[OPE] Reply to Ian Wright on counterfactual equilibrium

From: Jurriaan Bendien <adsl675281@telfort.nl>
Date: Tue Sep 22 2009 - 15:46:00 EDT


Executive summary:

1. From the statistical observation of price convergence or price stability,
equilibrium does not logically follow. Equilibrium is an interpretation, a
naming of something which is unknowable except in special cases.
2. We should not conflate different meanings of equilibrium, observable
price distributions, the stability of prices, the stability of the economic
system and economic regulation with each other.
3. For Marx, the "balancing out" process (effectively the pattern of
adjustment accomplishing material, social and capital reproduction) is not
achieved by the market itself, but through market mediation, and also by
non-market factors; endowing markets with all kinds of independent powers is
a reification.
4. The law of value is not a "pushing force" on prices, but a limit or
constraint which regulates prices. I think you are confusing the law of
value with the general law of capitalist accumulation, which results as the
outcome of the clash between the law of commodity-value and the competition
for surplus value.
5. The law of value cannot not regulate economic life as a whole, only new
outputs of commoditised products of human labour; at best it only influences
other kinds of price relativities.


If you are still interested, read on (I wrote some more about this tonight).

I am not fishing for a compliment here, I'm trying to verify the whole truth
of the matter as best I can. Okay, I could have the truth on my side, but
not win the argument, because ideology is more powerful than science, but I
can try using the means available.

My training is that you should never be more radical than is appropriate to
the situation, but in a scientific debate you should honestly strive for the
truth. I had a situation once in 1981 where the police pulled me right over
a crowd barrier, out of a crowd among whom I was standing doing nothing, it
was a demonstration about unemployment, and then they charged me with
"obstructing the police", but in court I proved what really happened with
photos and witnesses, and the case was dismissed. In describing my arguments
about equilibrium ideology, I consider that I am not being radical at all,
but merely stating what is obvious to any bona fide logician able to
distinguish between truth-coherence and truth-correspondence.

I might have a stallion and I might name him Henry. I might introduce him to
my friends, "look this is Henry". My friends might say, "It's not Henry,
it's a horse". I might insist that "it's Henry, not a horse", and my proof
might be, that if I call out "Henry", Henry comes rushing towards me. A
scientist might point out a few things about operant conditioning at that
point, and demonstrate by way of experiment, that after a certain number of
trials, just calling out "Dick" will also cause the horse to rush towards
him, and moreover that if I call out "Dick" the same thing will happen. If
e.g. my girlfriend buys me a pair of size "M" underpants whereas I wear size
"L" underpants, then after I have gone back to the store to swap size "M"
for size "L", I can of course think that my actions constitute a "movement
towards equilibrium", but all I have really done is got myself another pair
of underpants that fit me. From the fact that the sun goes up in the East
and sets in the West, I could infer that the sun revolves around the earth,
but in fact just the opposite is the case although I cannot observe this
directly, only infer it.

At issue in the scientific controversy are all kinds of claims made about
what markets can accomplish, and the critique is that many of these claims
are false, because markets do not accomplish these things - people do,
groups of people whose behaviour is constrained and guided both by mutually
related market and non-market conditions/interests.

I never said that ALL talk of equilibrium has an apologetic intent, in fact
I acknowledged specifically that the notion of equilibrium is useful for
certain analytical purposes. My objection is rather than you (Ian) and so
many others perform a sleight of hand, whereby you conflate several
different meanings of "equilibrium" with (1) observable price movements, (2)
the "stability of the economic system" and (3) "economic regulation". This
still falls well within the ideology that economic harmonies are secured via
a tendency toward equilibrium prices.

This is precisely where the Marxist economic tradition suffered shipwreck.

The Wright equilibrium approach seems to be, that you can show, that the
prices for a type of product or output converge to a certain price level
across time, which stays relatively constant, and then you assume, that this
price level must be the equilibrium price, and that the relevant prices
exhibit the statistical tendency to converge on this equilibrium price. The
basis for saying that the "equilibrium price" is not a counterfactual
abstraction, is then the statistical observation of a factual price
convergence in the price distribution.

It does not matter if the hypothesized equilibrium price level is never
actually reached in any particular market sale, so long as we can show,
statistically, that empirically prices do mostly as it were "gravitate"
towards it, an empirical tendency. What the LTV then adds, is that we can
show that average price levels for outputs strongly correlate with the
quantity of labourtime employed to produce them.

The logical problem with the foregoing empiricism is, that from the
observation of "where the most data points in the price distribution lie",
we cannot logically infer that "this is the equilibrium price level", except
by simply "defining" or "interpreting" the equilibrium price level to mean
"this spot in the distribution, namely the spot in the distribution
containing the most data points, or the spot to which the data converge".
Well obviously you can do that, and people frequently and conventionally do,
but this just boils down to (1) metaphysically "assuming" an equilibrium
price, and (2) metaphysically "assuming" that price distributions will tend
toward this equilibrium price. The unstated and unproven assumption is that
at this price, supply and demand are balanced. We can then make the whole
thing more complex by showing that the stability of one price depends on the
stability of other prices and thus that general price stability is a
condition for particular price stability etc. From this springs forth the
notion that the market is a sort of "octopus with a stabilizing tendency".

The "reality" is that we may be able demonstrate a certain amount of price
stability or convergence in price distributions across time, the "ideology"
is that this price stability or convergence "represents" an equilibrium
price (or an approximation to it) or a movement towards an equilibrium
price, which is supposed to be the result of a prior process of market

Given however that at any time there may be a big gap between potential
supply and actual demand, and between actual supply and potential demand, or
between potential supply and potential demand, in truth we have no way to
telling what the equilibrium price is, we can only hypothesize and bring in
more and more assumptions, to understand how a market works. If e.g. people
stopped buying, it could be for all kinds of reasons, because the price was
too high, because they had no more need of the product, because there is an
alternative product, because the product made no money, because they could
not or did not wish to access the market, because they were ill, because the
weather changed, and so on.

The reality we know, is, that supply and demand adjust to each other, but
this has nothing necessarily to do with equilibrium prices, or with a
tendency towards equilibrium prices at all, that's just an interpretation.
If a billion people are malnourished, that is terrible, but that is "market
adjustment". If a billion people are overweight, that is also market

I can see that the Wright law of value is a "force" that factually (not
counterfactually) acts to push prices toward labor-values. This is indeed
the idea of classical political economy such as you find it in David
Ricardo, and also a sort of statistical metaphor in modern times. But in
Marx's own theory, the law of value has no such "pushing force", that would
be a phlogiston theory.

Instead, in Marx's theory, real people and real businesses compete in
markets and try to control these markets, that is where the "push" is coming
from. It's just that everybody has similar objectives and if people do not
buy, traders are stuffed. So in this competition, the actors are very much
constrained both by the relationship between paid and unpaid labour, and the
monetarily effective demand/supply for products. The law of value (the
proportionality of commodity values and socially necessary labour time) thus
sets limits on what can happen, it's a regulator in that sense - at a
certain point, even, "the house collapses around their ears" as Marx says,
because the divergences between production activities and circulation
activities have exceeded the limits and become too great.

Effectively, at the surface, there's a continual clash between the
determinants of cost-prices, determinants of sales volumes and the
determinants of profits, and a constant need to increase productivity. But
at a deeper level, the price levels in product markets are the outcome of a
forcefield featuring a three-way structural competition: between workers,
for jobs, incomes, promotions; between workers and their employers,
revolving around the relationship between paid and unpaid labour; and
between capitalists, for profits, sales, market shares, market positioning
etc. The general theory which Marx has about this competition in product
markets is, that it is mainly regulated by the determinants of S/V, C/V and
S/C+V, that is to say, by value proportions (Wertverhaltnisse). Marx's
criticism of Ricardo was among other things, that Ricardo lacked a credible
theory of competition, and in particular, that he failed to specify what the
competition was really about.

For Marx at least, the stability of the economic system was not due to the
spontaneous tendency of market prices to gravitate to equilibrium prices,
and economic regulation did not even require equilibrium prices either.
Price stability was the effect or reflex of a social process, and the
existing "price regime" could in fact disadvantage a lot of people. We can
conceptualize real adjustments of supply and demand in markets, and their
regulation, as well as price stability, without assuming any equilibrium
price, and without assuming any tendency towards market equilibrium. We can
show without any doubt that in the whole of Das Kapital, equilibrium theory
plays almost no role at all, Marx does not refer to it. But the power of
bourgeois ideology is that people look for it when it's not there.

You have the material and social processes by which people produce and
reproduce their lives, and then you have the (expanded) reproduction of
capital, and then somehow these must occur at the same time, even although
they set limits on each other, and may contradict each other in some way. So
long however as workers go back to work, and people respect property and
personal rights/duties, it's business as usual.

If the amount of total social capital is three, four or ten times times as
large as the capital tied up exclusively in production, it is not possible
to maintain that the law of value governs all prices, never mind secure the
stability of the economic system, or regulate the whole economy. That is
simply false. Marx, incidentally, never argues that the law of value
regulates the disposition of all assets in society or all market trade, he's
talking only about the new output of commodities, and he's talking about the
capitalist mode of production in its "ideal average", not capitalist society
as a whole.

In general, my impression is that the Cockshott/Wright/Zachariah approach
conflates abstract theory directly with empirical reality via stochastic
effects, but although it seems fantastically intelligent and erudite, none
of the foundational concepts, categories and relationships are clearly
spelled out. The math seems astonishingly brilliant and precise, until you
decypher what the numbers really mean and what they are proxies for. It all
ends with the apology that "we thought it would be reasonable to assume
this", but in reality, the statistical argument already assumed much of what
one needed to prove, so at best there is only corroboration, not proof.

The question that remains is, "why should Marxists try to prove that
capitalism can function harmoniously and equilibrate itself on the basis of
the law of value?".


PS - if I had not had certain hassles in the past, I would by now been able
to show you a precise scientific paper in which the whole thing is explained
once and for all, and the Marxist or other equilibrium myths are
scientifically proved to be what they are: ideological myths. This is just
an indication of my thinking about it.

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Received on Tue Sep 22 15:49:04 2009

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