[OPE] Reply to Paul Cockshott on neo-Smithian Marxism andequilibrium

From: Jurriaan Bendien (adsl675281@tiscali.nl)
Date: Thu Apr 24 2008 - 14:13:33 EDT


Fair enough, I have to get my head around it more too. My argument would be that the average or aggregate approximate 50/50 distribution (already noted by Eugen Varga) is in large part an statistical artifact (in point of fact, in recent memory the compensation of employees/operating surplus ratio has been more and more skewed towards profits). As I have grappled with national accounts data and the statistical concept of value added, I am inclined to be a bit skeptical of official profit volume measures. The chief merit of them is that they are calculated in a fairly constant way across time, and thus can show the trend. As Dumenil & Levy have shown, most profit volume measures trend in the same direction, even if the level may be different.

All I am saying is that if you think that prices can secure an economic equilibrium in the real world by themselves, you must be kidding. There is no empirical evidence of that.  All that prices achieve is a process of adjustment of effective supply and effective demand, a calibration or equilibration process, which is sometimes reasonably successful, and at other times spectactularly fails. No serious policy maker or banker is very concerned with equilibrium models, what they are really interested in is the adjustment process itself, and price stability. At best the equilibrium models are only an aid to understanding that. They know jolly wel that they're dealing with a moving process in which, ultimately, price relations express relations of economic power. There are price setters and price takers, and that is how it is.

What are we to say of an economy which cannot even ensure that all of the world's citizens can get their daily bread, even although there is plenty food produced that can satisfy everybody? It's a monstrous absurdity, a moral obscenity, as far as I am concerned. It means that world society is deeply mistaken about its priorities about human life itself. The pope may declare his commitment to human rights at the Twin Towers, but that's not where it's really at. I mean, we can sit here disputing about the concept of equilibrium while out there there's people crapping out totally, because the trading system doesn't enable them to obtain food, and speculators are even speculating on food prices. How low can humanity go, I wonder? 

Yesterday I was dipping into the book "Moral Markets" recommended by Herb Gintis. A few essays are quite sharp, but for the rest, what a tremendous intellectual regression. Literally, they are trying to build a theory of markets and values on the basis of Adam Smith, David Hume etc. but they are mystified as to why bourgeois society effects a bifurcation between commerce and justice in the first place. That cannot lead to very profound insights.

What Marx is talking about is that the social order is ensured by a pattern of social cooperation which is shaped by physical and practical necessity, and this exists mediated by prices or in spite of prices. In the Weimar republic, people survived too. In contemporary Zimbabwe, people survive too. How can neoclassical theory explain all that?  Interesting question. In his theory of economic reproduction, Marx notes the difference between simple reproduction (the surplus is consumed, wasted or hoarded) and expanded reproduction (the surplus is productively invested). With simple reproduction, people survive, but there is no economic growth. With expanded reproduction, there is. 

But that is just to say that the process of economic reproduction permits of all sorts of variations with a broad margin, depending on how exactly the surplus is utilized (Paul Baran's point). That is Part 1 of my critique of Grossmann. Part 2 is that expanded reproduction results in a lot of non-productive assets (the results of accumulation) which can also be capitalized, and participate in the capital accumulation process. Part 3 is the organisational structure of capitalist production itself (Mandel makes this argument abstractly in Late Capitalism, p. 36-37 though it has to be expanded): "it disregards the fact that the part of surplus value marked for consumption could be divided among a constantly decreasing number of capitalists... if the entire mass of surplus value available no longer suffices to valorize all the accumulated capital, the result would not be the collapse of the entire economy but only the devalorization of the "surperfluous" capital through competition and crisis". All that Grossmann really proves, is that overaccumulation leads to devalorization, but not that the valorization of capital itself becomes impossible. 



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