Sunday, January 31, 2016

The Historical Development of Marxist Interpretations of the Law of Value

In essence, after Marx and Engels’ death Marxists held various positions, as follows:
(1) The law of value in volume 3 of Capital
Many Marxists followed volume 3 of Capital and gave up the view that commodity prices tend to equal pure labour values (which was the theory in volume 1). Instead, they defended the view of volume 3 that the “law of value” only ultimately and indirectly explains prices, and defended Marx’s three aggregate equalities:
(1) the sum of surplus value = sum of profits;

(2) the sum of values = sum of prices, and

(3) the value rate of profit = the money rate of profit.
These aggregate equalities were asserted as true as Marx’s attempt to transform labour values into prices of production.

Böhm-Bawerk later usefully summarised Marx’s various attempts to salvage the law of value in volume 3 of Capital as follows:
“First argument: even if the separate commodities are being sold either above or below their values, these reciprocal fluctuations cancel each other, and in the community itself—taking into account all the branches of production—the total of the prices of production of the commodities produced still remains equal to the sum of their values (III, 188).

Second argument: the law of value governs the movement of Prices, since the diminution or increase of the requisite working time makes the prices of production rise or fall (III, 208, 211).

Third argument: the law of value, Marx affirms, governs with undiminished authority the exchange of commodities in certain ‘primary’ stages, in which the change of values into prices of production has not yet been accomplished.

Fourth argument: in a complicated economic system the law of value regulates the prices of production at least indirectly and in the last resort, since the total value of the commodities, determined by the law of value, determines the total surplus value. The latter, however, regulates the amount of the average profit, and therefore the general rate of profit (III, 212).” (Böhm-Bawerk 1949: 32).
It is curious that many Marxists forgot about the Third Argument: that commodities tended to exchange at their true labour values in pre-modern forms of commodity exchange. This was defended by Engels in his “Supplement and Addendum” to volume 3 of Capital of 1895 (Engels 1991 [1895]), and also defended by a few Marxists after his time as I note here.

At any rate, this interpretation of Marx, from volume 3, dominated Marxist thought both in the West and in Russia until WWII (Nitzan and Bichler 2009: 99).

(2) Simultaneous Dual System Interpretation
A revolution came with the work of Ladislaus von Bortkiewicz (1868–1931), Vladimir Karpovich Dmitriev (1868–1913) and Mikhail Ivanovich Tugan-Baranovsky (1865–1919).

We turn again to Marx’s three aggregate equalities:
(1) the sum of surplus value = sum of profits;

(2) the sum of values = sum of prices of production, and

(3) the value rate of profit = the money rate of profit.
The work of Ladislaus von Bortkiewicz showed that two of the three aggregate equalities defended by Marx in volume 3 of Capital fail, and that the sum of surplus value = sum of profits quality cannot be defended unless under very special assumptions (see Bortkiewicz 1906; 1907a; 1907b; 1907c; English translations in Bortkiewicz 1949 and 1952; see also here). Even worse, Bortkiewicz’s work suggested that the tendency to a falling rate of profit is wrong too (Kliman 2006: 47).

Bortkiewicz’s new model adopted a dual-system view that contended that labour values and prices of production are determined entirely separately, so that the transformation problem is avoided (Nitzan and Bichler 2009: 108).

When the work of von Bortkiewicz was translated and become known in the West, a number of Marxists adopted his view. Paul M. Sweezy (1910–2004), the author of The Theory of Capitalist Development. Principles of Marxian Political Economy (1946, London), was the most influential.

The reformed interpretations of Marx by both Ladislaus Bortkiewicz (1868–1931) and Paul M. Sweezy (1910–2004) have been seen by some as proto-Sraffian and having anticipated aspects of Sraffa’s own re-interpretation of Classical Political Economy (Mongiovi 2002: 395).

However, Ian Steedman (1977), building on the work of Sraffa, demonstrated that labour value itself was not only redundant since physical quantities of commodities can determine the profit rate, but also, in a devastating point, capable of being negative in joint production process even when prices and profit rates are positive (Nitzan and Bichler 2009: 101). The Dual System interpretation, and indeed the very labour theory of value itself, is destroyed under such a critique (Keen 2011: 426–443; Nitzan and Bichler 2009: 101).

(3) Temporal Single System Interpretation (TSSI) Marxism
This emerged in the 1980s as a new generation of Marxists surveyed the wreckage of previous interpretations of Marx’s economic theory.

Temporal Single System Marxists argue that Bortkiewicz’s criticisms of Marx apply only to a Classical long-period equilibrium interpretation of Marx’s value theory, and that this long period interpretation is wrong and a misrepresentation of Marx’s views (Mongiovi 2002: 409).

TSSI also treats factor input prices in a temporal and not simultaneous manner (Nitzan and Bichler 2009: 106). The orthodox “simultaneous” treatment of the prices of factor inputs holds that they should be measured by current prices at the time of final production of the output commodity and not at their prices when purchased. The TSSI instead holds that prices and labour value of factor inputs should be measured at the time at which they were purchased (Nitzan and Bichler 2009: 107).

However, the TSSI simply assumes labour value equal prices, as Nitzan and Bichler argue:
… the single system articulated by the TSSI does not have prices and values. It has prices as values. The distinction is crucial. The conventional Marxist approach argues that labour values are the cause of prices. This causal link is meaningful because the definitions of the two magnitudes are different. Prices are counted in money, whereas values are counted in labour time. The two magnitudes could be used interchangeably – but only if the theory is correct.

The setup of the TSSI is completely different. Here, there is no point in asking whether or not prices are equal to values, simply because values are defined by market prices.” (Nitzan and Bichler 2009: 107–108).
If the TSSI simply defines labour values as equal to price by definition then it badly misunderstands Marx, who derived prices from labour values, whether (1) in volume 1 of Capital where commodity prices tend to equal labour values, or (2) in volume 3 where labour values are transformed into prices of production.

Moreover, Mongiovi charges the Temporal Single System Interpretation with the following flaws and errors:
(1) the concept of labour value, contrary to Marx, is reduced by the Temporal Single System Interpretation merely to price (Mongiovi 2002: 406, n. 20);

(2) the Temporal Single System Interpretation’s attempt to deny that Marx’s economics was in the tradition of long period Classical equilibrium theory is wrong (Mongiovi 2002: 402, 412).

(3) the Temporal Single System Interpretation attempts to defend the propositions that the (1) sum of profits equals the sum of surplus value and (2) the sum of prices equals the sum of values by reducing this to an idiosyncratic and empirically empty pure mathematical identity that is a sleight of hand (in other words, by an analytic mathematical propositions merely true by definition) (Mongiovi 2002: 405–406, 413);

(4) Temporal Single System Interpretation Marxists focus on random passages in Marx and take these passages out of context to prove their own idiosyncratic ideas (Mongiovi 2002: 409–411).
On (2), there seems to be good evidence that Marx really did conceive his economic theories firmly in the Classical long-run equilibrium position. For example, the evidence for how Marx regarded “average price,” “cost-price” or “price of production” as the long run Classical “natural price” is superbly presented in Fred Moseley’s paper “Marx’s Concept of Prices of Production: Long-Run Center-of-Gravity Prices,” which demonstrates how the Temporal Single System Interpretation badly misunderstands Marx’s concept of the “price of production.”

If correct, then TSSI is fatally flawed by its own incompetent misunderstanding of Marx, and reduces to an empty tautological theory with no explanatory power and adds nothing of any importance to economic science.

(4) the New Interpretation (NI) of Gerard Dumenil, A. Lipietz, and Duncan Foley
The New Interpretation (NI) of Marx by Duncan Foley and Gérard Duménil emerged in the 1980s and appears to dispense entirely with any attempt to transform labour values into prices by conflating values with prices.

(5) Michael Heinrich’s “New German Reading of Marx.”
This is presented in Michael Heinrich’s book An Introduction to the Three Volumes of Karl Marx’s Capital (2012).

Heinrich’s interpretation, however, disputes that there is any tendency for the rate of profit to fall in capitalism and seems in some respects to morph into Keynesianism, as analysed here. How Heinrich understands labour values is unclear to me.

I am unsure if Anwar Shaikh, Fred Moseley, Alan Freeman, Makoto Itoh and Dominique Levy are also followers of the New Interpretation (NI), but I have read that they share similar views on the transformation problem.

Further Reading
John Barkley Rosser, “He’s Baaack! Karl Marx and The Transformation Problem,” March 2, 2015, Econospeak

Matias Vernengo, “Sraffa and Marxism or the Labor Theory of Value, what is it good for?,” Naked Keynesianism, August 14, 2012.

Böhm-Bawerk, Eugen von. 1949. “Karl Marx and the Close of His System,” in Paul. M. Sweezy (ed.), Karl Marx and the Close of His System and Böhm-Bawerk’s Criticism of Marx. August M. Kelley, New York. 3–120.

Bortkiewicz, L. von. 1906. “Wertrechnung und Preisrechnung im Marxschen System I,” Archiv für Sozialwissenschaft und Sozialpolitik 23: 1–50.

Bortkiewicz, L. von. 1907a. “Wertrechnung und Preisrechnung im Marxschen System II,” Archiv für Sozialwissenschaft und Sozialpolitik 25: 10–51.

Bortkiewicz, L. von. 1907b. “Wertrechnung und Preisrechnung im Marxschen System III,” Archiv für Sozialwissenschaft und Sozialpolitik 25: 445–488.

Bortkiewicz, L. von. 1907c. “Zur Berichtigung der grundlegenden theoretischen Konstruktion von Marx im 3. Band des ‘Kapital,’” Jahrbücher für Nationalökonomie und Statistik 34: 319–335.

Bortkiewicz, L. von. 1949. “On the Correction of Marx’s Fundamental Theoretical Construction in the Third Volume of Capital,” in Paul. M. Sweezy (ed.), Karl Marx and the Close of His System and Böhm-Bawerk’s Criticism of Marx. August M. Kelley, New York. 197–221.

Bortkiewicz, L. von. 1952. “Value and Price in the Marxian System,” International Economic Papers 2: 5–60.

Engels, F. 1991 [1895]. “Supplement and Addendum” to Volume 3 of Capital,” in Karl Marx, Capital. A Critique of Political Economy. Volume Three (trans. David Fernbach). Penguin Books, London.

Keen, Steve. 2011. Debunking Economics: The Naked Emperor Dethroned? (rev. and expanded edn.). Zed Books, London and New York.

Kliman, Andrew. 2006. Reclaiming Marx’s ‘Capital’: A Refutation of the Myth of Inconsistency. Lexington Books, Lanham.

Mongiovi, G. 2002. “Vulgar Economy in Marxian Garb: A Critique of Temporal Single System Marxism,” Review of Radical Political Economics 34.4: 393–416.

Moseley, Fred. “Marx’s Concept of Prices of Production: Long-Run Center-of-Gravity Prices”

Nitzan, Jonathan and Shimshon Bichler. 2009. Capital as Power: A Study or Order and Creorder. Routledge, Abingdon, UK and New York.

Samuelson, Paul A. 1971. “Understanding the Marxian Notion of Exploitation: A Summary of the So-Called Transformation Problem between Marxian Values and Competitive Prices,” Journal of Economic Literature 9.2: 399–431.

Steedman, Ian. 1977. Marx after Sraffa. NLB, London.

Sweezy, Paul M. 1946. The Theory of Capitalist Development. Principles of Marxian Political Economy.. Dennis Dobson, London.

Robert Skidelsky: Lecture 5: Distribution as a Macroeconomic Problem

Here Skidelsky gives lecture 5 of a series at the University of Warwick on economics. This lecture concerns distribution and macroeconomics.

Saturday, January 30, 2016

Robert Wilbrandt’s Interpretation of Marx’s Law of Value in Volume 1 of Capital

The socialist German economist Robert Wilbrandt (1875–1954), the author of Karl Marx: versuch einer Würdigung (Leipzig, 1920), had an interesting interpretation of the “law of value” in volume 1 of Capital, as described by Alexander Gray:
“Professor Wilbrandt, in his very sensitive appreciation of Karl Marx, offers us two points which are of some interest towards an appreciation of what Marx's admirers think that Marx really meant. The first is a rather naive admission that the first Volume (1867) was bound to be misunderstood, until such time as the third appeared.1 In the course of these twenty-seven years Marx himself died, and as there are some who would place on Engels a not inconsiderable share of the responsibility for the third Volume, it might be a matter for consideration whether Marx himself ever had an opportunity of understanding Volume I—which, of course, is more or less what Croce says. In fact, however, it was not the publication of the third Volume which made possible a comprehension of the first: it would be truer to say that the publication of the third Volume imposed, post-haste, a revision of the orthodox interpretation of the first Volume, if a show of consistency was to be maintained.

The other significant contribution made by Wilbrandt towards a comprehension of Marx is, at the first blush, rather surprising. In opposition to the view that Capital represents an analysis of the workings of an abstract capitalism, not of any particular capitalistic State, but of a State which corresponds to the concept of pure capitalism as ideally conceived, Wilbrandt would have us believe that Marx, in writing the first volume, had in mind pre-capitalistic mediaeval conditions; and in this consideration alone do we find justification for Marx. It is not the usual view; but it has at least this in common with the totally opposed conception, that it makes it clear that whatever Marx may have been talking about, it was certainly not this world that we know here and now.” (Gray 1946: 318).
Note Wilbrandt’s view: that the law of value in volume 1 of Capital – that commodities tend to exchange at true labour values – was only meant to be applied to the pre-19th century world of commodity exchange in a lower form of capitalism.

Gray thought that this was “not the usual view,” and with respect to modern Marxists he is probably right.

However, a really important point is that both Marx and Engels in their later writings in the 1890s did actually hold this view! Certainly this is how Engels, in his “Supplement and Addendum” of 1895, later defended the “law of value” of volume 1 as an empirical theory from hostile charges that volume 3 refuted it (see Engels 1991 [1895]).

Wilbrandt’s interpretation has solid justification in Marx and Engels’ own writings, as I have carefully demonstrated (see here).

Finally, the 20th-century Marxist economist Ronald Meek (1917–1978) also appears to have defended a form of this interpretation. In Studies in the Labour Theory of Value (2nd edn.; 1973), Meek endorsed the view that supply prices of pre-modern commodities were equivalent to labour values, citing Engels’ Supplement of 1895 (Meek 1973: 198–200).

Engels, F. 1991 [1895]. “Supplement and Addendum” to Volume 3 of Capital,” in Karl Marx, Capital. A Critique of Political Economy. Volume Three (trans. David Fernbach). Penguin Books, London.

Gray, Alexander. 1946. The Socialist Tradition: Moses to Lenin. Longmans, Green and Co., London and New York.

Meek, Ronald L. 1973. Studies in the Labour Theory of Value (2nd edn.). Lawrence and Wishart, London.

Wilbrandt, Robert. 1920. Karl Marx: versuch einer Würdigung. B.G. Teubner, Leipzig.

Robert Skidelsky: Lecture 4: Banking Reform

Here Skidelsky gives lecture 4 of a series at the University of Warwick on economics. This lecture concerns banks and banking reform.

Friday, January 29, 2016

Engels’ Understanding of the “Law of Value” in the Anti-Dühring

In Friedrich Engels’ Herr Eugen Dühring’s Revolution in Science (1894; first published in 1878), he describes the “law of value” in two passages:
“The feudal middle ages also developed in its womb the class which was destined in the future course of its evolution to be the standard-bearer of the modern demand for equality: the bourgeoisie. Itself in its origin one of the ‘estates’ of the feudal order, the bourgeoisie developed the predominantly handicraft industry and the exchange of products within feudal society to a relatively high level, when at the end of the fifteenth century the great maritime discoveries opened to it a new and more far-reaching career. Trade beyond the confines of Europe, which had previously been carried on only between Italy and the Levant, was now extended to America and India, and soon surpassed in importance both the mutual exchange between the various European countries and the internal trade within each separate country. American gold and silver flooded Europe and forced its way like a disintegrating element into every fissure, hole and pore of feudal society. Handicraft industry could no longer satisfy the rising demand; in the leading industries of the most advanced countries it was replaced by manufacture.

But this mighty revolution in the economic conditions of society was not followed by any immediate corresponding change in its political structure. The state order remained feudal, while society became more and more bourgeois. Trade on a large scale, that is to say, international and, even more, world trade, requires free owners of commodities who are unrestricted in their movements and have equal rights as traders to exchange their commodities on the basis of laws that are equal for them all, at least in each separate place. The transition from handicraft to manufacture presupposes the existence of a number of free workers—free on the one hand from the fetters of the guild and on the other from the means whereby they could themselves utilise their labour power: workers who can contract with their employers for the hire of their labour power, and as parties to the contract have rights equal with his. And finally the equality and equal status of all human labour, because and in so far as it is human labour, found its unconscious but clearest expression in the law of value of modern bourgeois economy, according to which the value of a commodity is measured by the socially necessary labour embodied in it.” (Engels [1894]: 120–121).

“The ‘exchange of labour against labour on the principle of equal value,’ in so far as it has any meaning, that is to say, the exchangeability against each other of products of equal social labour, that is to say, the law of value, is precisely the fundamental law of commodity production, hence also of its highest form, capitalist production. It manifests itself in existing society in the only way in which economic laws can manifest themselves in a society of individual producers: as a law of Nature inherent in things and in external conditions, independent of the will or intentions of the producers, working blindly.” (Engels [1894]: 349).
It is very clear that Engels is thinking here of modern capitalism of the 19th century: capitalism culminates in the “law of value,” where commodities exchange at their labour values. But by the time of Engels’ “Supplement and Addendum” to Volume 3 of Capital in 1895 he had changed his tune: now the “law of value” in this sense only applied to the premodern world of commodity exchange (see here).

Marx in volume 3 of Capital would describe this law of value as follows:
“The assumption that the commodities of the various spheres of production are sold at their value implies, of course, only that their value is the center of gravity around which prices fluctuate, and around which their rise and fall tends to an equilibrium.” (Marx 1909: 208–210).
Engels in the Anti-Dühring (first published in 1878) thought that the law of value in this sense applied to 19th century capitalism, just as Marx had said in volume 1 of Capital.

But after Marx’s death in 1883 as the transformation problem became a serious issue and he edited the draft of volume 3 of Capital, Engels was forced to recognise that Marx had used a different theory of price determination in volume 3 and that Marx even suggested the strict law of value in volume 1 only applied to the pre-modern world, a solution which Engels himself adopted by 1895 in his defence of Marx’s law of value in volume 1 as still an empirical theory in some sense.

This is further evidence of how misguided and ignorant are many modern Marxists in their inability to understand the deep incoherence of Marx’s thinking on the labour theory of value.

Engels, Friedrich. [1894]. Herr Eugen Dühring’s Revolution in Science (trans. Emile Burns from 1894 edn.). International Publishers, New York.

Engels, F. 1991 [1895]. “Supplement and Addendum” to Volume 3 of Capital,” in Karl Marx, Capital. A Critique of Political Economy. Volume Three (trans. David Fernbach). Penguin Books, London.

Marx, Karl. 1909. Capital. A Critique of Political Economy (vol. 3; trans. Ernst Untermann from 1st German edn.). Charles H. Kerr & Co., Chicago.

A Gunnar Myrdal Lecture in 1966

A piece of history, even if, of course, dated.

Gunnar Myrdal (1898–1987) gave this lecture at the University of California, Los Angeles (UCLA) in 1966 about the US, Europe, and international development in the Third World.

Gunnar Myrdal was a much underrated economist, and so much so that G. L. S. Shackle – whether rightly or wrongly – judged that “had the General Theory never been written, Myrdal’s work [sc. Monetary Equilibrium 1931] … would eventually have supplied almost the same theory” (Shackle 1967: 124) (see this post here).

It is interesting what Myrdal says here:
(1) he argues that the developed world in 1966 should liberalise its economies to Third World imports and allow outward capital flows into the Third World;

(2) however, the Third World should maintain its protectionist stance and stop First World imports from crippling its infant industry.

(3) he notes the liberalisation of trade after WWII and its history;

(4) he discusses the US Trade Expansion Act of 1962;

(5) he discusses the Marshall plan, and how it benefited Europe, as well as the emergence of the European Economic Community (EEC). Myrdal argues that the West should have given Marshall-style aid to the Third World for development purposes.

(6) Myrdal points out that national and linguistic differences in Europe impede its economic integration. And Myrdal appeared to think that Britain should not have joined the European Common market on economic grounds.

(7) Although Myrdal seems to have approved of the European Free Trade Association (EFTA), he had some harsh comments on the anti-democratic nature of the emerging European Economic Community (EEC)! (from about 42.00). How topical!

At 43.29–43.43 Myrdal even says:
“I have said before and I want to repeat it now: that no American senator – living or dead – could ever have thought of voting for the United States joining a supranational, bureaucratic and un-democratic organisation like the EEC.”
Ouch!! The EU of course directly came out of the EEC.

This can be heard below.

Myrdal, Gunnar. 1931. “Om penningteoretisk jämvikt. En studie över den ‘normala räntan’ i Wicksells penninglära,” Ekonomisk Tidskrift 33: 191–302.

Myrdal, Gunnar. 1939 [1931]. Monetary Equilibrium. W. Hodge & Company, London.

Shackle, G. L. S. 1967. The Years of High Theory: Invention and Tradition in Economic Thought 1926–1939. Cambridge University Press, Cambridge.

Robert Skidelsky: Lecture 3: Fiscal Policy

Here Skidelsky gives lecture 3 of a series at the University of Warwick on economics. This lecture concerns fiscal policy.

Real Refugees versus Economic Migrants in Europe

It seems that a large number of the migrants who came into Europe in 2015 are mere economic migrants, not genuine refugees, as is becoming painfully clear from recent news:
(1) Even left-wing and social democratic Sweden has discovered that it may have to deport as many as 80,000 of the migrants who came into Sweden in 2015 (see here and here). Why? Because they are not genuine refugees. The figure of 80,000 would be 49% – nearly half – of the 163,000 who arrived in 2015. Some migrants who refuse to leave also stay illegally and become part of the “black market economy,” which not only means such people often get exploited and become an underclass, but also tend to undermine Sweden’s labour market protections.

(2) In Finland, matters are worse: Finland may have to deport about 20,000 of the 32,000 who arrived last year (see here), and again because they turned out not to have a valid claim to asylum. This is a stunning 62.5% of those seeking asylum who arrived in Finland last year.

(3) EU officials are now complaining that there is also a rise in the number of people arriving in Europe who don’t actually have a valid claim to asylum, and migrants have been lying by claiming to be from Syria when they are not (see here). The European Commission chief Frans Timmermans, quoting unpublished data from the EU border agency Frontex, has even stated that 60% of those who arrived in Europe in December, 2015 are economic migrants, not real refugees (see
here). In essence, it is now being discovered that many people are from safe countries such as Albania, Kosovo, nations in West Africa, north Africa, Pakistan and Bangladesh.

(4) even worse, there is a whole industry in fake Syrian passports that are being used by migrants to fraudulently get into Europe (see here and here). This is a security nightmare.
In short, this is a catastrophe on many levels, and the left should face reality and not stick its head in the sand: Europe can’t take in a million a year for years on end, because it will put enormous strains on resources and social services, drive political opinion to the right, and pose nightmarish security issues. It may even break up the EU (not necessary a bad thing in itself), but at the cost of delivering political power in Europe to the populist right.

Moreover, mass immigration on this scale will likely lead to intensified labour market deregulation and failed neoliberal policies to integrate migrants into labour markets.

Finally, there is a perfectly good left-wing argument against open borders and mass immigration, as I have pointed out here.

Thursday, January 28, 2016

Keynes rejected Wage and Price Flexibility as the Path to Full Employment even in Theory

This is a major error of neoclassical theory, and the mistaken view some people still attribute to Keynes: that wage and price flexibility in theory is still a reliable and effective mechanism for reaching full employment, even if the real world has wage and price rigidities. In fact, Keynes rejected that view.

Curiously, even some Institutionalist economists have failed to understand it. For example, even Gardiner C. Means – the American Institutionalist who developed administered price theory – was unclear about what Keynes’ fundamental arguments were in the General Theory, and whether the theory depended on inflexible wages and prices.

This is illustrated by a fascinating piece of forgotten history told by Means himself: his visit to John Maynard Keynes in July 1939:
“In the summer of 1939, on my way to a holiday in Norway, I made it a point to visit Keynes with the specific purpose of asking him to what extent his explanation of persistent unemployment rested on an assumption of wage-rate or price inflexibility. His answer was a categorical: ‘Not at all.’ I asked the question in several different ways in order to make sure there was no failure of minds to meet and the answer was always the same. I said, ‘Suppose that prices and wage-rates met the classical assumption of perfect flexibility so that, if there were excessive unemployment, the price-wage level would fall frictionlessly. Then with the nominal money stock remaining constant, wouldn’t the rise in the real value of the money stock create added demand which would tend to absorb unemployed workers?’ But still the answer was no. Once interest rates had fallen to their limit there would be no further corrective. We were in complete agreement that, in practice, neither prices nor wage-rates were as flexible as classical theory assumed, but he insisted that his theory of unemployment did not depend at all on this fact.” (Means 1976: 61–62).
You couldn’t have a clearer statement by Keynes himself about what the essence of his theory was. But, despite these emphatic statements by Keynes, Means was dissatisfied with Keynes’ replies.

Later, Means (1976) defended the neoclassical synthesis interpretation of the General Theory contrary to the explicit answers Keynes had given to him in 1939, because Means continued to believe in the efficacy of the real balances effect (Means 1976: 63), which only goes to show how even some Institutionalists – as well as neoclassical Keynesians – failed to understand the fundamental message of the General Theory.

Means, Gardiner C. 1976. “Which was the True Keynesian Theory of Employment?,” Challenge 19.3 (July/August): 61–63.

Bernie for President!

The most promising Democratic candidate in … as long as I can remember. Forget corporate shills like the Clintons: Bill Clinton’s economic record was just neoliberal poison (see also here). Why would Hillary be any better?

Sure, you can make criticisms of Bernie, but there is nobody else as good as him.

One point: he should go big on fiscal policy first and make the economy boom before reforming the tax system. Leave tax system reform until after unemployment has fallen to low levels, and one has to be careful with taxes on speculation (see Davidson 2002: 205–210).

Davidson, P. 2002. Financial Markets, Money, and the Real World, Edward Elgar, Cheltenham.

Robert Skidelsky: Lecture 2: Monetary Policy

Here Skidelsky gives lecture 2 of a series at the University of Warwick on economics. This lecture is a discussion of central banks and monetary policy, especially before the crisis of 2008.

Another Introduction to Post Keynesian Economics by Engelbert Stockhammer

Another lecture by Engelbert Stockhammer on the basics of Post Keynesian economics.

Wednesday, January 27, 2016

What are the Useful Insights in Marx’s Capital?

It is not difficult to identity them:
(1) the use of a proto-effective demand theory by Marx;
(2) endogenous money theory;
(3) Marx’s rejection of Say’s law;
(4) the notion of a monetary production economy (also developed as a theory by Keynes); and
(5) a conflict theory of the distribution of income, and the recognition that workers and capitalists have unequal power.
However, the trouble is that none of these insights prove that Marx’s overall theory was right: far from it.

There are many deeply rotten and false things in Marx. The labour theory of value is rotten to the core, and the version in volume 1 of Capital was all but abandoned by Marx by volume 3 where he adopted Classical prices of production as the anchors for the price system.

Marx’s theory of wages – that wages would tend towards subsistence and reproduction of workers – was wrong. Marx made many disastrously wrong predictions derived from his theory (see here). His historical materialism was claptrap. His view that there is an eternal tendency for the rate of profit to fall is highly dubious.

Worse still, Marx was also a die-hard metallist in his monetary theory, so has more in common with libertarian metallists than Keynesians on that point! Marx was an adherent of the flawed, false metallist theory of money. He thought – wrongly – that money always needed to be tied to metals like gold.

Moreover, there are issues about Marx’s originality. Take Marx’s understanding of endogenous money. This was an insightful theory for his time, but endogenous money theory was already well known to the Banking school well before Marx’s ramblings in Capital.

Marx took and incorporated fundamental ideas on endogenous money right from the work of Thomas Tooke (see Smith 2004: 62–65).

Moreover, demand-side explanations already appeared in Malthus too (e.g., Keynes took great inspiration from Malthus). Even more, the Birmingham School already had a proto-Keynesian analysis of markets. And Thomas Attwood and even Marshall understood quite well what we now call debt deflation. They deserve as much credit as Marx for making highly insightful contributions to economic theory, perhaps more so.

Finally, there is also an irrational desire that some heterodox Keynesians have to pretend that Marx was “essentially right,” often because they want to pay lip service to Marx or because they are former Marxists themselves and still have an emotional attachment to Marxian theory. But this will not do. Marx was fundamentally wrong, not right.

All in all, whatever insights Marx did have need to be balanced by his disastrous errors and the fact that his whole theory was based on a rotten foundation: the labour theory of value.

Smith, Matthew. 2004. “Thomas Tooke’s Legacy to Monetary Economics,” in Tony Aspromourgos and John Lodewijks (eds.), History and Political Economy: Essays in Honour of P.D. Groenewegen. Routledge, London. 57–75.

Will there be another Crash in 2016?

Ann Pettifor discusses this question in the interview below.

An Introduction to Post Keynesian Economics by Engelbert Stockhammer and Victoria Chick

These talks by Victoria Chick and Engelbert Stockhammer give an introduction to Post Keynesian economics, and were held on 20th October, 2015 at the McGrath Centre, St Catharine’s College, UK.

One could add that some modern Post Keynesians have argued that Keynes’ marginal efficiency of capital (MEC) idea in the General Theory meant he failed to properly free himself from the neoclassical marginal productivity of capital concept (King 2002: 209). Admittedly, other Post Keynesians think the marginal efficiency of capital concept is sound (see, for example, the view of Shackle 1965: 99).

However, for critics of the MEC, the trouble is that it seems to suggest that there exists a rate of interest which is low enough to induce full utilization of capital goods. But this is just smuggling in the Wicksellian natural rate of interest, when Keynes had wanted to abandon the natural rate. That is to say, Keynes did not sufficiently stress the role of uncertainty and expectations in undermining the coordinating role of interest rates (King 2002: 14). In Chapter 18 of the General Theory, Keynes played down the role of uncertainty (which he had stressed in Chapter 12) and, if he had really maintained the crucial role of uncertainty (as he did later in Keynes 1937), this would have “ruled out any stable functional relationship between investment and the interest rate” (King 2002: 14). The door was thereby left open for neoclassical synthesis Keynesians to reformulate the General Theory as a general equilibrium model where the interest rate has a pivotal role (King 2002: 14). That was where mainstream Keynesians after WWII took a terribly wrong turn.

By contrast, Post Keynesians took the role of uncertainty seriously and dispensed with those problematic aspects of the General Theory that are a legacy of neoclassical theory (for Keynes’ mistakes in the General Theory, see here).

Finally, I add below my list of recent books on Post Keynesian economics and Modern Monetary Theory (MMT):
Introductory Studies
Davidson, Paul. 2009. The Keynes Solution: The Path to Global Economic Prosperity (1st edn). Palgrave Macmillan, New York and Basingstoke.

Lavoie, Marc. 2009. Introduction to Post-Keynesian Economics (2nd rev. edn.). Palgrave Macmillan, Basingstoke, UK.

Skidelsky, R. J. A. 2010. Keynes: The Return of the Master (rev. and updated edn.). Penguin, London.

King, J. E. 2012. The Elgar Companion to Post Keynesian Economics (2nd edn.). Edward Elgar, Cheltenham.
This is the second and updated edition of this work (1st edn. King 2003) that gives excellent short essays and overviews of all major subjects in Post Keynesian economics. This is a splendid first port of call for any research, especially for the beginner.

Wray, L. Randall. 2012. Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems. Palgrave Macmillan, New York.

King, John E. 2015. Advanced Introduction to Post Keynesian Economics. Edward Elgar, Cheltenham.
An advanced introduction to Post Keynesian economics by John E. King, whose work is always outstanding. Publisher details and the contents can be seen here. In particular, Chapter 8 is a discussion of the global financial crises of 2008 as interpreted in Post Keynesian theory.

Advanced and Specialist Literature
Hayes, Mark. 2006. The Economics of Keynes: A New Guide to The General Theory. Edward Elgar, Cheltenham.

Pasinetti, Luigi L. 2007. Keynes and the Cambridge Keynesians: A ‘Revolution in Economics’ to be Accomplished. Cambridge University Press, Cambridge.

Tily, Geoff. 2007. Keynes Betrayed: Keynes’s General Theory, The Rate of Interest and Keynesian Economics. Palgrave Macmillan, New York.

Godley, Wynne and Marc Lavoie. 2007. Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth. Palgrave Macmillan, New York, N.Y.

Mitchell, William and Joan Muysken. 2008. Full Employment Abandoned: Shifting Sands and Policy Failures. Edward Elgar, Cheltenham.

Davidson, Paul. 2009. John Maynard Keynes (rev. edn.). Palgrave Macmillan, Basingstoke.

Hein, Eckhard and Engelbert Stockhammer (eds.). 2011. A Modern Guide to Keynesian Macroeconomics and Economic Policies. Edward Elgar, Cheltenham.
A recent collection of essays on many different subjects.

Keen, Steve. 2011. Debunking Economics: The Naked Emperor Dethroned? (rev. and expanded edn.). Zed Books, London and New York.
This is the revised and updated version of Keen’s earlier work (Keen 2001).

Davidson, Paul. 2011. Post Keynesian Macroeconomic Theory: Foundation for Successful Economic Policies for the Twenty-First Century (2nd edn). Edward Elgar Publishing, Cheltenham.

Harcourt, G. C. and Peter Kriesler (eds.). 2013. The Oxford Handbook of Post-Keynesian Economics. Volume 1: Theory and Origins. Oxford University Press, New York.

Harcourt, G. C. and Peter Kriesler (eds.). 2013. The Oxford Handbook of Post-Keynesian Economics. Volume 2: Critiques and Methodology. Oxford University Press, New York.
A two volume collection of essays and advanced overviews of many different issues in Post Keynesian economics.

Lee, Frederic S. and Marc Lavoie (eds.). 2013. In Defense of post-Keynesian and Heterodox Economics: Responses to their Critics. Routledge, London.

Jespersen, Jesper and Mogens Ove Madsen (eds.). 2013. Teaching Post Keynesian Economics. Edward Elgar, Cheltenham, UK.
A collection of papers by leading Post Keynesian economists.

Lavoie, Marc. 2014. Post-Keynesian Economics: New Foundations. Edward Elgar, Cheltenham.
This is the newly updated and expanded version of Lavoie’s earlier work (Lavoie 1992). It runs to 680 pages, and is possibly the best and most authoritative work available.

Davidson, Paul. 2015. Post Keynesian Theory and Policy: A Realistic Analysis of the Market Oriented Capitalist Economy. Edward Elgar Publishing, Cheltenham, UK.

Mitchell, Bill and L. Randall Wray. Modern Monetary Theory and Practice (forthcoming).
This textbook on MMT appears to be forthcoming. There is a table of contents here.

Halevi, Joseph, Harcourt, G. C., Kriesler, Peter and John Nevile. 2016. Post-Keynesian Essays from Down Under. Theory and Policy in an Historical Context. Volume I: Essays on Keynes, Harrod and Kalecki. Palgrave Macmillan, Basingstoke, UK.

Halevi, Joseph, Harcourt, G. C., Kriesler, Peter and John Nevile. 2016. Post-Keynesian Essays from Down Under. Volume II: Essays on Policy and Applied Economics. Theory and Policy in an Historical Context. Palgrave Macmillan, Basingstoke, UK.

Halevi, Joseph, Harcourt, G. C., Kriesler, Peter and John Nevile. 2016. Post-Keynesian Essays from Down Under. Volume III: Essays on Ethics, Social Justice and Economics. Theory and Policy in an Historical Context. Palgrave Macmillan, Basingstoke, UK.

Halevi, Joseph, Harcourt, G. C., Kriesler, Peter and John Nevile. 2016. Post-Keynesian Essays from Down Under. Volume IV: Essays on Theory. Theory and Policy in an Historical Context. Palgrave Macmillan, Basingstoke, UK.

Wray, L. Randall. 2016. Why Minsky Matters: An Introduction to the Work of a Maverick Economist. Princeton University Press, Princeton.
Further Reading
“A Bibliography on the History of Post Keynesian Economics (updated),” September 6, 2014.

“Post Keynesian Textbooks,” July 5, 2011.

“Bibliography on Post Keynesian Economics,” July 6, 2011.

“Bibliography on Post Keynesian Methodology,” September 16, 2013.

“Bibliography on Keynes’s Theory of Probability (Updated),” July 6, 2014.

“Bibliography on Uncertainty in Post Keynesian Economics (Updated),” May 21, 2014.

“Keynes’s Mistakes in the General Theory,” May 7, 2013.

“John King on ‘Post Keynesians and Others,’” July 11, 2014.

Keynes, J. M. 1937. “The General Theory of Employment,” Quarterly Journal of Economics 51: 209–223.

King, J. E. 2002. A History of Post Keynesian Economics since 1936. Edward Elgar Publishing, Cheltenham, UK and Northampton, MA.

King, J. E. (ed.). 2003. The Elgar Companion to Post Keynesian Economics. Edward Elgar, Cheltenham, UK and Northhampton, MA.

Keen, S. 2001. Debunking Economics: The Naked Emperor of the Social Sciences. Zed Books, New York and London.

Lavoie, Marc. 1992. Foundations of Post-Keynesian Economic Analysis. Edward Elgar Publishing, Aldershot, UK.

Shackle, G. L. S. 1965. A Scheme of Economic Theory. Cambridge University Press, Cambridge.

Robert Skidelsky: Lecture 1: The Anatomy of the Crisis

Another video of Robert Skidelsky, a British economic historian and the author of the best biography of John Maynard Keynes in existence. Skidelsky’s Keynesian economic ideas have also converged with Post Keynesian economics over the years.

Here he gives lecture 1 of a series at the University of Warwick on economics. This lecture is an analysis of the financial crisis of 2008 and how orthodox neoclassical economics brought the world to this catastrophe.

Robert Skidelsky on the State of Economics, Banks, and Inequality

Robert Skidelsky, author of Keynes: The Return of the Master (London, rev. edn. 2010), speaks below in an interview on the state of neoclassical economics, banks, and inequality. Unfortunately, I don’t think Skidelsky sees the how rotten the current EU is and the merits of a possible Brexit, but apart from this there is much of interest here.

Monday, January 25, 2016

Steve Keen on the History of Money and Banking

This is lecture 10 of Steve Keen’s course at Kingston University in the UK. This lecture concerns the history of money and the certain myths of fractional reserve banking.

Sunday, January 24, 2016

The Gender Wage Gap is a Myth

The myth is this:
(1) Women, when they do the same job or same type of work as men, get paid on average 77% less in their (i) hourly wages or (ii) weekly or yearly earnings (when they work the same amount of time), and (2) this hourly/weekly/annual wage gap is caused by a systemic, institutionalised, and misogynist wage discrimination against women in the West.
Christina Hoff Sommers discusses this below.

First, one must distinguish between (1) full-time, annual earnings of men and women in vastly different professions and (2) the hourly wage for the same type of work.

If you take aggregated, averaged data on full-time, annual earnings, there is indeed a gender pay gap, but to prove that men and women are paid significantly differently for the same work in their hourly wage, you need to look at disaggregated data of hourly wages of men and women, not an average of lifetime earnings.

That is, you need to look specifically at men and women doing the same type of work, and then see if their hourly wages are different. When this is done, certainly some inequality can be found (and that is a problem), but the scale of this inequality is grossly exaggerated and women are generally paid the same wage for the same type of work as men do (see here).

Clearly the belief that there is some massive institutionalised, misogynist discrimination against women in the Western world is a myth.

The main reasons for the gap in average female full-time, yearly earnings as against earnings of men are (1) the different professions and career paths that women choose, and (2) different life choices of men and women.

If the difference between the full-time, lifetime earnings of men and women is regarded as an issue to be solved (and not, as some people argue, simply the result of the different career paths and life choices of men and women), then paid maternity leave and the encouragement of women into higher-earning professions could mostly fix it.

But what if after such measures a gap remains and it is because women freely choice different careers? Is this really a problem?

Calais Chaos

It is in the news here and here.

And people wonder why the French National Front did so well in the first round of French regional elections.

We now learn that disgraceful far left anarchists are inciting the migrants to violence.

Is this the future of Europe? Nations with no control over borders, and Europe filled up with large numbers of migrant camps, with people living as an underclass and with serious breakdown of law and order, and governments unwilling or powerless do to anything?

At some point, reality has to sink in: the migrants in Calais are demanding to be let into the UK. This is an unreasonable demand when they can claim asylum in France, or another European nation that will take them.

There is also reason to think that a significant number aren’t even genuine refugees at all, but mere economic migrants (see here and here).

Jeremy Corbyn yesterday visited the Grande-Synthe camp near Dunkirk, and complained that conditions there are a disgrace, as we can see in the video below.

No doubt that is true: conditions in these camps are disgraceful and inhuman.

So why encourage the migrants in their unreasonable demand to be let into Britain when that won’t happen any time soon? Why not tell them to face reality and claim asylum in France so that they can leave these wretched camps and actually get help from the French government?

What is more compassionate here in view of hard realities?

Finally, I can foresee so easily what will happen to Labour under Jeremy Corbyn: his chances of getting into number 10 will be crippled by (1) his love of the EU and (2) his support for open borders and mass immigration, when these issues are becoming politically toxic in the UK for good reasons (here and here).

Saturday, January 23, 2016

Chomsky on Freedom of Speech

Note well: Chomsky is a radical man of the left and he (1) condemns hate speech laws, (2) the idea that the government should determine what is history, and (3) laws against Holocaust denial. Why? Because is a radical defender of free speech, the most precious foundation of a free society.

But the regressive left these days would no doubt subject him to the most vicious abuse for this sort of defence of freedom of speech, because the regressive left often opposes free speech. Could there be any greater betrayal of a truly free society?

Is a Shrinking Labour Force such a Problem?

It may not even be a problem at all.

That is, in light of the massive revolutionary effects of automation and robotics that is happening as we speak, as we can see here, here and here.

It is potentially so revolutionary it is rightly being dubbed the “fourth industrial revolution.”

The warning signs have been here for years: e.g., a 2013 Oxford study suggests that about 47% of human jobs will be lost to AI by 2030. First, working class and then middle class jobs will be hit.

When, for example, machines can do the work of people in fast food restaurants, what sort of world will result for low-skilled and semi-skilled workers? Even offshoring will become pointless, if production by machines costs less than third world labour.

And don’t trust halfwit neoclassical economists to provide sensible analysis here, because their response is almost always that only if you make wages become flexible and rely on laissez faire market theology, then this will eliminate involuntary unemployment. That is rubbish. There is no reason to think a fantasy-world self-equilibrating market will solve the problem of mass unemployment, because it does not exist.

At the very least, all this suggests that the endless hysteria about shrinking working-age labour forces in the West is grossly exaggerated. If anything, fewer workers mean less of a problem with mass unemployment in the future. More likely, there will be plenty of people to look after the elderly and do whatever necessary work is left to people.

Friday, January 22, 2016

A Neoliberal Vision for Europe

The Swiss global financial services company UBS has put out a report called “The Future of Europe” on 13 January, 2016:
“The Future of Europe,” UBS, Chief Investment Office, January 2016.
If you want to see one example of a neoliberal vision for the future of Europe, read it.

At one level, there is some very interesting analysis in it and at least the recognition that the EU needs some central fiscal policy.

But, in its other economic proposals, it makes horrifying reading. Because of the alleged population crisis, Europe, they argue, has two choices, as follows:
(1) huge mass immigration or

(2) massive neoliberal deregulation and labour market deregulation (“The Future of Europe,” p. 6).
Unfortunately, under present economic orthodoxy, option (1) is just as likely to lead to (2), so really (1) boils down to (2).

Option (2) means smashing labour market regulation, job security, minimum wages, and cutting business regulations. In other words, let the corporations and big business do whatever they want.

Option (1), as proposed in the report, would involve mass immigration of 1.8 million new migrants of working age each year for 10 years (“The Future of Europe,” p. 7). So Europe must have 18 million new migrants in the next 10 years, a number which is 38% of the current population of Spain, about 27% of the population of France, or 22% of the current population of Germany. That number is bigger than the current individual populations of Sweden, Netherlands, Belgium, Austria or Denmark. Just think about the catastrophe caused by just 1.1 million people coming into Germany last year: Europe must increase this number to 1.8 million a year for 10 years, under this proposal.

Bizarrely missing from the analysis is the crippling mass unemployment Europe is already experiencing, as we can see from some data here:
Nation | Unemployment Rate
Greece | 24.5% (October, 2015)
Spain | 21.6% (October, 2015)
Portugal | 12.4% (October, 2015)
Italy | 11.3% (November, 2015)
France | 10.8% (October, 2015)
Ireland | 8.9% (October, 2015)
Finland 8.2% | (November, 2015)
Sweden | 7.2% (October, 2015)
Netherlands | 6.9% 2015 (October
United Kingdom | 5.1% (January, 2016)
Denmark 6.0% | (October, 2015)
Across the EU, the unemployment rate is about 9.1% (as of November, 2015), and youth unemployment even higher. If we were to add in (1) long-term discouraged workers who have given up looking for work and (2) the underemployed, the data would be even more horrifying.

So presumably this vast army of people will be thrown into an underclass of long-term unemployed, as vast numbers of new workers are brought in? Naturally in the process, they want to smash up what’s left of labour and business regulations.

This ingenious “solution” to Europe’s economic ills will not work, however, because neoclassical economics is clueless in its inability to manage a capitalist economy.

Only massive fiscal policy and a jobs guarantee can fix the problem of mass unemployment, but it is unlikely this will happen any time soon.

A final issue is this: the irrational obsession running through most economic and demographic analysis of the West today is the fact of ageing populations.

But when you look hard at the economic problems allegedly being caused by this demographic trend, you’ll quickly discover most of the concerns are grossly exaggerated and the result of an inability to see the long-run consequences of trends that even now are visible all around us.

Does Europe need endless mass immigration because of an ageing population? Probably not, and for two reasons.

First, there is every reason to think that historically unprecedented and soaring productivity will occur this century as sector after sector is hit by mass unemployment, because artificial intelligence, robotics, automation and machine intelligence will make huge swathes of human labour obsolete. If anything, by 2050 we will be hit by a terrifying mass unemployment crisis and resulting failure of aggregate demand.

The “ageing crisis” that neoclassical economists are concerned about now will probably be easily dealt with by massive productivity growth and a shift in employment by part of the new mass of the unemployed to old age care.

Secondly, if Europe needs more children, then governments can switch to social policies that encourage families to have more children, e.g., full employment, job security, generous welfare policies for new children, paid maternity leave, and child care. In contrast, mass immigration is more likely to increase the trend of mass unemployment and cripple the welfare state.

Thursday, January 21, 2016

Open Borders in Europe means More Neoliberalism

An International Monetary Fund study is gushing over the benefits of 1.1 million new migrants in Germany.

Why, you ask?

Once you put aside the minor point about a temporary boost to GDP, we get to the real issue: according to the pro-business IMF, Germany can get migrants into jobs in the coming years by ramping up “labor-market flexibility” – which is nothing but neoliberal code for smashing up what’s left of German labour market regulations and trade unions, since unhinged neoliberal ideologues always think that if only wages were made more flexible, then the economy would adjust to full employment. This is delusional fantasy.

Unfortunately, the sober reality is also sinking in that, as described here, most of the migrants are unskilled or semi-skilled workers, who will do little except compete for scarce jobs with domestic German low-skilled workers, and in the process drive wages down. Economists even talk about lowering Germany’s minimum wage to effect the needed labour market flexibility, and the IMF suggests the same thing and for other European states to boot!

It will take years for the state to teach the new arrivals German and make them into highly-skilled workers for German industry or services, and one can barely believe that the Germans will suddenly become Keynesian big-spenders to stimulate the domestic economy.

In the absence of government stimulus and with a weak private sector (and a possible global economic downtown this year), more mass immigration means more unemployment, and more demand on Germany’s welfare state, which in turn could easily provoke neoliberal demands to slash welfare to “incentivise” unemployed people into work.

The effect of all this should be perfectly clear: open borders means an intensified neoliberal assault on the population. It surprises me that more left-wing people don’t see it.

One can barely believe it, but according to this report here, an average of 3,000 people a day are still pouring into Germany from Austria.

The Real Problem with Jeremy Corbyn

Quite simple. He’s in favour of the UK staying in the EU, even when a heroic wing of his own Labour party is anti-EU and wants out, because they correctly see that the EU is a corporate tyranny and threat to democracy and left-wing economics.

Democracy and the EU are incompatible, and more and more people in Europe agree.

Meanwhile, over at the European parliament, it’s left to the leader of the UK’s right-wing, populist Thatcherite party to complain that the EU is anti-democratic. Poor old Jeremy won’t be saying this anytime soon, so it seems.

Wednesday, January 20, 2016

Nonsense about Science

In my opinion, the theories of Thomas Kuhn and Postmodernism have wrought a catastrophic anti-science mentality to elements of the modern left.

If we were to go through the endless, hare-brained rantings of Postmodernists about the natural sciences, it would take us ages (see here and here for just two examples).

But there is a more insidious assumption lying behind a lot of hatred of science.

It is this: (1) science never finds objective truths, but only “paradigms,” and (2) science will forever shift between different paradigms, which are mutually contradictory. Thomas Kuhn deserves the blame for this view of science.

The trouble with this view: it is lazy-minded stupidity.

The reasons are two-fold.

First, there are many propositions and theories in science that still stand today and have never been refuted. E.g., the view that the earth revolves around the sun; the view that the moon revolves around the earth; the view that ocean tides are mostly caused by the gravity of the moon and sun. The germ theory of certain diseases has never been refuted. The view that nuclear fusion occurs in the sun still stands. If we looked hard enough, the examples would quickly multiply and fill up page after page.

But there is also a powerful secondary argument: modern science is relatively young. It only really got going from the 16th century onwards, and we would expect it to make many mistakes and false steps in the first few centuries. Relative to the age of the human species and certainly to the thousands – possibly millions – of years in which the human species will persist into the future, natural science in the year 2015 is still like a toddler.

And yet it has become unbelievably powerful: it is like a 500-pound toddler with a record of success so mind-blowing that nothing else can compare with it.

The idea that science will never – not even a 1,000 or 10,000 years from now – arrive at, say, a physics so good that it can be regarded as a final theory of that discipline is just lazy, sloppy thinking from people who read too much Thomas Kuhn and take their ideas from the madhouse we call Postmodernism.

The science-hating Postmodernists and followers of Kuhn have a simple question to answer: what will science the wise old man look like? (to develop my metaphor).

How the hell do you know that 500,000 or 1 million years from now, physics, geology, biology and neuroscience won’t essentially be complete and that rational people will understand that, say, our scientific explanations of quantum mechanics, macroscopic physics, genetics, and human consciousness can’t be improved on in any substantive manner but only in trivial ways?

Tuesday, January 19, 2016

Marx’s Letter to Engels of 2 August, 1862 on Prices of Production

A key passage in that letter is here:
“The price so regulated = the expenses of capital, + the average profit (F.I. 10 p.c.), is what Smith called the natural price, cost price, etc. It is the average price to which competition between different trades (by transfer of capital or withdrawal of capital) reduces the prices in different trades. Hence, competition reduces commodities not to their value, but to the cost price, which, depending on the organic composition of the respective capitals, is either above, below or = to their values.”
Marx to Engels, 2 August, 1862
Look carefully at the passage in yellow highlighting. If this was really always Marx’s private, consistent and honest opinion from 1862 onwards, it only proves how volume 1 of Capital was a deeply dishonest work of propaganda by a deceptive communist ideologue.

Why? Because volume 1 leaves readers with the impression that commodities tend to exchange at their true labour value and that was a real “law” of 19th century capitalism and a serious empirical theory of price determination for that same period of capitalism. The few cryptic statements about prices of production in volume 1 in footnotes do not change this fact, and, if anything, deeply underline Marx’s sleight of hand.

One might defend Marx by arguing that he was a sloppy, inconsistent and confused thinker who either (1) changed his opinions on this subject in the course of his life, swinging back and forwards between two mutually contradictory views or (2) he was guilty of holding inconsistent, contradictory views simultaneously when he wrote volume 1 of Capital, privately holding an opinion he did not uphold in that volume.

But either way Marx is damned.

Top Five Feminist Myths of All Time

The feminist Christina Hoff Sommers discusses them below.

Second wave feminism had some very good ideas indeed and was, generally, a positive development.

Third wave feminism seems to be largely a betrayal of women and an outgrowth of the same rotten Postmodernism, identity politics, and cultural relativism that has poisoned the rest of the left. As Sommers documents, third wave feminism often also has the same contempt for facts that characterises Postmodernism.

Steve Keen on the Post Keynesians: Realism Uncertainty, Endogenous Money and Financial Instability

This is lecture 4 of Steve Keen’s course at Kingston University in the UK. It concerns the Post Keynesian school.

Sunday, January 17, 2016

Peter Hitchens on Marxism and Open Borders

In the video below, which struck me as very interesting, especially his remarks on his brother Christopher Hitchens.

The amusing meme that the American neoconservatives who planned the Iraq war (which Christopher Hitchens supported so vehemently) were the new liberal Trotskyists is a favourite of libertarians (see here), and there may well be an element of truth to it, given that the neoconservative foreign policy was a radical departure from the realist school of foreign policy that had previously been influential in the US government. But let us move on to my main point.

Marxism has been divided into the (1) internationalist wing and (2) the nationalist wing. What Peter Hitchens says here can be applied to the internationalist wing, but not necessarily to the nationalist communists/Marxists.

After all, it is not difficult to extract an anti-open borders ideology from what Marx wrote about mass immigration, and the Soviet Union had highly illiberal immigration and emigration policies (see Light 2012).

In fact, mass emigration was such a threat to Communist states that they actually had to resort massive intervention from keeping their populations from fleeing (e.g., the Berlin Wall).

But it seems to me that so many modern Marxists these days have just been infected with the same Postmodernist rot, cultural relativism and pro-open borders ideology that informs so much of the mainstream left, and this is another source of why Marxists support open borders.

Light, Matthew A. 2012. “What Does It Mean to Control Migration? Soviet Mobility Policies in Comparative Perspective,” Law & Social Inquiry 37.2: 395–429.

The Regressive Left’s Obsession with Race

Just look at this article here in the UK Independent by Edward Siddons, which concerns the recent sexual assaults in Germany.

If we read it carefully we can see before our eyes an outstanding fault of the modern left: the bizarre conflation of culture with race.

First, Siddons points out that some people on the far right are complaining that maybe the cultural attitudes of the attackers might have something to do with their crimes.

But then Siddons immediately implies that this means that such people are therefore focusing on the attackers’ race, with the implication that they must all be racists. What?!

In looking at the news coverage and personalities raising issues about the events in the media over the Cologne attacks and even on the populist right, I see nobody screaming about the race of the attackers and saying that they committed the crimes because it is in their genes. No doubt some exist on the really far right, but clearly these people do not dominate the conversation.

Instead, there are questions about whether some of the regressive cultural ideas in the parts of the world from which the attackers came might have something to do with their crimes. This is clearly totally different from their racial origin: culture is not race.

There seems little doubt that the conflation of culture with race comes right out of the Postmodernist poison and all its offshoots over the past 30 years, and that it is a most dangerous and sinister idea, for it would make even criticism of culture or cultural ideas tantamount to racism.

Just think about where it would lead: we could easily say that neo-Nazism in Germany as a cultural belief system must be racial in origin and in the genes of Germans. Therefore any criticism of German neo-Nazism is equivalent to anti-German racism!

Or take this video below about a similar spate of sexual assaults in Sweden.

If we take the view that criticism of culture is tantamount to racism, then it would follow that this BBC report is racist for merely letting people suggest that culture may have something to do with the attacks.

That is where this nonsense would logically end.

Saturday, January 16, 2016

Is Schengen Dead?

It looks more and more like it.

Why? Because Merkel’s irresponsible decision to throw Germany’s borders open to 1.1 million migrants has killed it.

There is some interesting analysis here and here, which, despite the brave face put on Wolfgang Schäuble’s remarks in Brussels, reveals a deep, new crisis hitting the EU.

Last year the major threat to the EU was the surge of democracy in Greece against austerity, but in the end the EU – and above all Germany – smashed any hope of that and the Greek government meekly accepted the horrible truth that it is little but an economic colony of the EU.

How paradoxical it is that Germany may have indirectly killed the EU, since, as Jean-Claude Juncker says in line with his neoliberal thinking, what’s the point of having the Euro without Schengen?

And now this year another – and quite possibly far more serious – crisis will hit the EU as the consequences of Merkel’s policies will follow.

Schengen may collapse even further. There will be more backlash against a policy that people simply didn’t vote for and many oppose, as well as the social and economic problems caused by 1.1 million new people suddenly in Europe but from a different culture. The mass sexual assaults in Germany during the New Year hardly augur well for the future. And how are all these people going to get employment? And then there is the nightmare of security concerns.

Even worse, there are signs that another massive wave of illegal immigration into Europe will happen this year, despite the tightening of borders (see here and here).

The million dollar question: what will be the political consequences of this? Will it lead to a vehement anti-EU backlash and the collapse of the EU itself?

Unfortunately, the left is almost totally incapable of seeing that open borders and mass immigration are a catastrophe. It is more likely that the political future of Europe belongs to the populist right or (possibly after a change of heart) a mainstream right devoted to an anti-EU, nationalist and anti-open borders agenda.

Friday, January 15, 2016

Keynesianism could probably have prevented World War II

Let us look at the simple facts relating to the rise of the Nazi party in the 1930s.

This is the Nazi party share of the vote in federal elections in the Weimar Republic from 1924 to 1933:
Date | % of Vote | Reichstag Seats
May 1924 | 6.5% | 32
Dec. 1924 | 3.0% | 14
May 1928 | 2.6% | 12
Sep. 1930 | 18.3% | 107
July 1932 | 37.3% | 230
Nov. 1932 | 33.1% | 196
March 1933 | 43.9% | 288
By 1928, during the economic boom in Germany, the Nazi party vote looked like it was almost dead and was only 2.6%. Remarkably, even in the aftermath of the Weimar hyperinflation in 1924 it was only 3%.

When the deflationary depression struck Germany from 1929–1932, it soared to 18.3% (September 1930), then 37.3% (July 1932), and finally to 43.9% in March 1933 in the aftermath of the Great Depression. Hitler became Chancellor on 30 January, 1933, admittedly after some political jockeying.

It was the depression that essentially made the Nazi party and made Hitler chancellor.

Had the Weimar Republic government intervened in 1930 and 1931 onwards with policies to stabilise the financial system, provide massive fiscal stimulus, and employment programs, then the Great Depression in Germany would have been quickly reversed and prevented and the Nazi share of the vote would very probably have stayed relatively low. Hitler would never have been a plausible candidate for chancellor in 1933 and crucially the threat from communism would also have been much weaker.

Without the Nazis, it seems very difficult to see how the Second World War would have happened.

Thursday, January 14, 2016

Extreme Multiculturalism versus Liberal Nationalism

Liberal nationalism wins every time.

Liberal nationalism is an outgrowth of the French revolution and the liberalism of the 19th century: it holds that all people living in a state should have equal citizenship rights and only one system of law for everybody. Liberal nationalism supports multiracialism. It does not matter what skin colour you have: you can still be, for example, a full French citizen or American citizen. Being a citizen of a liberal national state is open to people from different races, ethnic groups or religions, provided that you integrate and accept its core values and legal system.

Liberal nationalism demands a secular state, secular legal system and a universal system of education for its citizens. Liberal nationalism encourages a melting pot view of society – and not, for example, segregated communities.

Under liberal nationalism, there is a common language and common national identity, and a mainstream culture. Old ethnic, religious and sectarian conflicts and tensions tend to be broken down and overcome, and so a better, more cohesive society is created.

Moreover, liberal nationalism has no problem with people keeping their original ethnic and cultural traditions alive (or even languages) – as long as people integrate in the sense above and their cultural beliefs and practices do not radically conflict with core values of their new nation.

Now contrast liberal nationalism with extreme multiculturalism, certainly in the European Union today with its open borders and mass immigration.

Under extreme multiculturalism in Europe and unfortunately in some other parts of the West, we are seeing parallel legal systems and segregated communities spring up.

In Britain, for example, more and more people do not even speak English (see here and here). There are more and more segregated communities in the UK cut off from one another (see here).

Extreme multiculturalism severely undermines the principle of one legal system for everybody, because it encourages blatant double standards in the treatment of people with different, minority cultures (see here). In Britain, extreme multiculturalism and the crippling culture of political correctness are major reasons why the Rotherham abuse scandal could happen, and authorities refused to enforce the law.

Extreme multiculturalism undermines an effective secular and universal education system (which breaks down differences and helps to create citizens with a common language and shared values), because extreme multiculturalism tends to create a segregated education system too, often based on religious fundamentalism (see here).

Liberal nationalism was, and is, one of the most important and successful civilising forces in human history: it has created successful nations in Europe like France and the UK, and nations like America, Canada, New Zealand and Australia, where people came to settle from astonishingly diverse ethnic and religious backgrounds.

But extreme multiculturalism is severely undermining this achievement and causing havoc in the Western world – and, above all, in Europe.

It is being enabled and promoted by a left infected with ideas from Postmodernism and extremist multiculturalism, which, bizarrely, often infects the mainstream right as well.

It is turning parts of the Western world back to the Middle Ages right before our eyes: we are going back to a world of ethnic and religious segregation, parallel legal systems and increasing tensions between communities, and the destruction of the national identities and even common languages that are absolutely necessary for any successful modern society to function properly.

Hopefully, more and more people on the left will wake up and defend the virtues of liberal nationalism before it is undermined in even more catastrophic ways.

Even worse, some people on the left cannot even comprehend the difference between (1) extreme multiculturalism and (2) the liberal “melting pot” view of nationalism. Instead, they conflate them and, in their sheer incompetence and stupidity, actually leave it to certain people on the conservative right to defend liberal nationalism, a state of affairs which proves how unbelievably useless the modern left has become.

Have we got to the stage where it is only people on the right and sometimes even neoconservative right who will defend the secular, liberal view of nationalism?

Addendum: In Praise of Secular Public Education
A commentator below complains that the emphasis on secular public education is “too French.” I disagree. In most Western countries, the government or public schools tend to be, at the very least, nominally secular, even in America. This is a very good thing indeed.

Let Superintendent Chalmers explain.

Tuesday, January 12, 2016

The Debate on Marx’s View of Wages in Capitalism

It is interesting to revisit an old debate had in these articles:
Baumol, William J. 1983. “Marx and the Iron Law of Wages,” The American Economic Review 73.2: 303–308.

Hollander, Samuel. 1984. “Marx and Malthusianism: Marx’s Secular Path of Wages,” The American Economic Review 74.1: 139–151.

Hollander, Samuel. 1986. “Marx and Malthusianism: Reply,” The American Economic Review 76.3: 548–550.

Ramirez, Miguel D. 1986. “Marx and Malthusianism: Comment,” The American Economic Review 76.3: 543–547.

Cottrell, Allin and William A. Darity. 1988. “Marx, Malthus, and Wages,” History of Political Economy 20.2: 173–190.
In essence, Baumol (1983) thought that Marx’s view was that there could be a rising real wage in capitalism and that wages did not need to tend towards subsistence. Ramirez (1986) defends this view too.

Hollander (1984) strongly disputed it, arguing that Marx’s view was that wages tend towards subsistence.

Cottrell and Darity (1988) take a more nuanced view, but in the end reject Baumol’s view, and they point out that Marx’s Value, Price and Profit (1865; first published in 1898) does say that wages tend towards a minimum and that Capital does not contradict nor repudiate that view (Cottrell and Darity 1988: 181).

My analysis of Value, Price and Profit here and chapter 6 of volume 1 of Capital here shows this is true.

A final point is that Marx did reject the orthodox “iron law of wages” since he rejected Malthusian population theory, an important issue which some people forget.

Marx, Karl. 1913. Value, Price and Profit (ed. by Eleanor Marx Aveling). Charles H. Kerr & Company, Chicago.

Sunday, January 10, 2016

Meet the Renegades Interview with Steve Keen

An interesting interview below with Steve Keen on economics and the ideology of neoclassical theory.

Saturday, January 9, 2016

“Cultural Appropriation”: The Latest Nonsense from the Regressive Left

Hysterical screaming and whining about cultural appropriation is the latest rubbish from the regressive left. It refers to the borrowing or adoption of elements of one culture by people from another. But typically – as in so much regressive left nonsense – there is a blatant double standard: apparently it is only evil White people, Western civilisation or “dominant cultures” that are to blame for this, because such “appropriation” supposedly oppresses, insults or disrespects the minority cultures. In its extreme form, regressive leftists are now complaining about “culturally insensitive” Halloween costumes and even Western fondness for ethnic food since it is evil “cultural appropriation.”

Strangely, nobody – as far as I can see – says anything about how the non-Western world has engaged in massive “cultural appropriation” of Western culture and products of Western culture. Why? Because (1) this doesn’t fit the regressive left victimology and (2) any rational Western person won’t care less that non-Western people borrow Western culture: it is a total non-issue. For example, if people in China or Japan wear Western-style clothing and business suits, who in the West could care less? If people in Japan want to dress up as cowboys or in German or French national costumes, do you care less?

If people in India or Bangladesh want to eat British pork pie, are they bound to learn everything they can about British culture and eat it in a way showing “respect” to the British culture that produced pork pies? If they were to eat pork pie with other Indian dishes or cook it in a way different from the way British people do, is this showing disrespect for British culture? Clearly not. The very idea is bloody absurd.

This latest meme of white or Western “cultural appropriation” is truly bizarre, because for years the Western Postmodernist multiculturalists have been saying that the introduction of new cultures into the West and our adoption of new cultural practices, customs and food etc. is a very good thing that “enriches” us. But now, apparently, it is proof that we are all a bunch of culturally insensitive racists – which just goes to show how incoherent and unhinged is the Postmodernist and regressive left in this day and age.

Finally, there is another issue: this stuff is so ridiculously trivial, given the really serious problems in the world.

Every year literally millions of children are dying in the developing world from easily preventable or curable diseases long banished from the West, an issue which could be largely fixed by relatively trivial aid from the industrialised world, if only there was a mass popular movement in the industrialised world to do something about it.

But today’s leftists at universities would rather p*ss their pathetic, sorry lives away screaming about sombreros or Mexican halloween costumes. Words cannot describe my contempt for such people.

Friday, January 8, 2016

Bill Mitchell on how “Democracy in Europe requires Eurozone Breakup”

Bill Mitchell has written a great post here about the Eurozone’s threat to democracy:
Bill Mitchell, “Democracy in Europe requires Eurozone Breakup” Billy Blog, January 6, 2016.
It is a pity that more professional Post Keynesian economists do not take this view, for it is so obviously true.

Monday, January 4, 2016

Some Critiques of Edward Said’s Orientalism

The late Edward Said (1935–2003) is an icon of the modern left. His book Orientalism (1978) has been very influential indeed in modern intellectual life, and not just on the left.

But does he deserve the great reputation he has? Let me be clear: everyone sensible knows that a lot of shameful racism, imperialism and colonialism has come out of the West. This is not in dispute.

But what is in dispute is Edward Said’s “Orientalist” thesis which is just another branch of the Postmodernist rot that has infected the modern left and also goes far beyond reasonable claims about Western imperialism. Much of Edward Said’s grand orientalist theory was based on the absurd philosophy of Michel Foucault, for example.

Take one of the most notorious things Edward Said ever wrote:
“For the Orient idioms became frequent, and these idioms took firm hold in European discourse. Beneath the idioms there was a layer of doctrine about the Orient; this doctrine was fashioned out of the experiences of many Europeans, all of them converging upon such essential aspects of the Orient as the Oriental character, Oriental despotism, Oriental sensuality, and the like. For any European during the nineteenth century—and I think one can say this almost without qualification—Orientalism was such a system of truths, truths in Nietzsche’s sense of the word. It is therefore correct that every European, in what he could say about the Orient, was consequently a racist, an imperialist, and almost totally ethnocentric.” (Said 1978: 203–204).
Wait, are you telling me that all *all and every* European of the 19th century who wrote about the Orient was a “racist, an imperialist, and almost totally ethnocentric”? There was no tradition of sympathetic interest in the Orient not marked by racism or imperialism? None at all?

If you think Said’s ramblings here are ridiculous nonsense, you would not be alone. Historians who actually study Oriental scholarship have long called Said out on this bizarre smear, and point to the rich and varied opinions of Europeans when they studied the Orient.

Right before this passage Said appears to flirt with Nietzsche’s denial of any objective truths, so that the passage is doubly outrageous: how can you deny objective truth and then assert this sweeping statement and expect people to think it is true?

At any rate, here is some critical writing on Said and orientalism:
Ibn Warraq. 2007. Defending the West: A Critique of Edward Said’s Orientalism. Prometheus Books, Amherst, N.Y.

Irwin, Robert. 2006. For Lust of Knowing: The Orientalists and their Enemies. Allen Lane, London.

Irwin, Robert. 2008. Dangerous Knowledge: Orientalism and its Discontents. Overlook Press, Woodstock, NY.

Irwin, Robert. 2008. “Edward Said’s Shadowy Legacy,” Times Literary Supplement, 7 May 2008.

Muravchik, Joshua. 2013. “Enough Said: The False Scholarship of Edward Said.” April 2013. World Affairs.

Proudman, M. F. 2005. “Disraeli as an Orientalist: The Polemical Errors of Edward Said,” Journal of the Historical Society 5.4: 547–568.

Varisco, Daniel Martin. 2007. Reading Orientalism: Said and the Unsaid. University of Washington Press, Seattle.

Windschuttle, Keith. 1998. “Liberalism and Imperialism,” The New Criterion 17.4: 4–14.

Windschuttle, Keith. 1999. “Edward Said’s ‘Orientalism Revisited,’” The New Criterion 17.5
Like Foucault, one of the many charges that can be made about Said is that he frequently made factual errors and engaged in shallow readings of his sources. He also largely ignored German oriental scholarship – a fundamental oversight that when looked at closely undermines many of his claims about oriental scholarship essentially being a cover for Western imperialism.

Finally, Robert Irwin, author of two books that critique Said (see Irwin 2006, 2008), speaks below in an interview on BBC radio.

Said, Edward W. 1978. Orientalism. Routledge & Kegan Paul, London.