[OPE] Chris Harman on the spectre of Keynesianism

From: Jurriaan Bendien (adsl675281@tiscali.nl)
Date: Tue May 20 2008 - 15:40:13 EDT


  Anyone knows that reported macroeconomic events impact on the prices of stocks, securities, currencies, and other assets. To predict how asset values will develop in the future, requires an understanding of how the "whole" and the "parts" interact. So the professional speculator cannot really escape from the need to understand what's behind macroeconomic trends.

  In reality, few governments have ever - for any length of time - pursued a purely Keynesian, or purely supplyside economic policy. Probably it would be more accurate to say that "we are all post-Keynesians now".

  I have NEVER discovered any Marxist discussion of how the increase in joint-stock capital can counteract the fall in the average profit rate for industries. There are almost no systematic theoretical analyses available by Marxists of the various ways in which foreign trade can influence average industrial profitability.

  Perhaps you are right that if a situation permits several different outcomes or developments, or if a variable could in due course interact in a way opposite to what it did before, then this creates more mathematical complexity, if you try to model this. 

  However, my own judgement is that a lot of "mathematical complexity" is due simply to poor theorising, poor conceptualisation. In science, the best theories are the simplest theories with the greatest explanatory power. 

  In that sense, "complexity theories" really run counter to what science aims at. Okay, if theories are extremely crude, we need to allude to complexities, but too much complexity is counterproductive and not useful.

  It is possible to devise a theoretical scheme comprising a very wide spectrum of very finely graded distinctions, intended to capture every aspect, variation or nuance of a phenomenon, but there is a sense in which we will "not be able to see the wood for the trees" in that case - such a theoretical scheme is unable to orient behaviour at all. At best we can teach a computer to draw some salient inferences from very large masses of data we feed into it. 

  The point of theory is precisely to reduce complexity, by identifying systematically what is really essential, in contrast to what is of secondary or peripheral significance. The point of data is to show what theory must explain. The empiricist forgets the "theory-laden" nature of observation, but the theoreticist who does not study the data doesn't know what needs to be explained, what the questions and problems are. He only has a theoretical framework which defines the "conditions for making sense" about a topic. 

  In general, Jan Toporowski seems to argue that the "fuel" for capital market inflation has been the historic growth of pension funds and insurance funds. I could hardly quarrel with that, but obviously those funds have existed for a very long time. So why does capital market inflation gain prominence at a specific point in time? In my own analysis, a number of other factors must also be introduced into the picture, in order to explain the emergence of the great "financial hausse". Once we do this, I think it becomes easier to understand the way the "real economy" and the "financial economy" are linked together.

  Chris Harman argues that "What begins as an excess of saving over investment ends up as a recession that can turn into a slump". The problem with this kind of expression is that it is too vague. It is possible to conceive of certain conditions in which it might be true, but the critical point is that if the bourgeoisie just happens to have more capital funds available than it really knows what to do with, this does not necessarily imply an economic crisis must break out at all. It may just mean that if they apply their excess funds to assets which suddenly lose part of their value, they can kiss some of their wealth goodbye. The impact on the economy as a whole may not be so very great.


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