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Fred asks "Compared to what?" about the achievements of "an interpretation
of Marx's theory" vis a vis other theories.
Well, compared to, for example, the circuitist school in France, which has
its own "theory of the monetary circuit"; or compared to monetary Post
Keynesianism, which shares with the circuitist school the treatment of
money as fundamentally credit/debt--with one necessarily implying the
other; or compared to modern work in complexity theory, with a welter of
different models of financially-driven endogenous cycles.
In other words, there is a bit of a "straw man" debate going on here, with
the proposition that there are only two polar opposites--whatever
interpretation of Marx is being championed on the one hand, and Sraffian
analysis on the other.
There are many, many researchers in non-neoclassical economics who are
neither Marxian nor Sraffian in their foundations.
>Ajit did not respond to my argument in (3815) about COMPARED TO WHAT?
Some of the participants on this list might do well to acquaint themselves
with some of this non-Marxian, non-Sraffian, non-neoclassical,
non-equilibrium work. Neither Sraffa nor Marx are the only games in town (a
proposition which I doubt is news to Ajit!).
Two useful references on these (there are many more, of course; these are
just two new ones):
Rochon, L.P., 1999. Credit, Money and Production, Edward Elgar, Aldershot
(for a coverage of the circuitist/PK theories, which presumes a substantial
familiarity with Keynes)
Barnett, W., Chairella, C., Keen, S., Marks, R. & Schnabl, H> (eds.) 2000.
Commerce, Complexity and Evolution, Cambridge University Press, New York
(for a recent volume on complexity theory with several examples of
non-neoclassical monetary dynamic modelling).
>I repeat a part of that argument, and then continue.
>Ajit criticizes "my theory" because it does not explain the determination
>of m. However, if Marx's theory is weak, COMPARED TO WHAT? Sraffian
>theory cannot even explain money, period; i.e. it can not explain the
>necessity of money, why money must exist in a commodity-producing
>economy. At least Marx's theory can explain, as a logical deduction from
>the fundamental assumption of the theory (the "labor theory of value"),
>that money has to exist, in order to function as the special commodity in
>which all other commodities express their labor-value. This is not an
>ad-hoc explanation of the necessity of money, based on the "difficulties
>of barter", but a deduction from the fundamental assumption of the
>theory. In other words, the necessity of money is explained in an
>integrated way, along with the explanation of lots of other phenomena
>(e.g. conflict over the length of the working day), all derived from this
>fundamental assumption. I think this is a very significant theoretical
>accomplishment that no other economic theory has been able to achieve.
>Furthermore, it just occurred to me yesterday: Sraffa's theory does not
>explain absolute prices either, but only RELATIVE prices! The Sraffian
>system of equations has an extra unknown. The system can be solved if the
>price of one of the commodities is set equal to 1 (i.e. is TAKEN AS
>GIVEN!). This one commodity, called the numeraire, is arbitrarily chosen
>and is not necessarily real money. (Indeed in a system of paper money,
>the numeraire commodity cannot be real money). Sraffa's innovation was to
>take as the numeraire the "standard commodity", which is a composite
>commodity with peculiar characteristics and which has no relation to real
>money at all. Sraffa's relative prices in terms of the ideal "standard
>commodity" have nothing to do with real world prices; they are only a
>solution to a logical problem with Sraffian theory ("the invariable
>measure problem" in order make prices invariant to changes in the
>distribution of income between wages and profits).
>Therefore, we can see that Sraffa's theory is also determinant "only up to
>a scalar multiple", just like Marx's theory. In this respect, so roundly
>condemned by Ajit, Marx's theory is no worse than Sraffa's theory. And
>the fact that Marx's theory is trying to explain real world prices and
>real world profit makes it preferable to Sraffa's theory, which is only
>trying to determine hypothetical numeraire-prices, which have no relation
>to real world prices and profit.
>How can anyone who accepts such a highly unrealistic theory like Sraffa's
>criticize Marx's theory for failing to provide a complete explanation of
>the determination of the value of money in his theory of real world prices
>and profit? I think it is far better to have a partial explanation of
>reality than a partial explanation of hypothetical
>numeraire-prices. Especially when Marx's theory has such substantial
>explanatory power of important phenomena of real capitalist economies.
>I look forward to further discussion.
Dr. Steve Keen
Economics & Finance
University of Western Sydney Macarthur
Building 11 Room 30,
Goldsmith Avenue, Campbelltown
PO Box 555 Campbelltown NSW 2560
email@example.com 61 2 4620-3016 Fax 61 2 4626-6683
Home 02 9558-8018 Mobile 0409 716 088
Home Page: http://bus.macarthur.uws.edu.au/steve-keen/
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