Re: calling for the assassination of the President is against the law
At 04:31 PM 7/26/2004 -0400, you wrote: My recollection is that calling for the assassination of the President is a serious crime in the United States. [clip] You can't just go around threatening the President of the United States, even if you're a Senator, that's a serious crime. Ah, but note the caveat--it's a serious crime to threaten the President *of the United States.* It's unlikely that U.S. law extends a similar protection to chief executives of other countries. (And apparently, from Justin's just-now posting, it doesn't.) Gil
Re: Greed
David S. writes: Is Marx making an empirical point? Based upon observation, capitalists are motivated by greed? Or is it a definitional point -- under capitalism, capitalists by definition are motivated by greed. For instance, let's hypothesize a man who decides in his youth that there is a Rembrandt that he loves and wants to own. So he decides to become rich enough to buy the Rembrandt and then spends a lifetiime engaging in capitalist acts until he is sufficiently wealthy to buy the Rembrandt, at which time he sells his business and buys the Rembrandt. Now, while we can criticize this man for being possessive, exclusionary, etc., I would suggest he is not motivated by greed in the colloquial sense or even in the sense that Marx seems to be using the term. So he is not a capitalist? David Shemano From a certain theoretical standpoint--and I'm talking mainstream theory, not Marxist--these questions are irrelevant. Given competitive markets (or indeed, just competitive markets for firm equity shares), it can be shown that, whatever their personal consumption goals, people who own equity shares in a given firm will want that firm to maximize profits. So to the extent that firm managers respond to the concerns of equity holders, they will act as though greedy--that is, operate the firm so as to maximize (the expected present value of) profit. These theoretical results vindicate and give a precise interpretation for Marx claim that it doesn't really matter what individual capitalists want to do--Capital wants to accrue profit (in Marxian terms, surplus value). Gil
Re: absolute general law of capitalist accumulation
Charles Brown wrote: by Devine, James Charles writes: The funny thing is dialectics is logic. So, it is a way of talking about things. Formal logic is a linguistic project. To which Ravi responds: i am not sure who wrote what, but addressing the above: i would submit that formal logic is a mathematical project, not a linguistic one (even wittgenstein might agree). fwiw, i agree with most of the rest of charles' summation of logic. For an in-depth defense and exploration of the idea that logic is grounded in mathematics rather than vice-versa, see G. Spencer-Brown's classic LAWS OF FORM. His argument rebuts the notion that formal logic is a linguistic project: Spencer-Brown's argument is that, given any consistent distinction (and thus any specific linguistic structure), and two rules, (essentially): 1) a double affirmative is equivalent to an affirmative ( Is is = is) and 2) a double negative is equivalent to an affirmative ( Not not = is), then certain results unavoidably follow, *whatever* the distinction or linguistic structure you begin with. Gil
Re: oops factor
Quoting Dan Scanlan [EMAIL PROTECTED]: Checking Your Bill for a New Charge Called 'Oops' By David Pogue (SF Chronicle, Dec. 4, 2003) -- Every few years, economists identify another mutant variation of inflation to keep them awake at night. In the 1980s, it was stagflation. Three years ago, it was deflation. And now, meet the economic specter of the new millennium: stealth inflation. [clip] I think this article is on to something. My own experience with this phenomenon has been with my VISA credit card company. I'd had the card for something like 20 years with no problems or complaints--virtually always paid on time, etc.--when three or so years ago, suddenly and unilaterally, they canceled my VISA card and replaced it with a Mastercard. (The subsequently given rationale was that they'd negotiated a better deal with M-card.) Problem was, I already had a Mastercard and didn't need another--I wanted the VISA card I'd always had. I called and told a customer rep this, and told him I wanted the same setup I've always had--i.e.,a VISA card with no annual fee, and no interest charges if the bill is paid on time each month. He said yep, no problem, and sent me a new card. Fine. It wasn't until I got the next bill I found out that it had an annual fee. So I call. They say, oops, it was a mistake, we'll cancel the fee, but we've got to send you a different card. I say, one without an annual fee, right? They say, right, and send me a new card. Great. Until the next bill, where I see an interest charge, even though I'd paid the previous bill on time. So I call, and find out that on that card you accumulate interest charges immediately, whether or not the bill is paid on time. They say, oops, sorry, we'll cancel the interest charge, but we have to send you a new card. And I say, this one won't have an annual fee or immediately accumulating interest, right? And they say, right. And send me another new card. Okay. Well, at least I haven't had to change cards since then, but there have still been occasional annoying irregularities always resulting in me being charged for something I didn't know about, and requiring a phone call to a customer rep to clear up. In the latest go-round,for example, I got very busy recently and did something very unusual: I entirely forgot to send in the payment for a monthly bill. I discovered this when I got the next bill, with, of course, a hefty late fee and big interest charges. Oh, well, I think, my fault. I call a customer rep and ask how much I'd have to send in right then in excess of the amount on the current bill in order to catch up with *all* interest charges, so there would be no further accumulation of interest charges on the next bill, assuming I paid it on time. So the customer rep calculates a number, I add an additional figure *on top* of that, and send in my payment. Everything taken care of. ...Except not so much, since there were still additional interest charges on my next bill. So again I call, and find out from the customer rep that the earlier rep had made a mistake in advising me(oops), because it is company policy to let interest charges that result from late payments accumulate on any oustanding balances for *two* months, even if everything is paid in full after *one.* I see. But she deleted the interest charge. At some point in the above string of misfeasance I had the urge to get on PEN-L and ask if others had similar experiences. But then I thought, nah, probably just a combination of bad luck, miscommunication, new and untrained customer reps,etc. But now I'm not so sure. And I'm wondering, in light of the article Dan forwarded, if others have had something like this experience with their credit cards. In the meantime, you can find me in the barter economy. Gil
Re: absolute general law of capitalist accumulation
Hello, Charles. Secular meaning over a long period of time. As dd points out, economists usually use this in the sense of as opposed to cyclical. Gil Thanks for your comment, Gil. Please excuse a layperson's question, but I have never quite been able to understand this economist's use of secular. What is the definition of secular. Charles by Gil Skillman You could certainly point to recent economic phenomena supporting an affirmative answer to this question. E.g., in the US, the fact that significant increases in productivity have helped make it possible for capitalist firms to make do with their existing workforces rather than increasing employment in proportion to the increase in national output. However, I'd argue that such changes, where they occur, are not *secular* as Marx's general law requires. Specifically: Marx understands his law to apply to the situation of developed capitalist economies. His statement of the law implies secularly or tendentially increasing rates of poverty and unemployment in such economies. I don't think we've seen secularly increasing rates of poverty and unemployment in developed capitalist economies (though I'd be interested to hear others' assessments of the long-run trends for these phenomena), despite overall population growth and consequent increases in the size of the working class. -clip-
Re: absolute general law of capitalist accumulation
Concerning Marx's statement of the absolute general law of capitalist accumulation, Charles asks Does the empirical generalization suggested below have validity today nationally or globally ? You could certainly point to recent economic phenomena supporting an affirmative answer to this question. E.g., in the US, the fact that significant increases in productivity have helped make it possible for capitalist firms to make do with their existing workforces rather than increasing employment in proportion to the increase in national output. However, I'd argue that such changes, where they occur, are not *secular* as Marx's general law requires. Specifically: Marx understands his law to apply to the situation of developed capitalist economies. His statement of the law implies secularly or tendentially increasing rates of poverty and unemployment in such economies. I don't think we've seen secularly increasing rates of poverty and unemployment in developed capitalist economies (though I'd be interested to hear others' assessments of the long-run trends for these phenomena), despite overall population growth and consequent increases in the size of the working class. Part of the problem might be the law itself. Granting entirely Marx's premise that capitalist accumulation is accompanied by continuous increases in the organic composition of capital (implying increasing output per worker), it doesn't follow that a reserve army will necessarily be created--rather, just that the aggregate demand for labor power will expand less quickly than the rate of capital accumulation. There is another potential problem with Marx's argument that has unexpectedly far-reaching implications. Granting Marx's inference that the general law implies the creation of a (growing) industrial reserve army (IRA) of the unemployed, it obviously follows that the rate of accumulation is not constrained by aggregate labor supply. But then what is it constrained by? Specifically, why don't profit-seeking capitalists increase the rate of accumulation (which can be done profitably, since the existence of an IRA implies that doing so won't put upward pressure on wages) to the point where the aggregate labor supply is a binding constraint? I can imagine a variety of answers to this question, but all of them seem to create significant difficulties either for the validity of the general law itself or for the logical coherence of the value theory from which Marx derives this law. For example, suppose it's argued that, given the presence of the IRA, the rate of accumulation is constrained by the total funds capitalists have available for accumulation--that is, by the magnitude of total profit, equal to the average money rate of profit times the pecuniary value of the capital stock. This implies that the rate of capital accumulation is constrained by the level of the profit rate. But this is a steadily diminishing constraint, since the same process of technical change that creates the IRA also lowers unit production costs and thus raises the profit rate. And in any case, rising profit rate or not, so long as the rate of profit net of the rate of increase in the organic composition exceeds the growth rate of the labor force, the labor constraint must eventually be binding, thus tendentially eliminating the IRA. Gil
Reagan's legacy
Did anyone else see the CNN hagiography? He was 93 - how many people died as a result of his policies? One of the biggest misrepresentations of the Reagan hagiographers is that he fostered smaller government (a claim featured in the headline for the Sunday NY Times article on his death). What nonsense. For the 8 years prior to his administration, federal outlays as a percentage of GDP were about 20.8%. For the 8 years of the Reagan administration, the comparable average was about 22.2%. How is this smaller government? The most favorable snapshot supporting the view that Reagan made the federal government smaller is the comparison between the last Carter budget year with the last Reagan budget year--but it's also the most telling as to the true nature of Reagan's impact. In 1981, federal outlays were 22.2% of GDP, while in 1989 they were 21.2% of GDP, a percentage point lower. But at the same time, military expenditures as a percent of GDP went from 5.1 % to 5.6%, an *increase* of a half a percentage point. What went down, of course, were primarily federal expenditures on social welfare---*that's* the essence of Reagan's legacy: more for armaments, less for health, education, housing, and income support. Gil
Re: More on the labor theory of value
But Michael, number of pages produced is a measure of labor performed, not labor power. And in Marxian terms, the value produced by labor is to some extent redundant, since to Marx labor *is* the substance of value, no? It would be more accurate to say on the basis of your example that the British paid by, ahem, the value marginal product of the author's labor. But Dickens was indeed paid by the word, since his stories were serialized. In much the same way, Samuel Clemens was in effect paid by the page, since his books were sold by subscription, and the book price increased with its length. Which explains why a lot of his books --A Tramp Abroad, e.g.--benefit from significant editing. Gil In a way, the violinists' demands are not as strange as they seem. Richard Biernacki has argued that the Germans and the British had a different conception of labor -- the Germans historically measured labor by something like Marx's labor power; the British, by the value produced by labor. For example, in German publishers paid authors by the number of pages they produced rather than by the sales of the books. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
Re: Intro books/article on equilibrium
Bill, Which type of equilibrium? Competitive or non-competitive? Cooperative or noncooperative game-theoretic? Static or dynamic? Gil A co-worker of mine is interested in equilibrium theory. I have a few books at home I plan on lending him, but thought folks here might have some good suggestions for reading. Suggestions welcome. Thanks. Bill
Re: More conservative Rock-and-Roll stars
OK, all American Rock-and-Roll stars are libertarians. Bruce Springsteen? Jackson Browne? Rage Against the Machine (as in, members of the former)? Bonnie Raitt? Gil
Re: quote of the day
That Colin Powell. What a sense of irony. Gil I am angry that so many of the sons of the powerful well-placed ... managed to wangle slots in Reserve and National Guard units. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
Re: ketchup, buns and manufacturing
In response to this question from Carrol, Doesn't Taco Bell manufacture food? If Wonderbread was sold at the factory would it cease to be manufacturing and become service? dms answers The answer to that is: NO Taco Bell does not manufacture food. Pepsico manufactures something called food products through its Frito Lay (and other divisions) but Taco Bell no more manufactures tacos than Col. Saunders manufactures chicken, or the Starbuck's outlet down the street manufactures coffee, or the Armani Exchange manufactures clothing. Supermarkets are not food manufacturing enterprises. The clerks stocking, pricing, checking out food at the supermarket are not food manufacturing workers, and Taco Bells, Starbucks, KFC, and Armani are all markets.. IF Wonderbread were sold at the factory, the bread itself would still be manufactured, (although we would still have an argument about whether or not it is actually bread. I vote for legislated requirements a la the baguette in France). The separation that capital develops between production and sales, is a division of labor in fact designed to allow non-manufacturing, circulation, marketing, the opportunity to keep up with production, to conversely not draw away from production time, and limit production to the simple inventory and requirements of the factory outlet. McDonald's contracts and sub-contracts for its potatos (introducing the Idaho spuds variety into Poland and Russia to get that authentic McDonald's flavor across the Elbe. I am not making this up), but it does not manufacture the spuds itself. It's true that fast-food places don't manufacture their own intermediate goods (which are, in this case, things like potatoes, hamburger patties, buns, cheese, and whatever that liquid plastic substance is that makes up their superthick shakes), but then neither does virtually any firm that everyone would agree *is* in the manufacturing sector. On the other hand, in such places labor is certainly applied to these inputs, aided by the use other intermediate goods in the form of machines, to create products that didn't exist before (as surely as making Wonderbread is manufacturing, even if the factory doesn't make the flour, or yeast, or salt, or eggs , or styrofoam, or whatever else goes into its ingredients). Not a very involved manufacturing process, to be sure, but manufacturing in any case. What blurs the lines with services is that usually fast-food joints also heat up the food and put it in a convenient carry-away bag for you. But that doesn't negate what went on before the bag is handed to you. Think of it as a special instance of just-in-time production. The real question, it seems to me, is thus not whether manufacturing is involved in such cases, but rather what is the motive underlying the proposed switch in classification. And in this case it seems pretty clear: the statistics on losses in manufacturing (by current definition) jobs are pretty damning for Dubya's domestic economic policy, so a change in definition would be politically convenient. But necessarily misleading, since fast-food jobs are low-wage jobs (as are 6 other of the top 9 or 10 fastest growing occupations in the US). Gil
Re: Brilliant analysis from a soft rock icon
Mark Farner (of Grand Funk Railroad infame). Metallica - Original Message - From: Michael Perelman [EMAIL PROTECTED] To: [EMAIL PROTECTED] Sent: Friday, February 20, 2004 10:31 AM Subject: Re: [PEN-L] Brilliant analysis from a soft rock icon Pat Boone. On Fri, Feb 20, 2004 at 01:04:56PM -0500, Louis Proyect wrote: Davis Meshano wrote: Mojo Nixon! The greatest live performer in the history of rock n' roll, and a libertarian to boot. I could spend all day quoting Mojo Nixon. A libertarian? Wow! That leads to an interesting question. How many other rightwingers made a living as rock-and-rollers? The only one I can think of is Ted Nugent. Maybe you can include Stereolab as well. They were hanging around Frank Furedi's cult for a while. Other than that, there's none that come to mind. Louis Proyect Marxism list: www.marxmail.org -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
Re: song lyrics and poetry
Hey, let a thousand flowers bloom (Sung to the tune of Where have all the flowers gone) Gil : Do people find such contributions useful? Just asking. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail michael at ecst.csuchico.edu
Re: intermediate microeconomics textbook...
Diane, Three choices are: Walter Nicholson's calculus-based text, called Microeconomic Theory or Intermediate Microeconomic Theory (he has another, non-calculus-based intermediate text as well), Hal Varian, Intermediate Microeconomics: A Modern Approach, and Binger and Hoffman, Microeconomics with Calculus. The calculus is integrated (heh heh) completely into the exposition in Nicholson and BH, while in Varian the calculus is all in an appendix. The strength of the Varian text comes from his division of the material into short, manageable chapters. Gil Hi! Can someone recommend an intermediate microeconomic theory textbook that uses some calculus for advanced undergraduate students? Some recommendations on interesting supplemental micro topic readings/articles would also be helpful. I don't normally teach this course, in fact I never teach this course, so my reference point seems to be Jack Hirshleifer from my undergraduate days :). I have a few suggestions from colleagues but each one is different! Offlist is fine. Thanks in advance, Diane
Re: pop quiz Friday
Hmm. I don't remember if he used exactly these words, but Axel Leijonhufvud (or Axel the Lionheaded, as we affectionately call him) said something like this in an interview a year or two ago. I kidded him about it afterwards. Gil Who said it?: Economists don't know much about how different kinds of markets actually work.
Re: the evolving exchange value of the human body
From foot-binding to leg-lengthening. Progress of a sort, I suppose Gil A tall order It's painful and slow, but can make you five inches taller. Jonathan Watts on the surgical trend sweeping China - leg-lengthening Monday December 15, 2003 The Guardian Kong Jing-wen has paid £5,700 to have both of her legs broken and stretched on a rack. The pretty college graduate is now lying in bed, clearly still in considerable pain three days after a doctor sawed through the flesh and bone below her knee to insert what looks an awful lot like knitting needles through the length of her tibiae. These giant steel pins are connected by eight screws punched horizontally through her ankle and calf to a steel cage surrounding each leg. Once the bone starts to heal, these cages will act like a medieval torture device - each day over the next few months Kong will turn the screws a fraction and stretch her limbs more and more until she has grown by 8cm. Despite the agony, the cost and the inconvenience, the 23-year-old says she does not regret a thing. It hurts, but it will be worth it to be taller. I'll have more opportunities in life and a better chance of finding a good job and husband. Her parents, who financed the operation and are now at her bedside, agree. It's an investment in our daughter's future. Because she was short, she used to lack confidence, but this should change that. Kong Jing-wen is one of a growing number of perfectly healthy Chinese young men and women who are willing to break a leg for beauty in order to rise up the ladder in height-conscious China. The complex and time-consuming procedure they are willing to endure was initially developed in Russia for people with stunted growth, mismatched legs or disfigurements. But these days the operation is increasingly used for cosmetic purposes. In part, the popularity of such surgery can be explained by the surge of interest in fashion and beauty in a country where the rising middle classes are shaking off a dowdy Maoist cultural legacy and using the rewards of explosive economic growth to explore cosmetic possibilities. Shops and magazines in the cities show endless images of long-legged western models, inevitably putting pressure on young women. Doctors have been able to pioneer new forms of this surgery because height is so socially important in China that it is often the first thing strangers will talk about. It is also listed among the criteria required on job advertisements. To get a post in the foreign ministry, for instance, male applicants need not bother applying unless they are at least 5ft 7in, while women must be at least 5ft 3in. Chinese diplomats are expected to be tall to match the height of their foreign counterparts. For more glamorous positions the conditions are even tougher: air stewardesses have to be over 5ft 5in. But height discrimination is evident even at ground level: in some places, people under 5ft 3in are not even eligible to take a driving test. To get into many law schools, women students need to be over 5ft 1in and men over 5ft 5in. Height requirements are also frequently mentioned in the personal ads of newspapers and magazines. All this has ensured a steady stream of business for osteogenetic surgeons like Dr Xia Hetao, who has pioneered a height-increasing technique in Beijing used by about 150 people every year. More and more people want to be taller, he says. It is so important for the image of an individual or a company that some people come here in tears begging for an operation. With a minimum £4,000 price tag attached to the procedure, the patients are all well-off by Chinese standards. According to employees at Dr Xia's institute of external skeletal fixation technology, it is not just women who are prepared to have their legs lengthened - men are just as keen. The vast majority of patients are job- and spouse-hunters in their 20s, but teenagers are also among the patients and the oldest person to have the operation was a 52-year-old woman. She was very wealthy and had everything else she wanted, so she decided to fix her height which had always been a concern for her, explained one of the staff. In many cases, the clients are not even particularly short to begin with. Dr Xia said one 5ft 8in women asked to grow an inch so that she could reach the standard needed to qualify as an international fashion model. But most of the others are under average height and undergo up to two operations so that they can grow by a maximum of almost five inches. Each procedure has three stages. First comes the operation in which the legs are broken and steel pins - 27cm long and 8mm in diameter - are pushed through the bone. These are fixed to an external frame by eight or so screws, each of which is 4mm in diameter. Next comes the stretching, which is carried out over several months (depending on how much the customer wants to grow) by turning the screws each day and lengthening the bone at the point where it was broken. When
Re: the Clinton years
Across his 238 pages Pollin is unambiguous. It was under Clinton he points out, that the distribution of wealth in the US became more skewed than it had at any time in the previous forty years. Inside the US under Clinton the ratio of wages for the average worker to the pay of the average CEO rose from 113 to 1 in 1991 to 1 to 449 when he quit. In the world, exclusive of China, between 1980 and 1988 and considering the difference between the richest and poorest 10 per cent of humanity, inequality grew by 19 per cent; by 77 per cent, if you take the richest and poorest 1 per cent. I suspect this assessment is myopic at best, and largely beside the point when it comes to comparing the Clinton and Bush II regimes. In the US, the trend toward greater wealth and income inequality began in the 1970s and continued full-steam through the Reagan and Bush I years, so Clinton inherited a tendency that was already built into the economy. A significant portion of the increase in wealth inequality under Clinton was due to the stock market bubble, reflective in part of a robust economy that kept unemployment low, and since burst. And I'm not sure what Pollin expected Clinton, or any one President for that matter, to do about the widening chasm between the richest and poorest 1% or 10% of humanity--insist that the UN adopt a progressive global income tax? Force the Gingrich Congress to increase US foreign aid to poor countries a thousand fold? Also, what could Clinton have done to reverse the rising (pre-tax) ratio of CEO to average worker pay, and how much of a difference could it have made? Domestically, Clinton did manage to get through a tax increase on the wealthy and a tax decrease for the middle class. On the other hand, to his eternal discredit, he went along with eliminating welfare as we know it without extracting from the Republicans, who were desperate to gut the welfare system, significant concessions for workers, like increased support for education, training, child support, etc., in return. Clinton, in other words, was a disappointment, and certainly not a leftist. Duh. But Bush II is an unmitigated, across-the-board disaster, and I think that those who insist there is no real difference between Clinton and Bush II are missing a key point. You think wealth inequality increased under Clinton? Clinton didn't call for eliminating the inheritance tax and dividends tax or for dramatic decreases in income tax rates on the wealthy. Bush did, and got them with a sunset clause only as a political accounting shenanigan, and is now calling to make these tax decreases permanent. These regressive changes will surely lock in and further expand existing wealth inequalities. Also, the resulting massive structural deficit in the Federal budget will eventually render Medicare and Social Security infeasible; these programs would not have been seriously threatened under Clinton's budget management. And that is, of course only the beginning. Clinton favored signing the Kyoto protocol on global warming. Bush refused to sign it after saying that he would, and his administration has since censored reports on the issue by its own agencies in order to avoid dealing with it. The Clinton EPA actively pursued litigation against corporate polluters. The Bush EPA abandons much of this effort, raises nonenforcement to standard practice, leading several career EPA administrators to resign in protest, and introduces rule changes to let polluters off the hook re installing new pollution control equipment. Clinton didn't do much to reduce global income inequality? Bush shuts off medical and other aid for the poorest women in the world on the pretext of opposing abortion. Speaking of abortion, Bush has actively abetted the right's efforts to restrict abortion rights, while Clinton supported and defended these rights. And I haven't even mentioned the unfolding nightmares in Iraq and Afghanistan, Ashcroft's various incursions against personal freedoms, the Bush administration's opposition to affirmative actionthe list goes on. In sum, whatever Clinton's (considerable) failings, life is or will be worse for most people in and out of the US as a result of Dubya's policies. Gil
Re: the Clinton years
Michael writes: Gil seems to be saying that Clinton rode the rightward drift that had come before -- beginning I believe in the Carter years. Clinton was very smart. He knew what was happening. Instead of putting things right, he shifted the Dems. even farther to the right. Sam Smith in his Undernews a week or so ago, showed that this tactic won him reelection, but also propelled the Dems. downward. This assumes that the Dems weren't headed in a rightward direction in any case. And again, even granting this point, it remains the case that Bush II is much worse than Clinton--though perhaps less disappointing, since Dubya's policies are more or less exactly as one would have expected prior to his installation by the Supreme Court. I have only gotton through the first Clinton chapter so far, but Pollin seems quite balanced. He is not blaming Clinton, only saying that things were not going well during the boom. I don't know who you're quoting here, because I never stated that Bob Pollin blamed Clinton for the changes. Indeed, I agree with your assessment of his book. As you can see from the rest of my post, my main issue is with those who would assert that there is no important difference between Clinton and Bush II. And I agree that the economic boom of the 1990s benefited workers considerably less in relative income terms than did earlier, milder expansions--but again, more than the current almost-jobless economic upswing under Bush. Gil -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Re: insurance question
Sitting here just south of the insurance capital of the US, I figured I should step up on this. Tell me more, Michael. What type of insurance? Which nation(s)? For starters, there's The Historian and the Business of Insurance, edited by O. Westall, specific to insurance in Great Britain, and Viviana Zelizer, Morals and Markets: The development of life insurance in the US Gil Does anybody know of a nice thumbnail history of insurance? -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Re: Sad Story
I think it was John Marshall who said the power to tax is the power to destroy. The same can be said for regulation. In fact, taxation and regulation are better than abolition and confiscation. First, like a frog in boiling water, creeping taxation and regulation create less resistance than outright abolition and confiscation, so you will be more successful. Second, confiscation requires an assumption of responsibility to perform the service confiscated, and with responsibility comes failure and criticism. Therefore, you are better off regulating and taxing, which allows you to criticize instead of being criticized. Further, your nitpicking disagreements with me avoid the point -- ideologically, modern liberalism is in agreement with the fundamental policy prescriptions of the Communist Manifesto, so Justin's daughter is correct. The fact that policy implementation does not entirely reflect the lliberal wish list does not change that fact. By David Shemano's reasoning, not only are taxation, regulation and income redistribution tantamount to abolition of private property and centralization of economic power in the hands of the state, (the claim of his previous post), but these forms are tactically superior methods of abolition and centralization because fewer people oppose them. Thus modern liberalism is functionally equivalent to communism. This assessment is reinforced by a passage from his subsequent post: For the third time, my serious point, which no one has refuted, let alone disagreed with, is that the modern liberal sees nothing fundamentally contentious about the policy prescriptions of the Communist Manifesto. The modern liberal may disagree at the margin, or have concerns about practicality, but there is no philosophical opposition. You must agree, then, David, that the following are the formulations of a de facto communist. Right? To prohibit the use of certain poisonous substances or to require special precautions in their use, to limit working hours or to require certain sanitary arrangements, is fully compatible with the preservation of competition. The only question here is whether in the particular instance the advantages gained are greater than the social costs which they impose. Nor is the preservation of competition incompatible with an extensive system of social services There is no reason why in a society which has reached the general level of wealth which ours has attained the first kind of security [i.e., that against severe physical privation] should not be guaranteed to all without endangering general freedom. There are difficult questions about the precise standard which should thus be assured...but there can be no doubt that some minimum of food, shelter, and clothing, sufficient to preserve health and the capacity to work, can be assured to everybody...Nor is there any reason why the state should not assist the individuals in providing for those common hazards of life against which, because of their uncertainty, few individuals can make adequate provision. There is, finally, the supremely important problem of combating general fluctuations of economic activity and the recurrent waves of large-scale unemployment which accompany them. This is, of course, one of the gravest and most pressing problems of our time...Many economists hope, indeed, that the ultimate remedy be found in the field of monetary policy... Gil Skillman
Question
Here's something that's been puzzling me: it has been said that the U.S. state governments are in their worst fiscal crisis since the 1930s. And yet the US is not in the middle of its worst recession since the Depression; the Reagan-Volcker recession of the early 1980s, for example, was much worse in terms of lost GDP and raised unemployment rates. So what accounts for the disproportionate severity of the state-level fiscal crisis relative to the condition of the national economy? Is it that the Federal government offers so much less support for services and income supports that states provide? Or because state tax rates are often tied to federal rates, which have been dramatically cut back for the rich? Some combination of both, and if so, with what relative weights? Or is some other factor involved? And is there some book or article that spells this out clearly? Thanks in advance-- Gil
Re: Jazz corruption.
For what it's worth, I think the original connection went corruption--brothels and speakeasies and underground clubs--jazz and sometimes blues. A prominent source of corruption was Prohibition, during which jazz was the hot dance music of the day. Nowadays corruption has no particular musical connection--cf.Providence RI or swingin' Bridgeport, CT. As for rock n roll, well, different clientele. Were he alive today, I suspect Boss Tweed wouldn't be into heavy metal. Ethnomusicologically, Gil is there a correlation between corruption and jazz? it makes sense for Chicago and New Orleans... what is the explanation of this correlation, if it exists? why doesn't this correlation work for rock n roll, or does it? did it work for Baroque music, back when Bach was hot? If the mayor stamps out corruption, does that also strike a blow against creative music? enquiring minds want to know... Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevinehttp://bellarmine.lmu.edu/~jdevine JKS writes: [Kansas City] was one of the crookedest places on the planet, and accordingly a capital of jazz. Charlie Parker hailed from there, had his first gigs in Jay McShann's band.
Re: Bush ultimatum
Excerpting from Jim's post: Bush said Sunday during his weekly radio address. This madman has every intention of firing back at our troops when we attack his country. Yeah, how crazy is that? Firing back at troops who attack your country? Who knows, if he's *really* crazy he'll order a preemptive first strike on the country that's threatening him with weapons of mass destruction. Gil
Re: labor economics text
Funny you should ask. Yes there is, entitled _Labor Markets and Employment Relationships_, but unfortunately it won't be published until winter semester next academic year. Gil is there such a thing as a good labor economics textbook? Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevinehttp://bellarmine.lmu.edu/~jdevine
Re: RE: Today's quiz
Since you guys think you are so hot, try this one: Now I am prowling through the backyard and I am hiding under the car and I've gotten out of everything I've gotten into so far and I eat when I am hungry and I travel alone. Hint, everybody: notice how a lot of the phrase rhymes, sort of like song lyrics. Virtuously, Gil
Triplethink!
Ravi writes, among other things: the background is russell's attempt to derive mathematics from logic based on richard dedekind and gottlob frege's formalisms. but in the attempt, russell discovered in inherent paradox arising from frege's notion of a function. russell wrote to frege: let 'w' be the predicate: to be a predicate that cannot be predicated of itself. can 'w' be predicated of itself? from each answer its opposite follows. likewise there is no class (as a totality) of those classes, which, each taken as a totality, do not belong to themselves. the most common example of this paradox is expessed as: consider the set S of all sets that do not belong to (are not members of) themselves. is S a member of itself? russell attempted to avoid the circularity by introducing a theory of types, but then came godel's incompleteness demonstration and the end of the golden age of mathematics-logic ;-). Well, perhaps not. It's possible that Russell's attempt to derive mathematics from logic was doomed to fail because he got the problem exactly backward: logic is best understood as a province of mathematics, not vice-versa. George Spencer-Brown, who is either a genuinely brilliant weirdo or a brilliantly weird genius, depending on your point of view, established this point in his (in)famous book _Laws of Form_, in which he develops an arithmetic that yields, as a special case, the Boolean algebra that formalizes formal logic. However, the beauty of Spencer-Brown's arithmetic is that it is not limited to Boolean algebra. This allows him to derive from his arithmetic a third category of truth-value--imaginary--that is not allowed in the Boolean universe, and that makes it possible to sidestep the logical knots posed by self-referential paradoxes. He has a neat little preface to the first American edition of the book in which he likens the logical problem posed by self-referential paradoxes to the mathematical problem posed by the equation x-squared plus 1 equals 0. The solution mathematicians came to adopt with respect to the latter, of course, was to define imaginary numbers. As Spencer-Brown points out, convincingly to me, one can do a similar thing, offering similarly expansive possibilities, with truth values of propositions. _ ___ | Gil | | PS: You'll find a lot written about Spencer-Brown's work, both positive and negative, if you do a web search. It's my take that his work deserves neither the extreme condemnations nor the extreme commendations one finds.
Re: short vs. long-run contracts
If the paper Sabri refers to is the 1991 J. Ec. Theory paper by these three authors, the point of the Fudenberg et al. paper is a bit more specific, and correspondingly less silly, than Sabri's short summary would suggest. Here's the abstract: Long-term contracts are valuable only if optimal contracting requires commitment to a plan today that would not otherwise be adopted tomorrow. The authors show that commitments are unnecessary and, hence, short-term contracts are sufficient if (1) all public information can be used in contracting, (2) the agents can access a bank on equal terms with the principal, (3) recontracting takes place with common knowledge about technology and preferences, and (4) the frontier of expected utility payoffs generated by the set of incentive compatible contracts is downward sloping at all times. You may think that the above is not a very interesting thing to know--in the context of labor markets, which Fudenberg et al aren't specifically talking about, conditions (2) and (3) seem empirically doubtful at best-- but that's a different indictment than the one Sabri suggests. Gil Sabri writes: Did you know about Fundenberg, Holmstrom and Milgrom paper about long versus short term contracts, for example? Using heavy mathematics they prove that there is no difference between having a long term contract and a sequence of short term contracts. That means, don't worry, be happy, even when you have no job security. I haven't seen that paper, but it's prima facie absurd. The equivalent theory in finance says that there is no difference between having a long-term bond and a sequence of short-term bonds rolled over from period to period. (This is the expectations hypothesis, for issues such as treasury bills bonds that don't differ in terms of inherent risk.) But it doesn't work in the real world, despite the fact that financial markets are 100 times more like the idealized market than labor-power markets are. Long-term bonds have to pay higher interest rates than the average of actual and expected short-term bonds to compensate financial investors for extra risk illiquidity. Of course long-term labor contracts may involve fewer pecuniary rewards than similar short-term contracts, because the latter have the non-pecuniary benefit of security. But that doesn't make them the same. Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevinehttp://bellarmine.lmu.edu/~jdevine
Re: RE: Trotskyism alive and well
Jim writes: are you sure it isn't the National Institute _for_ Drug Abuse? Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevinehttp://bellarmine.lmu.edu/~jdevine No, that would be *Prescott Bush's* great-granddaughter. Gil -Original Message- From: Michael Perelman [mailto:[EMAIL PROTECTED]mailto:[EMAIL PROTECTED]] Sent: Thursday, January 09, 2003 12:40 PM To: [EMAIL PROTECTED] Subject: [PEN-L:33685] Trotskyism alive and well Flash. I do not want to reignite the debates over Trotsky, but the Bush administration just appointed his great granddaughter, Nora Volkow, to head up the national Institute on Drug Abuse. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Oh!...uh...
(Was: uh-oh ii) Will the Republicans quickly overreach themselves? How much long-term damage can they do in two years? Will the Democrats ever wake up? I think Michael's questions are quite apt. To the second question, the Repubs can do a great deal of damage in two years, in terms of further and more permanent tax cuts to the wealthy, corporate favors, further evisceration of environmental protections, appointment of neanderthal judges, etc. And the experience of Dubya's first months in office indicates the likely answer to the first question--the pigs will be eagerly oinking at the troughs in no time. As for the third question, perhaps the adverse election results will finally shock the Demos into realizing that they're not going to succeed by acting like pseudo-Republicans. If they're going to lose anyway, they might as well lose by addressing the issues, providing real alternative, and potentially energizing the alienated and marginalized who right now see now real choices. Granting that this were to happen--which seems uncertain at best--that's when the hard work begins. I agree with Jim that the left needs to reduce its sniping within ranks and increase its focus on the task of grassroots organizing. But I think there's an at least equally difficult task that has to be faced, that of crafting a set of positions that both addresses left concerns and is strategically viable, i.e. that Democrats can win with. I think the immediate problem here is that the Repugs--amply aided by Democrats posing as Republicans--have so distorted the premises of the debate on a social issues that it has become increasingly difficult to make a principled case for what are, to me at least, obvious priorities (a national health care system, for example) without getting gunned down by myopic diatribes against raising taxes (and the like). To fight against such divide-and-conquer strategies, the Dems have to build coalitions across what should have been their natural constituencies all along. This means they would have to abandon their narrow, tactically-driven politics for broader strategic considerations based on some hard thinking about progressive policy alternatives. [An idiosyncratic illustration of this point: I just finished talking to a colleague in political science who teaches courses on public policy. He routinely goes out and searches web sites for representative positions across the political spectrum on major policy issues. He said that when he looked recently for policy statements on health care provision, he found loads and loads of stuff from the right, but almost nothing from the left--or what passes as the left in contemporary US politics--that was newer than 1996.] Easier said than done, of course. And I also realize the above sounds hopelessly reformist and middle of the road. But the political center of gravity in the US has shunted so ridiculously far to the right that I think this is where the left in this country has to begin. Gil
Re: Re: Oh!...uh...
In response to my comment To the second question, the Repubs can do a great deal of damage in two years, in terms of further and more permanent tax cuts to the wealthy, corporate favors, further evisceration of environmental protections, appointment of neanderthal judges, etc. Carrol writes Aren't you describing the first six years of Clinton, until Monica hogtied him and saved social security. He could still kill a lot of people, though, in his last two years. Since Clinton is an example _par excellence_ of a pseudo-Republican Democrat, this characterization is necessarily true up to a point. (It is unforgivable, for example, that Clinton went along with welfare reform, and, having done so, didn't at least use his considerable political clout to get something tangible in return) But only up to a point. Even Clintonesque pseudo-Democrats would most probably not have: repealed the estate tax or given nearly as huge a share of the income tax cuts to the most wealthy; repudiated the Kyoto accord; chopped away so relentlessly and insidiously at enforcement of environmental laws; invoked anti-abortionism as an excuse for not supporting embryo use in medical research or for removing US support for international family planning efforts; sicced the Feds on marijuana-using cancer patients in California or euthanasia-seeking terminal patients in Oregon; had the imperialist gall to formulate or issue a preemptive-strike national security policy; or used Saddam Hussein as a political excuse to sidestep domestic issues such as corporate malfeasance. Clinton's judicial appointments (when they weren't held up by Repubs in the Senate), while only moderate, were at least not Pickering neanderthals. Etc. And let's not forget that Bush is only getting started. Now that the Republicans control both houses of Congress, the depredations of his first two years are likely to get significantly worse. Expect at minimum an immediate effort to make the estate tax repeal permanent, e.g. Gil
Re: raising min wage
Mat, for some sources, check out: Zavodny, Madeline, Why Minimum Wage Hikes May Not Reduce Employment, _Economic Review_, Federal Reserve Bank of Atlanta, 1998, 83(2), pp. 18-28. Card and Krueger, _Myth and Measurement_ 1995 (reporting empirical studies in which they find that raising state-level min. wage levels was associated with *reduced* unemployment, but you should also check out the followup literature on this book.) Rebitzer, James B; Taylor, Lowell J. The Consequences of Minimum Wage Laws: Some New Theoretical Ideas.. [Journal Article] Journal of Public Economics. Vol. 56 (2). p 245-55. February 1995. Basic argument: The claim that raising the minimum wage tends to reduce unemployment only obtains generically as a theoretical matter under perfectly competitive market conditions. Given either monopsony power or efficiency wage-type conditions in the labor market--for which there is evidence--raising the minimum wage need not increase unemployment or inefficiency, and in fact may reduce it. Finally, just as a footnote to this argument, I have a paper showing that raising the minimum wage may raise the number of *people* employed (and reducing hours worked per person) in the (typical) presence of quasi-fixed costs. If you're interested I'll forward it to you directly. Gil I'm trying to collect a list of arguments for raising the minimum wage, especially those that apply in 'developing' nation contexts. Fairness, equity, social justice arguments and/or efficiency/economic/macro arguments are all fine. Do people know of any good articles, books, websites that catalogue these arguments? Also, I'd be interested in any newer or less well known arguments people may have. (send on or off list--I'll collect the ones I get off list and submit them at the end). Also I'd be interested in counter-arguments to the usual arguments against raising minimum wages. Thanks, Mat
Re: dead economists
Ellen, here you go: The ideas of economists and political philosophers, both when they are right and when they are wrong, are more powerful than is commonly understood. Indeed the world is ruled by little else. Practical men, who believe themselves to be quite exempt from any intellectual influences, are usually the slave of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back. Defunctionally yours, Gil Anybody have handy the famous Keynes quote about dead economists? Ellen
Marx: Institutionalist and Pure Theorist
[Was: Time for Economics] Re this exchange: Rob writes:it's Marx who is the institutionalist par excellence. absolutely! I wish the folks who try to reduce Marx to neoclassical economics would see this. Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevinehttp://bellarmine.lmu.edu/~jdevine Obviously Marx closely studied the historical development of capitalist and pre-capitalist institutions. But in his theoretical treatment of surplus value and its surface appearances as profit and interest, he intended his analysis to be as stringently institution-free as any (neo)classicist might desire, taking as given only the defining elements of the capitalist mode of production--and those, only in their purest, hypothetically most fully developed form. Thus he writes in the _Resultate_: Classical economics regards the versatility of labour-power and the fluidity of capital as axiomatic, and it is right to do so, since this is the tendency of capitalist production which ruthlessly enforces its will despite obstacles which are in any case largely of its own making. At all events, in order to portray the laws of political economy in their purity we are ignoring these sources of friction... [K.I, Appendix, Penguin ed., p.1014] Correspondingly, in the final footnote of Ch. 5, Marx indicates his intent to observe the phenomenon of the formation of capital on the basis of the exchange of commodities in its purity... [K.I. p269] And similarly in K.III he says Important as the study of frictions of this kind [i.e., those which inhibit the equalization of wages and working hours across production sectors] is for any specialist work on wages, they are still accidental and inessential as far as the general investigation of capitalist production is concerned and can therefore be ignored. In a general analysis of the present kind, it is assumed throughout that actual conditions correspond to their concept, or, and this amounts to the same thing, actual conditions are depicted only in so far as they express their own general type. So far as I know, only this self-consciously and stringently *non*-institutionalist aspect of Marx's analysis has ever been investigated in neoclassical terms. making.
Just the facts, comrade
[Was: the D of P, then abstraction vs. concreteness] Re Sorry, Jim, this is not worth responding to. Your arguing in favor of workers democratic socialism is akin to Justin arguing in favor of market socialism. I am not in the business of countering one abstraction with another. I prefer to post those boring snippets of facts and history that Carrol Cox finds so completely irrelevant. When you stumble across some interesting data about the Cuban revolution in your peregrinations at your campus library, please share them with pen-l. In the meantime, I am moving on to other more fruitful topics and I am opposed to idealism, not abstractions. If we were discussing an abstraction like commodity, we might get somewhere--although without my participation. Notions, however, such as workers democratic socialism is a platonic ideal, more or less how Dudley Moore viewed Bo Derek in 10. and I am not interested in your theoretical points. Nor Justin's. That is the whole point. I am interested in unearthing useful data, like the fact that Malaysia is the number one tin producer in the world. You don't have to work at Columbia to glean such information, but I am afraid that vaporous gab about freedom, democracy and workers socialism on pen-l is a form of procrastination that gets in the way of useful digging. Facts cannot of themselves establish grounds for action, personal or social (that's the so-called is-ought distinction in a nutshell). To achieve the latter, you have to hook the facts up to some value judgment (what the facts also depends on a value judgment, as Jim said, but let that be). Value judgments can be entirely subjective, as for instance if someone says that a set of facts is useful just because he/she considers them useful. Alternatively, the value judgment in question can be derived from a given set of principles. The latter is an abstraction. So, to insist on an exclusive focus on the facts while yet accepting facts as possible grounds for given actions is necessarily either to assert that this is so just because someone says so, or to invoke an (implicit) abstraction. Of course, one always has the option of refusing to reveal or discuss the abstraction on which one's principled choices are made, and/or of refusing to discuss the abstractions that might inform the principled choices of others. Gil
Just the facts, comrade
Pardon: substitute the word ideal for every instance of the word abstraction in my previous post under this heading. Abstractly, Gil
Re: Re: Re: Re: Re: Re: : liberalism
Michael writes: I would only add that in these debates nobody seems to learn anything from anybody else -- at least, you can pretty well predict what the few participants in such debates will write. To be sure, most postings in most PEN-L debates appear as predictable rehearsals of existing positions. But for what it's worth, that doesn't mean that no learning is going on, despite the occasionally frustrating lack of anything that looks like progress or meetings of minds. Among the things I've gotten from past PEN-L debates in which I've participated are: finding out the range of possible arguments against a given position (and possible responses); references to relevant literature (particularly useful); and offline correspondences that often *do* end up going somewhere. On the first point, for those who enter given debates seriously and in good faith, positions and counterpositions can be developed much more rapidly than via the traditional route of published exchanges in journals. I think that's been a real contribution of this medium, despite its drawbacks. Gil
Re: Re: Drudgery
The Wall Street Journal today had a front page story about women in Mali, whose use of mechanized grinding machines has given them time to improve their lives and become literate. What's the point of this? Did the cotton gin enable slaves to improve their lives and become literate? The application of machines to work is a complex issue, let's treat it that way. As I read Michael's post, the point was that Mali women's use of mechanized grinding machines has given them time to improve their lives and become literate. No attempt to draw more general conclusions about the social consequences of machinery, or to minimize the complexity of this issue, was made. Indeed, in light of well-known instances of less progressive applications of machinery to work (e.g., the role of the cotton gin in US slavery), this item serves if anything to highlight the complexity of the issue.
Re: Re: Re: Re: Drudgery
OK. Labor saving devices save time and labor. This time and labor can be invested in other (possibly worthwhile) projects. I'm on my fifth day of not smoking and I'm irritable and I wanted to find out why Michael was telling me that the world is round. Oh...Well, I can't help you on that one, Joanna, but you have my empathy and cheers on the non-smoking effort.
Re: On median voters and minority rights
Where I wrote This is way off the mark. I'm not referring to any model of voting, silly, neoclassical, or otherwise, other than to note that if a majority rule choice obtains, then the preferences of the voter with median preferences among the available options will generally be satisfied. This is obvious in the case of a vote between two choices (e.g., Pepsi vs. Coke, the case we were talking about), since in any majority vote the median voter *must* be on the winning side. Of course, with more extensive sets of alternatives a majority choice may not exist in the first place. This reminds me of a former colleague of mine who objected to my use of the phrase the theory of comparative advantage. It's not a theory, he would say (and probably still does), since it's true by definition (or something like that). When this kind of rhetoric comes up, it's time to cut the cards (and count them, too), just as when someone says it's self-evident that... Actually, the median voter rule _is_ a model or part of a model of majority voting, in that it assumes that the spectrum of voters' preferences is single-peaked (since otherwise the equilibrium can be unstable). Rather, the equilibrium might not exist in the first place, as opposed to being unstable. I already addressed this possibility in my final statement above (which Jim elides from his reply.) But *if* a majority-rule equilibrium existed--that is, an unambiguous choice by the majority, with no cycles of vote-switching-- that choice would correspond to the wishes of some median voter. (On this point see Jim's own comment below about the practical interpretation of the meaning of the phrase median voter, which is the sense in which I originally used the term.) Such a choice always exists (if we include the possibility of indifference) in the two-alternative case of Coke vs. Pepsi we were talking about to begin with (that's why Arrow posits the existence of at least *3* alternatives in his theorem). If people are willing to make a choice between Pepsi and Coke, then preferences are as single-peaked as they need to be. Unlike voting under actually-existing capitalism, it's assumed that each voter has equal power, so that the median voter is exactly half-way down the list of voters -- rather than corresponding to half-way down a list where the preferences of some (rich) individuals are, in effect, counted many times. Perhaps the median-voter model would apply better with socialism than with capitalism. Right, that's the hypothetical case we were talking about to begin with, in a democratic socialist regime. We weren't talking about the pseudo-democracy that arises under capitalism, so I don't know why Jim brings this up here. However, in line with the orthodox economist's gut-level and _a priori_ assumption of methodological individualism, it assumes that the only interaction between the voters is in the voting itself, so that the act of voters _talking_ to each other in order to convince each other is forgotten. That is, in the model, I am not allowed to convince Joanna that her preferences are wrong, while she can't change her preferences. This fits with the timelessness of the standard model: Her preferences at time t may not be satisfied even though they may be satisfied at time t+1, when the vote actually takes place. And since I wasn't referring to any model in the first place, I wasn't ruling out this possibility, nor was I assuming a static or one-shot world in which people can't talk before voting. Again, Jim is imposing this model interpretation--I wasn't. Further, the identity of the median voter would likely change, as issues and preference distributions change over time, so that Gil becomes the median voter in time t+2. Perhaps, and nothing I said ruled out this possibility, since I never suggested a world in which the identity of the median voter was frozen. (Horrors!) For example, if anyone decides not to vote or non-voters suddenly start voting, that also would also change the nature of the median voter. Great. Same comment as above. This point implies that since the entire set of voters determines who the median voter is, saying the median voter decides is pretty much the same as saying the majority decides, adding little or no content. Right. I agree. It's *Jim* who's been making this big, and now evidently pointless by his own estimation, deal about the meaning of the phrase median voter. I originally meant it in the sense he now suggests: suppose the majority insisted on Pepsi when you favored Coke--would that be an acceptable instance of eliminating fake variety? Joanna _per se_ is forgotten, so she no longer seems like some sort of dictatorial arbiter of taste. This point is reinforced if preferences are distributed in a single-peaked way, since there would be a large number of people with preferences similar to the current median voter's.
The market as a preference aggregator?
I agree with Justin that it's a bit of a stretch to think of the market as a mechanism for aggregating individual preferences into a social preference ordering. It's more appropriate to think of the market as a mechanism of social *choice*, i.e. as something that selects *particular* outcomes given particular initial conditions (including individual preferences), rather than something that yields a social preference ranking based on individual preferences. The difference, plainly put, is that social preference orderings have to be combined with social constraint sets--the set of what's socially feasible at any given historical moment--in order to yield actual outcomes. To treat the market as a social preference ordering, for example, you'd have to read social preference from a given pairwise comparison as society prefers the allocation that constitutes a market equilibrium over the one that doesn't, and if they both constitute market equilibria, society is indifferent. Not clear that that makes any sense. But supposing that the market is understood as a social preference aggregator, then I agree with Gar that Arrow's theorem would apply. I understand Arrow's impossibility theorem a little differently, though--as I read it, it states that there is no coherent (i.e., complete and transitive) social preference ordering over choice sets with at least three alternatives that simultaneously satisfies (U) Universal domain: any possible array of (coherent) individual preference orderings is permissible; (P) Pareto principle: if all individuals (weakly) prefer any some allocation A over some other allocation B, then the social ordering will also reflect this (weak) preference; (I) Independence of irrelevant alternatives: the social ranking of any two feasible allocations does not depend on what other allocations are included in the choice set; (N) Nondictatorship: the social ordering will not simply reflect the preferences of any single individual. The most obvious way in which the market mechanism, understood in the above sense, would fail as a social welfare function is with respect to (U) , since it will not generally be true that for any two allocations, at least one will constitute a market equilibrium (however that might be defined--perfectly competitive or otherwise, e.g.). Fulfillment of condition (I) is also problematic given the possibility of income effects on individual choices. On the whole, it's probably more accurate and less confusing to say that markets don't aggregate preferences, but rather translate given arrays of individual preferences into social outcomes. Gil people should realize that Arrow's theory is a critique of _all_ collective decision-making mechanisms, not just democracy. It also applies to markets. Can you think of a method of collective choice that isn't subject to the theorem? Um, how so? The theorem says you can't have: nondictatorship, independence of irrelevant alternatives, independence of order of choice, and, dammit, one other thing I can't recall, all together. It's a theorem in voting theory. These things are irrelevant to markets. Of course a market with dictatorship (a monopoly) is distorted, but the independence conditions simply don't matter to formulating a market model. * Universality. The voting method should provide a complete ranking of all alternatives from any set of individual preference ballots. * Monotonicity criterion. If one set of preference ballots preference ballots would lead to an an overall ranking of alternative X above alternative Y and if some preference ballots are changed in such a way that the only alternative that has a higher ranking on any preference ballots is X, then the method should still rank X above Y. * Criterion of independence of irrelevant alternatives. If one set of preference ballots would lead to an an overall ranking of alternative X above alternative Y and if some preference ballots are changed without changing the relative rank of X and Y, then the method should still rank X above Y. * Citizen Sovereignty. Every possible ranking of alternatives can be achieved from some set of individual preference ballots. * Non-dictatorship. There should not be one specific voter whose preference ballot is always adopted Note that voting in this context is simply a means of aggreating individual preference into social choice. A market in which everyone has the same number of dollars would be a democratic vote by this criteria - one in which multiple choices are made by multiple voters. Note also that uneven distribution of money , short of severe monopoly does not resove the paradox, any more than uneven distribution of voting powers (where some people were allowed to vote multiple times) would resolve the paradox in any other election - short of dictatorship.
On median voters and minority rights
Was: variety of something or other... Consumer advisory: no repetitions of earlier arguments are advanced in the following post. Where I wrote: They do? So if Joanna were the median voter on the Pepsi vs. Coke question, that would be all right with you? Jim responds democracy is more than this kind of silly model of voting (the median voter rule). I highly recommend Lars Udehn's book (1996. The Limits of Public Choice: A Sociological Critique of the Economic Theory of Politics. London: Routledge), for a great (logical and empirical) critique of the whole neoclassical theory of politics. This is way off the mark. I'm not referring to any model of voting, silly, neoclassical, or otherwise, other than to note that if a majority rule choice obtains, then the preferences of the voter with median preferences among the available options will generally be satisfied. This is obvious in the case of a vote between two choices (e.g., Pepsi vs. Coke, the case we were talking about), since in any majority vote the median voter *must* be on the winning side. Of course, with more extensive sets of alternatives a majority choice may not exist in the first place. In any event, democracy does not mean simply majority rule. It also involves minority rights. People value rights for themselves as individuals, so they are willing to grant rights to others... In fact, they might decide to allow markets under certain circumstances. Sure, but to the extent that minority rights are guaranteed, there is correspondingly less assurance that what you've called fake variety will be excluded, since there is no way to ensure that minorities wouldn't exercise their rights by demanding alternatives that the majority would consider trivially different. To use one of your examples, suppose a minority insists that, for them, Dodges are strictly better than Plymouths; what then? Also, my point was (and is) that _all_ societies put limits on what kind of products are available to consumers. The question is how this decision should be made: should it be made by a self-perpetuating state bureaucracy? by a class of hereditary nobles? by a self-perpetuating class of rich people? or should it be made democratically? As stated in this general and abstract form, of course the latter. But things get more difficult when the meaning of democracy is tested in concrete cases. For example, suppose that, under the socialist regime of your choice, a super-majority votes to return to a capitalist system. Would you regard this as an adequate warrant for re-establishing capitalism? Gil
Re: markets profit maximization
Subject to a significant caveat, I agree with Jim's central point that cost minimization is a less restrictive and thus more general behavioral notion than profit maximization. The caveat is that, for enterprises that don't attempt to maximize profits, you can't know what counts as a cost, or what constraints there are on attempts to minimize costs, until you know what the *specific* goals of the enterprise are. Cost minimization in this context thus has no more general predictive content than utility maximization. Two examples: first, compensation to labor suppliers counts as a cost to capitalist firms, but is presumably part of the objectives of worker-owned firms. Second, although the standard (and central) implication of cost minimization is that contingent input demands are inversely related to their respective relative prices, idiosyncratic constraints (e.g., attention to Justice for Janitors) may prevent this inverse relationship from arising. Relatedly, it would be difficult to assess the prediction empirically, since it may be difficult to determine what output to hold constant when measuring contingent input demand. On a separate point, in theoretical terms there is a close connection between market competition and profit-maximizing behavior in the following sense: take a bunch of potential firm owners that care about lots of different things (such as income risk or the power to practice discrimination, say) *including* income. Obviously, in general no coalition of these would-be owners would unanimously agree on the single goal of profit maximization. The latter is guaranteed if you add two components to your market story: first, that ownership shares in firms are freely traded; and second, that markets for firm shares are competitive in the specific sense that each firm is small relative to the market for its shares. Other things equal, the chances for the latter condition are increased if share buyers are mobile, that is can easily get into and out of given asset markets and make transactions. This may help explain, for example, why traditional capitalist firms are focused on a single goal such as profits while the goals of not-for-profit and worker-owned firms are more difficult to characterize. Finally, re the exchange between Doug and Justin, I would think the key normative issue doesn't concern markets *per se* but the operation of certain types of markets. Example: supposing that for-profit suppliers could somehow be banned (or at least discouraged, say by limiting volume of purchases or sales), what would be the fundamental objection against the activities intermediated by e-Bay? Gil It's useful to think about an alternative way that an individual or organization might make decisions. For example, a not-for-profit institution (such as my university) has what's called a mission statement (promote liberal arts education, serve Catholic faith and the Judeo-Christian tradition, preserve a student-centered university community, promote justice, etc.) This represents a very complicated set of goals that must be interpreted by the Board of Trustees. But it's not reduced to a single number like profit that's maximized. Instead, they try to live up to these various goals as best they can (though my experiences is that justice is short-changed) while _minimizing costs_. My experience on the budget committee is that the university expresses this kind of procedure as follows: they take the number of students as given, along with a lot of their other operations (that serve their mission statement), and then try to _balance the university's budget_ by raising tuition, finding ways to cut costs, or whatever. This kind of cost-minimizing behavior does not contradict markets, so markets can exist without profit maximization. A market with no-one in it but multi-goaled cost minimizers would be a lot like a market where all participants are individual consumers (i.e., human beings) or maybe Marx's story of simple commodity production. It would not have the incessant accumulate-to-compete and compete-to-accumulate drive that a capitalist market has.
Re: Re: Re: Re: Re: Re: Re: Re: markets profit maximization
The problem with this line of argument is that for every seemingly trivial example of product differentiation one can come up with, you can also point to product differences that seem trivial to the average consumer/would-be voter and yet are critical to some. Some people find no difference between oysters and mussels; others are deeply allergic only to mussels. Aspirin is fine for most people but gives some bleeding ulcers. The sugar substitute aspartame is a boon to some--particularly diabetics--but causes migraine-like headaches in others. Personally, I've found only one shaving cream that doesn't make me sneeze. Etc., etc. In light of such cases it is perhaps less obvious what products count as essentially identical, and maybe even less obvious that all decisions on this score should be made collectively. Gil At 01:22 PM 07/10/2002 -0700, you wrote: Enormous amounts of resources are spent to market products that are essentially identical. Maybe you don't get phone calls from the phone companies Say what!!! You don't think there's a difference between Pepsi and Coke? .not to mention the difference between Microsoft and Microsoft? I'm shocked! Shocked!!! Joanna
Re: variety in capitalist markets
Even more basically, who gets to decide what counts as adequate variety and what counts as fake variety? Coke and Pepsi are apparently identical to Joanna but not to you. Should she get to determine which one you drink (or if you drink colas at all)? Gil [was:RE: [PEN-L:27843] Re: Re: Re: Re: Re: Re: Re: Re: markets profit maximization] the key question is whether a socialist economy would provide adequate variety of consumer products without fake variety. (BTW, Coke does taste different from Pepsi, but a Dodge is pretty much the same as a Plymouth.) Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevinehttp://bellarmine.lmu.edu/~jdevine -Original Message- From: Gil Skillman [mailto:[EMAIL PROTECTED]mailto:[EMAIL PROTECTED]] Sent: Wednesday, July 10, 2002 1:59 PM To: [EMAIL PROTECTED] Subject: [PEN-L:27843] Re: Re: Re: Re: Re: Re: Re: Re: markets profit maximization The problem with this line of argument is that for every seemingly trivial example of product differentiation one can come up with, you can also point to product differences that seem trivial to the average consumer/would-be voter and yet are critical to some. Some people find no difference between oysters and mussels; others are deeply allergic only to mussels. Aspirin is fine for most people but gives some bleeding ulcers. The sugar substitute aspartame is a boon to some--particularly diabetics--but causes migraine-like headaches in others. Personally, I've found only one shaving cream that doesn't make me sneeze. Etc., etc. In light of such cases it is perhaps less obvious what products count as essentially identical, and maybe even less obvious that all decisions on this score should be made collectively. Gil At 01:22 PM 07/10/2002 -0700, you wrote: Enormous amounts of resources are spent to market products that are essentially identical. Maybe you don't get phone calls from the phone companies Say what!!! You don't think there's a difference between Pepsi and Coke? .not to mention the difference between Microsoft and Microsoft? I'm shocked! Shocked!!! Joanna
Re: Re: Re: markets profit maximization
Seems plausible. I should have added that an important consideration in figuring out what firms try to do is the agency problem, i.e. the issues that come with the separation of ownership and control. Firm owners may want strict profit maximization, and yet their managers favor (for example) non-cost-minimizing plush offices with a view. Gil I have seen studies indicating that firms do not aim at cost minimization, so much as labor cost minimization; and that engineers are trained to work the same way. Anne Carter was the first source I saw; later a Dutch economist Boone. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Re: RE: Re: variety in capitalist markets
Jim writes obviously, these decisions cannot be made by Joanna alone. Instead, such decisions -- what is adequate variety? what products are allowed? -- have to be made democratically by the population as a whole, and following democratic principles more profound than those that prevail in the U.S. They do? So if Joanna were the median voter on the Pepsi vs. Coke question, that would be all right with you? How about if the median voter decided that aspirin were a good enough pain reliever...or that no substitutes for aspartame (or something like it) were necessary...or that mussels were essentially identical to oysters...or that peanuts were preferable to pretzels on airline flights? These decisions are unobjectionable so long as they're made democratically? Or to use Justin's example, suppose the (adult-consensual) pursuit of someone's sexual preferences depended on the use of goods that were democratically deemed to be unnecessary and/or undesirable? That's appropriate? I guess I'm asking if you see any place here for what in political language would be called minority rights, and if so, what implications would that have for the scope of democratic will in the determination of product variety? It should be pointed out that there's nothing radical at all about a government restricting the consumption of an item. After all, marijuana is illegal in the U.S. Also, governments have said a lot about what adequate variety is: the Pentagon, for example, has tried to veto the merger of military-industrial firms so as to allow the P to choose. What's radical is subordinating the government -- and thus the market -- to democratic will. Well, I agree it's *one* version of what's radical. But certainly not the only. It would also be radical to subordinate government and certain *types* of market activities to democratic will. The illegalization of marijuana has proven extremely hurtful to some--minor users serving long prison terms, law-abiding sufferers of glaucoma or the effects of chemotherapy--who would perhaps not find it comforting if this ban were in fact the expression of democratic will (which perhaps it is). I'm not sure this example is the best starting point in the case for extending the reach of collective decisionmaking to *all* would-be market transactions. Gil
Marx and value: common ground?
Jim, I'm going to sidestep for now the part of our exchange dealing with Marx's putative association of a bourgeoise system of ethics and the hypothetical condition that commodities exchange at their respective values and focus on the part of our exchange dealing with Marx's justification for invoking the latter condition. Frankly, I don't see much distance between what you argue on this point and what I've been saying. Where I wrote But the fact remains that Marx *is* making a deductive argument here, and he advertises it as such. He isn't simply asserting that surplus value *can* be explained on the basis that commodities exchange at their values, as you suggest; he's insisting that the explanation *must* be made on this basis. This reading is nicely corroborated in the sentence just before the passage you cite from Chapter 5: The transformation of money into capital *has to be developed* on the basis of the immanent laws of the exchange of commodities, in such a way that the starting-point is the exchange of equivalents. [I, 268-9, emphasis added] The claim is reiterated in the final footnote of the chapter, where Marx says If prices actually differ from values, we *must* first reduce the former to the latter, i.e., disregard this situation as an accidental one in order to observe the phenomenon of the formation of capital on the basis of the exchange of commodities in its purity... [emphasis added] Now, clearly Marx isn't saying this assumption has to be made, must be imposed, to satisfy the demands of etiquette, or on ethical grounds, or because somebody will break your legs if you don't; Marx is saying that this conclusion is *logically* entailed by the argument he develops in the chapter. And as I pointed out, this argument is logically invalid. you respond I read the has to be made and the must as part of his argument that the force of abstraction is the equivalent in political economy of the microscopes and chemical reagents of the physical sciences and that the force of abstraction _must_ replace both of these (emphasis added). (I found a beaten-up old copy: this is on the second page of the Preface to the 1st German edition.) So Marx was saying that we must use his method, which involves assuming value = price, if we want to get beyond appearances. But isn't it true that the *justification* he gives specifically for incorporating the value = price assumption in the application of his method is the one he develops in Chapter 5, to which you refer below? If so, we can focus on that justification. If not, could you refer me to the passage in the preface to the first German addition where he asserts that this assumption is an integral component of his method, and explains why? Of course, since he did so, we don't have to apply his method exactly. But it helps to understand what he was doing. The must also follows because assuming unequal exchange didn't explain surplus-value's rise: one commodity seller's M' M corresponded to another's M' M. Since the assumption of price not equalling to value wasn't enough, there must be something else, as special commodity (labor-power) which has a use-value of producing surplus-value. Doesn't this say, in other words, that price-value disparities are not of themselves *sufficient* to account for surplus value's rise? Does this statement say anything at all, one way or the other, concerning whether price-value disparities might under any conditions be *necessary* for the existence of surplus value? I'm not asking if *you* understand them to be necessary or not, or whether Marx proves they're unnecessary in some subsequent chapter or some other work. I'm asking if Marx's argument in chapter 5, which you've just summarized, speaks at all to the question of the *necessity* of price-value disparities for the existence of surplus value, and if so, where? Gil
Thus sprach Marx: interpretation or characterization?
Where I wrote: Gil Skillman responded: I know he said this. And I pointed out that the argument on which he bases this claim is logically invalid. Andrew writes First, I object to the term pointed out. In your post, you (a) impute to me an argument I've never made, suggesting that you hadn't actually read what I wrote, (b) rebut that fictitious argument with a passage from Marx that I had just cited in support of my real argument,reinforcing that suggestion, and (c) categorically reassert Marx's conclusion while ignoring the substantive criticism I made concerning the logic supporting that conclusion, further reinforcing the suggestion. And now you object because I use the phrase pointed out? If our situations were reversed, whom would you have said had the greater cause for grievance? But all right, I'll accept this criticism and claim only that I argued... rather than pointed out... What you did was (a) *assert* logical invalidity and (b) offer an *interpretation* under which his argument seems to be logically invalid. So what is at fault? The text? Or your interpretation? Granting (a), I must disagree with (b). If we're using the English language in the same way (and I have no reason as yet to suspect that we aren't), and you're not raising an issue here concerning the English translation from the original German (and I presume that you're not, though please inform me otherwise), then I am offering more than simply an interpretation of what Marx argues, I'm offering a *characterization* of what he has argued, to wit: both in the body of chapter 5 and in the final footnote where he recapitulates the main part of the argument in summary form, Marx argues that surplus value must be explained on the basis that commodities exchange at their respective values, on the grounds that price-value disparities are not of themselves *sufficient* to account for the existence of surplus value. This is a characterization of what he *did* say in Chapter 5. I take it you do not deny that he makes this claim (perhaps among others). I also assert that nowhere in the chapter does Marx make an argument one way or the other as to whether price-value disparities are under any conditions *necessary* for the existence of surplus value. This is a characterization of what he *did not* say in Chapter 5. If you think that characterization is false, then you can demonstrate its falsity by pointing to a passage, in the English translation or the German original, in which Marx *does* make a representation with respect to necessity. In that case, it will not be just a matter of us having differing interpretations; it will be that I've made a false characterization. If, on the other hand, you can point to no such passage, then it cannot simply be the case that you have a different interpretation of what Marx wrote (again assuming that we're interpreting English--as opposed to Marx's argument--in the same way, and that the translation from German is adequate) , since in fact he *didn't* write anything on this point; it will be the case that you are putting forward a different argument than the one Marx in fact makes in Chapter 5. Which is fine; perhaps we can discuss your new argument, once we agree on what Marx did and did not write in the chapter. It seems to me, and to basically everyone who has thought about interpretive adequacy, that when a text seems not to make sense, the initial presumption (as Georgia Warnke puts it) must be that the critic has misunderstood it. You're assuming that which you cannot possibly know, i.e. that I didn't make just such an initial presumption when I first advanced this argument ten years or so ago. This strikes me as a presumption at least equal in audacity to that implicit in using the phrase pointed out rather than asserted. At any rate, I have given at length, in this forum and many others, my grounds for now rebutting this presumption. I doubt that those who have thought about issues of interpretative adequacy would deny that this initial assumption is indeed rebuttable by criticisms made in good faith, which is what I understand myself to be offering. The value theory debate would generate more light and less heat if Marx's critics would respect this point and practice a little humility. Instead of saying one has proved this error, pointed out that claim to be logically invalid, etc., one could simply say that one has not yet succeeding in reading the text in such a way that it makes sense. That would invite others to work together to try to read text in such a way that it does makes sense. Of course, one advances one's career by drawing attention to others' insufficiencies, not by drawing attention to one's own. But if one's goal is to further knowledge, not advance one's career, the less spectacular but more objective and modest way of putting things is preferable. If there's heat being generated here
Re: please modify your browsers
Yikes! Sorry, Doug, this was a default setting. I'll see about changing it. Gil
[no subject]
Where I wrote There's no reason to think that Marx understands a bourgeois system of ethics to embrace the notion that every commodity sells at its [labor] value, and some significant reasons to believe to the contrary. First, Marx associates the former primarily with *formal* (as opposed to quantitative) equality in the exchange relationship (and the bourgeoise political economist par excellence, Adam Smith, did not insist that commodities should exchange at their [labor] values); Jim responds what Smith thought is indeed a non sequitur, since Marx was dealing with mid-19th century bourgeois thought (especially Ricardo, with Lockean moral overtones, as when the businessman asserts that his property arose from his own labor). Marx himself cited obscure thinkers such as Mercier de la Riviere who represented the crude political economy of his time... Uh, Jim, Mercier de la Riviere published the work cited by Marx in 1767, 9 years before Smith published the Wealth of Nations. And the other contemporary economists Marx cited in his Ch. 5 discussion are Condillac (1776) and Le Trosne (1777). You were saying...? Anyway, my basic point still holds--there is no evident basis for believing that Marx associated any ethical connotations, bourgeoise or otherwise, with the condition that commodities exchange at their respective values. Later, where I wrote In KI, Chapter 5, Marx advances arguments *justifying* his subsequent assumption that commodities exchange at their respective values. He doesn't actually invoke this assumption analytically until the beginning of KI, Ch. 6, [i.e., immediately after the quote above.] that is, *after* he's justified this stipulation. The passage that Jim quotes here is the conclusion of the argument intended to justify this assumption, not the assumption itself. Jim responds I don't think that Marx presents his ideas that way, like some sort of deductive process. As I've said before and for brevity's sake will not repeat at length, that part of CAPITAL should best be seen as written like a mystery. I won't dispute that this part of CAPITAL reads like a mystery to you, Jim. But the fact remains that Marx *is* making a deductive argument here, and he advertises it as such. He isn't simply asserting that surplus value *can* be explained on the basis that commodities exchange at their values, as you suggest; he's insisting that the explanation *must* be made on this basis. This reading is nicely corroborated in the sentence just before the passage you cite from Chapter 5: The transformation of money into capital *has to be developed* on the basis of the immanent laws of the exchange of commodities, in such a way that the starting-point is the exchange of equivalents. [I, 268-9, emphasis added] The claim is reiterated in the final footnote of the chapter, where Marx says If prices actually differ from values, we *must* first reduce the former to the latter, i.e., disregard this situation as an accidental one in order to observe the phenomenon of the formation of capital on the basis of the exchange of commodities in its purity... [emphasis added] Now, clearly Marx isn't saying this assumption has to be made, must be imposed, to satisfy the demands of etiquette, or on ethical grounds, or because somebody will break your legs if you don't; Marx is saying that this conclusion is *logically* entailed by the argument he develops in the chapter. And as I pointed out, this argument is logically invalid. Gil And for what it's worth, as he painstakingly spells out in the final footnote of Chapter 5, Marx justifies this assumption on the basis that price-value disparities are incidental to the existence of surplus value. The warrant he gives for this conclusion, developed at length in the body of Chapter 5, is that price-value disparities are not of themselves *sufficient* to account for the existence of surplus value. I'm quite familiar with that quotation. He doesn't see value/price deviations as contradicting his theory of exploitation. Instead, he ignores them as part of his mode of presentation. One could, with exactly parallel logic, conclude that the presence of oxygen in the earth's atmosphere is incidental to the existence of human life on the planet, since it is not of itself sufficient to account for the existence of human life... no, that's a false analogy, since in CAPITAL volume I, Marx shows that exploitation can exist _despite_ an assumed price/value equality. No-one has shown that life on earth can exist despite a hypothesized lack of oxygen. JD
Thus sprach Marx
Where I wrote Gil Skillman wrote: Now, clearly Marx isn't saying this assumption [exchange of equivalent values] has to be made, must be imposed, to satisfy the demands of etiquette, or on ethical grounds, or because somebody will break your legs if you don't; Marx is saying that this conclusion is *logically* entailed by the argument he develops in the chapter. And as I pointed out, this argument is logically invalid. Andrew responds If the conclusion is that surplus-value can arise only if commodities exchange at their values, it is indeed invalid. But this isn't what he said. I know. I never suggested otherwise. He said that exchange of equivalents must be assumed, not because surplus-value cannot arise otherwise, but IN ORDER TO OBSERVE the phenomenon of the formation of capital on the basis of the exchange of commodities IN ITS PURITY... (my emph.) I know he did. I quoted this same passage (see PEN-L 27449). And he said that this must be the starting point of analysis because the implications of the contrary assumption reduce to those of the exchange of equivalent values, and thus the contrary assumption doesn't move the analysis forward. I know he said this. And I pointed out that the argument on which he bases this claim is logically invalid. Gil
Re: BLS Daily Report
I'm sorry to hear this. This posting has been a reliable and informative aspect of PEN-L for a long time. Thanks, Dave. Gil is no more. There are apparently valid concerns here at BLS that prevent me from forwarding it, or any part of it, on a regular basis. I hope that it has been of assistance to you. This is the last message. Dave
Re: LTV and income disparity
Hi, Nancy. To get right to the point, the labor theory of value does not of itself imply a zero-sum conflict in the distribution of social income. The reason for this is that, even if the total potential labor expenditure in an economy is fixed, the total product of that labor--and thus the total social income--need not be fixed, so that there's potentially more for all. A fixed labor expenditure can translate into progressively higher levels of total output due to, for example, technical progress. This growth in labor productivity would be reflected in a lower average quantity of labor embodied in each commodity. A corollary of this is that richer rich does not of itself imply poorer poor. Of course the latter outcome may happen in any case, but not for reasons that have specifically to do with the operation of Marx's theory of value. That said, the responses to your comment, based on the supposed implications of supply and demand, aren't particularly on the mark, and to the extent they are, they beg the question. Off the mark, because an increase in demand, understood in either a micro or a macro sense, need not translate into an increase in total income. For example, an increased demand for vintage coins won't increase social income as standardly measured; and an increase in *aggregate* demand may only increase the price level without increasing *real* income. Question-begging, because the answer doesn't explain what led to an increase in demand in the first place. For what it's worth, Gil I am on another listserve, ANTHRO-L, which sometimes turns political -- there are a few good marxist anthropologists on it. a few months ago, i was discussing the gap between the rich and the poor in terms of the labor theory of value. to me, it seems self-evident that the richer the rich get, the poorer the poor will get. Since value is based on labor-power, there can be only a finite amount of it in the world, whether it is stored up as capital or circulating as money. There were many and great objections to my statement -- too involved to summarize here, but mainly centered around the idea that value is created by the market dynamic of supply and demand -- the more demand, the more value; the less demand, the less value. Suffice it to say that I didn't know enough about the labor theory of value to be able to meet all their arguments. In the meantime, I have brushed up on the idea of the fetishism of commodities, and do understand a little bit more. but i wondered if anyone of the many who know more about marxism would be willing to comment: does the LTV show that the rich and the poor are directly connected in that the more the rich get, the less the poor get? If so, why? If not, why not? thanking you all in advance for any enlightenment you might bring to the question, nancy brumback new college of california 766 valencia st. san francisco, CA 94110 415-437-3405 [EMAIL PROTECTED]
Re: RE: Re: RE: Brenner
Re this portion of the recent exchange on Brenner between Justin and Jim: (Justin:) When I say Marx officially regards certan phenomena as surface, I means that when he talks value theory. he suggests that thesea re in need of value theoretical explanation. As Gil Skillman has (to my mind but not yours) shown, there is another strain in Marx that does not require invocation of value theory, what Gil calls historical materialist explanation. ... (Jim:) I still wonder about this word official. If anyone is pushing the idea of official views, it's Gil, since he seems to want us to apply only the official methodology of the hegemonic school of economics, i.e., the methodological individualism of neoclassical economics (including game theory). (For something to be official, there has to be an officialdom. The NC economics hierarchy is the most obvious officialdom among economists, rewarding those who toe the line (use the methodology, agree with the main propositions) with publication and tenure and punish those who disagree.) Gil, please correct me if I'm wrong in my impression of your methodological slant. With respect to Justin's comment, I've actually argued something stronger: not only is value theory *unnecessary* to ground any of Marx's valid substantive claims (concerning, e.g., the systemic basis for exploitation, or the role of labor power commodification, with or without the subsumption of labor under capital, in the process of capitalist exploitation), but Marx's use of value theory (in K.I, in particular) is in fact *counterproductive* to his explicit analytical purposes, since it obscures both the systemic basis of capitalist exploitation and the significance of the distinction between labor power and labor in the process of capitalist exploitation. I should quickly add that these are *hindsight* judgments--that is, they only become clear once you stand in the analytical terrain Marx first established using his value theory. So, for example, I'm not denying that *Marx* found it necessary to use value theory as a foundation to achieve his valid insights. With respect to Jim's comment, I've never, ever claimed any sort of unique validity for the analytical methodology of mainstream economics (featuring, I suppose, the notions of individual optimization and equilibrium or strategic consistency). I wonder if you could point to any published or unpublished statement of mine, Jim, that indicates the contrary. Rather I've argued against the reverse fetish, involving the categorical rejection of theoretical results achieved within this framework on the ground that it is un or non or anti Marxist. In this connection I would note that, so far as I can tell, no analytical claim of Marx's in _Capital_ depends on the premise that people don't optimize; or take market prices as given; or freely move among potential exchange partners; or other negations of putatively neoclassical assumptions. To the contrary, Marx sometimes explicitly *embraces* these conditions within the scope of his argument. Jim comments further When Marx says that surface phenomena are in need of value-theoretic explanation (which is, in my view, an accurate portrayal of his views), he's saying that we can't simply look at supply and demand and other microphenomena (prices, individual profits, etc.) We have to look at them in the context set by the capitalist mode of production. In modern lingo, he's saying we have to look at the macrofoundations of microeconomics. If you look at just the prices, individual profits, supply demand, etc., as NC economists do, you end up suffering from commodity fetishism. I don't follow this argument. On one hand, I don't see the basis for the claim that value-theoretic explanation is tantamount to providing the macrofoundations of microeconomics. Why is it *necessary* to invoke Marx's value categories in order to establish such foundations? On the other hand, NC economists *don't* just look at the prices, individual profits, supply demand, any more than Marx does; these entities and magnitudes are grounded in their analytical fundamentals, just as Marx claims to ground these phenomena in value terms. Gil
Re: Inheritance tax is Marxist
Democratic foes of repeal advocate the redistribution of wealth, ``an old Marxist idea that has been rejected everywhere in the world but still has appeal'' in the United States, Sen. Phil Gramm, R-Texas, said Tuesday as debate began. Good old Gramm, past master in the uses of the Big Lie in political rhetoric. Gramm's comment is, of course, stunningly and redundantly contrary to fact, most obviously because most other developed countries engage in much more redistribution of wealth than the US (though I was distressed to learn that Italy has repealed its inheritance tax). Second, redistribution of wealth is not only not a specifically Marxist idea (much too timid a social change from a Marxist standpoint), but it's one that obviously precedes Marx (e.g., an article in the most recent American Prospect notes that pre-Marxist James Madison wrote in favor of progressive redistribution to combat social stratification). Propagandist Gramm has also been flogging the death tax chestnut, even arguing the immorality of taxing death, oblivious to the fact that although 100% of the U.S. population (eventually) die, only 2% pay the inheritance tax. And yet Democrats largely cede the moral high ground to reactionary ideologues like Gramm by not challenging such absurd claims. Gil
Re: RE: P.S.
When I said... For what it's worth, mainstream theory suggests another possible explanation for positive interest rates besides time (and possibly risk) preference, although it is not one that is typically emphasized: interest represents a scarcity rent for capital. This latter explanation is both plausible and consistent with the now much-reinforced empirical finding of interest-inelastic savings. Jim wrote: This may be a much-reinforced empirical finding, it is not treated as such by the intermediate macro textbooks, at least not all of them. There's one I read -- was it Abel Bernanke? -- that (1) said that saving is interest-inelastic and then (2) consistently drew the supply of saving as upward-sloping, matching the downward slope of the demand for saving curve (i.e., investment demand). They did the same for the supply of labor[power] curve. Yes, and quite a surprise, isn't it, that textbooks are slow in catching up with reality? Hall Taylor is the intermediate macro text I have on hand, and it notes that the evidence favors a 0-elasticity savings supply function. Since that edition the results of a multi-country study was published, I believe in Review of Economics Statistics, that strongly corroborated this funding. BTW, the inelastic saving supply curve fits with Keynes' idea that interest and profits represent quasi-rents, i.e., temporary scarcity rents. Of course, that doesn't quite explain why savings never lose their scarcity value, so that the interest rate zooms to zero. I agree, and take the latter sentence as a legitimate critical comment on the former. To label interest or profit as quasi-rents is to posit that in the long run, these returns can be expected to disappear--or, speaking more generally, fall to their reservation or opportunity cost levels. This is clearly what Adam Smith had in mind when he spoke of the natural rate of profit, and argued the actual profit rates would tend toward their respective natural levels. But this need not be the case, as Marx's analysis in KI, Ch. 25 illustrates. He adds: I should have said that mainstream theory suggests another possible explanation for positive interest rates that, like explanations based on time or risk preferences, is consistent with the operation of competitive and complete markets. Of course nothing ensures that the relevant markets in which interest rates arise have these nice properties. Leaving that restriction aside, mainstream theory could adduce explanations based on market power (e.g., collusive rate-setting) or contractual imperfections (e.g., efficiency interest rates, as in the Stiglitz/Weiss model of credit rationing). I don't think that these latter explanations that orthodox theory could adduce help us with the question at hand. They are microeconomic explanations, that don't explain the general (macro) rate of interest, perhaps as measured by the yield on a minimum-risk corporate bond (or by an average of empirically-existing interest rates). Rather, they explain differences of interest rates between different lenders or markets. Maybe, but not necessarily, so long as most markets for interest-bearing assets exhibit these features in some degree. A parallel case is the relationship between the wage curve ( a micro notion) and the Phillips curve (macro) discussed by Blanchard and Katz. If I understand Marx's theory correctly, it explains the general interest rate within the framework of the supply of and demand for loanable funds, though of course it adds some twists by putting this market into a societal context (while not assuming full employment as the original theories of loanable funds did). Interest is one piece of the surplus-value, so that if workers aren't dominated in society and thus exploited, there is no production available with which to pay interest. The concept of interest arises because of the division of labor that has developed historically between industrial capital and money-lending (banking) capital. The industrial capitalists are willing to share some of the surplus-value that they've pumped from their workers with the banking capitalists because the latter provide the service of financial intermediation. (Marx saw that service as unproductive, but that's another issue, one I won't touch.) In this view, the long-run equilibrium interest rate -- a.k.a. the natural rate of interest of Wicksell _et al_ -- would depend on the relative institutional power of industrial capital and banking capital and would thus change between historical eras. This is consistent with a (bilateral) monopoly story, unless Marx was insisting that the relative institutional power struggles took place entirely at the collective, political level. Gil JD
Revelation
Presley is also the world's expert on the economics of Dennis Robertson. === Who is Dennis Robertson? Ian It's time to end the masquerade. *I* am Dennis Robertson, and I would like to state for the record that Presley has gotten it all wrong. Also, I'd like to know M. Perelman's qualifications as a critic of my prose stylings. Harrumph, Dennis Gil Skillman Robertson
Re: pop quiz time
It sounds like Keynes, except he would have criticized (neo)classical economics rather than mainstream economists; the latter phrasing sounds more recent. For what it's worth, mainstream theory suggests another possible explanation for positive interest rates besides time (and possibly risk) preference, although it is not one that is typically emphasized: interest represents a scarcity rent for capital. This latter explanation is both plausible and consistent with the now much-reinforced empirical finding of interest-inelastic savings. Gil [who said it?] ...confusion forces practical economists to explain the determination of interest by opportunity cost reasoning - a particular rate of interest being set by the 'pure' rate yielded by the riskless government bonds, with inflation, risk, and administrative cost premia added. But there is no watertight justification for the perpetual existence of this 'pure' rate. Interest exists because it is there; it is still held up by its own theoretical bootstraps. The failure of mainstream economics to explain adequately the existence of interest betrays the fact that it is merely a theoretical concept with no true basis in reality. It is a figment of our collective imaginations.
P.S.
Sorry, that previous answer to Ian's pop quiz was too truncated. I should have said that mainstream theory suggests another possible explanation for positive interest rates that, like explanations based on time or risk preferences, is consistent with the operation of competitive and complete markets. Of course nothing ensures that the relevant markets in which interest rates arise have these nice properties. Leaving that restriction aside, mainstream theory could adduce explanations based on market power (e.g., collusive rate-setting) or contractual imperfections (e.g., efficiency interest rates, as in the Stiglitz/Weiss model of credit rationing). Gil It sounds like Keynes, except he would have criticized (neo)classical economics rather than mainstream economists; the latter phrasing sounds more recent. For what it's worth, mainstream theory suggests another possible explanation for positive interest rates besides time (and possibly risk) preference, although it is not one that is typically emphasized: interest represents a scarcity rent for capital. This latter explanation is both plausible and consistent with the now much-reinforced empirical finding of interest-inelastic savings. Gil [who said it?] ...confusion forces practical economists to explain the determination of interest by opportunity cost reasoning - a particular rate of interest being set by the 'pure' rate yielded by the riskless government bonds, with inflation, risk, and administrative cost premia added. But there is no watertight justification for the perpetual existence of this 'pure' rate. Interest exists because it is there; it is still held up by its own theoretical bootstraps. The failure of mainstream economics to explain adequately the existence of interest betrays the fact that it is merely a theoretical concept with no true basis in reality. It is a figment of our collective imaginations.
The uses of game theory
A while back someone asked about the usefulness of game theory. Below is a site that should, um, restore your faith in the power of this analytical framework. Amazing! Gil http://207.67.219.101/objective/gametheory.html
Re: Nash equilibrium's relevance
Jim writes In the article below, Varian explains Nash equilibrium. As an expert in game theory, he points out that it's not a realistic prediction of how people play most actual real-world games. If so, why is Nash's equilibrium used for all sorts of things, such as electricity regulation? (If I remember, the movie mentioned that.) Is it that Nash equilibrium is basically a normative concept and that it's applied to improve the efficiency of electricity regulation (or what not) rather than to be an accurate description of the way the world works? My take on this is that Nash equilibrium or one of its refinements--e.g. the notion of perfect equilibrium developed by Nash's co-Nobelist Selten--provides a plausible reference point, or starting point, for thinking coherently about social outcomes in which strategic considerations may arise. Although it's doubtful that people are unboundedly (individually) rational, as the theory requires, it's at least plausible that their behavior *approximates* this ideal in many settings. Certain economic experiments have shown, for example, that outcomes approach the Nash prediction as people become more familiar with the game being played. And for what it's worth, the global overfishing problem (see the front-page NYTimes article from a day or so ago) seems in many respects like a classic instance of a suboptimal outcome to a prisoners' dilemma-style problem. Granting that predictions of the simple Nash equilibrium are often not realized in practice, though, it doesn't follow that Nash's basic notion of equilibrium in a noncooperative setting--i.e., each actor seeks to realize some objective given that all other players are attempting to seek their respective objectives--is faulty. It may just need tweaking. One possibility is to abandon the notion of selfish preferences, as eg. Mathew Rabin has done by introducing fairness considerations into individual objective functions. Another possibility is to introduce bounded rationality in decisionmaking (as opposed to imperfect or incomplete information, which has already been done--showing how to deal with the latter was part of co-Nobelist Harsanyi's contribution). Gil (BTW, it seems quite a major theme in orthodox economics -- which puts a lot of value on a strong distinction between normative and positive economics -- that normative and positive matters are all mixed up in an ideologically convenient way. For example, the famous Walrasian (Arrow-Debreu) model is really a normative model, since it is based on all sorts of unrealistic assumptions, including the existence of God (the Auctioneer). But then that model is applied to describe -- and worse, prescribe -- real-world matters.) -- New York TIMES/April 11, 2002 What, Exactly, Was on John Nash's Beautiful Mind? By HAL R. VARIAN So what did John Nash actually do? Viewers of the Oscar-winning film A Beautiful Mind might come away thinking he devised a new strategy to pick up girls. Mr. Nash's contribution was far more important than the somewhat contrived analysis about whether or not to approach the most beautiful girl in the bar. What he discovered was a way to predict the outcome of virtually any kind of strategic interaction. Today, the idea of a Nash equilibrium is a central concept in game theory. Modern game theory was developed by the great mathematician John von Neumann in the mid-1940's. His goal was to understand the general logic of strategic interaction, from military battles to price wars. Von Neumann, working with the economist Oscar Morgenstern, established a general way to represent games mathematically and offered a systematic treatment of games in which the players' interests were diametrically opposed. Games of this sort - zero-sum games - are common in sporting events and parlor games. But most games of interest to economists are non-zero sum. When one person engages in voluntary trade with another, both are typically made better off. Although von Neumann and Morgenstern tried to analyze games of this sort, their analysis was not as satisfactory as that of the zero-sum games. Furthermore, the tools they used to analyze these two classes of games were completely different. Mr. Nash came up with a much better way to look at non-zero-sum games. His method also had the advantage that it was equivalent to the von Neumann-Morgenstern analysis if the game happened to be zero sum. What Mr. Nash recognized was that in any sort of strategic interaction, the best choice for any single player depends critically on his beliefs about what the other players might do. Mr. Nash proposed that we look for outcomes where each player is making an optimal choice, given the choices the other players are making. This is what is now known as a Nash equilibrium. At a Nash equilibrium, it is reasonable for each player to believe that all other players are playing optimally - since these beliefs are actually
Re: RE: Re: Re: RE: Nash, Harsanyi and Selten
That would be *quadrature* of the circle (constructing a line equal in length to the circumference of any given circle). Squaring circles is impossible. I once circled a square, though (warily). Gil
Re: game theory
Jim writes Why is it that game theory focuses only on the 2x2 matrix type of game (or the N-person game)? (it doesn't) or am I wrong to think that it is so one-tracked in its mind? In a word, yes. The 2X2 games are primarily just used for illustrative purposes.
Re: RE: Re: game theory
Jim writes yes, but do three- or four-person games ever produce useful results? are other game metaphors used besides I move and you move of the standard prisoner's dilemma box? Re the first question: for the most part, analyses of games that generically feature several players are not limited to the three- or four-person case. Re the second question, yes, abundantly. Game theory has provided the microfoundation for much, maybe most, of modern microeconomics, and as such has been developed way, way beyond its simple roots. I know about games such as the dollar auction, which probably can be modelled using standard game-theory tools, but it's hardly ever mentioned outside of books such as Poundstone's PRISONER'S DILEMMA. That book also mentions various other games, including one invented by John Nash that involved movement of pieces on boards divided into hexagonal spaces. (It was sold commercially for awhile and seems the basis of Avalon-Hill-type war games.) Are any of these various non-standard games given any kind of attention? How about, as I mentioned in my original missive in this thread, card games such as solitaire? Am I right to say that game theorists concentrate only on the simplest possible games, because those are the easiest to analyze? In general, no. They may start with the simplest cases, but usually extend the results to the most general case possible. For example, the analysis of strategic bargaining models started with the bilateral, 2-player case, but now has been extended to the n-player case. Grab any recent graduate text on game theory, Jim (Fudenberg and Tirole, and Myerson, are two good ones), you'll see how general the development has been. Gil
Re: Reply to Skiilman and RV on Roemer
Miychi writes In debate between Skilllaman and RV on Roemer, It is unclear that whether exploitaion is ³forced² or²voluntary². In reality, based upon sepatation from means of production, workers are ³ forced² to work at least to maintain their physical condition. This unclearness result from, I think, Roemer¹s idea of coupon ownership of firms by ³citizen²(what is ³citizen²?). And this unclearness lead to Roemer¹s(and skillman and RV?) ³market socialism without revolutionary action. In order that revolutionary act emerges, opression must be presumed. And in order that oppression emerges, capital must have compelling power to people to work. Roemer(and skillman and RV?)was caught in problem of ownership and can¹t see oppresionin exploitaion Capitalist exploitation involves, at the very least, coercion at the level of *class*, in the sense that the representative worker has no choice but to perform surplus labor for a capitalist (whether paid in the form of profit or interest on a production loan) or suffer a loss in well-being, the size of the loss depending on the existing distribution of means of production. (For example, if workers were totally expropriated, which Marx takes as the relevant case in K.I, a worker must choose between producing surplus labor for a capitalist or starving.) Justin develops this idea of class-level exploitation in an Economics Philosophy article from several years ago. Since this point is entirely consistent with Roemer's analysis, there's no unclearness about the connection of exploitation to separation [of workers] from the means of production--indeed, that's the basic idea behind DOPA. The reason that RV haven't focused on this is because it's not a point of contention. Gil
Re: Nash, Harsanyi and Selten
In response to this comment from me Relatedly, a generic insight provided by Nash noncooperative equilibrium is that the interactions of rational self-interested actors need not--under some conditions, probably won't--lead to socially rational outcomes. Charles writes CB: This seems to rather directly contradict Adam Smith, doesn't it ? Isn't this the opposite of the fundamental classical proposition put forth by Adam Smith on The Invisible Hand and all that ? I'd say rather that the game-theoretic results I mentioned speak more to the Adam Smith of Book 5 than of Book 1 of Wealth of Nations. Gil
Re: Re: Nobel Prize
No, noncommunication is a condition of game theory. Co-cnspirators are treated as a single actor for purposes of the game. jks Strictly speaking, cooperative game theory doesn't address the possibility of communication one way or another, since strategies and information sets aren't model in that framework. Noncooperative games, in the modern definition, are simply games in which strategic choices are spelled out and analyzed explicitly. These could include communication. Gil
Re: bounced from Mike Yates
Michael, here are two recent references: Daron Acemoglu and Jaume Ventura, The World Income Distribution, NBER Working Paper 8083, January 2001. Acemoglu and Ventura develop and offer evidence for a new neoclassically-based theory, but give references for the standard neoclassical account. Matthew Higgins and Jeffrey Williamson, Explaining Inequality the World Round: Cohort Size, Kuznets Curves, and Openness, NBER Working Paper 7224, July 1999 There is also a literature, although I can't pull up any references at the moment, on the failure of the convergence hypothesis, that involves adding additional factors--like social capital and human capital--to the (problematic, as we know) aggregate production function for national economies. You could pull that off of EconLit. Gil I am working on a book to be titled Naming the System: Inequality and Labor in the Global Economy. I am working on a chapter which aims to lay out the neoclassical thoery's answers to such questions as why there is such a large gap between the GDPs per capita in rich and poor countries and why this gap is getting larger; why there is so much inequality in income, wealth, etc in every capitalist country; why most people have such crappy jobs worldwide; why there are crises; why there is so much unemployment and underemployment; etc. If anyone has any tips as to how I should present the neoclassical answers, for a general audience, I would appreciate hearing from you. You can reply to [EMAIL PROTECTED] or to the list. I check the archives every day. Michael Yates -- Michael Perelman Economics Department California State University [EMAIL PROTECTED] Chico, CA 95929 530-898-5321 fax 530-898-5901
Re: Roemer and Exploitation
I look forward to addressing Roberto's new set of comments on this thread after reading them carefully. But insofar as the exchange is already lengthy, involved, and possibly of limited general interest, I'll follow through on my earlier promise by responding offline. Gil Following a thread of discussion on Roemer's theory of exploitation. In reply to G. Skillman's comments (PEN-L, 11-3, 20:44). Let us start with the points of agreement: 1) Differential Ownership of Productive Assets (DOPA) is certainly necessary to have exploitation, at least in Roemer's model. (And I say it in my paper.) 2) If profits persist, then given Roemer's Fundamental Marxian Theorem, exploitation persists, too. This is not under discussion. Now back to the differences: SKILLMAN WRITES: despite some (certainly regrettable) *verbal* carelessness by Roemer in explaining the meaning of his formal conclusions, the latter show that differential ownership of *scarce* productive assets (DOSPA) is the necessary (and, subject to a caveat mentioned in my earlier post, sufficient) basis for capitalist exploitation, not simply differential ownership of said assets (DOPA). RV: I don't think it is a mere matter of verbal carelessness. Roemer's research program is aimed at finding a more general definition of exploitation based on DOPA (and not DOSPA, see Chapter 7 of GTEC) such that Marx's surplus labour definition is redundant. (The emphasis on DOPA is indirectly confirmed by Roemer's post-GTEC studies based on equality of opportunity etc.) In order to do this he has to prove that DOPA and exploitation are equivalent, i.e. DOPA is necessary and sufficient for exploitation to occur. If we agree that this is not the case and that his careless verbal claims are not well-grounded, this is perfect for me, then we have to re-consider the careless verbal claims that his DOPA-based definition of exploitation substitutes Marx's. In any case, as regards DOSPA: (a) it does not do the same job as DOPA: one has to provide a 'scarcity' mechanism through which profits, and therefore exploitation, are made persistent. But then Roemer's normative claim regarding the role of inequality in ownership must be changed accordingly, in order to take this other mechanism into account. This is not a neutral change because in principle the mechanism guaranteeing persistence would be normatively as relevant as the initial DOPA, and therefore the claim that inequalities in endowments are the only relevant thing would need to be qualified. Indeed, the scarcity qualifier becomes the positively and normatively interesting thing. (b) Roemer's models are NOT static models, they are dynamic models analysed in a steady state and under extremely stringent assumptions. Hence, if DOSPA is the relevant condition, then one must conclude that GTEC does not provide a general theory of persistent exploitation. Indeed scarcity is not discussed at all, and no mechanism guaranteeing persistence is provided in GTEC, nor can it be inferred from Roemer's models. As noted below, arguably no such a mechanism can be introduced in Roemer's models without substantively changing Roemer's research program and methodology. In particular: SKILLMAN quotes Roemer (p. 9) Suppose, now, there is a limited stock of seed corn. By 'limited' I mean there is not enough to employ the whole population in the [capital-intensive] technique. And also Roemer (p. 10) It is important to notice that for this example to work [i.e., to exhibit exploitation] there must be an industrial reserve army--that is, more producers available than seed corn to employ them. *For if, instead, seed corn were in excess relative to the labor supply, then the work week in the [capital-intensive] technique would be bid down to three days* [thereby eliminating exploitation in this example]. (Emphasis added) And Roemer (p. 11) Indeed, the following are requirements for this example to work: (1) a class of propertyless producers [that's differential ownership], *in relative abundance to the supply of capital which can employ them* [that's capital scarcity] (emphasis added). ALSO similar explicit caveats in _Value Exploitation and Class_ (pp ! 18-19) and _Free to Lose_. (p. 23) RV: I like these quotations very much. Assume, for the sake of the argument, that they support Skillman's claim that Roemer had DOSPA rather than DOPA in mind. Then one has to conclude that Roemer is a very bad model builder given that (a) in NO MODEL of GTEC disequilibrium in the labour market is allowed; (b) more strongly, given the subsistence constraint, disequilibrium in the labour market (unemployment) simply *cannot* be easily included in Roemer's model. Thus Roemer has been again regrettably careless in making his methodological points regarding walrasian models: if an industrial reserve army is fundamental to have persistent exploitation, how can we reconcile disequilibrium in
Nash, Harsanyi and Selten
[Was: Re: Nobel prize] In response to this comment by Justin, But Nash Harsanyi made real contributions to economics. Jim writes you think? As far as I know, there's no reason to think that the Nash equilibrium applies in reality (and I'm not familiar enough with Harsanyi's work to say anything). It's just one possible result. The main contribution of game theory in general seems to be as a way to describe possible conflictual or cooperative situations, rather than to predict real-world results in a consistent way. (It's a little like all those 2x2 conceptual boxes that litter sociology books.) But since I'm no expert on game theory, I am willing to be corrected. First, there are *two* Nash equilibria (something that the recent film on Nash bollixes considerably, in addition to misrepresenting the main one), one for noncooperative games and a bargaining solution for certain types of cooperative games. Both have served as foundations for the application of game theory to (particularly mainstream) economics, but Nash's noncooperative solution has probably had the greatest impact, because it allowed generalization of noncooperative game analysis beyond the generally unrealistic focus on *zero-sum* games in Von Neumann Morgenstern's classic from the previous decade. In fact, I don't think it's too much to say that game theory has revolutionized microeconomics, thanks in part to the refinements introduced by Harsanyi (especially concerning games of incomplete information) and Selten (who made it possible to deal with issues of credible strategies in contexts where strategic interactions are played out over time). Applicability of Nash equilibrium to real-world concerns, particularly those that matter to progressive economists, is necessarily a more controversial issue. On one hand, issues of conflict and strategic interaction of the general sort addressed by Nash are central to Marxian and institutionalist economics. Relatedly, a generic insight provided by Nash noncooperative equilibrium is that the interactions of rational self-interested actors need not--under some conditions, probably won't--lead to socially rational outcomes. On the other hand, game theory was originally framed as an extension of decision theory, and therefore carried all of the latter's ahistorical, un-socially constructed baggage (which is not to say that appropriately constructed game-theoretic models aren't relevant to analyses of particular settings). More recently, pushed in part by experimental results that challenge the generality of predictions based on purely rational Nash equilibrium, game theorists have been shaking off these restrictions by considering the impact of evolutionary preferences and norm-based behavior. But even these developments owe a clear debt to Nash's work. So I'd say, yeah, Nash (as well as Harsanyi and Selten) have made real contributions to economics, even the sort of economics that concerns folks on this list. Gil
Re: Re: Re: Re: Roemer and Exploitation
Rakesh writes I also had written the following on which Gil did not comment: To say that additional capital is increasingly in short supply vis a vis the new and displaced laboring population as accumulation progresses only means that in the course of accumulation the primordial source of this capital, surplus value, becomes progressively more scarce, too small, in relation to the already accumulated mass of capital I skipped this because my response would have been redundant: i.e., whether or not surplus value becomes progressively more scarce...in relation to the already accumulated mass of capital has no particular relation one way or another to the question of whether labor is subsumed under capital, and thus no particular reason to venture into the hidden abode of production. Again, there's no reason to think that the possibility that surplus value becomes progressively more scarce can't be demonstrated in the context of the appropriate empirically motivated Walrasian model. Gil replies: I rid, I mean read, this statement as corresponding to Marx's KI/25 analysis of the general law of capitalist accumulation, to the effect that any rise in wages above subsistence due to demand pressures from capital accumulation is necessarily self-limiting, since the resulting loss in profit leads to a corresponding reduction in the rate of accumulation. (This self-limitation is further reinforced by tendentially rising OCC.) But I don't see why anyone has to venture into the hidden mode of production to yield *this* particular point. which point exactly? the point in the excised paragraph above about the primordial source of capital? Yes, necessarily, since it's equivalent to the point I answered explicitly. For example, Marx's argument holds if it's true that the only funds for accumulation come from the retained earnings of capitalists. This result could certainly be generated by the appropriate (and empirically motivated) Walrasian intertemporal model. I took this issue up in my response to Roberto Veneziani when I suggested there was no necessary connection between the economic conditions leading to the subsumption of labor under capital (i.e., capital's reign over the hidden mode of production and those capable of explaining the persistent scarcity of capital in the face of capital accumulation. How do you explain persistent scarcity? What do you mean by scarcity? Re the second question, you first: what did you mean by the phrase progressively more scarce in the paragraph you appended at the top of your post? It's likely we mean very much the same thing by this term. The first question is not at issue. What *is* at issue is whether the appropriate explanation can be couched in Walrasian terms. In your post 23776, you suggested it could not be. You refer at some point to capital constrained equilibrium--is this a well understood defintion of scarcity to the economic theorists on the list? Are these questions taken up in your formal reply to which Roberto V has referred? I think so, but you'd have to ask the other economic theorists on the list re the first question. On the second, yes. By the way, what do you make of Keynes' argument about the relationship between the declining marginal efficiency of capital as capital becomes less scarce though not necessarily less physical productive? What is the connection between the scarcity to which you refer and Keynes' nebulous idea of capital scarcity (or the lack thereof)? Re the second question, roughly speaking, a condition of capital scarcity implies the marginal efficiency of capital is strictly positive. On the first question, I suspect the distinction Keynes is alluding to involves the difference between *physical* and *revenue* productivity. An investment may lead to a new machine being built, but not necessarily to any money being made from the use of the new machine. I took this issue up in my response to Roberto Veneziani when I suggested there was no necessary connection between the economic conditions leading to the subsumption of labor under capital (i.e., capital's reign over the hidden mode of production and those capable of explaining the persistent scarcity of capital in the face of capital accumulation. I am not suggesting a necessary connection. If there is no necessary reason to refer to the hidden mode of production in discussing reasons for persistent capital scarcity, then I believe I've answered your criticism of the Walrasian framework that prompted this exchange. Exactly. And *given* such socially-determined differences [in time preferences--rb], I show that one can account for the persistence of capitalist exploitation. Well, this very concept of time preferences surely needs unpacking. For some purposes, at least, I would surely agree. Gil
Re: Marx vs. Roemer
Continuing the discussion with Charles. Fast forward to... CB: (Again, just because we are doing a fine tooth comb treatment, surplus value and capital are not entirely identical, but it may not matter. I'm not trying to be picky, but I am thinking that as you are doing a very fine graded analysis, these types of details cause a question mark to sort of popup in one's mind) GS:No, that's fine, it's better to make these choices explicit. As far as I can tell, capital in the passage I cited above is shorthand for the transformation of money into capital, a phrase that Marx uses in the passages immediately preceding and immediately following the one I cite. Again as far as I can tell, Marx uses the transformation of money into capital as a corollary of creation of surplus value--compare, for example, his usage of surplus value at the top of p. 268 and the near-parallel use of transformation of money into capital near the bottom. ^^^ CB: Page 268 : Is that in Chapter 5 ? Yes, the penultimate page of Ch. 5 in the Penguin or Vintage edition. I hesitate, because it seems that the creation of surplus value is in production. I have more that idea that in M-C...P...C'-M', the surplus-values are created at P. The transformations of money into capital occurs at M-C and then again at M'-C'', no ? As I read Marx, although the creation of surplus value *requires* the production of new value, surplus value literally does not exist--is not created-- until the *completion* of the circuit of capital bracketing the P in your expression above. In other words, at the step P...C' in your expression, surplus value does not yet exist. Consequently, the creation of surplus value at least implies the transformation of money into capital. Foundation for these claims: In Chapter 4, Marx defines surplus value as the increment (delta M = M' minus M) arising from the circuit of capital, insofar as this increment corresponds to the valorization [Verwertung, Marx's coinage] of the value originally advanced. (pp 251-2). To me, this means that by definition the creation of surplus value involves something more than just production of new commodities. [Notice, for example, that he didn't define surplus value as (delta C = C' minus C).] This view is corroborated in Marx's discussion near the end of Chapter 5, when he asks rhetorically But can surplus-value originate [note the verb!--GS] anywhere else than in circulation...? and adds The commodity-owner can create value by his labour, but he cannot create values which can valorize themselves. But then it is incorrect to assert that the creation of surplus value is in production. The creation of surplus value is in production *and* circulation. Fast forward... GS: No, I'm saying that Marx's Chapter 5 argument demonstrates the claim that price-value disparities are not sufficient to explain the existence of surplus value. But he makes no demonstration one way or the other concerning the claim price-value disparities are not necessary for the existence of surplus value, leaving open the possibility that they *might* be necessary, at least under some conditions. Since no claim has been made about necessity, one cannot validly infer that price-value disparities are incidental to the existence of surplus value, as Marx does in the conclusion of Chapter 5. If A is necessary for B, then it is certainly not incidental to B, whether or not it's sufficient for B. ^^^ CB: OK ,so Marx says and demonstrates that they are not sufficient, but doesn't address whether they are necessary, so they might be necessary. To say price-value disparities are a necessary condition of surplus-value would be to say surplus value implies ( in the sense of modus ponens) price-value disparities, correct ? For at least some instance of the general formula of capital M--C--M', yes. Not price-value disparities, not surplus value. And in such a case , we would not say that price-value disparities are incidental to surplus-value. Is that what you are saying ? Your statement is certainly true, but I'm actually saying something more basic: since Marx does not even consider the claim not price value disparities, not surplus value in his Chapter 5 argument, his inference price value disparities are incidental to surplus-value cannot be entailed by that argument. He's asserted a conclusion that does not follow logically from his premises.
Re: Defending civilised values by torture
Talk about your axis of evil! No wonder the US has so little global credibility: it keeps trying to have its moral cake and eat it, too. On the one hand, we're waging a war on terrorism, which is used to justify the amazing cloak of secrecy over our military's actions. On the other, the prisoners captured in this war are yet somehow not prisoners of war? What? On one hand, the US is the land of rights and liberty, fighting the evil foes of same. On the other, the US hands over these prisoners to regimes that are *certain* to violate those rights in the extreme. I wonder if Amnesty International might be petitioned to investigate and raise the visibility of these violations? Gil US sends suspects to face torture Duncan Campbell in Los Angeles Tuesday March 12, 2002 The Guardian The US has been secretly sending prisoners suspected of al-Qaida connections to countries where torture during interrogation is legal, according to US diplomatic and intelligence sources. Prisoners moved to such countries as Egypt and Jordan can be subjected to torture and threats to their families to extract information sought by the US in the wake of the September 11 attacks. The normal extradition procedures have been bypassed in the transportation of dozens of prisoners suspected of terrorist connections, according to a report in the Washington Post. The suspects have been taken to countries where the CIA has close ties with the local intelligence services and where torture is permitted. According to the report, US intelligence agents have been involved in a number of interrogations. A CIA spokesman yesterday said the agency had no comment on the allegations. A state department spokesman said the US had been working very closely with other countries - It's a global fight against terrorism. After September 11, these sorts of movements have been occurring all the time, a US diplomat told the Washington Post. It allows us to get information from terrorists in a way we can't do on US soil. The seizing of suspects and taking them to a third country without due process of law is known as rendition. The reason for sending a suspect to a third country rather than to the US, according to the diplomats, is an attempt to avoid highly publicised cases that could lead to a further backlash from Islamist extremists. One of the prisoners transported in this way, Muhammad Saad Iqbal Madni, is allegedly linked to Richard Reid, the Briton accused of the attempted shoe bomb attack on an American Airlines flight from Paris to Miami in December. He was taken from Indonesia to Egypt on a US-registered Gulfstream jet without a court hearing after his name appeared on al-Qaida documents. He remains in custody in Egypt and has been subjected to interrogation by intelligence agents. An Indonesian government official said disclosing the Americans' role would have exposed President Megawati Sukarnoputri to criticism from Muslim political parties. We can't be seen to be cooperating too closely with the United States, the official said. A Yemeni microbiology student has also been taken in this way, being flown from Pakistan to Jordan on a US-registered jet. US forces also seized five Algerians and a Yemeni in Bosnia on January 19 and flew them to Guantanamo Bay after the men were released by the Bosnian supreme court for lack of evidence, and despite an injunction from the Bosnian human rights chamber that four of them be allowed to remain in the country pending further proceedings. The US has been criticised by some of its European allies over the detention of prisoners at Camp X-Ray in Guantanamo Bay, Cuba. After the Pentagon released pictures of blindfolded prisoners kneeling on the ground, the defence secretary, Donald Rumsfeld, was forced to defend the conditions in which they were being held. Unsuccessful attempts have been made by civil rights lawyers based in Los Angeles to have the Camp X-Ray prisoners either charged in US courts or treated as prisoners of war. The US administration has resisted such moves, arguing that those detained, both Taliban fighters and members of al-Qaida, were not entitled to be regarded as prisoners of war because they were terrorists rather than soldiers and were not part of a recognised, uniformed army.
Re: marx's proof regarding surplus value and profit
Michael writes: One more short, but obvious point regarding profit and surplus value. Marx did offer one simple proof of the role of surplus value in the creation of profit. Suppose, he says, that we take the working class as a whole. If the working-class did not produce anymore than it consumed, profits would be impossible. Michael, no one disputes that surplus *labor* is a necessary condition for both the existence of profit and the existence of surplus value. It does not follow from this that surplus value has a role in the creation of profit. It could with equal (non-) logic be said that profit has a role in the creation of surplus value. Similarly, it does it follow that value... is fundamental to price, in the sense that prices and profits depend on what happens in the sphere of value. Gil
Re: Re: Roemer and Exploitation
Hello, Rakesh. You write in part Production (P) is explanatorily fundamental to the scarcity of DOPA (S) and thus the persistence of exploitation (E). That is, P=E implies P+S=E It's into the hidden abode of production one must enter to explain the persistence of scarce DOPA relative to labor, no? Walrasianism Marx is not suited for that kind of investigation, is it? I'm going to tread lightly here, because we both know from our mutual experience on OPE-L that we're probably not going to end up agreeing in any case. All I want to do, therefore, is address your question in good faith by indicating the grounds for an alternative viewpoint that allows for the relevance of Roemer's analysis to Marx's Volume I argument concerning the persistence of exploitation. I don't thereby assume that you'll find these logical grounds appealing or relevant. You suggest above that Production (P) is explanatorily fundamental to the scarcity of DOPA (S) and thus the persistence of exploitation (E), and suggest further that Walrasianism Marx is not suited for that kind of investigation. The basis you offer for the first statement is It is the scarcity of surplus labor in the production process that ensures the relative scarcity of capital with respect to labor: the diminishing flow of surplus value relative to rising minimum capital requirements constrains and discourages the rate of accumulation that would be needed as the OCC rises to absorb not only a growing population but also the proletarians, artisans and peasants continously displaced by technological change and the expansion of commodity production. I rid, I mean read, this statement as corresponding to Marx's KI/25 analysis of the general law of capitalist accumulation, to the effect that any rise in wages above subsistence due to demand pressures from capital accumulation is necessarily self-limiting, since the resulting loss in profit leads to a corresponding reduction in the rate of accumulation. (This self-limitation is further reinforced by tendentially rising OCC.) But I don't see why anyone has to venture into the hidden mode of production to yield *this* particular point. For example, Marx's argument holds if it's true that the only funds for accumulation come from the retained earnings of capitalists. This result could certainly be generated by the appropriate (and empirically motivated) Walrasian intertemporal model. I took this issue up in my response to Roberto Veneziani when I suggested there was no necessary connection between the economic conditions leading to the subsumption of labor under capital (i.e., capital's reign over the hidden mode of production and those capable of explaining the persistent scarcity of capital in the face of capital accumulation. (1) differences in preferences are the typical neoclassical argument to justify differences in wealth, and Roemer explicitly rejects this sort of argument. See for instance, the discussion about differences in rates of time preference in Roemer 1981, p.85, and Roemer, 1982, p.12. (A particularly detailed discussion is in Free to loose, but I do not have the reference because I left my copy in Italy!!). Gil, what are the page numbers here, do you know? pp 60-63. But I want to take exception to the sense of RV's objection here. I agree emphatically with RV and Roemer that differences in (time) preferences cannot legitimately be used to justify differences in wealth. I never suggest they could be. Rather, wealth-induced differentials in time preference are invoked in my model to *explain*, not justify, persistent exploitation, and this is entirely consistent with Roemer's discussion, where he says: Marxists and left-liberals view rates of time preference as socially determined. Therefore in their view it is not possible to justify exploitation and inequality by appealing to different rates of time preference, for those differences arose from prior conditions of inequality and oppression. Exactly. And *given* such socially-determined differences, I show that one can account for the persistence of capitalist exploitation. Gil
Re: marx's proof regarding surplus value and profit
Charles, you write CB: Your argument for this is probably in your previous posts, but could you reiterate it ? Does it follow from something else that surplus value is a necessary condition for profit ? Marx makes surplus value part of the definition of profit. First things first: where does Marx make surplus value part of his definition of profit? It could with equal (non-) logic be said that profit has a role in the creation of surplus value. Similarly, it does it follow that value... is fundamental to price, in the sense that prices and profits depend on what happens in the sphere of value. ^^^ CB: Is that does not follow... ? Yes Gil
Re: urpe@assa
Mathew, the URPE@ASSA coordinator is Mieke Meurs at American University. I can look up her e-mail address if you need it. The deadline is generally not until May or June, so you're not under the gun here. If Mieke doesn't send an announcement directly to PEN-L, I'll forward the announcement when I get it. Nothing has been sent out yet, as far as I know. Gil Does anyone know the details on submitting session proposals for the URPE meetings at ASSA, D.C., 2003--deadline, who to send it to, e-mail, etc.?
Re: Roemer and Exploitation
I'd like to continue the exchange with Roberto Veneziani (RV) concerning the meaning of Roemer's formal results and the impact of his excellent paper, Exploitation and Time on that meaning, but before doing so I want to make a couple of things clear up front. First, we start from a position of greater agreement than has been typical for PEN-L discussions of Roemer's work. As he states, RV agrees that his paper should not be taken as demolishing Roemer's contribution (which listmembers will recall was my original point in discussing RV's paper), while, as I've already stated, I think that RV has made a valid and important contribution that compels a significant reassessment of Roemer's claims. I also think it represents the most serious attempt to extend Roemer's microfoundational Marxist model to a genuinely intertemporal setting since my working paper from a few years ago (recently revised and presented at the last ASSA conference). Indeed it's superior to my paper in at least two respects: first, RV's model offers the most immediate extension of Roemer's static model to a dynamic framework, including in particular the representation of preferences, which turns out to be a key sub-issue relating to the main one (see below); second, my paper restricts attention to myopic equilibria in which actors optimize in each period on the basis only of *current* market conditions rather than the full intertemporal stream of market conditions. This reduces the multiplicity of equilibria, which is analytically handy, but RV's more general equilibrium treatment is more in the spirit of Roemer's approach. Having said all this, I still believe that RV's paper modifies rather than contradicts Roemer's fundamental point about the systemic basic of exploitation in exchange economies (including capitalism), once that point is properly understood. Which leads me to my second prefatory point. I realize that much what I'll say will be controversial, at least to members of this list, and I don't presume that my comments are going to convince anybody about the relevance of Roemer's results for Marxian political economy. Therefore no one should fear that this is the start of a long debate, since I agree with Michael that such e-mail debates cannot hope to resolve any serious differences. I hope at most to raise interesting questions for those of us who engage the theoretical underpinnings of Marxian PE, understood broadly. Those who believe they already know the answers to the questions can, of course, tune out. Now, on to the substance. In his post, RV focuses on the first of my two major points about his paper, concerning what I understand to be the proper interpretation of Roemer's formal results concerning the systemic basis of exploitation in class-based exchange economies. My basic argument here is that despite some (certainly regrettable) *verbal* carelessness by Roemer in explaining the meaning of his formal conclusions, the latter show that differential ownership of *scarce* productive assets (DOSPA) is the necessary (and, subject to a caveat mentioned in my earlier post, sufficient) basis for capitalist exploitation, not simply differential ownership of said assets (DOPA). For what it's worth, I first make this point in my 1995 Econ Phil article. In my earlier post, I point to two bases in GTEC for this assessment. The first comes right in the introduction, when Roemer offers a simple version of his subsistence model which illustrates the central concepts his theory. In setting up the model, he says (p. 9) Suppose, now, there is a limited stock of seed corn. By 'limited' I mean there is not enough to employ the whole population in the [capital-intensive] technique. This is what he, and I, mean by scarcity in this context--economic scarcity in the specific sense of having a capital-constrained rather than a labor-constrained equilibrium. What is Roemer's own assessment of the role of scarcity in his analysis? he makes this plain on the next two pages: p. 10 It is important to notice that for this example to work [i.e., to exhibit exploitation] there must be an industrial reserve army--that is, more producers available than seed corn to employ them. *For if, instead, seed corn were in excess relative to the labor supply, then the work week in the [capital-intensive] technique would be bid down to three days* [thereby eliminating exploitation in this example]. (Emphasis added) p. 11 He repeats: Indeed, the following are requirements for this example to work: (1) a class of propertyless producers [that's differential ownership], *in relative abundance to the supply of capital which can employ them* [that's capital scarcity] (emphasis added). He makes similar explicit caveats in _Value Exploitation and Class_ (pp 18-19) and _Free to Lose_. Let me quote from the latter: What are the features of the economy described in the preceding section that have caused exploitation to emerge? Two are
Re: Re: Marx vs. Roemer
CB writes CB: To be more precise, Marx's position is that labor is the only source of new value, exchange-value. Individual capitalists may increase or lose some of their share of the total surplus value by various buying and selling of all types among themselves. Marx's recognizing this does not contradict his basic proposition that labor is the only source of new value, exchange-value. and JKS replies Right, so you have profit taht is generated by possession of monoply advantages that does not represent value in Marx's sense. Note that this profit is not a result of redistribution of SV, a point that can be made if we imagine a situation with two capitalists, one of whom acquires a monopoly and behaves as monopolists due. His monopoly rent is not redistribute from the other guy, it's due rather to his possession of the monopoly (Marx's point): so, profits without value that are therefore NOT due to the expoloitation of labor--rather to the exploitation of consumers. Right, Gil? I'm not sure, given some syntactical and spelling oddities in your statement above. Let me try to address that point directly: 1) Although monopoly power (or perhaps more to the point, monopsony power exercised by capitalists in markets for labor power) may increase the rate of surplus value, other things equal, it is not necessary for the *existence* of surplus value in Marx's analytical framework. 2) What *is* necessary for the existence of surplus value, by Marx's stipulation, is that new value is produced subsequent to, and dependent on, the initiation of a circuit of capital (denoted M--C--M'). Since value magnitudes are determined by socially necessary labor time expended in production, surplus value therefore cannot arise merely from the redistribution of value that existed prior to the initiation of the circuit. Thus, the mere existence of monopoly power in commodity markets is also not *sufficient* to account for the existence of surplus value as Marx defines the term. 3) It does not, however, follow from (1) or (2) that disparities between commodity values and their respective prices are incidental to the existence of surplus value, as Marx explicitly claims at the end of Volume I, Chapter 5. What Marx affirms in Chapter 5 is that such disparities are not *sufficient* of themselves to account for the existence of surplus value. However, this leaves entirely open the possibility that particular price-value disparities might be *necessary* (and therefore not incidental!) to the existence of surplus value, *and Marx doesn't address this possibility one way or another in Chapter 5.* The reason this is potentially relevant is that Marx stipulates *two* conditions for the existence of surplus value: A) As noted above, new value must be produced subsequent to, and financed by, the initiation of a circuit of capital. B) A portion of the newly produced value must be appropriated by someone (i.e., the capitalist) *other* than the one(s) who created that value (cf Marx's discussion of the leather and boots example on p. 268 (Penguin ed.)). Granting that *targeted* price-value disparities cannot, by definition, account for condition (A), Marx's argument in Chapter 5 entirely fails to address whether they might in any case be *necessary* for condition (B). And since he does not consider this possibility, he cannot validly conclude at the end of Chapter 5 that price-value disparities are merely disturbing incidental circumstances which are irrelevant to the actual course of the process. [p. 269, footnote] NB, I'm making no claims here about the significance of this lacuna vis-a-vis Marx's Volume I argument. If the reader feels that this logical deficiency is unimportant in the larger scheme of things, so be it. Gil
Re: Re: Re: Marx vs. Roemer
Shane writes in response to Justin: A monopolist is able to get an above-average rate of return on its capital. Nonmonopolists (except, perhaps, in Lake Woebegone..) must therefore receive a below-average return on their capital. This does not necessarily follow. Suppose, for example, that capitalists enjoy monopoly (more accurately, monopsony) wage-setting power in markets for labor power due to the empirically relevant fact that workers face significant costs of job search (this is a typical feature of search models; see for example the survey article on monopsony in labor markets by Boal and Ransom in the J. of Econ Lit, 1997). Then more monopsony power, and thus more surplus value, for one capitalist does not imply less for any other capitalist. Rather it implies that workers as a class perform more surplus labor. [I could have made an exactly parallel point using markets for credit extended directly to value producers, per Roemer's isomorphism theorem, but obviously this introduces an extra complication, so I won't go there.] Another way of putting this is that Marx's remark in Chapter 5 to the effect that The capitalist class of a given country, taken as a whole, cannot defraud itself, (p. 266, top, Penguin ed.) is *doubly* a red herring, first because fraud is not at issue in any case, and second because the issue is not whether capitalists exploit *each other*, but rather whether they as a class exploit *workers.* The economic process determining these different returns to different capitals is a process of distributing the value of the total surplus product among the various claimants to that surplus value. Marx's Law Of Value applies to the aggregate surplus as produced. Because Marx defined value as a determinate quantity of labor time and capital as *capitalized* surplus value he was able to view the capitalist system as a dynamic entity subject to quantitatively determined laws of motion such as the Law of the Falling Tendency of the Rate of Profit which has been shown both to be empirically true and to be a strict consequence of the fundamental social relationships defining a capitalist economic system. For what it's worth, I'd say the empirical relevance of this law remains an open question, as does the sense in which it is a strict conseqeuence of the fundamental social relationships defining a capitalist system.
Re: RE: Re: Re: Re: Marx vs. Roemer
At 03:04 PM 3/11/02 -0800, you wrote: Shane [Mage] writes in response to Justin:A monopolist is able to get an above-average rate of return on its capital. Nonmonopolists (except, perhaps, in Lake Woebegone..) must therefore receive a below-average return on their capital. Gil writes: This does not necessarily follow. Suppose, for example, that capitalists enjoy monopoly (more accurately, monopsony) wage-setting power in markets for labor power Shane Mage can talk for himself, but I think that it's a big mistake -- or even a rhetorical bait and switch -- to suddenly change over to talking about monoposony in labor-power markets. I read Shane as talking about monopoly in product markets, not monopsony. I don't think it's a mistake, because in Chapter 5, where this issue arises, Marx makes no distinctions about *which* commodity markets he's talking about. If the argument holds for the expression of price-setting power in one commodity market, it should hold for the expression of price-setting power in *any* commodity market (including the commodity called labor power). (BTW, Marx wasn't familiar with the concept of monopsony as far as I can tell. But he assumed at one point in volume III that it didn't apply, in that he assumed that Smith's concept of compensating wage differentials did apply and that the rate of surplus-value equalizes between sectors. True monopsony is a microeconomic phenomenon which would cause the monopsonistic industry to enjoy an above-average rate of surplus-value. In theory if the monopsonist is large enough as part of the economy, it might tilt class relations in favor of capital, raising the rate of surplus-value overall.) Yes, that's my point. Gil continues: ... due to the empirically relevant fact that workers face significant costs of job search (...). Then more monopsony power, and thus more surplus value, for one capitalist does not imply less for any other capitalist. Rather it implies that workers as a class perform more surplus labor. You'd think that in a neoclassical world, the capitalists would also face search costs in their efforts to hire employees. This would give the employees who currently have jobs a little bit of monopoly power vis-a-vis their employers. There's no reason in the neoclassical world for the monopsony power of the employers to _a priori_ exceed the monopoly power of the employees, so that we've got a indeterminate bilateral monopoly situation. There's also no necessary grounds in neoclassical terms for insisting on bilateral search costs. The point here is theoretical possibility, not generality. So there's no reason in the neoclassical world for workers to perform more surplus-labor. There is, in the entirely neoclassical scenario of one-sided search costs. Again, the issue is about theoretical possibility, not generality. But what if it's normal for job vacancies to be less in number than job seekings, i.e., if there's Keynesian cyclical unemployment? In that case -- where there is a non-neoclassical situation of persistent excess supply (a.k.a. reserve army) of labor-power, the workers would be at the disadvantage that Gil refers to. I don't believe that persistent excess supply...of labor-power has any necessary connection to *Keynesian* unemployment, per se. Marx, for instance, talks about the former in V. I, Ch. 25 without making any evident reference to the latter. And if so, there's nothing essentially non-neoclassical about the former condition. One can establish that condition in the context of a suitable intertemporal neoclassical model. Strictly speaking, that doesn't have to be Keynesian: it could be due to the cut-back in accumulation that occurs whenever profits are squeezed by high wages, in a version of Marx's KI/25 story. I agree, which is why, in my reading, this aspect of Marx's KI/25 chapter is not inconsistent with a neoclassical framework. That is the capitalist hammerlock -- their class control over the accumulation process and of the production process -- would _ensure_ that normally the bilateral monopoly story doesn't apply, so that instead Gil's capitalist monopsony story applies. I would say further that *as a class* capitalists might enjoy a hammerlock...over the accumulation process even in the absence of monopsony, understood as wage-setting power by *individual* capitalists. [I could have made an exactly parallel point using markets for credit extended directly to value producers, per Roemer's isomorphism theorem, but obviously this introduces an extra complication, so I won't go there.] are you saying that lending money gives the lender monopsony power? No. doesn't the borrower have the ability to cheat? Maybe, but you don't need to posit the ability to cheat in order to make my point--for example, you can assume perfectly complete contracting conditions. Another way of putting this is that Marx's remark in Chapter 5 to the effect that The capitalist class of a given
Re: Veneziani on Roemer, Marx, and Skillman
Lest it be forgotten, this now extensive and multi-named thread began with my simple suggestion, in response to a P.S. in a post by Sabri, that Roemer's work raised issues that were of relevance to Marx's analysis in Volume I of Capital. This modest assessment was not intended as a referendum on Marx's general method and theoretical framework, nor as a defense of Roemer's general analytical method, despite Jim Devine's evident interest in enlarging the discussion to embrace these much larger issues. Nor were these larger questions engaged by my subsequent suggestion, in a response to Andrew K, that Veneziani's work, whatever its considerable merits, did not serve to demolish Roemer's contribution. Given these rather humble claims, I'm somewhat astonished that Jim took it upon himself to contact Roberto Veneziani concerning my comments on the latter's paper (noting that Jim has not been equally zealous in contacting Roemer to get his assessment of the much more extensive and negative critical comments that have been made here about his work, e.g.). It suggests to me that Jim might be taking this discussion way too seriously. That said, though, I think Jim did a real service to PEN-L in enlisting Veneziani. I indicated my opinion of the quality of his theoretical work in an earlier post. Although I think it's unlikely to engage the interest of most listmembers, I look forward to discussing the set of issues raised by Roberto's paper. Since, as he notes in his recent post, his initial response (conveyed by Jim below) were made before he was aware of my full comments, I'll not address the remarks below, but instead respond directly to his separate posting. Gil Concerning the thread with a similar name to the title of this message, Roberto Veneziani sends me the following comments corrections (which I've renumbered): [begin quote] 1) I agree that price = value is only fairness in exchange and that this is Roemer's and not Marx's view. I have tried to clarify this in the new version. All references to value pricing as fair pricing have been eliminated. 2) Your summary of the main conclusions of the paper is perfect, except on one issue, namely that Roemer's story of exploitation self-destructs ... due to accumulation, including worker's accumulation (your message). I agree that in accumulation models or in a subsistence economy with non-zero savings Roemer's theory breaks down immediately. (Roemer himself acknowledged the knife-edge properties of his accumulation models.) You have forcefully shown this in your paper with Prof. Dymski, and I did not want to just provide mathematical clothes to your convincing logical and economic argument. My point is that even in the most favourable case to Roemer's theory, i.e. in an interior Reproducible Solution with NO SAVINGS and NO ACCUMULATION [in short, in a solution with no savings] the theory does not work. I think this result is rather strong because it falsifies Roemer's claim (in his reply to your EP critique) that his models prove that DOPA [the differential ownership of productive assets, i.e., wealth inequality] is logically primary and exploitation and classes emerge prior to accumulation, etc. And it falsifies the claim at what he considers to be the relevant level of abstraction. 3) Given that my results obtain only thanks to the POSSIBILITY of savings, and with no actual savings by either capitalists or workers, they do not undermine Marx's vol.I/ch.25 argument. These results only undermine microfounded - analytical marxist - models, by showing that they are unable to model Marxian exploitation as a persistent phenomenon, and raise doubts about Roemer's narrow definition of exploitation and classes. Actually, as shown in an unpublished paper by Prof. Skillman, if the Walrasian framework is retained, the only way to have persistent exploitation is to assume that agents have different time preferences, i.e. the typical result of neoclassical models, where differences in wealth are due to differences in preferences. [end quote] [My comment:] if persistent exploitation is based on different classes having different time preferences, we have returned to the theory that Marx was attacking in his discussion of primitive accumulation and other matters, i.e., that the rich are rich because they are forward-thinking, while the poor are poor because they are short-sighted. Roberto says that he may be joining pen-l soon. Jim Devine [EMAIL PROTECTED] http:/bellarmine.lmu.edu/~JDevine Science is a way of trying not to fool yourself. -- Richard Feynman.
Re: RE: Roemer and Veneziani
Jim, you write I haven't read Veneziani's paper, but the possibility of workers' saving doesn't undermine Marx's theory Marx does discuss workers' saving in volume III (though I can't find the quotes, since my copy of CAPITAL that's been marked up is at work) It's often assumed that the classical (Smith/Ricardo/Marx/etc) assumption was that workers didn't save, but that's not true for Marx We're on the same page here I didn't say Marx never talks about worker saving To the contrary, I anticipated your remark above when I said that one can find potential responses to the issues raised by Roemer in Volume III, the Resultate, or Theories of Surplus Value What I did say is that Marx doesn't discuss this possibility and its consequences in his discussion of the general law of capital accumulation in Volume I, Chapter 25 The thing is that, as Sweezy says in his THEORY OF CAPTIALIST DEVELOPMENT, is that workers' saving is for use-value, not for accumulation of power and wealth What Sweezy described (before Modigliani, BTW) is what's now described as life-cycle saving, delaying some consumption to retirement and the like (Some is to buy consumer durables, such as houses) I don't see the significance of this point I'm not suggesting that worker saving is tantamount to capital accumulation *by workers*, and I don't see why that possibility is relevant The immediate *purpose* of saving shouldn't alter its potential impact on the rate of capital accumulation in market economies, so long as workers don't put their savings in their mattresses or piggy banks If they deposit it in banks, it becomes available to capitalists for accumulation To suggest otherwise, in the context of Marx's Chapter 25 argument, is to presume that when capitalists can no longer accumulate out of retained earnings, they can't borrow money to invest But they do systematically rely on the credit system, as Marx also acknowledges in Volume III Let me take that point a step further Marx states in Ch 21 of Volume III (p 478, Penguin ed) that the interest rate of loan capital is determined by supply and demand Thus, additional saving, *whatever* its source, should by Marx's own analysis lower the interest rate and promote accumulation The existence of unemployment and similar threats to the security of workers makes it extremely hard for any but a very small number of workers to save enough to cross the line between life-cycle and similar saving for use-value on the one hand, and capitalist accumulation on the other Further, small savers face extreme barriers to becoming large savers because of their lack of the ability to diversify In any event, almost no-one becomes a capitalist -- ie, running others' lives by owning sufficient means of production -- by saving Usually, luck or theft plays a bigger role I agree that both of these considerations would raise obstacles to workers accumulating capital on their own But again, so far as I can see, that's not the relevant issue in capitalist economies, the world Marx is considering in Volume I Chapter 25 Indeed, the threat of unemployment and other sources of uncertainty is a *spur* to saving, other things equal, promoting the potential impact of worker saving on the interest rate of loanable funds, described above More importantly, Marx isn't talking about workers as individuals as much as workers as a class A small number of workers can become capitalists without abolishing the proletariat as a _societal institution_ The institution is refreshed (as it were) by the downward mobility of those capitalists who lose out in the battle of competition (like one of my grandfathers, by the way) So a class without direct access to the means of subsistence and production who are dependent for their survival on those who do control such is reproduced over time, even if there is some turnover of personnel Same point as above (Also, as Sweezy pointed out, a lot of workers' saving is cancelled out on the aggregate level by other workers' dissaving So the workers don't save assumption makes sense as a simpifying approximation on the aggregate level) Two comments: First, this ignores Veneziani's key contribution, which is to indicate that the mere *possibility* of saving leads to a tendentially declining rate of exploitation Again assuming that workers don't hoard--put their savings in their mattresses--then a similar argument should apply in Marx's scenario Conversely, if it were true that this reality--that dissaving cancels out saving-- rescues Marx's account, then incorporating it also rescues Roemer's, since he also allows for the possibility of dissaving Second, even if this were valid, it's not part of Marx's account in Volume I, Chapter 25 The possibility of working class differentiation such that some workers save and some dissave is a possible *implication* of his argument there But to establish this argument *in the first place* he needs to argue that workers don't save,
Kism as progressive yet contradictory
[Was: : [PEN-L:23525] Re: Re: Re: Re: Wade vs Wolf ] Doug writes [Capitalism is] awful, but I guess it beats slavery or feudalism But it's also a deeply contradictory system, producing wealth and possibility alongside poverty and oppression A friend of mine who spent a few years as a reporter in Vietnam interviewed Nike workers who told her that they prefer their sweatshop jobs to what they would have been doing otherwise - things like chasing rats in rice paddies (not much fun to be a woman on the farm) Anticapitalists - and I'm one - often overlook that sort of thing And capitalism often produces great booms, though PEN-Lers seem to prefer talking about busts Which kind of begs the question of just how capitalist China is, and what lessons it might hold for other poor countries I think this is an important point, with critical implications for theory and praxis Marx's scientific case for socialism and communism argued that these were reached *through* capitalism, which acted, in historical perspective, as a progressive engine for developing the forces of production and, he argued, class consciousness But it is also a contradictory system, and these contradictions rebound on those who are active in opposing its oppressive tendencies Consider the case of political action against sweatshop labor On one hand, sweatshops abuse and exploit workers On the other, they often offer opportunities that are superior to the even more abusive and exploitative alternatives many workers face (I say this fully aware of the fact that workers are often coerced or misled into sweatshop labor) Sweatshops also typically (though not always) operate at low margins of profit So suppose that anti-sweatshop regulations designed to curb their abuses drive many out of business Is that good or bad, on balance? I think there is a coherent progressive stance that would involve neither laissez-faire nor attempts to ban sweatshops outright But the point is that the contradictory nature of the system seems to dictate nuanced, middle ground responses to certain capitalist excesses, so long as the responses aren't calculated to overthrow the system itself Another critical point touched on by Doug's comment concerns the connection between contradiction and capitalist crisis (wow, what alliteration) It is traditional in Marxist analysis to read the system's contradictory nature as translating into ever more destructive crises--the other half of Marx's scientific socialist vision But, at least so far, the historical record is far from decisive on this point Is US capitalism weaker than it was before 9/11? Before 1980? Before 1932? Is global capitalism weaker than it was in the early 20th century? What if the traditional thesis is not true, and instead the system's contradictions translate into a non-tendential series of crises and at least temporarily adequate systemic adaptations to same? Does this destroy the possibility that capitalist laws of motion create a revolutionary class? Gil
A role for static analysis?
[Was: Re [PEN-L:23396] Re: Some questions] Sabri, you write When I said I looked at, I literally meant it It is always difficult to deduce from e-mails what exactly the author has in mind, nor it is easy to tell whether the author is making a joke or not This is a very funny medium Indeed so For what it's worth, I wasn't joking, though given the limitations of the medium I wasn't expecting to induce any cathartic insights, either On the other hand, keep in mind that we mathematicians suffer from a major problem when we face mathematical books: we skip the words and look at the equations Sometimes this is a serious handicap but sometimes not We mathematical political economists look at both But I'm not sure what the equations _per se_ have to do with this issue The reason why I was not impressed with Roemer's work was essentially because of this: (1) Since Roemer's economic analysis, even of an idealized capitalist economy, is based on a static economic model, Whether or not that's a sufficient condition to be not impressed with a work in political economy is a judgment call, of course I'm certainly not insisting one must be impressed by Roemer's work But there exist many very insightful contributions to the understanding of capitalism that are based on essentially static conditions This would include Marx's analysis of the basis of surplus value in Chapters 1-7 of Capital Volume I, which incorporates no dynamic elements whatsoever Is his analysis here therefore unimpressive? Gil
Rigor mortis?
[Was: RE: Re: Some questions] Hello, Michael. You write: Putting a premium on rigor seems to be one of the silliest ideas ever proposed in economics. Take reality, remove all of the concrete aspects, represent that husk of reality as a mathematical equation, and see what comes of it. All the while, make sure that you structure this model so that nothing conflicts with the conventional wisdom. At least Keynes, and even Marshall, were contemptiuos of this sort of economics. Who can doubt that many economists have too often emphasized mathematical rigor over relevance and common sense? On the other hand, the dangers of misplaced or misleading abstraction are not unique to rigorous formal analysis. Verbal analyses have no built-in protections against remov[ing] all concrete aspects from a problem, representing the resulting husk as a simplified by cogent picture of reality, and in such way as to subtly reinforce the conventional wisdom. If anything, I think verbal analyses of complex systems might be more prone to to the possibility fundamental-yet-persuasive misrepresentations of reality, given the ambiguities inherent in everyday language. Check Sabri on this: as he says, he skips the words and reads the equations. At least Keynes, and even Marshall, were contemptiuos of this sort of economics. Were they contemptuous of the the use of formal rigor in economic analysis, or its misuse? If the former, that seems a shame, since rigorous analysis has, I think, promoted understanding of the conditions under which Marshallian- or Keynesian-style arguments work. Here's an example: in Marshallian terms, Keynesian unemployment exists when the real wage rate fails to adjust downward to its market-clearing level, and lowering the wage rate would therefore reduce unemployment. Keynes raises the possibility that lowering the real wage rate might instead *raise* the unemployment rate, other things equal. Question: under what economic conditions is the Marshallian analysis appropriate, and under what conditions does the Keynesian outcome obtain? This would seem to be a relevant question with powerful real-world consequences. Now, I guess if you're a genius like Keynes, you don't need to distill a messy and complex reality down to a formal system in order to pursue the answer to this, but for the rest of us it seems to help. The answer to this question I have in mind may not be the only one, it may not be the right one, but it makes sense, isn't obviously empirically irrelevant, and I can't imagine having anything more than a vague intuitive grasp of it without the use of a formal system. Gil Roemer, by the way, is very good to his grad students from the reports that I get. On Sun, Mar 03, 2002 at 08:02:14AM -0500, Drewk wrote: For some reason, Roemer is regarded as a paragon of rigor, but he -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Roemer and Veneziani
[Was: Re: [PEN-L:23400] RE: Re: Some questions] Roemer's Analytical foundations of Marxian economic theory should be understood as part of an ideological attack on, and effort to suppress, Marx's ideas in their original form If ideological attack on can be read as a synonym for critical assessment of, then I might agree with this claim Otherwise I confess I don't see it Roemer hasn't burned any of Marx's books, and he doesn't suggest people shouldn't read Marx To the contrary, I would guess a large number of people have gone back and read Marx more closely in light of Roemer's analysis So I also don't see any basis for the suggestion that Roemer's book constitutes an effort to suppress Marx's ideas in their original form Intellectual engagement, even if misguided, does not constitute suppression For some reason, Roemer is regarded as a paragon of rigor, If there is a problem, it isn't with Roemer's formal reasoning from given assumptions to specific conclusions, by and large I agree that he is occasionally less than careful in his *verbal* representations of what he's accomplished with his formal analysis, but even here the problem seems to be inconsistency rather than persistent misrepresentation For example, in the paper cited below, Veneziani reproduces a passage from _ A General Theory_ in which Roemer appears to suggest that differential class ownership of the means of production, all by itself, is a sufficient condition for the existence of exploitation But he doesn't really mean this, as he makes quite clear in the corresponding theorem and his introductory comments: you need differential class ownership *plus* scarcity of the means of production but he actually resorts to a blatant bait-and-switch in order to try to put over many of the work's major results, including the claim that one can show that exploitation is the source of profit without the concept of value His notion of reproducibility is a lynchpin of the book Well, on p 19 or so, Roemer first says (rightly) that a certain condition is *sufficient* for reproduction to occur, but in the next breath, he declares it (falsely) to be a *necessary* condition It is just a very restrictive, special-case condition that he smuggles in because he can't produce his results in any other way In other words, what he's saying is completely false Could be I looked for the offending passage on pp 19--21 and couldn't find it Does this charge have to do with the necessity claims re the maximal profit rate atop p 21? In any case, even if his statement is false, I don't see what this has to do with the charge of suppression, or for that matter, of an ideologically motivated attack on Marx Roberto Veneziani of the London School of Economics, in his Exploitation and Time, has demolished Roemer's claims regarding the role of differential ownership of productive assets Veneziani shows that Roemer's argument falls apart once one moves into a multiperiod context Veneziani's paper provides a very useful and interesting contribution to this literature, and does appear to establish that some refinement of Roemer's basic claim about the systemic basis of exploitation is called for But having read the paper closely and discussed it at length with the author, I think the paper is very far from having demolished Roemer's claims regarding the role of 'differential ownership of productive assets,' properly understood (I also suspect that Veneziani has overstated the impact of his formal results in this connection, but note I don't infer from this that he is guilty of an ideological attack on Roemer representing an effort to suppress [Roemer's] ideas in their original form ) Furthermore, to the extent it compromises Roemer's analysis, it *necessarily* also calls into question Marx's analysis of the general law of capital accumulation in VI, Ch 25 of Capital, since Veneziani's results depend on the possibility that *all* individuals, not just the rich ones, can save, a possibility that Marx evidently rules out, or at least fails to discuss Details: 1) First things first: despite the passage from GTEC cited by Veneziani, Roemer doesn't really assert that mere differential ownership of the means of production (DOMP) is of itself sufficient for the existence of exploitation As Roemer quite explicitly explains elsewhere in GTEC, the means of production must also be *scarce* for exploitation to arise In any case, his formal results on this point are unambiguous The relevant theorem is 22, which asserts the equivalence of the existence of exploitation with *the possibility of positive profits* (PPP), not mere DOMP Since, in this formal system, the profit rate is (also) a shadow price, this is equivalent to asserting the equivalence of exploitation with differential ownership of *scarce* means of production (DOSMP) So in any case, Veneziani hasn't established anything fundamental about the conditions for exploitation that Roemer didn't
Re: Re: RE: Roemer and Veneziani
Doug, What! Throw out these classics, when you could sell them on e-Bay for big bucks? Perverse Gil I was just cleaning out the bookshelves, trying to make room for new arrivals in a cramped Manhattan apartment, and came across two issues of the RRPE, one from the late 70s, the other from the early 80s One promised an article on The Rate of Profit, the other, new approaches to value theory Plus ca change The issues are on their way to the dump Doug
Re: Some questions
Sabri writes, among other things, PS: I looked at Roemer's Analytical foundations of Marxian economic theory but was not particularly impressed It looks like Varian's Microeconomic analysis By the way, Varian is definitely better than Roemer when it comes to using TeX, that software mathematicians use to write their papers and books I think you underestimate the significance of Roemer's contribution, Sabri, taking into account the book you refer to and, perhaps more centrally, Roemer's _General Theory of Exploitation and Class_ (GTEC) Start off by granting that there's a considerable distance between what his titles seem to promise--analytical *foundations* of Marxian economic theory and a *general* theory of exploitation and class As Devine and Dymski point out in the Ec Phil article Jim refers to in his post, the sense in which the latter book provides a general theory is, ironically, very specific, in fact more normative than positive: Roemer means that he develops an overarching definition of exploitation that has at least three specific manifestations, ie feudalist, capitalist, and socialist exploitation As DD point out, it's very *un*-general in that (1) since Roemer's economic analysis, even of an idealized capitalist economy, is based on a static economic model, he can't explain how capital scarcity and thus capitalist exploitation persists in the face of capital accumulation (2) since Roemer's economic analysis is based on a market model with perfect contracting conditions (including, in effect, the ability to specify and enforce exactly the labor to be performed), it can't explain why capitalist exploitation is typically based on the subsumption of labor under capital--ie, direct capitalist control of the production process But granting these legitimate points does not establish that Roemer has not made a significant contribution, nor that he is a bad economist, as opposed perhaps to a bad title chooser for his books These points establish rather that the level of abstraction that Roemer adopts in GTEC corresponds formally to the level of abstraction adopted by Marx *up to* Part 7 of Capital, volume I, since Marx (a) does not consider the existence or effects of aggregate capital accumulation until then, and (b) never claims one way or the other in Volume I that subsumption of labor is *necessary* for the existence of capitalist exploitation--rather he *assumes* that capitalist exploitation proceeds on this basis, under the historically given conditions specific to the capitalist mode of production [A historical footnote: Marx defines and discusses the significance of formal and real subsumption in the work now known as the Resultate, ie Results of the Immediate Process of Production, included as an appendix to the Penguin edition of V I Apparently this material was originally intended for inclusion in Vol I, but was removed by Marx in an 11th-hour decision prior to publication The only remnant of this discussion left in Volume I is a passing reference in Chapter 16 (p 645) to formal and real subsumption, which does not even offer definitions of these terms] To that extent, Roemer's analytical framework is at least formally relevant to Marx's level of abstraction prior to Part 7 of Volume I--that is, to a system of commodity exchange that supports circuits of capital (represented by M--C--M') as well as the circuit of commodity exchange for final use (C--M--C) And with respect to that level of abstraction, Roemer derives the following significant results: (1) Putting aside the possibility (as Marx does in Volume I) that subsumption of labor under capital is somehow necessary for the appropriation of surplus value, differential class ownership of (scarce) means of production is both necessary and sufficient for the existence of surplus value and thus capitalist exploitation Of course, as DD point out, this entirely begs the question of how either either the scarcity or unequal ownership of non-human productive assets persists, but that qualification doesn't invalidate the claim, as far as it goes As DD also point out, formal subsumption seems to be somehow *necessary* for exploiting labor under the capitalist mode of production, but again, Marx, like Roemer, does not address this issue one way or the other in Volume I (2) Contrary to Marx's claims in Ch 5 of Volume I, under conditions that are at the very least *necessary* for the existence of surplus value and thus capitalist exploitation, the scenario in which all commodities exchange at their respective values cannot be considered the pure case of commodity exchange, in any meaningful, non-tautological sense of the term, and price-value disparities cannot be considered entirely incidental to the existence of surplus value As an illustration of point (2), imagine a scenario of simple commodity exchange, ie one in which there are only self-employed commodity producers and no capitalists or circuits of
Re: Re: Dornbusch: Argentina must surrender sovereignty on financial issues!!!!
In this context, let us not forget that a committee of central bankers runs a significant aspect of the US economy. Nor forget European nations' fears that consolidation of the EU would mean they all march to the economic tune of the Bundesbank. There's a common theme at work here. Gil I hope people read the piece. Although the formatting on Alan's post is not easy, the URL is clear. They come right out an say that a committee of central bankers should come in and run the place. Does anyone here know about the Austrian experience that they discuss. -- Michael Perelman Economics Department California State University Chico, CA 95929 a Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Re: a lesson from Japan?
But let us not forget that Japan has faced some serious constraints in digging itself out of its deflationary spiral, constraints that the US doesn't necessarily face. Among them: 1) The link from loose monetary policy to expansion-creating loans has been disrupted by the high percentage of non-performing loans held by Japanese banks (now 35% or so); compare that to less than 10% (I think) for the US economy. 2) Free trade logic says Japan should have allowed significant devaluation of its currency, but this has consistently been opposed by the US, who doesn't want to see the resulting upswing in its trade deficit w/ Japan. Since the US Congress carries a big stick in the form of credible threats of quotas, this policy avenue has been more or less off limits. The yen has only come down relative to the dollar in the last 10 months, and that only about a 10% fall. 3) The current US macro situation isn't yet near Japan's deflationary trap (with near-zero interest rates and falling prices)--the inflation rate is very small but still positive; thus so far as I know there aren't reports of households or firms putting off spending due to expectations of lower future prices. To the contrary, industrial production and retail sales are picking up. What additional shock could the burst bubble have that will reverse these gains? In light of the above it would have been insightful to also have comparative before-and-after data on deflation, unemployment, and real interest rates. On the other hand, the US has dramatically higher levels of household debt and bankruptcy rates. But who knows how to factor that in to the mix. Gil MARCH 4, 2002/BUSINESSWEEK ECONOMIC TRENDS [by Michael J. Mandel] A Lesson from Japan... Post-boom blues can be delayed With consumer spending strong and productivity soaring, the U.S. seems to have escaped the worst effects of the popping of the stock market bubble. But history suggests it may be too soon to relax, since it can take considerable time for even a steep market decline to be felt in the real economy. Consider Japan, where the stock market plummeted by 35% from the end of 1989 to August, 1990. Nevertheless, Japanese consumer spending, productivity growth, output growth, and business investment stayed strong well into 1991. It was only then--about 18 months after the financial collapse started--that the economy slowed sharply. For example, in the boom years of 1988 and 1989, Japanese consumer spending rose at a nearly 5% rate. In the 18 months after the bubble popped, consumer spending continued to rise at a 3.5% rate--slower, but still impressive (table). Growth of gross domestic product was also quite good, averaging 4.2% over the same period. Moreover, Japanese productivity, measured as output per worker, rose at a decent 2.2% clip between the end of 1989 and the middle of 1991. Output per hour, the productivity measure the U.S. uses, likely rose at an even faster rate, since hours worked per person fell sharply in this period. Surprisingly, Japanese economic performance in this post-bubble period was actually better than the U.S. has shown recently. For example, since the Standard Poor's 500-stock index started decisively downward in the summer of 2000, U.S. productivity has risen at a 1.8% rate, slower than the Japanese productivity growth in the early 1990s. That doesn't mean the U.S. is going to fall into a Japan-like stagnation. But the Japanese example is cautionary: After a bubble pops, good macro numbers are no guarantee of future performance. Table: After the Bubble: Japan and the U.S. 6 QUARTERS 6 QUARTERS BEFORE EQUITY AFTER EQUITY BUBBLE POPPED* BUBBLE POPPED* --- ANNUALIZED RATE OF GROWTH REAL CONSUMER SPENDING JAPAN 4.9 3.5 U.S 5.0 3.2 PRODUCTIVITY** JAPAN 3.8 2.2 U.S 3.1 1.8 * For Japan, measured from the end of the fourth quarter, 1989. For the U.S., measured from end of the second quarter, 2000. ** Japanese productivity measured as output per worker. U.S. productivity measured as nonfarm business output per hour. Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevine
Macro, micro, and Marx's method
[Was: Transformation Tsurris]
Jim raises a number of interesting issues that go well beyond the simple
point I suggested re Marx's V. III transformation of commodity values into
prices of production. I react to some of these points below. Those not
interested in metatheoretical/pedagogical issues respecting Marx's analysis
in Capital should hit the delete key now.
1. Macro vs. Micro in Marx
Jim writes
Unlike modern orthodox economics which starts with so-called
microfoundations and tries to explain all macro phenomena, Marx started
(in volume I) with macro issues, the conflict in production between
abstract capital and abstract labor (since he abstracts from the use-value
of all commodities except labor-power) on the level of capitalist society as
a whole. That is, he uses his law of value to break through the confusions
implied by commodity production, i.e., the fetishism of commodities, to
focus on what he thought was most important, the societal capital/labor
relationship _in general_.
Of course, Marx wrote before a clear line of demarcation between macro-
and micro-economics was established in mainstream analysis, so it's no
surprise that Marx didn't pay much respect to a theoretical boundary line
that didn't as yet exist. And for a reason detailed below, drawing a strict
micro/macro partition is necessarily harder to do in Marxland than
Mainstreamland.
Applying standard definitions retroactively, though, one can see where and
how Marx crosses the line in _Capital_. By these definitions, Marx's
starting point in V. I. is apparently micro in nature, in the specific
sense that no reference to any economic aggregate is made in initiating his
argument. He starts by describing capitalist wealth as a collection {a
collection, note, not an aggregate; he's introduced no basis for
aggregating heterogeneous commodities as yet}. He then introduces a
qualitative distinction between the use value and exchange value of
individual commodities, and a claim about the quantitative relation (i.e.,
equality) among exchanged bundles of commodities. Both of these are
essentially micro claims; again, no reference to any economy-wide
*aggregate* is required to make them.
A truly macro relation (again, by standard distinctions) doesn't emerge
until Marx's statement of the macro money identity (MV=PT) in Chapter 3.
But Marx doesn't make immediate use of this identity, and macro
considerations, again subject to the caveat below, don't arise again until
Part 7 of V. I.
What's the caveat? Consistent with Jim's comments above and below, the
conventional (from a mainstream standpoint) boundary between micro and
macro is obscured because Marx deals with aggregates that tend to be
ignored or at least de-emphasized in mainstream theory--i.e., aggregates at
the level of class. Issues at this level are in the conventional sense
micro since they deal with questions of distribution and economic
interests of class actors; yet they bear immediate macro consequences
since class distribution affects, among other things, the rates of
accumulation and growth and the level of unemployment. Thus I read Jim's
comments as consistent with the prospect that micro and macro
conditions are simultaneously determined in Marx, whatever his choice of
emphasis.
...This abstraction means that he actively ignores -- abstracts from --
differences amongst heterogeneous capitals, including the technical
differences such as those represented by the organic composition of
capital and social differences such as those represented by the rate of
surplus-value, so that prices and values are proportional (as this
literature notes). In other words, he starts with the average capitalist
exploiting the average worker. (Unfortunately, rather than explaining this
clearly, he simply uses the 19th century British cotton textile industry as
representing the average. That's confusing, since it probably wasn't the
average industry.) At this level, we see the general conditions of the class
struggle determining the rate of surplus-value and the mass of
surplus-value. (General conditions of class struggle in turn depend on the
rate of accumulation, political institutions, etc., which in turn depend on
previous conditions of the class struggle, which in turn depend on ... a
long historical process.)
In volume III, he moves away from the macro level to address the issues how
the participants in the capitalist system see things and respond
(microfoundations) so that suddenly issues like supply and demand become
relevant (having been irrelevant at the volume I level of abstraction).
But it's intriguing, isn't it, how repeatedly issues of demand and supply
come up explicitly in Marx's Vol.I, chapter 25 discussion of the general
law of capital accumulation (e.g., pp 763, 769, 792, Penguin ed.)? In
fact, I don't know how you can even talk about this law without talking
about the implications of accumulation for the demand for labor power
relative to
Re: On the necessity of socialism
In response to Doug's (tongue-in-cheek?) comment Never. It was a ruse devised by the bourgeoisie to occupy the attention of otherwise smart and knowledgeable Marxian economists on something addictively divisive but politically irrelevant. Charles writes Charles: Isn't it worse than that ? Marx asserts as principle the insolubility of the transformation problem. The unsystematic relationship between value and prices is symptomatic of the basic anarchy of capitalist production. If the problem were solved , Marx would be refuted. Depends on what you think the transformation problem refers to. As I read Marx, the problem, as he posed it in Chapter 9 of Volume III, lies in showing that aggregate prices equal aggregate values and aggregate surplus value equals aggregate profits even if commodities exchange at prices of production which are disproportional to their values (which is the general case). Issues have been raised with the logic of Marx's original demonstration, and interpretations of his value theory have been offered that get around these issues at the cost of raising others. But the real question, it seems to me, is whether anything at all that is critical to Marxist political economy hinges on this demonstration. And I agree with Doug's negative response to this question. Gil
The famous PEN-L debate
Hello Jim, I was trolling through the Web when I came across this blurb from you extolling a new book, From Capitalism to Inequality: "Chapter three ... is crystal-clear. If we'd read this chapter beforehand, the famous PEN-L debate with Gil Skillman over volume I of Capital would not have happened."Jim Devine Intrigued (and pleased to hear that the debate is "famous"), I shelled out the $20 to order a copy and waited anxiously to receive it. But when I got the book and read Chapter 3, I found only a rehash of the very same arguments in Capital that I had been criticizing as logically incoherent, with no attempt at all to come to grips with that criticism. Indeed, the rehash in this book had much less nuance than Marx's original argument, so it's very hard for me to see how the "crystal-clear" analysis you extol in Chapter 3 would have obviated the debate. Could you please direct me to the points in the chapter that you believe successfully anticipate and address my argument? In curiosity, Gil
[PEN-L:10187] Re: Re: John Lloyd article on Russian collapse
Worse even. GDP, or some approximation of it, has fallen by half in Russia, about twice as bad as the U.S. during the Depression - but social indicators are much worse, with life expectancy falling and the population shrinking. I don't think there's any precedent for a falling population in a modern country not at war. Although I certainly agree that the West has played a key role in turning Russia into a socio-economic basket case, there may be more here than meets the eye. First, concerning the statistics, there is a potential double measurement problem. The USSR might have overstated GDP and understated negative social indicators, while the underground (and thus undermeasured) economy is probably a much bigger factor in present-day Russia. Second, population is now shrinking in very modern and not-at-war Japan, and has been shrinking in the non-war past (it may still be true) of very modern Scandinavia. Gil
[PEN-L:9819] Re: Re: Re: Hayek on Keynes
In response to the passages I cited from _Road to Serfdom_, Doug writes Hayek is clear that these welfare measures should remain pretty minimal, and not interfere with work discipline. Yes, according to his personal value judgment. But as the passages cited (particularly the one from p. 37) make clear, the Hayek of 1944 granted that as a matter of *principle* the degree of state intervention in these areas was purely a matter of costs vs. benefits, so long as any such intervention supplemented rather than "replaced" the mechanism of market competition. Keynes probably couldn't have disagreed with this statement of principle, and given his shared antipathy to Marxism noted by other listmates, that was plausibly sufficient for his endorsement. On another note, Doug, I've checked on the Blaug quote with a colleague, Bill Barber, who does history of thought. He agrees that general equilibrium was pretty much a dead letter by the turn of the century, but disagrees with the date that Blaug associates with its revival. Barber places the latter in the 40s rather than the 30s, which was my sense as well. But Keynes had also written about state manipulation of investment. There's a lot that's vague and contradictory about his writings on the topic, but it's clear he was talking about at least some encroachments on the sacred power of capitalists over investment. At the moment he was endorsing RtS, 1944, he was designing Bretton Woods, with its capital controls and fixed exchange rates. He'd recently written his essay on national self-sufficiency, and idea Hayek finds nightmarish (for rather congenially internationalist reasons, I've got to admit). So the endorsement of a mild welfare state was enough to win JMK over? Doug
[PEN-L:9813] Re: Hayek on Keynes
I'm coming rather late to this thread, but I thought I'd add my $.02 since
I've just been dealing in depth with this book in a course last semester on
the political economy of socialism.
I just pulled my ancient copy of Hayek's Road to Serfdom down from
the shelf, and noticed this jacket blurb from J.M. Keynes: "In my
opinion it is a grand book... Morally and philosophically I find
myself in agreement with virtually the whole of it; and not only in
agreement with it, but in deeply moved agreement." Since Hayek seems
to regard any kind of planning or welfare state measures as the first
steps in the title's path, this would presumably include most of what
the world now thinks of as Keynesian - not to mention "the somewhat
comprehensive socialization of investment" and the "euthanasia of the
rentier." Does anyone know what this is all about?
Well, one possible explanation is that, at least as of 1944, Hayek granted
the legitimacy of state intervention to a remarkable extent, subject
primarily to the qualification that such interventions "supplement" rather
than "replace" market competition. Thus, for example, he conceded the
appropriateness of health and safety regulations:
Though all such controls of the methods of production impose extra costs
(i.e. make it necessary to use
more resources to produce a given output), they may well be worthwhile.
To prohibit the use of certain
poisonous substances or to require special precautions in their use, to
limit working hours [!!--GS] or to
require certain sanitary arrangements, is fully compatible with the
preservation of competition. The only
question here is whether in the particular instance the advantages gained
are greater than the social costs
which they impose. [RtS, p. 37]
and allowed more generally that governments might legitimately provide
good or correct externalities:
There are, finally, undoubted fields where no legal arrangements can
create the main condition on which the
usefulness of the system of competition and private property depends:
namely, that the owner benefits from
all the useful services rendered by his property and suffers for all the
damages caused to others by its use
In all these instances there is a divergence between the items which
enter into private calculation and those
which affect social welfare; and whenever this divergence becomes
important, some method other than
competition may have to be found to supply the services in question. Thus
neither the provision of signposts
on the roads, nor, in most circumstances, that of the roads themselves can
be paid for by every individual
user. Nor can certain harmful effects of deforestation, ...or of the
smoke and noise of factories be confined to
the owner of the property in question or to those who are willing to
submit to the damage for an agreed
compensation. In such instances we must find some substitute for the
regulation by the price mechanism.
(p. 39).
Accordingly, he sanctioned governmental macroeconomic intervention:
There is, finally, the supremely important problem of combating general
fluctuations of economic activity and
the recurrent waves of large-scale unemployment which accompany
them. This is, of course, one of the
gravest and most pressing problems of our time. But though its solution
will require much planning in the
good sense, it does not--or at least need not---require that special kind
of planning which according to its
advocates is to replace the market. (p. 121)
[He goes on to say that monetary policy is completely compatible with the
tenets of 19th-century liberalism,
but that classical liberals should "watch their step" in using fiscal
policy measures--but not necessarily avoid
them entirely.]
He also did not rule out certain activities of the welfare state:
Nor is the preservation of competition incompatible with an extensive
system of social services--so long as the
organization of these services is not designed in such a way as to
make competition ineffective over wide fields.
(p. 37)
.including the provision of a minimum income.
There is no reason why in a society which has reached the general level of
wealth which ours has attained
the first kid of security ("security against severe physical privation,
and the certainty of a given minimum of
sustenance for all') should not be guaranteed to all without endangering
general freedom. (p120).
In light of these passages it's not so hard to understand Keynes's
endorsement. My sense is that Hayek subsequently became much more
conservative re the appropriate range of state activities. Gil
[PEN-L:9716] Re: Gen. Equilibrium
Doug, I can't tell from your post what you're taking issue with: that gen eq was revived in the 1930s? That it was considered "everybody's economics"? What? Gil Mark Blaug writes in Economic Theory in Retrospect (5th ed., p. 290): "Utility theory was gradually deprived of all its bite and reduced from cardinal to ordinal utility and from ordinal utility to 'revealed preference'; cost theories of value were shown, not to be wrong, but only valid in special cases; and general equilbrium virtually disappeared by 1900, only to be revived in the 1930s by Hicks and Samuelson as 'everybody's economics'" This isn't the story you get from Keynes or modern post-Keynesians; what's up here? Doug
[PEN-L:9661] Re: FW: reprint of Kennedy essay
Jim, Judging from the magazine's website, they're lefty and write critically of Clinton, the Kosovo war, US poverty policy, etc. Gil -Original Message- From: Editor, Albion Monitor [EMAIL PROTECTED] To: [EMAIL PROTECTED] [EMAIL PROTECTED] Date: Monday, July 19, 1999 4:35 PM Subject: reprint of Kennedy essay Hello, One of our readers forwarded to us your essay, "JFK Jr and the Hubris of the Rich," which apparently appeared on a mailing list. Although it's quite unusual for us to solicit material like this, we'd like to reprint it in the Albion Monitor as a letter to the editor. While junior will likely be eulogized to the heavens this week, your essay gives a perspective that most won't see. Please let us know by Tuesday noon (Pacific time) whether we can reprint it in this manner. Thanks, Jeff Elliott - "Empty wagons make the most noise." -- Farmer's Almanac, 1881 [EMAIL PROTECTED] Jeff Elliott Editor, Albion Monitor (707) 823-0100 vhttp://www.monitor.net/monitor Anyone know about the content and perspectives of this magazine? Jim C
