[lbo-talk] Mathematics and Formalism in Economics

Julio Huato juliohuato at gmail.com
Thu Sep 1 12:39:21 PDT 2011


I just spotted this post in the archives.

Mike Beggs wrote:


> I've read quite a bit of his Marxian stuff on money and I like it
> also. Marx had a long-period theory of the price level in gold
> standard conditions, and felt no need to develop a short-period
> theory. Foley is good on what happens if you relax the gold
> anchor assumption. What are your qualms re: the presentation?

Mostly about the choices he makes about what to abstract from and what to include in a given theoretical explanation. Often, it seems to me, he complicates his abstract models unnecessarily by including elements that are really secondary and contingent. If you email me, I'll reply with a copy of his chapter on public debt and money. And you'll tell me what you think.

Another (though minor) point is that I'd be totally shameless about connecting my analysis to Marx's. Marx allowed for two different historical forms of evolution of fiat money. In his unpublished chapter, Foley develops the debt route, which is -- no doubt -- the more interesting and relevant. But I admit that's a rather minor stylistic choice.

One of the reasons why I'd do this is the recent debate sparked by David Graeber's book, Debt: The First 5,000 Years. Post-Keynesians and MMT people (Chartalists) have relied on the book to promote the notion that money is ultimately a legal or fiduciary form, rather than an economic (relations of production, in Marx's terms) form. (Actually, it may be more complicated, because often times it seems that Chartalists view credit as rooted in human nature, which would be a feature of societies with a higher degree of objectivity than economic relations. In any case, the Chartalists skip the economic layer: money and credit are either human nature or entirely legal/political conventions that can be manipulated rather arbitrarily.) Graeber, an anthropologist, claims to have found evidence that credit predates barter, historically, which -- allegedly -- refutes Marx's view of credit as logically and historically posterior to basic commodity exchange and the most basic functions of money (i.e. measure of value and medium of exchange).

I don't have any problem with anthropologists finding conclusive evidence that people, in a given ancient society, were lending and borrowing privately-held food, pottery, or basic tools to one another with proto-legal and proto-political mechanisms in place enforcing such deals, way before people (individuals or communities) began exchanging privately-held items, let alone before a particular commodity began to perform the essential functions of money. That is something that historians, anthropologists, etc. can sort out and argue about on the basis of empirical evidence. And if Marx's beliefs on how this history proceeded were mistaken, so be it.

But I am under the strong impression that Graeber is conflating things. People helping people is something that you expect to happen in any human society. The basis of any society is the cooperation among its individuals, regardless of how such cooperation takes place specifically, under which historically-contingent economic, legal, or political forms. I am sure that in very ancient societies you could find individuals handing food or pottery or arrows or axes to other individuals only to have the favor "repaid" later, perhaps with an "interest" on top. But it seems to me that credit proper requires, at the very least, the foundation of private ownership. I cannot be said to borrow from you and then to repay you the debt if the deal doesn't involve clearly stipulated private items held by the individuals involved. Now, that is something that doesn't result from the individuals alone, but from the broader society. In other words, society has to have the economic, legal, and political mechanisms in place for those transactions to exist and the deals to be enforced. I.e. things that can be recognized as a legal code, debt markets, etc.

Stay with the markets (or proto-markets): If there's no meaningful, recognizable, socially- or market-determined interest rates emerging in those debt markets (or proto-markets), regulating the borrowing/lending of food, pottery, or whatever by individual owners, etc. (without the assistance of money, because this is supposed to have predated even barter), then how can you use the categories of debt, credit, etc. to refer to these transactions?


> In the interview (which is actually ten years old now) Foley has
> this to say:
>
> "I think [integrating money into economic theory] is like Odysseus's
> journey of return from Ithaca. Constantine Cavafy's poem 'Ithaca'
> addresses Odysseus's feelings when he finally reaches Ithaca after
> ten years. Cavafy says, you know Ithaca is not a grand place,
> you've been to more amazing places, you've seen the bizarre and
> the glittering jewels; Ithaca is just a small island. The last lines of the
> poem say, don't ask too much from Ithaca; it has given you a
> beautiful journey. I learned a lot about theories of money. I don't think
> I am any near to the synthetic view of money that I was looking for.
> That's one of the big lacunae in economic theory. [So you haven't
> reached Ithaca yet?] No, and I probably never will."

Here, it seems like his views on the matter are still very unsettled. That may be the reason why he's kept this stuff from publication. But, as I said, in a recent email to me, Duncan didn't seem willing to take anything back. Email me and I'll send you the chapter.



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