[OPE] The problem with Ian Wright's example: no equilibrium

From: Jurriaan Bendien <adsl675281@telfort.nl>
Date: Thu Oct 08 2009 - 12:15:53 EDT

In fact the orbit of the moon is not in equilibrium, since it moves slightly
farther away from the earth all the time, and the trajectory shows slight
variations. It is just that, because the deviations are quantitatively
slight, they are regarded as not very significant. In this way, a
statistican can always rescue his concept, by pointing out that relevant
quantitative deviations in the data distribution are slight, particularly if
viewed in a larger or smaller timeframe, and thus that the concept
adequately accounts for the phenomenon to which it refers "for all intents
and purposes". When however we are dealing with a foundational assumption
with massive implications, the real point can be put this: if (say) a
Martian was
watching a formula 1 race on earth, the Martian might conclude that the race
constituted a "movement towards equilibrium". Why? Because at the finish
line all the cars stop. But that would be a very poor interpretation of the
race. It's a bit like not seeing the wood for the trees.

Faced with the stability and instability of different societies, economists
start talking about market equilibrium and disequilibrium, analogies from
astrophysics etc. But in the process, they smuggle in a whole lot of
assumptions for which there is not just no scientific proof, but which are
unprovable. They are metaphorical generalities, not scientific fact. If we
take these metaphoral generalities on board, we make concessions to the
powers of markets for which there is no justification, if we care to examine
matters in their specificity.

The central idea economists have is that markets constitute the equilibrium
of the economy as a whole (the cohesiveness of society is explained by the
structure of relative prices), but in reality, all that happens is that
monetarily effective supply and monetarily effective demand adjust to each
other across time (irrespective of the actual needs of the population, which
may not match buying power, and what could be potentially supplied, if the
use of resources was organized differently - not a small matter, if people
literally starve to death), without the condition of oversupply or
undersupply ever being completely abolished, except perhaps in a special
case. If that is so, then scientifically we ought to be examing the
adjustment process itself, and explain why the adjustment of the exchange
process occurred here, but could not be achieved there.

The problem is that if responses to price changes are all that you have to
explain economic development, then whenever price changes fail to explain
market failure, which happens recurrently to a greater or lesser extent, you
are forced to resort to ad hoc extra-economic explanations. If supply and
demand adjust, it is argued that there is a movement to equilibrium, but if
supply and demand do not adjust, it is argued there must be extra-economic
factors preventing the movement to equilibrium. But in fact, even if a human
community is fairly stable, in spite of incessant market fluctuations... no
"tendency towards market equilibrium" can ever be observed, because no
equilibrium is ever observed, there are always market fluctuations. The
tendency towards equilibrium is merely a theoretical interpretation, in
which real tendencies are compared to an idealization. Simply put, we
theoretically assume constants to study variations, even if those constants
don't really exist, with some or other idea of what would constitute the
equilibrium condition. But it turns out, that the chosen assumptions are
precisely the ones needed to defend and conserve the market system... until
the market system no longer serves vested interests, and the assumptions are

We all know the ideological uses to which the idea of market equilibrium is
put, but point is, that the concept of equilibrium infiltrates all the
social sciences to the point where "tendencies toward equilibrium" are
discovered all over the place and the main conservative question becomes how
a balance (or "order") can be restored if there is an imbalance. But given
the reality of persistent and massive global imbalances, the real scientific
question is how these originated, and how society manages to reproduce
itself in spite of these imbalances. That is exactly what Marx's theory is
designed to do, not by postulating market equilibrium, but by
distinguishing carefully between the reproduction of material life and the
reproduction of capital.

The real "constant" is that people try to survive and better their lot,
irrespective of adverse conditions, a process which is mediated by markets,
but not constituted by markets - under the condition that they must
necessarily both compete and cooperate, without the one condition completely
undermining the other. It is then scientifically obvious that we ought to
base our economic science on this constant, and not on a hypothetical
market equilibrium never seen in real life. If we do so, we have no more
need of Roy Bashkar's philosophical dildo-under-the-bed epistemology,
since, by starting out from the experience of empirical reality, the
validity of all
assumptions can be empirically verified, validated and tested, at least in
principle. We sell ourselves short, if we opt for some arcane philosophy to
understand something, when a proper scientific study of the facts themselves
can yield an answer!

Another way of putting this is, that we ought to be centrally concerned with
the origin and reasonability of the assumptions which we necessarily require
to get the science off the ground, where we get those from. How reasonable
is it, to assume a market equilibrium, when in the whole of economic history
no evidence can be found for its existence, and when we can fabricate a
statistical artifact to
denote its existence by means of counterfactual assumptions?

Of course, if I want to explain why an apple fell from a
tree, I can hypothesize that at a certain point "the tree has a feeling that
it has to let go of the apple". I can justify this hypothesis by saying that
although we cannot have proof that trees have feelings, it is reasonable to
assume that they do, since, in some respects, trees respond to stimuli in a
way analogous to feelings. I can then set up comprehensive research
projects with a research grant to study how this feeling manifests itself,
why it manifests itself in cycles and waves more strongly or less strongly
in different parts of the season. But is the foundational assumption really


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Received on Thu Oct 8 12:18:40 2009

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