Re: [OPE-L] essentials and scope

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Fri Sep 15 2006 - 12:04:36 EDT

>--- Jerry Levy <Gerald_A_Levy@MSN.COM> wrote:
>>  Ajit and Howard:
>>  OK, Ajit.  Thanks for your re-cap and narrative.  I
>>  agree that we
>>  should stick to one question at a time.  Let's stick
>>  to the
>>  question: is money an *essential* aspect of
>>  capitalism?  (it's not that I am "more comfortable
>>  with" the concept of essential; rather, it's that I
>>  am more
>>  comfortable having a *cross-paradigm discussion*
>>  over
>>  that topic.)
>>  Let me ask you a direct 'yes or no' question:
>>  -- is money essential to capitalism?
>>  If you answer that question 'yes' then that will
>>  lead us in
>>  one direction of discussion; if you answer it 'no'
>>  then
>>  it will lead us in another direction.
>>  It should be clear, on the basis of other posts,
>>  that I would
>>  answer that question with a 'yes'.
>Well, Jerry! I don't know how long I can go on on this
>thread, but I will try to humour you one more time.
>Instead of answering your question by yes or no, let
>me ask you few yes or no questions:
>(1) Is transportation of goods essential to
>(2) Is stock Market essential to Capitalism?
>(3) Are Engineering colleges essential to capitalism?
>(4) Are schools essential to capitalism?
>(5) Are railways, roads, and ports essential to
>You may answer yes to all the above questions or yes
>to some or no to some depending on your choice. The
>point is that such questions are of no particular
>interest as such. I'm not sure whether you have a good
>sense of what you mean by "money" when you ask the
>question. The interesting thing about Adam Smith and
>the rest of classical economists as well as most of
>neoclassical economists is not that they give "no"
>answer to your question--actually they don't; they
>simply don't ask such sterile questions--but rather
>that they showed through their analysis that changes
>in money supply causes only 'nominal effects' in the
>system and not 'real effect'.

Even more important in this content than the nominal/real distinction
is Adam Smith's critique of mercantilism which is an argument that
money serves as an obstacle to the capitalist development of real
wealth (Foley's succinct and brilliant analysis of Smith's critique
of mercantilism is even better than II Rubin's as is Foley's analysis
of Ricardo's rent theory) .

Yet as Marx underlined the mercantilist fetish of money proves not to
be a discarded superstition in a general panic.


>The interesting thing
>about Keynes is not that he answered "yes" to your
>question, but rather through his analysis he showed
>that changes in money supply has real effect--thus the
>nominal and the real economy cannot be dichotomized.
>The point of it all is that you need to stop asking
>theoretically sterile questions if you want to do
>something interesting. I hope this was helpful.
>Cheers, ajit sinha
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