Re: Depoliticisisng economics

[Julio Huato <juliohuato@xxxxxxxxx>]

Michael,

> 'where's the beef?' What exactly
> are you finding in the development of that theory that, for example,
> will help us to understand capital? And, what will help us to
> understand what's necessary to go beyond capital?

There are tons of stuff in today's economics that go *beyond capital*.
 As an illustration, here's an idea sketched in my "best"
stream-of-consciousness mode:

In Marx's times, the notion of uncertainty had not yet been explicitly
incorporated in economic analysis.  In Smith, Ricardo, Malthus, or
even Mill, there are passages that suggest implicit (rough) notions of
uncertainty -- but little indicating they had a clue of its
political-economy implications.

Marx studied Petty's statistical work in his Ireland, Taxes, and
Political Arithmetick books.  Marx (and Engels!) seemed to have been
aware of work by Pascal, Fermat, and DeMoivre.  There are several
passages in Capital (and at least one I can remember in Gotha) were
Marx seems to refer to DeMoivre's law of error.  Perhaps they knew
Huygens' and Bayes' work as well.   But I doubt that they knew much of
their contemporaries Legendre (least squares), Gauss, or Laplace.  As
for the late 19th century folks (Pearson, Spearman, and "Student"),
they humanly couldn't.  After Marx, even economists contributed: I can
think of Von Mises and Keynes.  And then the understanding of
time-stochastic processes owes a lot to quantum physics.

But the really big advances in probability theory are much more recent
-- they have resulted from its highly abstract formalization by people
like Chebyshev, Markov, and Kolmogorov.  Nowadays, probability theory
has been entirely recast as a subset of a much more general, abstract
-- and powerful! -- branch of mathematics called "measure theory."  In
economic analysis, Arrow and von Neuman and Morgestern proposed ways
to deal with uncertainty in mapping economic actions to wellbeing --
and there's little that can be done in economics without a systematic
way to map actions to wellbeing in an uncertain world.  How, for
instance, can we build socialism without having some way to anticipate
the impact of our individual and collective actions on social welfare
in the face of uncertainty?

The implications of uncertainty for basic notions in classical
political economy are huge.  Just consider the notion of "ownership." 
What does it mean to "own" a good in economic (as opposed to legal)
terms?  It means staking a credible claim over the benefits derived
from its use or consumption -- and, when dealing with commodities,
over the benefits derived from its exchange value as well.  But the
benefits are necessarily a promise in the future (near or far).  And
that's where uncertainty (and risk) kicks in.  It's apparent that
uncertainty has played a huge role in shaping up the institutional
contours of capitalist economies.  One just needs to look at financial
institutions, insurance contracts, etc.

My claim is that understanding these features of capitalist societies
is *essential* to better grasp the implications of *collective
ownership*.  For example, one can think of collective ownership as a
form of insurance (and vice versa).  (Marx insinuated something of the
kind in Gotha.)  And then much of the analytical apparatus developed
to understand insurance and other financial instruments can be
deployed.  (I'm assuming that Marxists are able to unbundle the social
from the "technical" relations.)

And I could go on and on...

>        Really, it's not enough to say that there's confusion in the
> ranks of the enemy or that some economists are not quite rightwing
> republicans (ie., that they resist the inherent logic of the dominant
> theory). No immanent challenge that you describe can compare to that
> which was advanced years back by the Cambridge criticism (in
> particular, Robinson's challenge that the sum of capital is not
> independent of the interest rate).

My balance of the Cambridge critique is very different.  As far as
conventional economics is concerned, the neo-Walrasian approach
(general equilibrium) bypassed the issue altogether.  (That doesn't
mean that general equilibrium is beyond critique, but Robinson's
doesn't touch it.)  But, frankly, from the point of view of Marxism,
the idea that you cannot coin an abstract concept of physical "means
of production in general" ("capital" in Cambridge terms) and come up
with a necessarily imperfect but *workable* operational measure to
match that concept (an "aggregate measure of capital") is ludicrous. 
Not that it matters to the question, but thinking in terms o Marx's
two-department reproduction analysis, for example, would be precluded.
 I don't know of any Marxist settling this issue satisfactorily, but
in my mind I am personally at peace with the problem.  And here's in a
nutshell why:

Setting aside the duh fact that aggregation in empirics -- as
abstraction in theory -- entails the loss of information, the main
claim is that the weights in the aggregation are smuggled *value*
notions (intertemporal shadow prices that aggregate as the average
profit or interest rate).  Neither of the Cambridges represented the
standpoint of Marxism, but people familiar with Marx's work will not
have a hard time noting that those shadow prices are not *per se* in
the nature of *value* notions, but rather in the nature of what Marx
(in the section on fetishism in chapter 1) called "the *determining
factors* of value" -- which is a different enchilada.

What's the difference?  A clear description of the difference is in
that letter Marx wrote to Kugelman where the old man says that "even a
kid knows that a nation that doesn't distribute its labor resources in
accordance with certain proportions etc. would die right away." 
Distributing labor according to proportions governed by the technical
laws of economizing time (e.g., that the marginal bang across
alternatives must equalize, etc.) is *not* a *value* thing per se.  It
is instead a "*determining factors* of value" thing.  Nemchinov
clarified this most aptly in his controversy with Soviet scholastics:

The shadow price of the resource (the ultimate resource is, of course,
human labor time) is an implicit discount rate, whether the planners
know it or not, whether the planners use it or not.  But it's not
necessarily a *capitalist* or a *market* (in value terms) interest
rate.  Forgive my jargon, but it's hard to couch this in other terms
and stay clear: In static terms, this shadow price is the "Lagrangean"
of the planner's optimization exercise.  And in dynamic terms (a
nation needs to distribute its labor resources not only across
industries but also over time), it is the trajectory of the "co-state"
in the "Hamiltonian."

The objection to Nemchinov was a guilt trip: if he was right, then
Marxists were implicitly admitting that the odious "subjective value"
approach of bourgeois economics had been essentially right from the
getgo.  Since the 1870s neoclassical revolution, value had been
"redefined" not in terms of labor time, but in terms of "relative
scarcity."  But thinking straight, ultimately, what does it mean to
say that a good is "relatively scarce"?  It means that its supply is
not infinite.  That is, it means that the productivity of the labor
that produces such good is finite.  Ultimately, it means that human
collective conscious-and-active time is limited.  So, Marx defined
value as the inverse of the productive power of labor.  Then the
neoclassicals "redefine" it as "relative scarcity."  Marx focused on
the power of human labor.  Then the neoclassicals (with their minds
clouded by commodity fetishism) shifted the focus to the reflective
attributes of things.  What else is new?

> So, strip away the abstract
> principle and what do we have? Frankly, it looked kind of grim from
> your account. Will you respond by saying, ah, but Marx looked at the
> modern economics of his time? Well, yes, some of it--- but he didn't
> spend much time on JB Say after 1844; so, to make your case you need
> to identify a modern school which goes to the core, helps us to
> understand the obscure structure, no?

Yes, we need to find the most economical ways to engage with modern
economics.  What sources to tackle? Textbooks are influential, but --
for obvious reasons -- they lag behind.  So, we need to deal more
seriously with high theory.  More serious work on the Smiths and
Ricardos and less on the Says, Seniors, and Malthuses.  But how do we
know this in advance?  (In retrospect, one wishes that Marx had taken
Malthus more seriously -- Luxembourg and Keynes did and I think we
gained a better understanding of things for their doing so.)  At the
end of the day, one thing is investigation and another is
presentation.  Marx disposes of Say in a few passages, because before
writing on Say, he *learned* one way or another that Say was only
regurgitating the vulgar side of Smith.  But, short of having perfect
foresight, it's not always easy to tell *a priori* what is vulgarity
and what is substance.

>        My questions don't drop from the sky. Some of us old-timers
> have seen a movie before in which bright folks succumb to the siren
> call of nice math in their passage from Marxism to neoclassical
> economics with an attitude. I hope this is a different story. That
> header, though, gives me pause.

Dogmatism has its own sets of perils, Michael.  In this uncertain
world, only death and taxes are guaranteed.  But not to trivialize
your concern, I think we (collectively, comradely) need to keep the
eye in the ball and put ourselves in the position where the workers'
unity becomes *our* own personal problem and the need for a society
more in tune with the best of our humanity is *our* own radical need.

Best,

Julio