Re: [OPE-L] Say's Law

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Tue Oct 25 2005 - 23:13:56 EDT

On Tue, 25 Oct 2005 20:20:25 -0400
  Fred Moseley <fmoseley@MTHOLYOKE.EDU> wrote:
> On Sun, 23 Oct 2005, Jerry Levy wrote:
>> > Assuming that S = D for certain theoretical purposes is not the same as
>> > "being a prisoner to Say's Law".  According to Say's Law, S must = D
>> > ALWAYS AND OF NECESSITY in the real world.
>> Hi Fred:
>> While I agree that assuming S = D at one level of abstraction is not
>> equivalent to assuming Say's Law, I think that what you assert above
>> about Say's Law isn't quite correct:   Say's Law doesn't state that
>> S will equal D "ALWAYS AND OF NECESSITY in the real world."
>> Quite the contrary: Say's Law claims that when there is an increase
>> in aggregate supply, that increase in supply will cause there to be an
>> increase in aggregate demand.  That is, AD will adjust to AS.  Yet,
>> neither Say  nor any of his followers (that I am aware of) claimed that
>> the adjustment of AD would be instantaneous -- rather,  they
>> recognized that there would be a temporal (but, they believed, brief)
>> lag in practice. During that lag (the period when AD is adjusting to
>> the new  level of AS) then S would _not_ equal D.  In other words, a
>> claim that S creates its own D is not synonymous with a claim
>> that in the real world S must "always and of necessity" equal D.
> Jerry, I agree that this is one formulation of Say's law.  But my main
> point remains valid.  Assuming that S = D for the theoretical purpose of
> explaining the production of surplus-value and the distribution of
> surplus-value "in its pure shape" is not the same thing as assuming quick
> and automatic adjustment to S = D in the real capitalist economy.
> In other words, Marx's assumption of S = D for his purposes does not make
> him a "prisoner of Say's law".

Yes but what begins as an assumption
comes to be considered for all practical purposes an attribute
of reality unless one shows herself why the assumption is untenable
In your present reading of Marx he seems to have never got
around to relaxing the S=D assumption in his reconstruction
of the concrete, for his principal aim was
the explanation of the source and forms of surplus value, and
that exposition required the strict assumption of S equaling D.

  Marx is thus made *de facto* a prisoner of
Say's Law, and the Keynesians will all be too happy
to lump Marx in with the rest of the classical economists.
But as Andrew T rightly suggested, Marx did attempt to show the
barriers to S equalling D in the reproduction schema, and Marx's
assumption of supply creating its own demand was necessary to show
that even on this assumption, a shortage of surplus value would
obtain that would then manifest itself as an excess of commodities
on the market. This then led him to consider how accumulation
could at times more or less solve the realization problem and how
at other times it would not. That is, Marx did not believe that
capitalism was haunted by a permanent underconsumption crisis.
Its periodicity had to be explained.
Marx's principal aim was thus not the explanation of surplus
value as such and its mediated forms but the laying bare
of the economic laws of motion of capital, i.e. the tendency
towards crisis and catastrophe. He was not a static thinker
a la equilibrium economics but a dynamic thinker of positive
feedback and dialectical change. Even Raymond Boudon
would agree with that, I think!
As I suggested, you seem to have moved away from Mattick's
interpretation of the aims and argument of
Marx's magnum opus in your own recent interpretative work. Is that a
fair characterization?
I am worried about this because I thought you were the only
major economist who followed Mattick.
Yours, Rakesh

> Comradely,

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