From: Jerry Levy (Gerald_A_Levy@MSN.COM)
Date: Thu Dec 15 2005 - 10:45:28 EST
The following is a musing on my part that relates, at least in some ways, to the discussions about causes that we have been having recently (an outgrowth of the "Derrida's ghosts" thread) and the discussion (with Jurriaan about) aggregates. Consider the rate of interest. Well, hold on ... someone might say. There is no one, unique rate of interest -- instead there are an array of rates of interest. For instance, there is the discount rate, the prime rate, an array of rates offered by private banks for those with demand deposit accounts and those who wish to borrow from those banks, interest rates charged by credit card companies, etc. Often these rates differ from one bank to another for the same type of account or loan. In practice, there is never an occasion (is there?) when all of these rates coincide. In that sense, the 'rate of interest' could be thought of as being a concept which doesn't correspond well to the complexity experienced in actual capitalist economies, i.e. could be thought of as an aggregate and a simplification. Suppose now that we are trying to comprehend this complexity. How do we go about doing it? Here are several ways (maybe you can think of others?): 1) Since all of the separate rates are real and a part of the system, one might claim that all should be considered together and that none should be ranked (as being any more or less primary than others). The problem with this is that some rates of interest _are_ more important to the economy than some other rates of interest and a theory should have some way of specifying that, imo. 2) One might assert that, as a matter of empirical observation, while all of these rates are different, they all tend to move in the same direction. One might then ask whether there is one rate which influences the direction of the other rates. And, of course, there is: the discount rate. I.e. when the discount rate is raised or lowered, then the other rates of interest tend to follow and change in the same direction. If one was to pursue this line of reasoning, then one might claim that central banks and state policy then determine rates of interest! Indeed, one might claim in the US that rates of interest are determined by the Board of Governors of the Federal Reserve System! This, however, is merely an illusion, i.e. while the Fed can _influence_ interest rates, it does not _determine_ them. (This might be seen as part of a wider spread illusion: once the state implements macroeconomic policy, then the illusion is created that the state now controls and determines a capitalist economy.) 3) In the course of developing and presenting a theory of capitalism, one uses the process of abstraction to layer causes. If one were to do that, then it would be evident that an abstract theory of the determination of the interest rate (as simple unity) needs to be developed before one can go on to consider more concrete complexities like the determination of the discount rate which presumes an understanding of the state. If one takes this tack, then one could certainly concede the point made above that there are indeed an array of interest rates, but that one has to examine the (sub-) subject of the interest rate _as if_ it were a single rate before one then goes on to consider the diversity of rates and how they in practice relate to each other. [One could as part of that theory also bring forward _historical_ arguments as to why, for instance, the rate of interest as a subject needs to be developed before the discount rate.] I think the clear way to go is 3), but there may be other possibilities or arguments that I haven't considered. What do others think about this? In solidarity, Jerry
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