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This is response to Riccardo's recent posts.
Riccardo, you are no doubt correct that Keynes and the Keynesians and the
Post-Keynesians would not understand what it means to explain the
"necessity of money". Because they, like most mainstream economists take
capitalism as given, as "natural" (like air to breathe, as you say). They
do not treat money as a historically specific social form, whose existence
therefore needs to be explained.
But philosophers of science (including philosophers of economics) should
be able to understand what this means. In the philosophy of science, one
important criterion in the appraisal of the relative validity of different
theories, is the range of important phenomena that can be explained in an
integrated way, on the basis of one fundamental premise (or the fewest
premises possible). On the basis of this criterion, surely a theory that
can explain the existence of money from its fundamental value theory is
preferred to a theory that simply takes the existence of money as a given
fact, without explaining it.
Actually, microeconomists, have tried mightily for a long time to explain
the existence of money from the fundamental premises of their utility
theory of value, without success. As Frank Hahn (one of those who has
tried) concluded: "The most serious challenge that the existence of money
poses to the theorist is this: the best developed model of the economy
cannot find room for it." (*Money and Inflation*, 1983, p. 1)
Paul Davidson, a critic of neoclassical theory, has argued that the
repeated efforts of general equilibrium theorists (e.g. Patinkin, Clower,
Grandmont) to explain the essential role of money in a commodity economy
have all been ad hoc, artificial, and contrived adjustments. Davidson
argues further that such ad hoc hedging of general equilibrium theory is
suggestive of a "degenerate research program" in the sense of Lakatos.
So I would argue that this is one important area in which Marx's theory is
superior to all other economic theories: it can explain the existence of
money as a necessary consequence of its fundamental labor theory of value.
This is not just a "difference" between Marx and Keynes. This is an area
in which, on the basis of standard criteria of the philosophy of science,
Marx's theory is superior to Keynes' theory.
I think even Benetti and Cartilier might agree that it is preferrable to
explain the necessary existence of money on the basis of fundamental value
theory, rather than just take money as given. But they argue that so far
no theory of value has been accomplish this explanation, including Marx's
theory. Their attitude seems to be that since it appears to be impossible
to explain the existence of money on the basis of value theory, we have to
just take it as given.
I have answered at length Benetti and Cartilier's critique of Marx's
theory of money in a paper (presented as Riccardo knows at a conference in
Bergamo three years ago), which I will put on my web site. But I will
save that for another occasion. The relevant point for the current
discussion is that, if Marx could explain the existence of money as a
necessary consequence of his theory of value (which I think he can),
this would be preferred to simply taking money as given, without
explaining its necessary existence.
I look forward as always ...
Comradely,
Fred
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