[OPE] Specially for Patrick Bond: David Harvey on equilibrium

"Marx frequently makes use of equilibrium in his work. (...) The equilibrium
between supply and demand is achieved only through a reaction against the
constant upsetting of the equilibrium. (...) What differentiates Marx from
bourgeois political economy (both before and since) is the emphasis he puts
on the necessity for departures from equilibrium and the crucial role of
crises in restoring that equilibrium." (David Harvey, The Linits to Capital,
Verso edition 2006, p. 82-83).

In this way, Harvey joins in the chorus of the equilibrium Marxists. There
is a good scientific article in this, to explain how this crap is based on
false translations, and doesn't make any sense, since you cannot have a
"constant upsetting of equilibrium" which achieves an equilibrium, and if
you try to resolve this "dialectically" with the concept of "dynamic
equilibrium" then you must explain what this dynamic equilibrium consists of
exactly, and how this could explain incessant price fluctuations, and the
inability of part of the population to buy things because they have no
money, or sell anything, because they have no assets they can sell.

The real problem, dear Patrick, is that most of the literature conceptually
confuses market equilibrium with "price stability" and "social order", but
scientifically that does not wash, because a market equilibrium means that
supply is equal to demand, "and therefore" that prices are constant across
time, even in oligopolistic markets such as we have today, and if we cannot
actually find this situation anywhere empirically, then it is just a figment
of our econometric imagination. In that case, we have to find the source of
price stability and social order elsewhere. And we ought to say so, rather
than hide behind bourgeois wisdoms of the "spontaneously self-balancing
nature of markets" which in reality only refer to "adjustments" of supply
and demand with greater or lesser elasticity, including not buying and
selling things because you haven't got what it requires.

Prof. Harvey makes his methodological error quite explicit by quoting Marx
to the effect that "if supply and demand balance one another they cease to
explain anything" (p. 82). Harvey infers from this, that "The equilibrium
between supply and demand is achieved only through a reaction against the
constant upsetting of the equilibrium." But this not what Marx means at all.
What Marx means in this quote is, that if supply equals demand, you cannot
explain the price level itself by referring to the magnitude of supply and
demand.

Marx makes this perfectly explicit in a prologue to Das Kapital:

"Supply and demand regulate nothing but the temporary fluctuations of market
prices. They will explain to you why the market price of a commodity rises
above or sinks below its value, but they can never account for that value
itself. Suppose supply and demand to equilibrate, or, as the economists call
it, to cover each other. Why, the very moment these opposite forces become
equal they paralyze each other, and cease to work in the one or the other
direction. At the moment when supply and demand equilibrate each other, and
therefore cease to act, the market price of a commodity coincides with its
real value, with the standard price round which its market prices oscillate.
In inquiring into the nature of that value, we have, therefore, nothing at
all to do with the temporary effects on market prices of supply and demand."
http://www.marx2mao.com/M&E/WPP65.html

This is precisely why Marx felt justified in largely ignoring price
fluctuations in his analysis, or in assuming for the sake of argument that
prices and values are equal, in Cap. Vol. 1 and 2. But in Cap. Vol. 3 it
turns out that it is precisely the deviations of prices and values that make
the capitalist mode of production tick, that explain its competition
dynamics, which leads directly to monopolisation of markets, and to the
steady expansion of rent-seeking behaviour, the analysis of which is
foreshadowed in Marx's analysis of ground rent and surplus profits.

Notice especially in this lastmentioned quote that Marx does not say the
equilibrium actually exists, he says rather "Suppose supply and demand to
equilibrate", it's a theoretical argument.

Jurriaan

_______________________________________________
ope mailing list
ope@lists.csuchico.edu
https://lists.csuchico.edu/mailman/listinfo/ope
Received on Wed Sep 16 15:08:44 2009