theoretical soup

["Devine, James" <jdevine@xxxxxxx>]

[was: RE: [PEN-L:22466] RE: Re: RE: Re: Re: Historical Materialism]

Justin writes:>>I don't accept GET [general equilibrium theory]. I'm
basically a Robinsonian/Kaleckian institutionalist with a large dash of
Austrian thrown in for spice.<<

Daniel Davies writes: > Must make for some interesting dinner parties ....<

He can have interesting dinner parties all alone with himself, if Justin's
self-description fits. (There is an old popular song titled "you're never
alone with a schizophrenic," though of course they confused schizophrenia
with multiple personality disorder. Of course, humor aside, Justin's
self-description isn't really either of these. It's eclecticism.)

DD continues:>But I don't see how saying "I'm an institutionalist" gets you
off the hook here.  That's not a value theory, and neither Robinson nor
Kalecki have either a way of telling us how to measure the capital stock
without a value theory, or a value theory which is not fundamentally the
equivalent of the LTV (I accept your point about a glass being half-empty or
half full, but surely to heavens, any theory which accepts that value is
only produced by labour is a labour theory of value; I've never understood
why Robinson claimed that she didn't accept LTV).<

If I remember correctly, Robinson interpreted Marx's law of value as a
Ricardian labor theory of price. Given that assumption (i.e., that the point
of values was to explain price), _of course_ she should have rejected it.
That's an important reason to reject that misinterpretation, the basis of
almost all criticisms of Marx's heuristic. (Weirdly, that misinterpretation
is shared both by most critics of Marx's law of value and also by many
"fundamentalists." They then feed each others' misconceptions.)

Robinson's perspective is fundamentally empiricist -- as is that of the
institutionalists. She wrote a bunch of papers and books with abstract
economic analysis, graphs, and even math, but always says "this is just a
game, unrelated to the real world" (to paraphrase). (In the edition of her
article on "rising supply price" that I read in grad. school, the editor
relegated this comment to a footnote.) One of the great things that Robinson
did was to trash the neo-Ricardians  for using totally anti-empirical
concepts such as the "wage-profit frontier" (or "factor price frontier")
because the kind of steady-state equilibrium that is assumed to exist at
each point on that frontier could never exist in the real world. Empiricism
is a great acid for dissolving excessively rationalist (formalist) thinking,
but it doesn't seem enough to me.

I don't know about Kalecki, but his analysis was based on Marx's to a large
degree, which was in turn developed using the law of value (which I
interpret as a true-by-definition accounting framework used to get beyond
commodity fetishism in the analyis of capitalist society). Kalecki doesn't
present his own value theory. (He wrote very short and terse math-oriented
papers which left out a lot of explanation of not only his methodology but
of the economics behind his equations.) Like Robinson, all he does is to
present a theory of prices (based, in part on Robinson-Chamberlin
monopolistic competition theory) rather than a theory of value.

As I said, institutionalists are very empiricist, rejecting neoclassical
theory (e.g.) as unreal. They tend toward holistic explanations which
(natch) emphasize the role of human-made institutions. Some even see markets
as artificial institutions. (Marx, in this sense, is an institutionalist,
since he sees the class system as artificial.[*]) Because of their
empiricism or anti-high-theoretical leanings, they really don't have a
theory of value at all. Empiricism unfortunately leads to mere description,
which doesn't satisfy me...

DD:>And in the context of capital and value theory , "Austrian" isn't a dash
of spice; it's arsenic soup. It's a marginal theory of value, which hangs
you right back on the hook that you got off with general equilibrium.<

The Austrians hate general equilibrium, but they are extremely subjectivist
and philosophically idealist. That is a fundamentally flawed vision. (I
don't think marginalism is as important as subjectivism and idealism, BTW.
Marx was "marginalist" when it came to the issue of differential land-rent.)


I think that Justin is refering to the fact that the Austrians -- such as
H*yek -- put a lot of emphasis on stuff like the inability for central
planners to have enough information to actually plan an economy (a simple
empirical observation as far as I'm concerned). The problem with this is
that they totally ignore the fact that the markets they glorify (worship!)
are really poor at conveying information, too. Market prices convey
information about how to allocate resources to serve consumer wants in an
efficient way -- except when they don't, which is most of the time.

The Austrians try to measure the aggregate stock of capital (or what they
call "roundaboutness") independent of the income distribution in order to
provide a theory of income distribution. Like the neoclassicals, they fail
(as shown in the famous "Cambridge Capital Controversy" and admitted by
Samuelson). (The neoclassicals retreated from using an aggregate capital
stock measure by retreating into general equilibrium theory -- but textbooks
still use fallacious aggregate production functions.)

The good side of Austrian theory (as I understand it) is their emphasis on
dynamics as opposed to the neoclassical stress on static equilibrium --
which they borrowed from Marx or at least developed after Marx (perhaps in
ignorance of his work). (Schumpeter, on the other hand, acknowledged the
influence of Marx on his ideas.)

> ... I think it's clear that there are many good technical reasons to
suppose that economics needs *some* value theory, and the labour theory of
value shapes up pretty well compared to the  competition.<

The key issue here is "what in heck _is_ a 'value theory'?" Marx himself
never defined what he termed "the law of value," since he wasn't into
defining things that way (as Sweezy points out, it took the whole first
volume of CAPITAL to define "capital").

I think it's best to go back a few steps. Value is part of Marx's unified
theory, which starts with his dialectical perspective -- the emphasis on the
dynamic interaction between the whole and the parts (with, as Charles notes,
a greater emphasis on the whole, if only to counteract the individualistic
bias of the dominant social-scientific vision of his and our time). The
dialectical perspective militates against partial, incomplete, views, such
as those that try to summarize the workings of the world in terms of formal
mathematics alone, missing the qualitative dimension, the heterogeneity of
real-world phenomena. That example gets us to Marx's materialist side, which
first an foremost refers to an effort to understand the real, material,
world of human activity in nature as opposed to what people think about it
and unseen ideal entities.

I don't think that there's a big distinction between this "materialist
dialectic" and Marx & Engels' materialist conception of history (a.k.a.
"historical materialism"). The latter is best explained in their GERMAN
IDEOLOGY and in Marx's THESES ON FEUERBACH. These present critiques of
others' views and general principles, rather than providing final
answers.[**] Even Marx's "preface to A CONTRIBUTION TO THE CRITIQUE OF
POLITICAL ECONOMY," which is often misinterpreted as presenting a dogmatic,
mechanistic, and deterministic vision of history (base & superstructure and
all that) refers to his views as merely a "guiding thread" for his
investigations (i.e., a heuristic) not as a set of predigested and final
conclusions.

Within the context of the materialist conception of history, the law of
value makes total sense: instead of seeing history from a liberal
perspective (a conflict between the public interest and the special
interests, the conflict between bad ideas and good ones), Marx looks at
capitalist society as a community of workers, all working and contributing
to society (and to non-workers). Work is right of the center of the GERMAN
IDEOLOGY and also CAPITAL, though in the latter he uses it -- or more
accurately socially-necessary abstract labor time -- as a way of analyzing
capitalism as a whole (in volume I). His emphasis on the difference between
contributions of work and what people actually get from their work (and the
ability of some to get without contributing) is at the center of volume III.
Of course, we live within the context of capitalism, so we tend to have
fetishized consciousness, only looking at what people get (prices, incomes)
rather than what they contribute. So it's important to also look at the
latter (value). In this view, Marx's "law of value" is fundamentally a
theory of society (specifically, capitalist society).

In sum, Marx's whole philosophical and methodological vision has value right
at the center. It's part of the "core" of his research program.

There's another approach, of course, which is to reject the unity of the
vision and to pick and choose different parts. Dialectical vision is
rejected, often in favor of reductionism and other one-sided perspectives --
or empiricism. Historical materialism is reduced to a simple story of stages
and automatic development in imitation of the self-style orthodoxy's
dogmatic, mechanistic, and deterministic vision of history (G.A. Cohen) or a
bunch of substantive conclusions that can be separated from the method. Of
course, Marx's value theory is rejected -- since, after all, "value" and
"price" are basically the same word, so all we need is supply & demand,
perhaps with some institutional detail, since these determine prices.

What unifies all of these pieces that are chosen? Most often, it's
mainstream orthodox social science. Sometimes, there's no effort to unify
them at all, so that eclecticism reigns, with the underlying principles of
unity left implicit and unanalyzed. Often the whole idea of examining these
fundamentals is rejected.

Jim Devine


[*] BTW, there's a book of a discussion between Bill Dugger (a radical
institutionalist) and Howard Sherman (a Marxist) that's mistitled RECLAIMING
EVOLUTION (Routledge 2000), which is really about "reclaiming historical
materialism." They agree on most issues.

[**] Brenner, among others, argues that Marx's interpretation of the rise of
capitalism changed between the GI tract and CAPITAL.