Re: [OPE-L] That hissing? It's the sound of bubblenomics deflating

From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Thu Oct 04 2007 - 05:32:31 EDT




I did not "aggregate" the value of the stock of US physical assets with
the stock of US tradeable financial assets, rather I struck a ratio
between the estimates I had, to give a rough indication of magnitude. I
would say from the data I have looked at that the value of the stock of
financial assets in the US would be larger than the value of the stock
of physical assets. About half of Americans however own negligible
financial assets.

It is fair enough to make a ratio between them, but the two numbers are
of different types, and the type of the ratio is yet something else.


First you argued financial assets are "not values but information
structures, sequences of records held on the hard disks of the banking
system". Then you argue "social relations are codified in and depend
upon data structures." But these claims are not the same. I am not sure
what to make of this. 

No they are not the same, the second is intended to be a clarification
of the first. It was of course rather brief. The chapter 9 of the online
book  by Ian, Allin,
Greg and I, attempts to investigate the relationship between
conservation laws, information structures and credit money at somewhat
greater length.


I do not agree that "In commodity exchange a conservation law holds, the
sum of embodied labour/value does not rise in exchanges" as stated.
Because this law, if true, would hold only for the exchanges involved in
the production of the gross output (Marx's definition of gross output or
"value of production" differs significantly from the conventional
measure, as I mentioned). It would presumably mean that no net additions
to the new value created can result from the exchange of newly produced
commodities only, or, that exchanges or products can only redistribute
values, not add to them. This idea is strongly contested by bankers,
e.g. because without operating certain transactions the product-value
would not exist at all etc.


Yet assets are being devalued and revalued all the time, whether they
are being traded or not. The conservation law would then presumably
state that for every devaluation of some of the new commodity output
there must be an equal revaluation of some other component of the new
commodity output (?). 


However, at least one aspect is that the exchanges of total inputs and
total outputs in the sphere of production are not all the exchanges
there are. External to that sphere, a large trading process occurs as
well. When Marx referred to values, he referred only to components of
the gross output on his definition, not to total trade volume. 


One could depict unequal exchange in the trade in products as being only
a redistribution of values between different owners.

Depends what you mean by value. By value I always mean socially
necessary labour time embodied. 


This clearly can not be created in exchanges, but a conservation law
says more than this. It says that the each agent engaged in exchange
tends to retain the same stock of socially necessary labour time in the
commodities they hold. This is not absolutely the case because there is
some dispersion of exchange ratios around value ratios, but the
dispersion is small, and taken as a whole it is a zero sum game.


If you start confusing value with price, then of course it can appear
that the whole system is non-conservative, since an inflationary
increase in the money stock can bid up asset prices


When new debt is incurred, then in a conventional balance sheet it will
obviously appear on both sides of the ledger, i.e. for every asset there
is a liability, that's clear. I am not sure though what you mean by the
L1 norm in this case - this seems to refer to a mathematical technique
to discover a function/vector that will most closely describe/fit a data
set (?). 


L1 norm or,  Manhattan metric, is  the sum  of absolute values of
elements of a vector


Assume an agent has a vector of assets and liabilities, the L1 norm of
these grows both with increasing assets and increasing liabilities


I do not know what you mean by "real capital", I assume you mean
tangible physical assets or productive capital (?). 

I mean aggregations of structured matter whose entropy has been changed
as a result of labour, and which can be used for productive purposes.



In Cap. 2, Marx distinguished broadly between commodity capital, money
capital, and production capital. Financial assets would presumably be a
component of money capital. He also refers to "fictitious capital" or
"fictitious commodities" though he fails to specify exactly what he
means by that, it could be thought of as a capitalisation on property
ownership. In Marx's analysis, capital can, assuming a developed credit
and capital market, flexibly transit from one form of capital to
another. Thus, if for some reason production becomes a more risky or
less profitable avenue for accumulation, capital exits from the sphere
of production to the sphere of circulation. It does not cease to
accumulate, but the mode of accumulation changes, i.e. instead of
M-C...P...C'-M' the circuit becomes M-M', M-C-M', C-M-C', C-C'
(=countertrade) and so on. 

This will not add up Jurrian.

In Marx's volume 1 analysis the money stock is conserved, it is
impossible, in aggregate for capital to move from productive form into
money. An individual capitalist can do this but only to the extent that
another capitalist buys commodities from him, and thus undergoes the
reverse move.


There is no adequate formal analysis of debt or bank money in Marx.



The corollary is that capital which is not production capital exists
either as commodity capital (lodged in tradeable goods, physical assets
or tangibles of some sort) or as money capital (lodged in financial
claims of some sort) or fictitious capital (fiduciary claims of some
sort). Instead of producing anything extra, you can use capital to buy
up real estate, or companies, or trade in money, equities, securities,
other financial products etc. (a current favourite is "buy-outs"). It
would not be too difficult to show, with various statistical indicators,
that in aggregate the total stock of money capital and commodity capital
grows much faster, and is larger than, the total stock of production
capital (well, in this regard actually the Fed axed the computation of
M3, which was increasing around 12% yearly, as against about 10% in the
EU and 3 or 4% in Japan and possibly 20% in China).

The measure M3 is roughly 0.5 times the l1 Norm of bank accounts, this
does grow, but the commodity norm does not.

I explain these different norms in the chapter I mentioned.


Marx's knowledge of the role of capital finance in the historical
origins and development of capitalism was rather sketchy, and he did not
live to work out the ideas he presents in Cap. Vol. 3 in more detail. So
there is a lot more work to be done in that area, to make sense of
historical and current realities in terms of the approach he favoured.




I agree with the last point




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