appearances and GE

[Jim Devine <JNDF%LMUACAD.BITNET@xxxxxxxxxxxxxxxxxx>]

I'm a little mystified by a contradiction that seems to appear in
Gil Skillman's contributions to pen-l.  On the one hand, he rejected
Marx's law of value (a.k.a. the labor theory of value) because
market participants act in response to (expected) market prices
rather than to "labor values."  This seeems reasonable, since
Marx (for example) realized that market prices and the realm of
appearances in general were more important when one was concerned
with consciousness and behavior (see vol. III -- I don't have
the reference handy).

On the other hand, Gil finds that Walrasian General Equilibirium
theory, especially as deployed by John Roemer, to be very s
useful. The problem with this is that GE prices are almost
always (if not absolutely always) different from the market prices
faced and expected by market participants.  Among onther things,
GE prices are *equilibrium* prices and markets are almost never
in equilibrium, not to mention general equilibrium.  And as far
I can tell, the Walrasians have never provided us with a
reasonable *mechanism* by which the markets attain this general
equilibrium.  Ideas such as the Auctioneer should be left to the
theologians. On the other hand, the assumption that mareket
participants be banned from "false tradiing" (trading at non-GE
prices) or that cost-free recontracting (i.e., adjustment of
contracts so that they fit with GE prices) seems silly at best.
So on exactly the same grounds as Gil's rejection of the law of
value, we should reject GE theory.

It might be argued that GE is an abstraction and that absstractions
are needed if we wish to understand the confusion of the empirical
world.  I agree with this argument COMPLETELY.

But the law of value is also an abstraction.  So the question has
to be: which abstraction is better?  Of course, how one answers
that question depends on one's purposes.  If one aims to get an
understanding of capitalism (and other modes of production) as
sociological/economic entities, then in my humble opionion,
the law of value is superior: it immediately focuses on human
activity and people, not just in markets but in the process of
production.  But GE theory, on the other hand, is only a
theory of supply and demand in markets.  It cannot say anything
about non-market activity and non-exchange relations among people.
Leftist interpretations of GE, such as that of Romer, (Roemer, that
is), lead to the reduction of the complex sociology of capitalism
to the simple "pre-existing distribution of asset endownments"
and the unexplained scarcity of means of production.  Maybe
there's a way to wed sociology and economics via GE thoeory,
but I haven't seen it yet.

That said, I must admit that I use GE sometimes: what else is
the IS-LM model?  Again, whether one uses GE or not depends on one's
purposes.         Also, the above should not be interpreted
as a critique of game theory (which includes GE as a special
case).

in pen-l solidarity,

Jim Devine   BITNET: jndf@lmuacad    INTERNET: jdevine@xxxxxxxxxxxxxxx
Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA
310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950