Re: [PEN-L] The Mind of Paul Krugman: Mahathir, Pinochet, bad men, good policies - and the 'job of economic analysts'

Fri, 01 Oct 2004 19:25:20 -0700

 
----- Original Message -----
From: "Charles Brown" <[EMAIL PROTECTED]>
Sent: Thursday, September 30, 2004 3:57 AM
Subject: The Mind of Paul Krugman: Mahathir, Pinochet, bad men, good policies - and the 'job of economic analysts'
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>  Aren't the various bubbles that are discussed around here from time to time
> - stock market, housing market - sort of capital expanding itself without
> any living human labor in it ? Much of finance capital today, like currency
> exchange traders and futures market putting,  seems to create at least an
> illusion of self-expansion, but the illusion is real in terms of
> $$$$$$$$$$$$-power.
> Others have said there are M-M'ghosts in the market.
 
 
Charles:
 
Since you bring this topic up again, here's a quote, on that point, about which I have been asking around for comment and elaboration, getting response from Melvin P. and Juirriaan, but about which I'm still very curious.
 
I had offered in an exchange with Jurriaan that:
 
For instance, you have in the past on this list said some things about fictitious capital, bank credit, stocks, bonds, currency speculation and futures markets, seigniorage, financial derivatives. Robert Biel mentions the speculative value of human capital. There's also the value of the unpaid labor of, most egregiously, the 3 billion women in the world - household and child care, in addition to at least two incomes now being necessary to support a family - an issue almost unmentioned in the work of Marx and Engels; and some months ago you responded to a question I raised about Paul Sweezy's interview with E. Ahmet Tonak, in which he questioned how the explosion of finance capital, superficially maybe represented by M - M, could be related to the schema M - C - M' and to the generation of surplus by human labor. One response was that it is fictitious in the sense that it is a claim on but operating outside of the circuits of productive capital encompassing surplus value, or rather sits astride those circuits, and that one reason it is viewed as a house of cards is that it will eventually be reduced to the level of productive capital, when the speculative, and fictitious, nature of its existence can no longer be sustained. Is this explanation adequate in your view, or what needs to be added? You also mentioned tax law that skews income towards capital, and how the devaluation or hypervaluation of a nation's currency affects international trade, helping or hurting one player (at the expense of or to the benefit of the rest) - all, I suppose, equally in the realm of fictitious realization of profit on capital invested or risked.
 
This all may be something of an oversimplification, but where do you join or differ with or elaborate on that train of thought, and would you say that these phenomena cannot be handled within or treated as a consistent extension of the schematics that Marx wrote about? There may well be a lot in the literature concerning all this, online even, that I haven't been aware of and haven't yet found. I would appreciate being referred to that if it is available.
 
It appeared in MR Apr 1987, in an interview with Paul Sweezy conducted by E. Ahmet Tonak. I referred to it again recently and sent the article to Michael Perelman at his request. It's online at
 
 
Sweezy:   ....I think that Marxists
have a certain defensiveness about Keynes: we mustn�t
take seriously a bourgeois thinker because it may infect us
and maybe we�ll turn out to be revisionists without wanting
to be, you know. I don�t think that�s such a danger as long
as you internalize the basic structure of Marxism, which is,
of course, embodied in and summed up in the value theory
and the accumulation theory, surplus-value theory, all of
that. That�s absolutely crucial. And most of the valuable
Keynesian insights can be added to that, at least in my
view. There is no need to lose these basic insights which
are based on a very intimate knowledge of the real
business world--which of course, Marx also had in his day.
But which Marxists taking their stuff out of Capital, can�t
have in our day. This whole business of finance which I
was talking about last night. The present financial
explosion which is unprecedented can�t be handled in
terms of the hints in Volume III about finance. Although,
they are not unuseful, not without considerable value. The
whole notion of an abbreviated accumulation formula,
M-M�, without any production element M-C, is a very fruitful
way of thinking about finance, how it is possible for M� to
relate only to M without the system of production in the
middle. But that�s what�s happening all the time now. If we
don�t think about this, if we assume that finance is only an
aspect of the circulation of commodities, we�re not going to
understand a lot of what goes on in the world today. I must
say, my own feeling is that this is an area where nobody
has done really very well. I sometimes have the feeling
that economics now is in need of a general theory, in the
sense that physics seems to be in need of a general
theory, i.e., that there are a lot of things that are going on
that don�t fit into the standard physical theories. And they
are looking for a general field theory which would unify all
of it. They don�t have it yet. In economics, we need a
theory which integrates finance and production, the circuits
of capital of a financial and a real productive character
much more effectively than our traditional theories do. I
don�t see that anyone is actually producing it. Some
people are beginning to become aware of the need for it,
but it�s terribly complicated. And I�m sure that I�m too old to
be able to think of those things. I can get snatches,
insights here and there, but I can�t put it together into a
comprehensive theoretical framework. I think it will take
somebody who starts differently and isn�t so totally
dominated by M-C-M�, the industrial circuit, with the
financial circuits always being treated as epiphenomenal,
not part of the essential reality. I don�t know if you are
familiar with the book The Faltering Economy, edited by
Foster and Szlajfer?
 
Ralph


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