RE: Macro, micro, and Marx's method
I'm sorry this took so long, but maybe it was worth it.
Gil writes: Jim raises a number of interesting issues that go well beyond
the simple point I suggested re Marx's V. III transformation of commodity
values into prices of production. I react to some of these points below.
Those not interested in metatheoretical/pedagogical issues respecting Marx's
analysis in Capital should hit the delete key now.
oops! I hit the delete key ... time to recover.
1. Macro vs. Micro in Marx
I wrote:
Unlike modern orthodox economics which starts with so-called
microfoundations and tries to explain all macro phenomena, Marx started
(in volume I) with macro issues, the conflict in production between
abstract capital and abstract labor (since he abstracts from the use-value
of all commodities except labor-power) on the level of capitalist society
as
a whole. That is, he uses his law of value to break through the
confusions
implied by commodity production, i.e., the fetishism of commodities, to
focus on what he thought was most important, the societal capital/labor
relationship _in general_.
Gil writes: Of course, Marx wrote before a clear line of demarcation
between macro- and micro-economics was established in mainstream
analysis, so it's no surprise that Marx didn't pay much respect to a
theoretical boundary line that didn't as yet exist. And for a reason
detailed below, drawing a strict micro/macro partition is necessarily harder
to do in Marxland than Mainstreamland.
Marxland? where's that? when can I move there?
Strictly speaking the macro/micro distinction was applied, for example, in
the debate about general gluts (in the early 1800s), though only in crude
ways. Ricardo or Smith leaned heavily toward micro (or at least toward
microfoundations reductionism), as seen by their acceptance of Say's
Law. On the other hand, folks like Malthus and Sismondi leaned toward
macro, as seen in their rejection of that Law. Marx clearly joined the
latter camp, in section 2a of chapter 3 of vol. I (p. 113 of the 1967
International Publishers' edition), where a general glut of physical
commodities is seen as corresponding to a shortage of money. (My restatement
is in Walras-speak, rather than Marx-speak.)
BTW, it shouldn't be presumed that just because the macro/micro partition
is harder to draw in Marx's work than in orthodox economics, that this is a
problem, somehow a deficiency in Marx. To my mind, the line between macro
and micro is artificial in many ways. It's an analytical distinction to be
ignored once one gets to the synthetic phase of understanding.
Applying standard definitions retroactively, though, one can see where and
how Marx crosses the line in _Capital_. By these definitions, Marx's
starting point in V. I. is apparently micro in nature, in the specific
sense that no reference to any economic aggregate is made in initiating his
argument. He starts by describing capitalist wealth as a collection {a
collection, note, not an aggregate; he's introduced no basis for aggregating
heterogeneous commodities as yet}.
Strictly speaking, Marx starts his _Capital_ by saying The wealth of those
societies, in which the capitalist mode of production reigns, presents
itself as an heap of commodities. (from Hans Ehrbar's translation at
http://www.econ.utah.edu/ehrbar/akmc.htm). Marx's concern is clearly with
the wealth of those [capitalist] societies. This indicates that Marx's
focus is on _society_, not individuals in that society or even individual
commodities. As Ehrbar makes clear, the focus is on commodities as a
_social_ form of wealth, as a kind of wealth the character of which is
profoundly shaped by its societal environment. Thus, the focus involves
macro from the beginning, since one can't talk about a society without
seeing it as being some sort of totality.
Note that Marx uses the phrase presents itself. Anyone familiar with the
later discussion of the fetishism of commodities (chapter 1, section 4 of
volume I; see also section VII of volume III of _Capital_) should be alerted
by this phrase. Capitalism _appears_ to be merely a heap of commodities,
but this does not correspond to the capitalist essence that's hidden from
the casual observer looking at matters from within the system. In this
light, the word heap - - or collection - - is ironic: capitalist wealth
_seems_ to be a heap, but it's not really so.
The later discussion of commodity fetishism of course makes it quite clear
that the book is about society, not microeconomics. From the start, Marx
rejects the extreme micro-type thinking that Margaret Thatcher expressed
when she said that there's no such thing as society, only individuals. (BTW,
professional economists of the _laissez-faire_ stripe expressed this type of
opinion many times in different ways before she did so.)
Gil continues: He then introduces a qualitative distinction between the use
value and exchange value of individual commodities, and a claim about the
quantitative
Macro, micro, and Marx's method
[Was: Transformation Tsurris]
Jim raises a number of interesting issues that go well beyond the simple
point I suggested re Marx's V. III transformation of commodity values into
prices of production. I react to some of these points below. Those not
interested in metatheoretical/pedagogical issues respecting Marx's analysis
in Capital should hit the delete key now.
1. Macro vs. Micro in Marx
Jim writes
Unlike modern orthodox economics which starts with so-called
microfoundations and tries to explain all macro phenomena, Marx started
(in volume I) with macro issues, the conflict in production between
abstract capital and abstract labor (since he abstracts from the use-value
of all commodities except labor-power) on the level of capitalist society as
a whole. That is, he uses his law of value to break through the confusions
implied by commodity production, i.e., the fetishism of commodities, to
focus on what he thought was most important, the societal capital/labor
relationship _in general_.
Of course, Marx wrote before a clear line of demarcation between macro-
and micro-economics was established in mainstream analysis, so it's no
surprise that Marx didn't pay much respect to a theoretical boundary line
that didn't as yet exist. And for a reason detailed below, drawing a strict
micro/macro partition is necessarily harder to do in Marxland than
Mainstreamland.
Applying standard definitions retroactively, though, one can see where and
how Marx crosses the line in _Capital_. By these definitions, Marx's
starting point in V. I. is apparently micro in nature, in the specific
sense that no reference to any economic aggregate is made in initiating his
argument. He starts by describing capitalist wealth as a collection {a
collection, note, not an aggregate; he's introduced no basis for
aggregating heterogeneous commodities as yet}. He then introduces a
qualitative distinction between the use value and exchange value of
individual commodities, and a claim about the quantitative relation (i.e.,
equality) among exchanged bundles of commodities. Both of these are
essentially micro claims; again, no reference to any economy-wide
*aggregate* is required to make them.
A truly macro relation (again, by standard distinctions) doesn't emerge
until Marx's statement of the macro money identity (MV=PT) in Chapter 3.
But Marx doesn't make immediate use of this identity, and macro
considerations, again subject to the caveat below, don't arise again until
Part 7 of V. I.
What's the caveat? Consistent with Jim's comments above and below, the
conventional (from a mainstream standpoint) boundary between micro and
macro is obscured because Marx deals with aggregates that tend to be
ignored or at least de-emphasized in mainstream theory--i.e., aggregates at
the level of class. Issues at this level are in the conventional sense
micro since they deal with questions of distribution and economic
interests of class actors; yet they bear immediate macro consequences
since class distribution affects, among other things, the rates of
accumulation and growth and the level of unemployment. Thus I read Jim's
comments as consistent with the prospect that micro and macro
conditions are simultaneously determined in Marx, whatever his choice of
emphasis.
...This abstraction means that he actively ignores -- abstracts from --
differences amongst heterogeneous capitals, including the technical
differences such as those represented by the organic composition of
capital and social differences such as those represented by the rate of
surplus-value, so that prices and values are proportional (as this
literature notes). In other words, he starts with the average capitalist
exploiting the average worker. (Unfortunately, rather than explaining this
clearly, he simply uses the 19th century British cotton textile industry as
representing the average. That's confusing, since it probably wasn't the
average industry.) At this level, we see the general conditions of the class
struggle determining the rate of surplus-value and the mass of
surplus-value. (General conditions of class struggle in turn depend on the
rate of accumulation, political institutions, etc., which in turn depend on
previous conditions of the class struggle, which in turn depend on ... a
long historical process.)
In volume III, he moves away from the macro level to address the issues how
the participants in the capitalist system see things and respond
(microfoundations) so that suddenly issues like supply and demand become
relevant (having been irrelevant at the volume I level of abstraction).
But it's intriguing, isn't it, how repeatedly issues of demand and supply
come up explicitly in Marx's Vol.I, chapter 25 discussion of the general
law of capital accumulation (e.g., pp 763, 769, 792, Penguin ed.)? In
fact, I don't know how you can even talk about this law without talking
about the implications of accumulation for the demand for labor power
relative to
