epistemological
> construct. But it has meaning and real effects back upon the system
> because people don't generally pursue money for its own sake.
>
> Marx had no need to deal with these issues specifically in the way we
> do, with reference to price inflation, because the gold content or
> backing of money always ultimately anchored the relative price of each
> commodity to money in the long run. There was no index number problem
> because there was no concept of a price level for the classical
> economists, and value in terms of non-convertible money tended to be
> expressed in terms of fluctuations in the value of that money relative
> to gold. Keynes famously rejected the concept of a quantifiable 'real
> output' - "To say that net output to-day is greater, but the price
> level lower, than ten years ago, is a proposition of similar character
> to the statement that Queen Victoria was a better queen but not a
> happier woman than Queen Elizabeth - a proposition not without meaning
> and not without interest, but unsuitable as material for the
> differential calculus." [GT, p. 40] He preferred to measure output by
> the 'labour units' used to produce it, and with fewer qualms than Marx
> about the problems of reducing qualitative labour into units. But
> later in the General Theory he is driven to talk about real output as
> we know it (e.g. Ch 21), and with the differential calculus too -
> because it really does have some meaning, however problematic.
>
> I fully agree with the idea that capital is always financial and that
> a firm distinction cannot be drawn between 'real' and 'financial'
> accumulation. But again this is central to both Marx and Keynes's
> treatments of the relations between interest and profit - Marx
> explores it in terms of fictitious capital etc. Keynes - especially in
> Chatpter 17 of the GT - treats money, financial and productive assets
> on the same level, as assets substitutable between one another as
> agents manage their portfolios in search of the highest expected yield
> (including liquidity as a form of yield). Post-Keynesians have built
> on this, especially Minsky, whose oeuvre is practically an extended
> riff off Chapter 17.
>
> I agree that talk about bubbles is problematic if it's taken to mean
> there is a fundamental value (these days often supposed to be the
> historical average of some ratio or another) asset prices ought to
> revert to. But I don't think it's meaningless - it's a bubble if the
> price level of some class of assets is unsustainable, if there are
> forces which will act to reverse those price increases.
>
> > 3. rejection of the duality between 'economy' and 'politics'
>
> >The
> > last says that accumulation - which they argue is judged solely in
> financial
> > terms and must be judged *differentially* - cannot be explained by any
> one
> > set of institutions that can be described as the 'economy,' but instead
> > depend on a vast, diverse array of social relations that transcend any
> > analytical division between 'economy' and 'politics.' That is why they
> > cannot be dismissed as merely more thinkers talking about "cost-plus
> > pricing, with a differential profit margin depending on
> > market power." The power of capitalists is far more diverse and complex
> than
> > that.
>
> As a broad proposition, this is completely uncontroversial - it would
> be hard to find a heterodox economist who did not agree that the
> economy was social through and through and economics is a social
> science. But to say value depends on 'power' is not to say very much
> at all - as Foucault says, power is essentially qualitative, not
> quantitative, and inherent in a system rather than individuals. I
> don't know what bringing power into value determination does, unless
> it's broken down into more specific relationships. Maybe you could
> explain what is meant by the emphasis on 'differential accumulation' -
> my foggy memory of B + N suggests it has something to do with dividing
> firms into to categories along the lines of the old 'monopoly' and
> 'competitive' branches of capital.
>
> Mike Beggs
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