Re: [OPE] "an immense accumulation of factors": Rick Wolff's partial list of causes of the economic crisis

From: Alejandro Agafonow <>
Date: Sat Nov 15 2008 - 15:36:50 EST

Maybe it is to ask too much that in a brief post Wolff offers causal connections.  A. Agafonow ________________________________ De: GERALD LEVY <> Para: Outline on Political Economy mailing list <> Enviado: sábado, 15 de noviembre, 2008 21:11:01 Asunto: RE: [OPE] "an immense accumulation of factors": Rick Wolff's partial list of causes of the economic crisis > What prevent us to include in this list a mysterious influence of the Moon or a high tide?     Hi Alejandro:   There was nothing in his partial list which even remotely resembled the above. While there are examples of similar thinking to the above in the history of economic thought (e.g. W.S. Jevons' sunspot theory of the business cycle), I can think of no comparable instance in the history of Marxian economic thought. There is a reason for this: Marxians, like Wolff, do not eternalize social relations or miss-attribute economic relationships to nature (as marginalists routinely do when they assert that social relations which arise under capitalism are somehow a consequence of "human nature").  You should be asking your question to Gary S. Becker and Co., not Rick Wolff or I.    I find your question, frankly, rather bizarre. Changes in wages, productivity, corporate profits, speculation, fiscal policy and budget deficits,   the money supply, interest rates, and monetary policy, the international division of labor and trade policies, and the expansion of credit card use and working class debt are not at all the same thing as asserting that the crisis was caused, in part, by the Moon.   There is a logical connection  which Wolff tries to make based on historical and empirical analysis and his understanding of political economy outlined in very sketchy form below: whether he succeeds or not, his analysis  is not based on irrational ways of knowing or a simple fallacy such as association as causation.   In solidarity, Jerry       The problem is this: today's economic crisis was caused by an immense accumulation of factors, far too many for any policy to manage.  Here is a partial list.  Workers' wages stopped rising since the 1970s; thereafter, they accepted rising loans instead of rising wages as compensation for their greater work and productivity.  Corporate profits exploded because they got ever more output per worker (via computerization, etc.) while not paying their workers any more.  Corporations deposited their rising profits in banks who then loaned part of them back to workers, another part to investors for stock and then real-estate speculations, and yet another part to businesses for mergers.  Other factors included low taxes, expensive wars, and resulting US government deficits.  Then, too, China's industrialization flooded the US with inexpensive products as that country accumulated our massive dollar payments for them.  China then lent those dollars back
 into the US to finance the government's deficit and further increase banks' loanable funds.  All these very different factors helped build up the house of credit that has now crashed the entire economy.    Still other factors also shaped the crisis.  New mortgage brokerage practices and credit card promotions induced more debt than borrowers could afford.  Competition among rating companies yielded incorrect assessments of financial risks of trillions in newly invented financial instruments (derivatives).  This led to staggering global misallocations of scarce resources.  Homebuilders' competition yielded excess construction.  The Federal Reserve increased the money supply and lowered interest rates to offset the bubble burst in 2000.    Nor is this list of factors even nearly complete.  No policy emerging from deals between conservative and liberal legislators beset by armies of lobbyists could ever begin to control or manage the immense diversity of the causes of the current crisis.  Indeed, no policy of any kind -- whether imposed by a dictator, produced by democratic consensus, or anything in between -- can "fix the problem."  No policy ever did.  There are just far too many causes of crises that one can see and list -- and too many more not yet seen.    The whole idea of policy is bizarre.  <snip, JL>  URL:<>

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