From: Julio Huato <juliohuato at gmail.com> Date: Sat, Sep 17, 2011 at 9:59 AM Subject: Re: [lbo-talk] Mathematics and Formalism in Economics To: Mike Beggs <mikejbeggs at gmail.com> Cc: lbo-talk at lbo-talk.org
Mike,
See attached file.
On Tue, Sep 13, 2011 at 6:40 AM, Mike Beggs <mikejbeggs at gmail.com> wrote:
>
> I'd love to read it. I see from his CV he has quite a few early papers
> on portfolio theory, asset pricing and growth which I would like to
> get around to checking out, since I've been wading around in 1950s and
> 1960s mainstream monetary theory for my historical research and it
> would be interesting to see where he was coming from before he took
> the Marxian turn.
>
[...]
> I like his take in his 1983 Social Concept paper, where he writes
> about the role of gold in Marx's theory of money and different ways of
> theorising the falling away of the gold link. I basically agree with
> his perspective - I think Marx had essentially a long-period theory of
> the value of money based on commodity/foreign exchange anchoring,
> and never had much of a need to talk about what happened in the
> short period - but it's the short-period that matters now the anchor is
> gone.
Not sure I understand what you mean here, about Marx's long-period theory of the value of money. The following may or may not relate to what you're saying:
I view Marx's theory of value through the prism of 20th-century inferential statistics and probability theory -- which, as I like to emphasize, is an almost direct refinement of Hegelian/Marxian (speculative but extremely astute) epistemological insights and mostly a genuine Soviet product.
It is evident to me that Marx viewed value as what we now would call a *conditional expectation* or -- plainly -- conditional average. Implicitly, in his illustrations in Capital 1 & 2, he made the assumption of perfect foresight (or "rational expectations"), which is a convenient device if you want to pin down equilibrium. Under that assumption the probability distributions collapse and (expected) labor requirements = (historical) labor expenditures.
There is no doubt in my mind that the "rational expectations" hypothesis has a germ of truth as a description of an aspect in the reproduction of capitalism, insofar as capitalism sticks around. The proof is simple, since this is a very straightforward case of the fixed point theorem. If in any meaningful sense a capitalist society reproduces itself (e.g. it reproduces its class structure), then its steady state (or "dynamic equilibrium") must exist -- although it doesn't need to be unique. Furthermore, insofar as capitalism is not an ephemeral thing, then at least of the steady states has to be dynamically stable. So there has to be some convergent process tying K_t(.) to K_t+j(.), just like when you shake coffee in a cup, there will be at least one molecule of the liquid at t that will be found at the exact same location at t+j. Unless, of course, K ~= K!
That implicit assumption was entirely appropriate, since Marx's goal was to figure out the laws of motion of a mode of production with a modicum of stability to be observed and recognized as such. He didn't have the tools to elaborate the notion formally. The perfect-foresight (or degenerate "rational expectations") assumption should not be confused with the belief that the capitalist mode of production is stable in the long run. As Marx argued, if a mode of production reproduces itself one way or another, then it has a "moment" or element of stability and continuity, even if its reproduction is through instability and disruption. There are n ways in which capitalism can disintegrate. The problem is to understand what makes it stick together in spite of its centrifugal forces.
If you view things this way, then values (some of them, e.g. asset prices at any given point in time) can be extremely volatile in the short run, yet exhibit clear trends in the long run. What we need to see is that there's nothing *fundamental* (as in "economic fundamentals") tying these expectations other than -- ultimately -- those mindful or purposeful elements of our behavior that Marxists traditionally associate with labor as a specifically human activity, as they may be mediated by specific social structures -- e.g. -- the so-called "self-correcting mechanism of markets" or the tendency of people to stage political rebellions and revolutions when things get to a boiling point.
> Yeah - I read an early draft of Graeber's book (or maybe a shorter
> version - it was a long essay) a couple of years ago and I was
> thinking about it again after his interview with Doug. I agree with
> your take. The same basic line (that money is in essence a creature of
> the State) is put in the opening chapter of Keynes' 'Treatise on
> Money'. Explaining the historical origins of money is not the same as
> explaining its present role in the capitalist system - it seems to me
> that much chartalist argument makes the mistake of thinking
> something's essence is determined by its origins. It's telling that
> Keynes' narrative jumps from Hannibal's crossing of the Alps to
> Napoleon's two millennia later - it elides the rise of capitalism and
> its long adaptation and transformation of the monetary system it
> inherited from feudal society. Not that Graeber makes the same
> elision, and he obviously has a lot of interesting things to say - but
> I can't abide chartalism!
It makes sense that commodity exchange (let alone production) and the state emerged more or less simultaneously, since commodity exchange in a way we'd recognize today requires at least some proto-state enforcing private ownership rights and the existence of a state or proto-state implies a relatively sharp distinction between the civil/private and political/public disposition over goods and resources, economic or de-facto and to some extent also codified or legal, which is in itself a germ of the notion of excludability or private ownership. That division (civil vs political) has to go beyond the distinction between individual and collective disposition over goods and resources.
On this, it seems that the best historical record is that pertaining to the emergence of civilization in ancient Greece.