Raghu: Some people might say one of the big lessons of the crisis is that the Modigliani-Miller theory doesn't hold. In this case, the way that things were financed did matter. People and firms had too much debt.
Well, in the Modigliani-Miller world there are zero transaction costs. But big bankruptcies have big transaction costs, whereas if you've got a less levered capital structure you don't go into bankruptcy. Leverage is a problem... -------- Fama takes capitalism for granted, & assumes (therefore) that it makes sense. And if it makes sense, its operations must be explicable. But what if the trouble is not "the market" (or any other specific feature of capitalism) but capitalism itself? And if that is the case, there is no real reason to choose between Keynes & Fama. They both assume (a) that "The Economy" exists as an independent entity, and (2) that reality is intelligible (the premise of "science"). It would seem in that case that "Efficient Market" is a tautology, and that the purpose of "science" is to determine the content of that tautology. Marx also assumes that the "Capitalist" Market is tautologically explicable: The first 125 pages of Capital II explore that tautology. But Marx _also_ argues (that is what Commodity Fetishism is about) that Capitalism (that is, the selling and buying of laborr power) is (a) only part of capitalist society (and therefore subject to contingency) and (b) not separable from the society (i.e., non-capitalist as well as capitalist social relations) in which it exists. "The Economy" is therefore an illusion, and illusion cannot be reduced to a set of scientific laws. As Postone suggests, Marx produced a Critique of Political Economoy, NOT a Critical Political Economy: in other words, Political Economy is fundamentally illusory: the "economy" it pretends to describe does not exist. Carrol _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
