In this lengthy essay, I will explain the relationship between the claim that capitalism arises through the expropriation of workers, and the claim, specific to Marx’s economic theory, that capitalism rests on the exploitation of the working class. The term “exploitation” in Marx’s writings has a specific technical meaning which I shall explain in good time, but we should start by recalling that “to exploit” has two distinct and yet related uses in common speech. To exploit something means to use it for some purpose. “In his architectural designs, Frank Lloyd Wright exploited the particular physical and scenic characteristics of the site on which a building was to be constructed.” To exploit someone means to take advantage of that person for one’s own purposes. “Trump exploits contractors whom he hires on his construction projects by using the expense of legal proceedings to get out of paying the bills he has run up with them.” The first usage has no obvious normative implications. No one save a Mother Earth enthusiast would blame Wright for exploiting nature in his designs. The second usage at least prima facie does have normative implications. Marx deliberately plays on this ambiguity in Capital.The Philosopher's Stone
The Connection Between Expropriation and Exploitation, Part One
Robert Paul Wolff | Professor Emeritus, University of Massachusetts Amherst
59 comments:
The standard Marxist oriented explanations of exploitation in capitalism are needlessly complex and only serve to limit understanding.
In my mind the problem is that we're stuck in the idea that the system is an ill-defined 'capitalism' and we thereby get bogged down in confusing details and arcane concepts (like surplus value, use value, and so on).
We're far better off dropping the entire notion of 'capitalism' and focusing instead on the plain and simple fact that the system is and has been for thousands of years one of minority control, i.e. inequality (oligarchy). Inequality isn't a side-effect of 'capitalism'; it IS the system.
The motives of the empowered minority then become crystal clear - to costlessly divert goods and services to its needs (luxury consumption and aggressive wealth defense) and to suppress the majority in order to maintain the social hierarchy. Most importantly, the existential hostility becomes clearly exposed and we no longer need an academic degree to understand it.
Jim
http://commentsongpe.wordpress.com
@ commentsongpe
I agree. This is chiefly a moral issue and framing it that way is the way to go from the pov of persuasion. The power elite do everything in their considerable power to mask this travesty of justice.
BTW, Pope Francis is cutting to the chase in just this way.
Distribution is a moral choice and a socio-political issue, which is a reason that conventional economists leave discussion of it off the table and justify the unequal distribution in terms of the natural working of markets as the only effective and efficient way to manage distribution. TINA (there is no alternative) Marginalism is then trotted out to justify distribution based on "marginal productivity" using models that have little relation to reality and then claim "just deserts." It's BS, of course.
However, at some point numbers have to be put on it. That requires a rationale that has an economic foundation.
But the first step is getting it across that the present distributional system is unjust, hence immoral, and needs to be changed to be more inclusive.
Then we can argue about proportionality.
But nothing much will happen in societies that are ruled by power elites. In order to fix the issue permanently, the sine qua non is democracy as rule of, by and for the people, instead of representative government in which the representatives represent the power elite rather than the people at large.
It also requires systemic constraint that prevent the tyranny of the majority, e.g., through rights and suitable adjudication and enforcement system.
Approaching this as chiefly an economic issue is ass-backwards.
Both of you expounded upon the same issue I was thinking about. I was in a debate with some online Marxists in a comment section the other day and explained what I knew about MMT. Someone else who is sympathetic to Marx as a brilliant economist and also understood MMT tried to explain what money was to this person. Much of the time, the debate became a ridiculous semantics game over labor theory of value and the notion that you would need taxes to pay for UBI along with what would happen with automation in 1st, 2nd and 3rd world economies. Some of the comments reminded me exactly of a lot of people that try to apply quantity theory of money to today's non-numismatic systems when it comes to advanced economies like the US and Japan. Some of these people sounded just like
One of the most important insights I got from reading that debate was how the more MMT-minded person rejects the strict interpretation of labor theory of value that his opponent kept hammering on about. The debate is still going, but that has resulted is the opponent still asking how a government even issues money at all and wondering how one can even talk about economics at all if you don't accept his definition of what money is according to the Marxist conception of it. He didn't seem to understand the greater insights of what you have talked about wrt to inequality and how powerful people and often clueless idiots continue to impoverish others due to their own stupidity and lack of knowledge about how to actually represent the people. It was quite a sad spectacle to see how this person literally undermined his own cause by having a hard time coming to terms with all the facts that were laid out.
I still feel a have a lot to learn, but I'm constantly trying to read as much as I can from blogs like this and as many books as I can get my hands on as an autodidactic kind of person. I did not study economics as a major in school, but can recognize the significance of MMT and how it opens up a lot of opportunities with what you can do with fiscal space in the Untied States and other monetarily sovereign nations.
Correction: Some of these people sounded akin to a bunch of right-libertarian GOPers.
I forgot to finish the last sentence in the first paragraph, but I think you understand my point anyway.
You may be able to explain MMT to a Marxist, assuming they are interested in reforming capitalism. They also have alternative ideas of what money should be i.e. its characteristics.
There is another Marxist economist, named Richard Wolff, who summed it up this way:
If an employer pays you 20 dollars an hour, you can be certain that the goods and services you produce in that hour are worth more than 20 dollars. When that isn't the case, the business will go bust.
"There is another Marxist economist, named Richard Wolff, who summed it up this way:
If an employer pays you 20 dollars an hour, you can be certain that the goods and services you produce in that hour are worth more than 20 dollars. When that isn't the case, the business will go bust."
Exactly. I was hoping the opponent would at least be able to see that. My main point in my very long comment was that using GOP logic in your analysis is the same kind of thinking that would lead to finance capitalists like Carl Icahn and institutions like Goldman Sachs and Chase taking control of the U.S. Treasury if the Federal Reserve was ended due to misguided cheering about "Ending the Fed" and therefore worsening income inequality and life for people. I explained the differences between modified accrual accounting, cash basis accounting and accrual accounting at the government level in a systematic way, but also emphasized the implications of what these facts actually mean from a moral standpoint.
I have listened to Richard Wolff speak before and he's incredible IMO. I even mentioned him in my comment. As I was saying previously, I know there's a lot more content I want to read up on, particularly with Michal Kalecki and the work he did and certainly more of these texts I want to improve my understanding of. I want to be sure that I have a full comprehension of what I'm talking about.
Penguin, could you link to the conversation you had?
Bob,
It was on YouTube and I hope this link works properly so you can see the full context of what this debate was about. I chimed in with a few comments and the debate is mostly between two people right now.
https://www.youtube.com/watch?v=PN_7O6ytkR0&google_comment_id=z13mhleywkatcvnz304cipwjew2hstyghfs
The link worked, thanks :)
I'm afraid the Maoist perspective only complicates matters. I would view automation as comparable to slavery. The machines produce the surplus and are only given the minimal resources they need to operate (electricity, input materials, maintenance). The social relationship is one of ownership, as was the case during slavery. Does this invalidate the LTV or express it in another form?
Off-topic
Fleeing South Korea
Young skilled South Koreans throw in their careers for manual jobs overseas to flee the pressures of life at home.
http://video.aljazeera.com/channels/eng/videos/fleeing-south-korea---101-east/5265273618001
There's been an update on the comment section, Bob. Someone wanted to see a Marxist critique of MMT and was tired of what he saw as "utopian Keynesianism." That was the notification I got on my phone last night although other than that, it seems the debate died down.
I'd be excited to see a debate of some sorts over this though. I think a good point to try to diffuse tensions between the two camps is talking about MMT's connections to Kalecki and Lerner as opposed to Keynes himself and try to make people realize you don't have to support state authority or capitalism to understand what the implications are and how MMT would be useful if you wanted to reform capitalism as much as possible if revolution isn't as likely to happen. I'd love to see someone like Tom who seems very well-read on Marx much more than I am to offer his POV.
MMT economists frame the debate in terms of the current state of academic economics and its application to policy formulation. Keynes, Lerner, and Kalecki did too. Lerner and Kalecki abandoned Marxism.
My view on Marx is that he was a second-rate philosopher at best, an amateur economist, mathematically disadvantaged as he himself admitted, but a pretty good sociologist when sociology was not yet a discipline.
Marx is notable for combining fairly weak skills in particular areas into a powerful skills set that vaulted him into the position of becoming a world-historical figure. Of course, it helped that he had the aid of the very talented Friedrich Engels and was in the right place at the right time in the historical dialectic.
In my view, vulgar Marxists have lost the plot. Marx was a creature of his time and served the need of the time. History has moved on.
On the other hand, I believe that Marxians still have a lot to contribute but they are not fixated on Marx as a prophet.
Where Marx is still particularly relevant is in the issues surrounding class power, which was written out of Western academic thinking subsequent to the success of Marxism and especially Marxism-Lenenism as a revolutionary doctrine.
Class power leads to the ability to expropriate and expropriation leads to exploitation. In economics this leads to the classical view of economic rent, which Marx elaborated on so successfully that it was dismissed for the most part from conventional economics, which assume symmetry, even though most economists realize that this unrealistic.
Probably the bridge from MMT to Marxism is best served by Michael Hudson, especially on parasitic extraction of economic rent based on the rationale of what he calls "junk economics.". If I were going to engage Marxists, especially vulgar ones that regard Marx as their prophet, this is where I would begin, if I had the time.
Thanks Tom. This was exactly what I was getting when offering my take on the situation. I have taken a few sociology classes before, and Marx, Engels and Max Weber were always brought up as important influences in the field and the different theories and class and stratification there were brought to the table.
Vulgar Marxists is exactly the term I had in mind for these people, just like how I view the vulgar Austrians. Both of them are products of their own time and can't seem to understand what conditions have changed and how to readjust their analysis to the present situation.
It's not like the former doesn't recognize when there's a bad argument from the right-wing about their lack of knowledge about what socialism actually is, but after that, I seem to part ways with them on many other issues. I used the knowledge given here to disprove the notion that socialism is the reason why Venezuela is having its own problems for example. I would have thought this insight would have made more of the vulgar Marxists think critically about what's going on. I never provided actual policy recommendations, just mainly went into clarifying the differences between public debt, private debt, surpluses and deficits and what happens when a country loses its ability to create its own currency and spend into the economy as in the case of Greece.
What you said about Marx is the point Scott Adams has been making on his blog about people having their own talent stacks. You might not be the best at several skills, but combined together, you can overcome much of the hurdles and become a noteworthy figure, as in the case of Donald Trump. He's obviously not the best business man in the world, or the best public speaker, or the best politician, but seemed to have just enough different skills to combine them all together to become a powerful force in his field.
In all, the more I discuss these issues, the more of an understanding I reach, but I feel like I could be doing so much more to further my own knowledge. I am not a trained economist, but I enjoy reading about it a lot on my own and when I don't know something, I admit it and look it up.
@Tom
I agree with your comments on Marx. Your point on MMT, I think, is important.
"MMT economists frame the debate in terms of the current state of academic economics and its application to policy formulation. Keynes, Lerner, and Kalecki did too. Lerner and Kalecki abandoned Marxism."
By speaking the language of economics and ignoring or substantially minimizing the fundamental reality of our socioeconomy - that of minority power - MMT can also be described as 'vulgar'.
Jim
I would add that while Kalecki's economic models are far removed from Marxian notions of surplus value, etc, class and power were integrally incorporated into his outlook. He prominently used the term 'capitalist' in his models and thereby gave us a reasonable glimpse of what's really going on. In contrast, if we read only MMT, we'd end up thinking there was nothing in the world beyond a 'private sector', a 'government sector' and a 'ROW'.
I can see where MMT can be used by social democrats, but not for Marxists or Maoists. "21st Century Socialism" is just social democracy by another name.
I think the monetary insights of MMT / Lerner / Kalecki are highly valuable and crucially important for Marxists, especially given the confused monetary theories of Marx.
Neither MMT or Marxism can be taken by itself - by speaking in the language of academic economics, MMT hides the core reality and is thereby essentially false. Marxism is true in its essence but it also hides reality through its confused mystification of capitalism.
My belief is that the best way to understand our system is to interpret Kalecki in terms of oligarchy and its power as a class to costlessly divert production from the population to maximize its power and luxury.
Jim
I've compiled a list with some posts/essays (Mathew Forstater, L. Randall Wray, Bill Mitchell, Peter Cooper and one by yours truly) on the relationship between MMT and Marxism:
http://aussiemagpie.blogspot.com/p/marx-and-mmt.html
@Jim
Hi Jim. You wrote:
The standard Marxist oriented explanations of exploitation in capitalism are needlessly complex and only serve to limit understanding.
You might be interested, then, on Marx's June 1865 speech to the
First International Working Men's Association "Value, Price and Profit"
https://www.marxists.org/archive/marx/works/1865/value-price-profit/
Like the Manifesto, it was an speech written with a working-class readership in mind, as opposed to educated 19th century people.
Here's an abridged version:
http://www.acsu.buffalo.edu/~zarembka/Marx.htm
If you, like myself, don't like Marx's literary style, there's plenty introductory expositions:
http://aussiemagpie.blogspot.com/p/test-page.html
@Tom (January 1, 2017 at 9:44 AM)
You wrote:
Lerner and Kalecki abandoned Marxism.
My view on Marx is that he was a second-rate philosopher at best, an amateur economist, mathematically disadvantaged as he himself admitted, but a pretty good sociologist when sociology was not yet a discipline.
Tom, as I'm sure you know, I find that kind of remarks an irresistible provocation. For two reasons: their inexactitude and their lack of self-awareness from your part.
Lerner and Kalecki did not abandon Marxism, as you wrote. They never went carefully over Marx's theories and after careful and dispassionate consideration discarded them. They never were Marxists, to begin with. Lerner's training in economics was strictly conventional, at the LSE and at best he was a Fabian socialist. You don't need to take my word for that:
https://web.archive.org/web/20110430120044/http://www.newschool.edu/nssr/het/profiles/lerner.htm
Kalecki not even that: the nearest the got to be a Marxist was to publish in a socialist journal.
https://en.wikipedia.org/wiki/Micha%C5%82_Kalecki
Now, those two are post Keynesian grandees, second only to The Lord and Robinson. At least on this matter you should know better. But you don't, which doesn't stop you from making deliberately provocative comments.
At the other hand, oddly enough, you forget to mention another post Keynesian patron saint, Piero Sraffa, who not only considered himself a Marxist, but attempted to solve the "problems" he found in Marx's theories.
http://nakedkeynesianism.blogspot.com.au/2012/08/sraffa-and-marxism-or-labor-theory-of.html
Note that I say nothing about Bill Mitchell, L. Randall Wray, or even Peter Cooper: they seem to see value in Marx's theories, don't they?
---------
I am surprised by your claim that Marx admitted he was mathematically disadvantaged, for two reasons.
First, because you yourself are not a fan of maths in economics and you have argued that many times in this blog.
Second, because -- and I might be mistaken -- I never heard of that.
Frankly, to me, this seems like you are pulling arguments off your ass. But there is an easy way to prove me wrong: show us the quote.
Although there were a few antecedents (Hermann Heinrich Gossen, for instance) political economy only became mathematised with the Marginal Revolution and then only slowly: most political economists (even among the mainstream) were reluctant to adopt it. Marshall himself recommended his students to use maths sparingly.
You say that Marx was an amateur economist. There are different ways to understand that: (1) he was self-taught, (2) he didn't make a living as an economist.
Both are true: there were no university courses of economics back then. People like Adam Smith, David Ricard were also self-taught. They, too, are amateur. No?
Marx did not make a living as a professional economist.
Are you a professsional economist?
Okay. Silly question: you aren't.
A better question: Was Keynes a professional economist? The extent of his training was a few weeks, under Marshall who later got him a job as a professor at Cambridge. His publications came later, as a professor. Not much in the way of formal training, but he did work as a professional economist.
Incidentally, Lerner, whom you mentioned, did have formal studies, at LSE. He had papers published in journals and Keynes himself did not recommend Lionel Robbins his hiring as a professor.
----------
Not long ago I challenged you -- in this same blog, before other readers -- to argue your idealist dialectics as opposed to Marx's historical materialism. You could have shown your superiority as a philosopher to Marx. That shouldn't have been problematic for you: he was a second-rate philosopher, at best.
Still, you refused it: it was a personal matter, you wrote. You wrote, too, that for Marxists, idealist Hegelian dialectics sound like "mumbo jumbo" (your word, not mine).
You were right on something back then: mumbo jumbo fits it well.
Incidentally, come to think of it, Kalecki, too was self-taught. Does that make of him an amateur?
@ Magpie
Lerner and Kalecki did not abandon Marxism, as you wrote. They never went carefully over Marx's theories and after careful and dispassionate consideration discarded them. They never were Marxists, to begin with. Lerner's training in economics was strictly conventional, at the LSE and at best he was a Fabian socialist. You don't need to take my word for that:
Agreed about Lerner. I should have written socialism instead and realized it as I hit the post button.
Kalecki is often referred to as a Marxist (J. E. King), perhaps incorrectly. Sam Williams calls Kalecki "questionably Marxist." However, John Bellamy Foster refers to Kalecki as "the great Polish Marxian economist."
Kalecki's stance apparently remains controversial. See Did Kalecki Accept the Labour Theory of Value?l, along with Matias Vernengo's comment in the thread.
Kalecki is associated with Marx especially through Rosa Luxemburg's The Accumulation of Capital. See Harcourt and Kreisler's https://papers.ssrn.com/sol3/papers.cfm?abstract_id=2128363 Whatever Kalecki's relationship to Marx and now it developed, it is quite clear that he disapproved of dogmatic Marxism. I think that Sam Williams is probably correct that Kalecki was influenced by Marx and Luxemburg but that is it, so it may not be tenable to suggest he was ever a Marxist and moved away from it.
You say that Marx was an amateur economist. There are different ways to understand that: (1) he was self-taught, (2) he didn't make a living as an economist.
Correct, the classical economists and people that moved to economics from other fields, like Keynes (math) and Kalecki (engineering. Ludwig Wittgenstein was an amateur philosopher, having been trained as an engineer and never read deeply in philosophy. These people were geniuses, which is the source of their greatness rather than their erudition. It was probably beneficial in allowing them to think out of the box.
The big difference between Marx and Keynes, Kalecki and Wittgenstein was that Marx was also self-taught in mathematics as he was in economics. He realized that did not have the math skills needed to proceed at the level he wished to and therefore had to work at acquiring them. See ‘The Mathematical Manuscripts of Karl Marx’, New Park Publications, 280pp. £25 hardback, £15 paperback. Reviewed by Andy Blunden ,Labour Review (WRP), June 1983 here .
And mathematical beginners will feel for Marx when he wrote to Engels (January 11, 1858) during work on Capital: ‘I am so damnedly held up by mistakes in calculation in the working out of the economic principles that out of despair I intend to master algebra promptly. Arithmetic remains foreign to me. But I am again shooting my way rapidly along the algebraic route’. (p. VII)
Not long ago I challenged you -- in this same blog, before other readers -- to argue your idealist dialectics as opposed to Marx's historical materialism.
Both are insightful from different POV's that are based on different metaphysical assumptions. While they both provide insights that are useful, I am more inclined toward viewing consciousness as primary rather than matter, but I don't think that either is provable as a matter of logic or evidence. They are different frameworks.
For this reason I prefer Hegel's approach philosophically. But philosophy doesn't provide answers based on absolute criteria. It is necessary to stipulate starting points to avoid a vicious circle or reduction ad absurdum aka "turtles all the way down."
I have said that I think Marx's fundamental principal about economic infrastructure as foundational is an important stone in the foundation of knowledge, I don't view as being as comprehensive as Marx states it.
From my POV, the "proof," if there is any, lies in one's own experience, which admittedly results in subjective conviction. But in this case it is not gained through reading or thinking, although through reading and thinking one might become convinced that this is worth investigating experientially. This requires distinguishing between the finger and moon.
Note that I say nothing about Bill Mitchell, L. Randall Wray, or even Peter Cooper: they seem to see value in Marx's theories, don't they?
I think that Bill and Rand (and Mat Forstater) would say that this a matter of personal opinion and preference rather than core MMT.
Peter id's as a Marxist (although not a dogmatic one), I believe. He is not recognized as an MMT economist, although I think he is one the best expositors of MMT in his blog posts. But he has not yet set about writing articles or books on MMT, as far as I know, which I would say is what it takes to be considered an MMT economist. There are also economists that are MMT-friendly, like Michael Hudson, that are not considered MMT economists.
BTW, I regard Marx chiefly as an philosopher rather than as an economist. Economists criticize Marx for bing "too metaphysical." well, he was a philosopher. What did they expect?
This is not to say that Marx didn't make contributions to economics, but in my view his greatest contributions were to and social and political philosophy, theory and activism. While he is not regarded as a first rate philosopher by the historians of philosophy, he and Nietzsche changed the direction of philosophy away from traditional speculation based on reasoning.
Marx viewed the purpose of philosophy as effecting change rather then reflection and understanding, and he did change the world probably more than any other philosopher.
Nietzsche viewed his work as the call to stop thinking and "live dangerously." While Nietzsche's impact was not as obvious as Marx's, he did contribute to the cultural reorganization that would ensue.
Darwin and Freud also contributed strongly to this revolution that would occupy the 20th century. While the Enlightenment persisted, these influences can be viewed as a dialectical response to the Age of Reason that is still unfolding.
While I regard Marx as chiefly an activist philosopher rather than an economist, I regard Wittgenstein as chiefly a logician rather than a philosopher. Logic is prerequisite to philosophy as math is to science and accounting to finance.
@Tom
Agreed about Lerner. I should have written socialism instead and realized it as I hit the post button. (...)
I think that Sam Williams is probably correct that Kalecki was influenced by Marx and Luxemburg but that is it, so it may not be tenable to suggest he was ever a Marxist and moved away from it.
I have a few quibbles with the quotes (particularly Sam William's) but let's leave that aside.
Out of the three big historical post Keynesians, it seems we agree on two accounts: Lerner and Kalecki. We are making progress.
But what about Sraffa?
For some reason, post Keynesians have a tendency to forget the name.
The big difference between Marx and Keynes, Kalecki and Wittgenstein was that Marx was also self-taught in mathematics as he was in economics.
So, formal training in economics (philosophy, in Wittgenstein's case) is not a necessary condition for success in one's field (economics and philosophy), and indeed a lack of formal training was probably beneficial in allowing them [i.e. Keynes, Kalecki and Wittgenstein] to think out of the box.
Unlike economics (and philosophy), then, formal training in maths is of the essence. It's, after all, the common denominator to Keynes, Kalecki and Wittgenstein and what differentiates them from Marx.
I'm pleasantly surprised that you no longer reject maths as merely "physics envy" and indeed I'm curious about that radical change of mind. What made you reconsider that?
But why should formal training in maths be necessary, when formal training is not necessary in one's own field?
In Marx's quote (I must confess, I never heard of it and Google only revealed two instances of it, both of them isolated from the letters where they appeared), if one believes he had difficulties with his lack of maths training (I am so damnedly held up by mistakes in calculation in the working out of the economic principles that out of despair I intend to master algebra promptly), then why should one doubt he was solving that problem on his own (But I am again shooting my way rapidly along the algebraic route).
Joan Robinson had no formal training in maths and, in effect, she was a mathphobe: I don't need algebra, I can think is one of her famous quotes. Did that lack of formal training disadvantage her?
If a theory does not require sophisticated maths and can be expressed by literary means, why should formal training in maths be required?
Keynes was a mathematician, as you noted, and he was a mathphobe:
I cannot persuade myself that this sort of treatment of economic theory has anything significant to contribute. I suspect it of being nothing better than a contraption proceeding from premises which are not stated with precision to conclusions which have no clear application … [This creates] a mass of symbolism which covers up all kinds of unstated special assumptions.
https://rwer.wordpress.com/2014/07/07/keynes-on-the-use-of-mathematics-in-economics/
He didn't use much maths in his General Theory.
Hyman Minsky, too, was a mathematician. He didn't use that knowledge in his work.
Further, Geoff Tily (from the City Political Economy Research Centre) is a fairly well-known British post Keynesian. Against Diane Coyle, he wrote:
I haven't read Wray's book, but the post-Keynesian position is that Keynes cannot be interpreted in mathematical terms (or more precisely as a set of simultaneous equations).
http://www.primeeconomics.org/articles/diane-coyle-finds-minsky-but-misses-keynes
I remember at the time you seemed to side with Tily:
Diane Coyle seems to be under the mainstream spell cast by Paul Samuelson in his econometric bastardization of Keynes.
http://mikenormaneconomics.blogspot.com.au/2016/01/controversy-over-keynes-minsky-and.html
I won't quote from Tony Lawson's "Mathematical Modelling and Ideology in the Economics Academy: competing explanations of the failings of the modern discipline?", or from Philip Pilkington, or from a number of other post Keynesians.
But if maths is necessary, why doesn't Sraffa's mathematical work suffice?
Finally,
Both are insightful from different POV's that are based on different metaphysical assumptions. While they both provide insights that are useful, I am more inclined toward viewing consciousness as primary rather than matter, but I don't think that either is provable as a matter of logic or evidence. They are different frameworks.
I can live with that. It's a subjective thing.
Still, I find it rather different from your first position:
My view on Marx is that he was a second-rate philosopher at best
I think that Bill and Rand (and Mat Forstater) would say that this a matter of personal opinion and preference rather than core MMT
I'm sure there's something to that in their positions. But that is not the whole deal, not by a long shot. From Prof. Wray's "Theories of Value and the Monetary Theory of Production":
"This paper extends earlier work (Wray 1991; see also Wray 1992b) that argued that liquidity preference theory should be interpreted as a theory of value. Here I will argue that two theories of value are needed for analysis of a monetary production economy: the labor theory of value and the liquidity preference theory of value. Both Keynes and Marx were trying to develop a monetary theory of production; Marx, of course, adopted a labor theory of value in his analysis, and it was previously argued that Keynes adopted a liquidity preference theory in his. A monetary theory of production should adopt both, however, and I will argue that Keynes seems to have recognized this. Further, Keynes did adopt labor hours as the measure of value and said he agreed that labor produces all value. I admit it is still a leap to claim that Keynes accepted both theories of value. Instead, I argue he should have adopted both and will show that this is consistent with the purposes of the General Theory."
http://papers.ssrn.com/sol3/papers.cfm?abstract_id=150497
Regarding Peter:
But he has not yet set about writing articles or books on MMT, as far as I know, which I would say is what it takes to be considered an MMT economist.
I'd say that whether he is or not an MMT economist is neither our call to make (it's the big MMT names') nor is it relevant here: he is an economist and he is competent, knwoledgeable and intellectually honest.
He's a lot more than some young whiz kids who receive a lot of support from the MMT community and whose only talents are for self-promotion, sophistry, and sycophancy.
PS
And, please, never, ever, for no reason point me to visit that filthy "Lord Keynes" blog.
But what about Sraffa?
I didn't mention Sraffa since I don't know. I am not a student of Post Keynesianism and its history. My impression is that Sraffa is associated with PKE as a matter of association and contribution than identification. Something like Schumpeter wrt Austrian economics. I see them as originators of minor but important schools of economic thought. They were both "worldly philosophers," as were Smith, Marx, Keynes, Veblen, etc. At Cambridge, Sraffa hung out with Ramsey and Wittgenstein. I would like to put more attention on Sraffa owing to his association with Ramsey Wittgenstein, but no time.
I'm pleasantly surprised that you no longer reject maths as merely "physics envy" and indeed I'm curious about that radical change of mind. What made you reconsider that?
But why should formal training in maths be necessary, when formal training is not necessary in one's own field?
My take is that theoretical economics as a science requires very highly level math skills as well as the ability to adapt them to theorizing about the real world, as real scientists do. Jason Smith has looked at economics and found economists wanting in this regard. They are out of their league.
I see practical economics as essentially difference from theoretical economics, which doesn't interest me. I see practical economics as an offshoot of social and political theory the way that Marx, Veblen, Galbraith, etc. did. The objective is not to come up with a formal models or an overarching theory of the "the economy," but rather to get some handles on economic phenomena relative to society as a whole as a key piece of the material life support system of a society. The chief questions that practical economics is concerned with are 1) living a good life as person in a good society, which presupposes the questions what being a good person means and what citizenship is about, and 2) how this applies in the context of particular societies, in particular one's own. Highly developed math skills should be needed to do this and where they are needed, that can be farmed out to heavy math dudes armed computers, which is what central banking officials do now as well as financial managers.
Practical economics is like practical biology wrt to medicine. Of course, bio research is needed for both theoretical understanding and ongoing innovation, but the practical types work on solving the issues of the day and informing medical professionals as well as providing them with cutting edge tech.
This hat practical economists should be doing, especially from the macro scale since that is most applicable to policy. Political economy as I view is taking that info and applying it to policy formulation.
These are different knowledge types and skill sets. Theoretical economics are not qualified to be doing practical economics or policy formulation any more than Ashton Carter's PhD in theoretical physics equips him to be Def Sec. He spent years in on the job training but that is not a replacement for expertise in political theory, international relations, foreign policy and military strategy. He gets that input from experts.
To summarize, my view is use the tool to fit the job. This means being skilled in the use of the tool and being able to tell which tool is most suitable.
In teaching econ, I would have a widely application intro course in high school and a more detailed one in Econ 101. I would then have a two track system divided into theoretical econ with heavy math with a view to grad study and practical econ with training in related disciplines that are needed for application that would qualify student for grad study in practical econ, political economy, political theory, IR, and foreign policy.These people would have to be well qualified in statistic and algebra, but not necessarily heavy math since they would not constructing formal systems to support theory. But they would need enough math chops to understand what theorists produce.
In my view, the challenge of econ arises in the relation between money & banking and finance, and econ. Econ is about real stuff — production, distribution and consumption. But in a monetary production economy, the unit of measurement is the unit of account and distribution is rationed by price in markets in which "money" pays a key role. So exploring this relationship must be a key feature in teaching economics.
My view on Marx is that he was a second-rate philosopher at best
That not only my view but that of historians of philosophy. My grad work was heavily oriented toward history of philosophy and I never had to study Marx, nor was he included in the comprehensive exam. He was not considered important in comparison. The big ones are Plato, Aristotle, Aquinas, Descartes, Hume, and Kant. Th second tier are people like Plotinus and Augustine, Leibniz and Spinoza, Berkeley and Locke, and maybe Hegel. Hegel was not on the comprehensive either in the sense of a deep understanding being required. He was just not that key in the development of the Western intellectual tradition, which Whitehead famously called a footnote to Plato, who posed the enduring questions. Philosophy is about those enduring question, the responses they have evoked, and how those responses have shaped Western thought and civ from the POV of reasoning about them.
Marx's major contribution as a philosopher is twofold. First, he originated dialectical materialism, but here he was admittedly deeply indebted to Hegel, as he himself said, "standing Hegel on his head." Marx chose to adopt and adapt Hegel's method which was an adaptation of Plato's Socratic dialectic leaving out the dialogue. Marx took over Hegel's method, which classical Greek thought suggested to him, and applied it novelly. Secondly, Marx viewed philosophy in terms of political activism. But so did the Greeks, for whom philosophy — literally, love of wisdom — signified a way of life as a person and a citizen. Wisdom is not only to be acquired but also lived in society. This is what Marx was about, too.
Subsequently, Marx came to be viewed by followers as a prophet and enemies as the devil incarnate, but Marx's self-image was a reformer of the status quo that was shaped by the Age of Reason. He would likely be both amused and shocked about his present reputation. Marx rejected the search for universal first principles in favor of historical development. Hegel did, too, in a sense but his logic shows that he considered this logic to be the metaphysics of historical development. Marx didn't see it that way and preferred an empirical approach more consistent with the scientific spirit of the time.I don't think Marx would appreciate being garbed in the robes of a prophet but he probably would revel in his reputations as a gadfly (Socrates had described himself as a gadfly and was ordered to be put to death by the vote of the citizens of Athens for going to far.)
As a philosopher Marx chose to focus on social and political philosophy and make it relevant to the issues of his day, a revolutionary time. The biggies in social and political phil are Plato and Aristotle (Athenian democracy), Hobbes, Locke and Rousseau, and Kant. Marx was well-versed in Greek thought and his views are somewhat of dialectical response to this, as were Hegel's. Marx was aligned with Locke's liberalism by he rejected Locke's bourgeois liberalism. Marx was also aligned with Rousseau in assuming that humans in the state of nature are essentially virtuous and become corrupted by what they acquire, hence change is possible.
All educated Germans were familiar with Kant. Hegel was also responding to Kant's philosophy in his work, including his political philosophy. Kant was a republican, and Hegel saw the Prusssian state as the apex of history in in achieving self-detemination along with rational ordering of life. Marx was responding and reacting dialectically to these influences, too.
So Marx was not a highly original thinker philosophically, or at least history has not regarded him as such. His major contributions were in sociology, a subsequent discipline in its own right of which he was one of the founders. His historical analysis was deep and influential, and it is still relevant. But his understanding of class and power were his chief contributions that are lasting. Because they capture a lot about reality, they won't go away.
I'm sure there's something to that in their positions. But that is not the whole deal, not by a long shot. From Prof. Wray's "Theories of Value and the Monetary Theory of Production"
That is true, and I suspect that at least Randy and Bill among the MMT economists would give Marx a more central role if he were not culturally toxic. But as it stands, Marx is not presented as core MMT.
BTW, there is even a controversy over whether Minsky is core MMT.
Correction to my 10:35 AM
"Highly developed math skills should be needed to do this.." should be Highly developed math skills should NOT be needed to do this
"We are all Post-Keynesians here" - Tom Hickey
It was years ago, and I don't remember the forum you posted that in.
I'm still waiting for Richard Wolff's thoughts on MMT. As a self-described Marxist economist he should be able to recognize the implications of this theory. He is in favor of a jobs program and worker self-directed enterprises.
Marx as the 'founder' of sociology? Grotesque.
Marx as the 'founder' of sociology? Grotesque.
Marx is recognized as one of the originators, among whom was 14 c. Arabian Ibn Khaldun and 19th c. Auguste Comte and Herbert Spencer. The founders of sociology as a social science were Durckheim and Weber.
Durkheim, Marx, and the German theorist Max Weber (1864–1920) are typically cited as the three principal architects of sociology.[40] Herbert Spencer, William Graham Sumner, Lester F. Ward, W. E. B. Du Bois, Vilfredo Pareto, Alexis de Tocqueville, Werner Sombart, Thorstein Veblen, Ferdinand Tönnies, Georg Simmel and Karl Mannheim are often included on academic curricula as founding theorists. — Wikipediai/Sociology
Wikipedia omits Engels but he was contributing along with Marx. I would include him.
"We are all Post-Keynesians here" - Tom Hickey
I don't recall the context then, but I would say it is true of this.
Post-Keynesian economists are united in maintaining that Keynes' theory is seriously misrepresented by the two other principal Keynesian schools: neo-Keynesian economics, which was orthodox in the 1950s and 60s, and new Keynesian economics, which together with various strands of neoclassical economics has been dominant in mainstream macroeconomics since the 1980s.
Post Keynesians in general hold that neo-Keynesianism (as in Samuelson's neoclassical synthesis and John Hicks ISLM, and New Keynesianism (which PKE views as a variety of monetarism in which the interest rate controls the economy excepting at the lower bound) are not actually Keynesian. Samuelson's version of economic formalism is sometimes called "bastard Keynesianism."
Keynesianism is based on the principles of effective demand and uncertainty, and it rejects Say's law, long-run money neutrality, loanable funds, general equilibrium at full employment in the long run, and assumptions of symmetry that exclude uncertainty other than from exogenous shock. PKE is in agreement with that and so is MMT. But PKE is not a homogenous school. There are differences among PKE economists even though they agree on the essentials that Keynes pioneered.
The first PKE economist was Abba Lerner, who quickly took the General Theory to its logical conclusion. At first Keynes himself disagreed publicly but then later concurred with Lerner.
I have a problem with naming Marx as a founder of sociology when his intent was to critique capitalism. Sociology was incidental to the development of the Marxian perspective. Herbert Spencer is problematic for a similar reason i.e. his political and socio-economic views. As for Marx, he was not a scientist, nor was he impartial to the study of human societies. He had an agenda from the beginning.
Naming these figures from history as "founders" may be useful for establishing a posthumous legacy, but it runs the risk of having the ideas overshadowed by the person. Many people believe Karl Marx is responsible for the deaths of millions. It's not true, nor should it tarnish the field of sociology, but that is how it can be portrayed. Having Mr. Survival of the Fittest as another founder is not a good PR move.
One dismal science is casualty enough. Sad to say, but public perception is more important than what scholars may think. I wished we lived in a genteel world, but we don't.
At the time Marx was writing, there was no field of sociology or economics. Both field were just emerging.
Marx's work on capitalism was sociological in today's terms and class and power are sociological categories rather than economic ones.
Weber also wrote on capitalism from the sociological perspective in The Protestant Ethic and the Spirit of Capitalism
C. Wright Mills, the author of The Power Elite,The Power Elite was a also sociologist.
C. Wright Mills was heavily influenced by pragmatism, specifically the works of George Mead, John Dewey, Charles Sanders Peirce, and William James.[12] The social structure aspects of Mills' works is largely shaped by Max Weber and the writing of Karl Mannheim, who followed Weber's work closely. Mills also acknowledged a general influence of Marxism; he noted that Marxism had become an essential tool for sociologists and therefore all must naturally be educated on the subject; any Marxist influence was then a result of sufficient education. Neo-Freudianism also helped shape Mills' work.[13] Mills was an intense student of philosophy before he became a sociologist and his vision of radical, egalitarian democracy was a direct result of the influence of ideas from Thorstein Veblen, John Dewey, and George Herbert Mead.[14]
C. Wright Mills was heavily influenced by pragmatism, specifically the works of George Mead, John Dewey, Charles Sanders Peirce, and William James.[12] The social structure aspects of Mills' works is largely shaped by Max Weber and the writing of Karl Mannheim, who followed Weber's work closely. Neo-Freudianism also helped shape Mills' work.[13] Mills was an intense student of philosophy before he became a sociologist and his vision of radical, egalitarian democracy was a direct result of the influence of ideas from Thorstein Veblen, John Dewey, and George Herbert Mead.[14 —Wikipedia
He also wrote a book on liberalism v Marxism.
The Marxists (1962) takes Mills' explanation of sociological models from Images of Man and uses it to criticize liberalism and Marxism. He believes that the liberalist model does not work and cannot create an overarching view of society, but rather that it is more of an ideology for the entrepreneurial middle class. Marxism, however, may be incorrect in its overall view, but does have a working model for societal structure, the mechanics of the history of society, and the roles of individuals. One of Mills' problems with the Marxist model is that it uses units that are small and autonomous, which he finds too simple to explain capitalism. Mills then provides discussion on Marx as a determinist.[13] (see above link)
The work ethic, Protestant or otherwise, is sociological; power is a sociological category when described in non-economic terms; class is sociological, but not the Marxist definition of class, which is economic.
Sociologists are not forbidden to write about other fields, or to express their political views. But science is about describing reality, in a verifiable and objective manner. How can you remain objective if political ideology is introduced?
The work ethic, Protestant or otherwise, is sociological; power is a sociological category when described in non-economic terms; class is sociological, but not the Marxist definition of class, which is economic.
Try telling that to economists.
How can you remain objective if political ideology is introduced?
That's the economists' answer to injecting class into economics. Injecting class and power = Marxism in their view.
The injection has to go where it belongs: the dismal science.
I didn't mention Sraffa since I don't know. I am not a student of Post Keynesianism and its history. My impression is that Sraffa is associated with PKE as a matter of association and contribution than identification. Something like Schumpeter wrt Austrian economics.
I'm sure you are sincere when you say you "don't know".
That's why the history of economic thought is important. I'd suggest you read Marc Lavoie's "Should Sraffian economics be dropped out of the post-Keynesian school".
Lavoie places the focus of the conflict in disagreements between "Fundamentalist Keynesians" and "Marxian Sraffians" (his categories). The latter represent the "surplus approach": who gets what out of the wealth socially produced.
The former reject it. Instead, they consider "Keynesian uncertainty" (by extension animal spirits and the confidence fairy) sacrosanct: the Word of the Lord.
In spite of attempts to synthesise the two currents (there were conferences in Trieste, Italy between 1980 and 1992 to that effect) "conflicts between strong personalities" explain the failure of the Trieste thing.
You and most post Keynesians are more influenced by the Fundamentalist Keynesian side.
What Lavoie diplomatically doesn't mention -- but diplomacy doesn't constrain me -- is that Sraffa and his ideas were well received and seen by Fundamentalists as useful tools in their fight against mainstream economics: Sraffa was the leading post Keynesian theoretician in the Cambridge Capital Debates. Good enough to hit Samuelson and the
"bastards Keynesians" over the head, but not politically convenient. Remember the surplus approach: who gets what.
This also explains why post Keynesians don't have a price theory. In Fred Lee's words:
Post Keynesian price theory has no real existence beyond the idiosyncratic writings of various Post Keynesian economists, its various renditions are theoretically incompatible to a lesser or greater degree, and it has not been entirely freed from neoclassical concepts and terminology. My objective in this book is to move Post Keynesian analysis forward towards a more comprehensive, coherent, realistic - and, indeed, believable - non-neoclassical theory of prices by setting out its non neoclassical pricing foundation by developing an empirically grounded pricing model.
A price theory is not politically convenient. The end result is that post Keynesians not only don't have a price theory: they are incapable of understanding why they need one. Or, as you put it:
This is chiefly a moral issue and framing it that way is the way to go from the pov of persuasion.
In a way, the parallel with MMT is striking: MMT and functional finance are alright, so long as full employment (politically inconvenient) is left aside. MMT, like Sraffa's maths, is only a useful theoretical cudgel to hit deficit hawks/doves over their heads.
Lavoie, however, considers that
[T]here is no true incompatibility between Sraffian economics and the rest of the post-Keynesian school.
Similarly, from a theoretical point of view, I think there's no true incompatibility between MMT and Marxism (dogmatic or not).
He [Marx] was not considered important in comparison. The big ones are Plato, Aristotle, Aquinas, Descartes, Hume, and Kant. Th second tier are people like Plotinus and Augustine, Leibniz and Spinoza, Berkeley and Locke, and maybe Hegel.
I see, then, that in that guest list Marx, Schopenhauer, Nietzsche, John Stuart Mill, Jeremy Bentham, Bertrand Russell, Wittgenstein, Kierkegaard, Comte, Pascal are not included (to mention, off the top of my head, only the Westerners: no non-Westerners at all).
I can imagine worse company, if one is to be snubbed.
I support MMT because it it not so far out of the mainstream to be doable.
I have said that I prefer a more radical approach, but that is not going to happen without something drastic happening that puts more options on the table politically.
Nothing radical is going to happen in economic policy with out removing the power elite or neutering theme.
see, then, that in that guest list Marx, Schopenhauer, Nietzsche, John Stuart Mill, Jeremy Bentham, Bertrand Russell, Wittgenstein, Kierkegaard, Comte, Pascal are not included (to mention, off the top of my head, only the Westerners: no non-Westerners at all).
Second and third tier.
Non-Westerners were not included in the curriculum when I was in grad school. I had to pick that up on my own. Non-Western philosophy developed along different lines with different methodology and different concerns.
The Big Five, what we would now call "influencers," are Plato, Aristotle, Descartes, Hume and Kant. They established the enduring questions in metaphysics, epistemology and ethics, and to a lesser extent in social and political philosophy. These are the comprehensive thinkers that established traditions.
The others are of particular interest rather than general, so they are not as widely read or referred to.
That's why the history of economic thought is important. I'd suggest you read Marc Lavoie's "Should Sraffian economics be dropped out of the post-Keynesian school".
One has to budget one's time on priorities. While I am interested in the history of economics and would like to know more about PKE, it's not anywhere near the top of my list in importance. I actually spend relatively little time reading econ.
I should qualify. I think that most of economics is pretty useless wrt to both understanding what is happening in the world and also policy formulation. The reality is what policy can get through the political process and how it is implemented. This has little to do with theoretical econ.
I appreciate Marx because he understood that its all about application of class power and conflicts among factions in the power elite over the levers of power. He also saw that capitalism is about private ownership that is based on expropriation of the commons and that the while the balance of power is actually held by the petite bourgeoise, they identify their interest with the haute bourgeoise rather than the proles. This says more about the reality of political economy that all the theoretical economists put together.
MMT is useful, however, in that it deals with actual operations rather than theory. The takeaway is that as long as real resources are available, a currency sovereign can put them to use. I remember the day that I asked Warren that when he was commenting and he replied in the affirmative. That was revelatory for me. The problem is not economic, it is educational and political — education the electoral that they can afford any kind of system they chose as long as real resources are available to support it in the present and future. Then we can debate what kind of society we want to create, but that means doing away with the power elite that stand in the way first. All the rest is secondary.
Second and third tier.
Non-Westerners were not included in the curriculum when I was in grad school. I had to pick that up on my own.
On good logic that means that the grad school curriculum by which you study did not pick all the important ones or "first tiers", no?
I actually spend relatively little time reading econ.
I totally believe you. :-)
Then, the reasonable thing to do is to be very cautious with statements about things you may not be entirely sure.
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But this is what I think is more important:
I support MMT because it it not so far out of the mainstream to be [un]doable.
MMT describes how economies like the US, Australia, UK, Japan, already work, Tom. You know that.
The part that needs to be done, the bit that needs to be doable, is largely the Job Guarantee.
I don't need to remind you, either, that among the post Keynesians (including some pretty close to MMT) the JG seems to be the big problem: they are pretty sure the JG is not doable at all. According to these people there is a need for unemployment if one is to be half the men they are.
Kalecki seemed to believe it would take extensive popular mobilization to get full employment as a permanent goal of economic policy.
Exactly the same extensive popular mobilization is required for socialism.
So, what, exactly, makes socialism undoable and the JG doable? Prove to those guys that they are mistaken and the JG is eminently doable.
From where I stand, the enemies of socialism are exactly the same enemies of the JG and for the same reasons.
I am sticking to my simple story. It's working for me. The message has to be very simple and repeated over and over.
It's about real resource availability now and in the future. A sovereign current issuer like the US can afford to fund anything that the voters want to see happen as long as the real resources are available.
The reason that this is not happening is due to the people in power that don't see it their interest. They are the takers.
The first step is getting the money out of politics and locking the revolving door. Only then is it possible to level the playing field.
Just keep hammering on that and answer questions as they come up.
Most people can't even get their minds around Warren's 7DIF even after they read have it several times. And I am not talking about financial and economic illiterates either. It takes them about two seconds to fall back into their old patterns. It contradicts most people's deeply held beliefs, on one hand, and it seems counter-intuitive on the other.
So, what, exactly, makes socialism undoable and the JG doable? Prove to those guys that they are mistaken and the JG is eminently doable.
I don't see the JG as the lede. The first step is monetary operations, sectoral balances and functional finance put in very simple terms — currency issuer v. currency users, government balance = nongovernment balance, and affordability is never a problem for the federal government in meeting its goals.
The key is democracy as government of, by and for the people instead of "those who own the country should govern the country."
People then obviously ask, "Well, what about….? Just answer the questions as they come up.
The JG? Way down the line. People ask questions in line with their interests. Almost no one I talk to is concerned about full employment. When it comes up, I explain that the choice is between a buffer stock of employed and a buffer stock of unemployed. The unemployed are a real resource that government can put to work by funding, so it is wasteful (inefficient) to idle them.
I don't believe in "full employment" anyway. Technology increases productivity, which increases the opportunity for leisure. Now this increased opportunity for leisure is being distributed to those that control technology (means of production).
I have not found socialism to be much of an issue. The people that I interact with would prefer to live in a social democracy as an update New Deal, e.g., free public education preschool thru PhD (as desired), single payer health care (Medicare for all), and federally funded pension system. When they get it that there is no financial reason not to do this their eyes are opened. The JG can be accounted for as an update to the New Deal WPA and CCC with a universal and permanent job guarantee as a buffer stock of employed.
The way I talk about socialism is in terms of economic rent, which is extracted based on power. The real issue is power and who wields it for what purpose. Most people have no problem getting that, being on the short end of the stick. The real issue is leveling the power and ending the rent extraction and rent seeking.
On good logic that means that the grad school curriculum by which you study did not pick all the important ones or "first tiers", no?
"Philosophy" in the West means the Western intellectual tradition. That's just the way it is.
In my day, "history" meant Western history and that pretty much excluded Eastern Europe and Russia. I had to read that on my own, too.
Westerners in general have a superiority complex as far as I can see. I am not sure that has changed all that much, although there is wider appreciation in the West than when I was studying. But a lot of the understanding is fanciful.
I have told this story about Marx as he who shall not be mentioned before, but it is worth telling again.
A school at which I teaching received a grant to invite and videotape well-known of professors on different subjects. I was asked to invite a philosopher, so I invited a former professor that I got along with well who held a chair at a prestigious Ivy League university. Subsequently, I was told by the administration that I would have to disinvite him because he had written a book with "Marxism" in the title. I said that the book was contra Marxism. They said that it didn't matter because the donors might not get that fine point.
Mat Forstater, Toward a New Instrumental Macroeconomics: Abba Lerner and Adolph Lowe on Economic Method, Theory, History and Policy presents a vision that I agree should guide the way forward.
This paper argues that the ideas of Abba Lerner and Adolph Lowe contain overlapping and complementary insights and themes that may contribute to the development of a new approach to macroeconomics, and that have rather specific practical policy implications. This approach might be called Instrumental Macroeconomics, after Lowe's instrumentalism, but it could be termed Functional Macroeconomics after Lerner's functional finance without changing the intended meaning.1 Terminology aside, what is required today is a macroeconomics that considers macro-policy goals at the ground level of theoretical practice (a political macroeconomics), a macroeconomics that recognizes that the system is dynamic and transformational, with major features changing over time (an historical macroeconomics), a macroeconomics that pays careful attention to institutional frameworks and arrangements (an institutional macroeconomics). What is required is a macroeconomics rid of neoclassical microfoundations, but that considers sectoral as well as aggregate relations (a structural macroeconomics), technological change as well as monetary production, and that avoids the unacceptable mechanism of aggregate models that bypass the complex problems of human agency by slipping in unacceptable motivational and behavioral assumptions.
The works of Lerner and Lowe serve as an interesting point of departure in thinking about such a new approach to macro theory and policy. While there are some important areas of overlap in their work and thought, Lerner and Lowe also have some important differences in areas of emphasis, which, it shall be argued, are strikingly complementary. Lerner's functional finance deals with aggregate proportionality and balance, while much of Lowe's work additionally emphasizes sectoral relations. While full employment and price stability were lifetime concerns of both, Lerner–following Keynes--focused more on monetary factors, while Lowe emphasized issues of structural and technological change. A Lowe-Lerner synthesis offers a powerful starting point in fleshing out an alternative approach to macroeconomic theory and policy, one which–because of its careful attention to historically changing social and institutional structures–is as fresh and relevant today as it was when Lerner and Lowe began formulating their historical and institutional approach to macroeconomic theory and public policy.
continued
continued
Instrumental Analysis and the Method of Functional Finance
Lowe's investigations of the technological and structural features of contemporary capitalism from the 1920s to the 1950s led him to the position that modern industrial systems exhibit inherent macroeconomic instability, necessitating an abandonment of the traditional deductive method and its replacement with an alternative instrumental method for economic theory and public policy. Rather than taking only the initial conditions as given, and employing deductive analysis to predict and explain, Lowe proposed also taking as given a vision of desired macro-outcomes. These macro-goals would not be determined by economic analysis, but rather would be independently determined by democratic political process. Analysis would then "work backwards" from the macro-goals to the economic means for their attainment (Lowe, 1965; Forstater, 1997).
Such a conceptualization of the means-ends relation is also found in Lerner's functional finance. Functional finance was first put forward by Lerner in his article, "Functional Finance and the Federal Debt" (1943) and in his Economics of Control (1944).2 Sound finance confuses the means and the ends; a balanced budget is taken to be the end. It is seen as "good" in and of itself. In many cases it is even a politically stipulated goal. For Lerner, what matters is the effects of the government budget and other fiscal and monetary policies. Is the current fiscal stance goal-adequate? Does it promote our macroeconomic goals?
I think the first step in engaging people should be first to consider the open possibilities given MMT analysis in which the constraint is real resources availability, with affordability not a issue.
The second step is what it would take socially, politically and economically to create an ideal society and the steps needed to progressively actualize this vision based on present conditions.
One aspect is negative, removing the obstacles and the other is positive, actualizing the vision Iteratively and incrementally.
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