From: Jurriaan Bendien (adsl675281@TISCALI.NL)
Date: Tue Sep 04 2007 - 15:15:28 EDT
Ian, What if equilibrium is something that is never actually reached by markets themselves? What if the problem of market equilibrium is in fact confused with the problem of social order? Farjoun & Machover defined equilibrium as follows: "a system is in a state of equilibrium when all its internal forces neutralise each other, so that if left to its own devices the system will continue in the same state, and will be perturbed away from it only under the influence of outside forces. If the state of equilibrium is stable and the system is subjected to a small disturbance by external forces, the internal forces of the system create a negative feedback effect, pulling the system back towards equilibrium. The system will then either converge to that state of equilibrium or oscillate around it." (Laws of Chaos, p. 33). This sounds good - equilibrium is defined simply in terms of observable constancy across time - but it is in reality crucially ambiguous. It seems to me that we cannot sensibly talk about equilibrium at all, unless we can specify what "system" exactly is being equilibrated. In Marx's vision, I think markets by themselves are never in equilibrium, that is only a hypothetical situation. Market disequilibrium is precisely the "life of the market", i.e. imbalance between supply and demand prompts action from market actors, i.e. causes trading activity. Nevertheless, the social system may be in equilibrium, despite incessant market oscillations, because it is capable of reproducing and maintaining the social relations governing co-operation, in particular property relations. Only severe market fluctuations could cause these social relations to disintegrate. Thus, I think that in Marx's theory, the "ideology" is that markets by themselves generate economic harmony and spontaneously tend towards it, whereas "in reality", the social system is not "held together" by markets themselves, but by institutionalised social relations and enforcable property rights that define co-operation among citizens. So I think that in Marx's view, it is never the case that markets by themselves can constitute an equilibrium; it is an ideology to think so. In Marx's theory, it is recognised that supply and demand can, under the rule of capital, adjust to each other sufficiently to make enlarged economic reproduction possible, but this tendency does not automatically thereby result in an equilibrium state of capitalism or of markets. The same forces which generate relative market balance also eventually turn into their opposites, and endogenously generate market imbalance in capitalism. It is thus a simple mistake, to conflate the process of "market adjustment" with "market equilibrium". The very adjustment process itself ultimately leads to serious disequilibrium, precisely because the adjustment cannot occur in any way at all, but only in ways which meet specific business and institutional criteria. Marx is not always consistent in his description of "production prices". There are at least three meanings, between which Fred Moseley doesn't always distinguish: (1) Sometimes Marx suggests that they are only theoretical prices, defining a situation where supply and demand are equal for a given output. (2) But other times, Marx suggests that the production prices are long-term empirical averages of market prices for a given type of output - the idea here seems to be that we could average out the market prices for, say, a year, and then find the average of the averages for let's say ten years, and then this would be the ruling production price. (3) Yet another sense of production prices is that of "regulating average prices" that dominate the market for an output - these would be average price-levels above or below which producers are much less likely to trade a given output, as shown by the price distribution, they would be a sort of "modal average price". An addition complication in Marx's theory is, that it is not clear to which bit of trade (which transactions) the production price of a commodity actually refers (this is unnoticed in most of the Marxist literature). (A) It could refer to producer's output prices (sale of output by the producers themselves, or by a sector). (B) But it could also refer to the sale of output to the final consumer ( i.e. to a price which applies to the sale to the final consumer). In the latter case, the production price would include costs involved in modification, transport, wholesale and retail activities, i.e. the costs of several sectors involved. In Marx's simple and very abstract reproduction models, capital is simply reallocated directly between three production sectors, but in reality this is of course not the case, the whole thing is mediated by other sectors and by the financial circuit. It is in fact the financial circuit, which helps ensure that capitals of equal sizes can in principle reap equal profits, despite differentials in labour-productivity. As regards "equilibrium", I think Marx only really tries to show: (1) that a distribution of capital can be reached, that allows the economic system to reproduce itself and grow, be it spasmodically, and through recurrent crises (i.e. the adjustment process is full of contradictions). (2) that the way in which this capital distribution occurs creates a specific developmental trajectory for the mode of production: namely, producers aspire to buy below value, produce maximum surplus-value, sell below value (in competitive markets) or above value if they can (in monopolised markets), and at the same time obtain profits above the average (surplus profits), all this as fast as possible (i.e. with the fastest possible turnover). These principles then structure the whole nature and outcome of the empirical competitive process, in which unequal exchange to some degree or other is the norm, and equal exchange the exception. The deviation between labour-values, market values, production prices and market prices, which unequal exchange implies, is not intended to explain how the system creates its own equilibrium, but rather they are intended to explain what the real parameters of market competition are across time, and therefore, in what direction the system will develop, through the successive adjustments of ongoing economic reproduction. The competitive process may appear as an unfathomable "chaos" or "anarchic process" (or even a natural, biologically given process), but in reality it is governed by social laws or law-like regularities, created by the imperative to maximise the production and realisation of surplus-value. So I think the "missing book on competition" would have contained these core themes: (1) The contradictions of competition and co-operation between capitals, and how they are mediated (2) The contradictions of competition and co-operation between capitals and workers and how they are mediated (3) The contradictions of co-operation and competition between workers, and how they are mediated Once these are identified, we can also understand and explain the "ideologies" of competition. Some basic theoretical questions as regards (1) are: - what are the main ways in which costs can be reduced? - what are the main ways in which sales can occur below value, yet realise an average profit or better? - what are the main ways in which sales can occur above value, realising a surplus profit? - what are the main ways in which the capital turnover can be speeded up? - how is this competition impeded or blocked, or alternatively promoted or regulated? - when does competition intensify, and when does it lessen? Some basic theoretical questions as regards (2) are: - how can labour-productivity and therefore surplus-value be maximised? - how can labour-costs be minimised? - what forms of competition occur, and how are they blocked/regulated/resisted? - what intensifies the competition between capitalists and workers, and what lessen it? Marx of course discusses this in Cap. Vol. 1 at some length. Some basic theoretical questions as regards (3) are: - what are the forms/modalities of competition between workers? - what intensifies the competition between workers, and what lessens it? This belonged to the "missing book on wage labour". I have deliberately referred here to the contradictions of "co-operation and competition", since competition typically also assumes co-operation of some kind. Since bourgeois society has an ethos of individualism, the scientific literature on co-operation is very small indeed, and consists mainly of game-theoretical speculations or anthropological studies or management wisdoms. But in reality competition cannot be understood without understanding co-operation, which of course can be voluntary or coerced, just like competition. The notion of coerced co-operation is of course incompatible with bourgeois ideology, because if citizens are legally free and equal subjects, their actions ostensibly cannot be explained by coerced co-operation, only by individual choices to co-operate or not co-operate. What Marx refers to as the "dull compulsion of economic relations" does not exist in this picture. The whole idea of "civil society" (in the historical sense) is that of a sphere of freely interacting individuals, in which coercion is the prerogative of the state authorities only, in accordance with the rule of law. Jurriaan
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