RE: [OPE] Problems in International Political Economy (IPE)shaikhsdefence of Marx

From: Paul Cockshott (wpc@dcs.gla.ac.uk)
Date: Sat Apr 19 2008 - 18:48:47 EDT


Jurrian
-----0
Thermodynamic equilibrium sounds sexy, but does it make any sense? 

What exactly is it that is being equilibrated or balanced out? 

Your equilibrium, as I noted April last year, seems to be a statistical equilibrium defined as a constancy or stability in income & wealth distribution, which persists regardless of the pattern of transactions in economic exchange. The constancy or stability is empirically defined in terms of lack of quantitative change. This is similar to Farjoun & Machover,

Paul
----
It is the same idea as Farjoun and Machover transfered from statistical
mechanics to economics. The it carries over Boltzmanns idea that at a given temperature
there is an equilibrium PDF of energies for molecules.

Farjoun and Machover argue that there will be a statistically stable PDF  whose
x axis is the price/value ratio and the y axis probability., (or I suppose 
technically it gives the probability when convolved with a Kroeneker delta function).

Jurrian
--------

But this notion of equilibrium is already at some distance from the notion of "market equilibrium" used in bourgeois economics, or a supply-demand equilbrium. Effectively, you argue that the law of value guarantees a stable income and asset distribution, but I think that has nothing in common with what Marx argues.


Paul
----
You are right about it being quite far from what neo-classical economics means by equilibrium.

Note that it applies not only to income distribution but also to price/value ratios.
Farjoun and Machover make arguments to the effect that the rate of surplus value will tend to
be in the region of 100% but that this is influenced by the narrowness of another distribution
-- basically the spread of wage rates. The narrow the spread of wage rates the closer
the rate of surplus value will be to 100%.

Whether this has anything in common with what marx argues is moot point, I think it is actually
a significant new and original contribution that they made to political economy.

Jurrian
---------
I am sure we can all find all kinds of equilibriums to please ourselves, but the real questions are:

- which equilibrium notion Marx actually has (if any), 
- what is actually being "equilibrated" in his theory
- what notion of equilibrium best makes sense of empirical reality

Paul
----
The first two are questions for the history of thought, the last is the scientifically interesting one.

Another question is the extent to which the development of the economy is, on a macro scale,
a disequilibrium process.

This has, I believe, a deep relationship with whether or not, and to what extent, one can
say the system is governed by conservation laws.

There are a number of crucially non-conservative sub-systems in the economy:

1. The credit system
2. The process of material production, since it creates a surplus
3. The relationship between material production and the natural environment

Commodity exchange on the other hand, is a conservative system, as is a trading system using
commodity money. One thus has some aspects of the economy governed by conservation
laws and thus according to Noethers principle, by symmetries. Other aspects
of the economy show symmetry breaking ... for instance the creation of credit,
the generation of endogenous money. The econophysics arguments of Yakovenko
derive stable income distributions from the conservation of money. If
money is not conserved, the distributions become unstable, one gets a highly
kurtotic distribution in the space of company gearing ratios with the formation
of a 'rentier tail' to the distribution. This is similar to the Power Law income
distributions that Ian Wright is able to derive from the existence of a labour market.

I suggest you do a web search for Ajiits recent papers and read them at first hand
rather than get my imperfect account of them. I think however, he is mainly showing
that there will be no single rate of profit as a result of gravitational mechanisms.

Paul Cockshott
Dept of Computing Science
University of Glasgow
+44 141 330 1629
www.dcs.gla.ac.uk/~wpc/reports/



-----Original Message-----
From: ope-bounces@lists.csuchico.edu on behalf of Jurriaan Bendien
Sent: Sat 4/19/2008 12:43 PM
To: Outline on Political Economy mailing list
Subject: [OPE] Problems in International Political Economy (IPE)shaikhsdefence of Marx
 
Paul, 

Thermodynamic equilibrium sounds sexy, but does it make any sense? 

What exactly is it that is being equilibrated or balanced out? 

Your equilibrium, as I noted April last year, seems to be a statistical equilibrium defined as a constancy or stability in income & wealth distribution, which persists regardless of the pattern of transactions in economic exchange. The constancy or stability is empirically defined in terms of lack of quantitative change. This is similar to Farjoun & Machover, who argue:

"a system is in a state of equilibrium when all its internal forces neutralise each
other, so that if left to its own devices the system will continue in the
same state, and will be perturbed away from it only under the influence of
outside forces. If the state of equilibrium is stable and the system is
subjected to a small disturbance by external forces, the internal forces of
the system create a negative feedback effect, pulling the system back
towards equilibrium. the system will then either converge to that state of
equilibrium or oscillate around it. Note: Which forces count as internal and
which as external depends on the way the system is conceptualised. But the
distinction is not arbitrary, inasmuch as one conceptualisation is more
appropriate than another. In any case, a given force cannot count
simultaneously as both internal and external." (Laws of Chaos, p. 33).

But this notion of equilibrium is already at some distance from the notion of "market equilibrium" used in bourgeois economics, or a supply-demand equilbrium. Effectively, you argue that the law of value guarantees a stable income and asset distribution, but I think that has nothing in common with what Marx argues. Of course, Marx could be wrong. In Marx's dialectical theory, the "internal forces" promoting stability over time turn into their opposites, and so endogenously generate instability and crisis. The reason for this is that changes in quantitative proportions generate qualitative changes in the way the different important variables interact with each other, i.e. the causal chains begin to run differently.

In your case, "balance" consists of a constancy in the distribution of income and assets. 

In Farjoun & Machover's case, the "balance" consists of the constancy of a whole economic system. 

I am sure we can all find all kinds of equilibriums to please ourselves, but the real questions are:

- which equilibrium notion Marx actually has (if any), 
- what is actually being "equilibrated" in his theory
- what notion of equilibrium best makes sense of empirical reality

If Ajit argues that market prices do not necessarily have to gravitate to production prices or values (that these can all vary independently for a prolonged time) he is correct, and in fact Marx says so himself explicitly. But if Ajit is trying to say that the concept of prices "gravitating" to a certain level is meaningless, because he has devised a mathematical procedure to prove that this is so, I think he is wrong. 

To my knowledge, Marx never argued that equilibrium is accomplished or constituted by price movements in markets, and if Marxists do argue this, that is because they are still dependent on bourgeois ideology to justify themselves. 

According to the materialist interpretation of history, the stability of a social order depends on the enforcement of its property relations and the mode of labour cooperation. If those two things are mediated by the movements of capital, then you can say that if there is a disturbance in the movements of capital, this will impact on property relations and labour cooperation. But you cannot usually say that the social order breaks down, simply because of that disturbance. There may be all sorts of disturbances without the social order breaking down.

I think Marx is wrong in at least one crucial quantitative respect, namely, he confuses an abstract model with empirical reality - he believed (and says explicitly), that for every good traded below its value, other goods must necessarily be traded above their value in the same quantitative proportion, but there is in fact no logical or empirical ground for why this always has to be the case in reality.

The rational kernel in Ricardo's and Smith's theory is that labour specialization in a social division of labour can increase total productivity, and permit all participants to enjoy more wealth at lower cost. This is then turned into a rationale for the benefits of trade. But this argument says nothing about what kind of labor cooperation is involved, or what kind of trade. So, Ricardo and Smith effectively conflate relations of production with relations of distribution to prove the benefits of international commerce, but in so doing they abstract precisely from everything that is specific to capitalist production and trade. 

Cockshott & Cottrell's engineer's socialism lacks any substantive theory of social organisation and cooperation (beyond vague references to direct democracy), and endorses Ricardo's theory of trade. Probably the reason for this is that Cockshott & Cottrell's socialism is still strongly influenced by haute bourgeois and petit bourgeois thought, like the bolsheviks were - they are conveniently silent about everything that really matters. The limitation in Shaikh's theory is, that he goes too far into the economic aspects of capitalism, ignoring the social-organisational aspects. 

I will discuss these kinds of issues in more detail in my book on "The transformations of imperialism" .

Jurriaan






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