Mark Thoma recently relayed a request for comments by Michael Perelman, on a Perelman paper that trumpets the superior capital theory in Marx versus economic orthodoxy. At my blog I pick apart some of the more ridiculous claims. To whet your appetite, here is Perelman’s opening:
Introduction I want to talk about two capitals ‑‑ capital as it appears in economic theory and Das Kapital of Karl Marx. A careful consideration of these two capitals serves as a warning of what might be in store for any country that allows itself to follow the logic of markets.
Each of these two capitals presents a different sort of difficulty. Economics, the basic theory of capitalism, paradoxically never bothered to develop a serious theory of capital. In contrast, Marx’s idea of capital as a social relation is so rich that it defies being compressed into a simple theory.
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“Economics, the basic theory of capitalism, paradoxically never bothered to develop a serious theory of capital.”
O_O
Seriously?
The whole world is getting a lesson in economics as I speak (9-15-08). The DOW is dropping like a stone, regular banks and investment banks liquidity is vaporising. Austrian economics teaches that value is a perception, nothing more. As such it cannot controlled via a formula. All governments can only make things worse, the only way they make things better is by doing nothing. Money* is tool for storing or moving capital quickly and cheaply.
Central banks are agents of theft via inflation, more money chasing the same amount of goods only raises prices Inflation is nothing but an unlegislated tax. Gov’t debt like a credit card, it is paid back with interest and cripples the finances of the debtor by removing capital that cold be used elsewhere.
The Central Bank is a ponzi scheme that benefits the first receivers of the new money and punishes the last.
In an act of justice, the finance guru’s are finding their assets vaporising along with the rest of us.
In the long run more lives have been decimated by Central banking than the nuclear weapon.
A quick example when the Vide-President gives a foriegn aid grant of a billion dollars (aka a payoff), he is sentencing a thousand workers to toil for their entire lifetimes to pay it back (even if it gets spread across a hundred million for a shorter duration) it is and has always been theft.
“How much should we give,
the only answer is
more, more, more.”
~John Fogerty
That anyone would seriously think of Marxist economics, not just parts of it which certainly here and there and to some very limited extent are interesting, as viable economic paradigm is indeed remarkable.
I’m surprised, though, that he didn’t bring up the inherent contradictions of capitalism, i.e. accumulation of capital at the cost of driving workers’ wages to subsistence level. I guess this point’s utter lunacy with no factual backing whatsoever doesn’t bear well with Perelman’s enthusiastic ode to Marx’s genius.
All in one, the piece is an extremely bad summary of Marxist economics. Compare it with, for example, Nikolai Bukharin’s mastery and very readable The ABC of Communism (http://www.marxists.org/archive/bukharin/works/1920/abc/index.htm), chapters I and II.
As a final note, anyone who wants to have a truly devastating critique of Marxism that goes much much further beyond Boehm-Bawerk’s classic case should consult George Reisman’s Capitalism: A Treatise on Economics where he deals with Marxian Exploitation Theory. (Chapter 11, pp. 473-497)
Then, from the standpoint of positive economics, the task larger than a critique of Marxism, Reisman also shows that Boehm-Bawerk’s own time preference theory of (originary) interest is in no way even an approximately good explanation of interest.
Fundamentally, Boehm, as did Marx, Smith and others, starts from a totally unwarranted premise granting the workers the right to the whole produce while understanding the interest as a deduction from wages, albeit, he thinks, a justified one. This is all wrong, capitalists do not earn profits as deductions from wages, justified or not (a point that even Marxists noticed as involving a glaring contradiction on Boehm’s part), but bring wage income as a category of income into existence by reducing the income category of profit which without investment in labor and capital goods would remain the only such category.
Contrary to Marx, Smith and Boehm in the conditions of primitive circulation sequence (C-M-C) all income would be profits, not wages, precisely because under C-M-C there are no outlays for labor and capital goods, thus no costs of production to deduce from product sales revenues, there were no wage earners, only largely self-sufficient farmers and small artisans earning profits from the sale of whatever goods they brought to the primitive small town markets. Only with the coming of capitalism, with its security of private property, did wages and investment in capital goods *came* into existence on the scale unknown to any prior system of economic organization.
Marx seems pretty useful to me http://another-green-world.blogspot.com/2008/10/marxist-economics-utter-basics.html
Criticism welcome of my thoughts and if you don’t like Marx, Schumpeter is pretty useful in identifying the mistakes of much conventional economics which fails to see it as a system which is base on accumulation and tends to crisis.
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