[OPE] Replies to Levy/Wright/Bond on equilibrium

In reply to Jerry:

You don't get away by changing the subject so easily. After all, your
Marxism is purportedly the continuation of the thought of Marx and Engels.
Now if Marx and Engels in fact literally and substantively argued something
quite different from what Marxists claim, then what are we to think of their
so-called "Marxism"? Well, actually, I am prepared to do a deal. You leave
Marx & Engels to me, and you can have your concoction of "Marxism". I'll
work on the kinds of problems that Marx and Engels were concerned with, and
you can put red paint on your liberal face and protest about the war if you
like. Of course I am aware that the deal will not be struck between us,
because you would not concede that intellectual territory and couldn't,
because you want to be able to freely discuss your interpretation of Marx &
Engels - and why should I deny you that right? You have however a propensity
for implicitly or explicitly telling me how to behave on the ground that
your own behaviour is correct, and therefore insinuating, that you can say
anything you like and get away with it - such as appealing to Marx when it
suits, and abandoning Marx when it suits - because you do so correctly, but
what I am concerned with here is just the content of what you argue and you
do not resolve things simply by displacing the issue to matters of form and
formality. Actually, the question of equilibrium can be discussed without
any reference to Marx and Engels, because the scientific questions are
simply:

(1) What exactly is being equilibrated
(2) What does the equilibrium consist of
(3) Does an equilibrium really exist, can it really exist, or is it a
theoretical fiction
(4) How is, or can, the equilibrium be brought about, how is it accomplished
(5) How can we know that we have an equilibrium, what evidence is there for
that

We could discuss this without any textual reference to Marx and Engels, just
considering equilibrium theory and the realities to which it refers.

In reply to Ian Wright:

Your idea of an intrinsic "homeostatic tendency of markets" reconciling
social needs with useful work effort makes some sense at a high level of
abstraction (at a high level of abstraction almost anything can make sense
in some way, which is why people flee to the seeming precision and
specificity of numbers, with little awareness of how the numbers are
created), but everything in this whole argument turns on how markets
themselves are defined and what powers are imputed to markets.

"Markets" as a space for circulation themselves do nothing, they do not buy
and sell, that is a reification, people buy and sell, it's just that when
people trade, their buying and selling is socially mediated by what other
people are buying and selling, and thus, that the terms of trade they reach
in particular transactions, far from being random, are shaped by generally
applicable rules and norms as well as by aggregate relationships, between
the conditions of supply, and demand volumes. Each seller and buyer is
confronted with the aggregate effect of the transactions made by other
sellers and buyers, as an objectified force which is made manifest in price
movements or levels, and to which people must necessarily adjust.
Institutionalist economists build careers out of this idea.

Because that objectified force exists as a condition, however, it is very
easy to elide to the idea that markets themselves possess independent
agency, an autonomous force, and that prices possess independent agency, but
in fact that is a reification.

The reification may be convenient to denote or symbolize an aggregate social
effect in a summary way, but it becomes a very different story if it is
claimed that markets and prices, beyond mediating the social interactions
involved in creating, distributing and appropriating goods and services,
create equilibrium and social order, in particular when that equilibrium
ITSELF is defined and inferred in terms of (aggregate) prices, because in
that case the social order becomes a function of the "price mechanism". The
summit of bourgeois wisdom, in fact, is that market exchange creates social
order and creates value, and indeed these principles are at the very
foundation of national accounts. The young Marx in 1844, influenced by
Engels, already had a sharp sense of all this when he wrote:
The community of men, or the manifestation of the nature of men, their
mutual complementing the result of which is species-life, truly human life -
this community is conceived by political economy in the form of exchange and
trade. Society, says Destutt de Tracy, is a series of mutual exchanges. It
is precisely this process of mutual integration. Society, says Adam Smith,
is a commercial society. Each of its members is a merchant.
http://www.marxists.org/archive/marx/works/1844/james-mill/

In our own time, we have been able to witness how the US government
destroyed Iraq and proceeded to rebuild market institutions there, with the
difficulty that people often did not want to cooperate voluntarily in the
desired way, or could cooperate in that way, providing a striking
illustration of what is really required for markets to exist and function.

In reply to Patrick Bond:

I realize you dote on dear old Prof. Harvey, and indeed he has made very
creditable contributions to understanding Marx's critique of political
economy. I am not attacking Prof. Harvey or his reputation as such, merely
arguing that his explanation of Marx as equilibrium and disequilibrium
theorist, and of the reasons for why Marx in the first instance does not
concern himself very much at all with price fluctuations, is not really
correct. Pointing out that David Harvey has fully explored the crisis
tendencies of the capitalist economy does not really speak to the argument,
because the issue is, on what ground you can say that the capitalist economy
moves from equilibrium to crisis, where crisis is viewed as market
disequilibrium, and then back again to market equilibrium.

I invite you to reread - with hermeneutic permission from Jerry - some
passages in Theories of Surplus Value where Marx criticizes James Mill's and
David Ricardo's equilibrium theory (I render a short excerpt of an
inadequate official translation):

In the compensation of money and value of metal, as in his description of
the cost of production as the only factor in determining value, Mill commits
the mistake - like the school of Ricardo in general - of stating the
abstract law without the change or continual supersession of this law
through which alone it comes into being. If it is a constant law that, for
example, the cost of production in the last instance - or rather when demand
and supply are in equilibrium which occurs sporadically, fortuitously -
determines the price (value), it is just as much a constant law that they
are not in equilibrium, and that therefore value and cost of production
stand in no necessary relationship. Indeed, there is always only a momentary
equilibrium of demand and supply owing to the previous fluctuation of demand
and supply, owing to the disproportion between cost of production and
exchange-value, just as this fluctuation and this disproportion likewise
again follow the momentary state of equilibrium. This real movement, of
which that law is only an abstract, fortuitous and one-sided factor, is made
by recent political economy into something accidental and inessential. Why?
Because in the acute and precise formulas to which they reduce political
economy, the basic formula, if they wished to express that movement
abstractly, would have to be: In political economy, law is determined by its
opposite, absence of law. The true law of political economy is chance, from
whose movement we, the scientific men, isolate certain factors arbitrarily
in the form of laws. (...) During the crisis, a man may be very pleased, if
he has sold his commodities without immediately thinking of a purchase. On
the other hand, if the value that has been realised is again to be used as
capital, it must go through the process of reproduction, that is, it must be
exchanged for labour and commodities. But the crisis is precisely the phase
of disturbance and interruption of the process of reproduction. And this
disturbance cannot be explained by the fact that it does not occur in those
times when there is no crisis. There is no doubt that no one "will
continually produce a commodity for which there is no demand" (l.c., p.
340), but no one is talking about such an absurd hypothesis. Nor has it
anything to do with the problem. The immediate purpose of capitalist
production is not "the possession of other goods", but the appropriation of
value, of money, of abstract wealth. Ricardo's statements here are also
based on James Mills's proposition on the "metaphysical equilibrium of
purchases and sales", which I examined previously-an equilibrium which sees
only the unity, but not the separation in the processes of purchase and
sale, (...) The general nature of the metamorphosis of commodities-which
includes the separation of purchase and sale just as it does their
unity-instead of excluding the possibility of a general glut, on the
contrary, contains the possibility of a general glut. If the relation of
demand and supply is taken in a wider and more concrete sense, then it
comprises the relation of production and consumption as well. Here again,
the unity of these two phases, which does exist and which forcibly asserts
itself during the crisis, must be seen as opposed to the separation and
antagonism of these two phases, separation and antagonism which exist just
as much, and are moreover typical of bourgeois production.
http://www.marxists.org/archive/marx/works/1863/theories-surplus-value/ch17.htm

It is very clear here that Marx does not regard crises simply as market
disequilibrium, but as "the phase of disturbance and interruption of the
process of reproduction", and that is a very different concept. He argues
very clearly than any instance of market equilibrium is a coincidence or
momentary bliss, and that the crisis cannot be explained as a deviation from
equilibrium. The root problem, theoretically, is that Ricardo, like many
other political economists, persistently depicts exchange as "simple
exchange", leading to this whole discussion of equilibrium and
disequilibrium, but in reality capitalist exchange is not simple exchange,
and therefore the whole conceptualization of equilibrium and disequilibrium
by the political economists is false. If Marxists repeat this stuff, they
are just falling in the same theoretical trap as Ricardo did, becoming mere
apologists for the market rather than understanding how the market functions
and what the alternative to the market is. It is only more recently that
German scholarship has really woken up to this (see e.g. Christian
Girschner, Politische Oekonomie und Weltmarkt: Allgemeine Weltmarktdynamik
in der Marxschen Kritik der Politische Oekonomie. Cologne: PapyRossa, 1999).

Of course I like a nice, tender and sexy equilibrium just as much as the
next guy, but that is the poetry of life.

Jurriaan

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Received on Sat Sep 19 06:12:24 2009