What it Means to Close Economic Models

In this Pilkington interview, Varoufakis elaborates his comparison of the classical political-economic perspective on social value with the marginalists’ view of asocial utility. He explains why neoclassical (and Austrian?) economists have to close their models to create a methodological individualist analysis, and why that construction cannot represent economic activity, or predict economic system decline.

the Fall in the Rate of Profit & Surplus Recycling Mechanisms

This post is a work in progress.

I first heard Andrew Kliman give a talk on his new study The Failure of Capitaist Production (as opposed to the failure of financialization). Tonight I’ve read his argument against the MR falling rate of profit-underconsumption theory. The MR theory finds that financial-military imperial capitalism is a distinctive phase of world capitalism. I will be discussing Kliman’s use of data and rhetoric critically.

To defend financial capital (It’s simply an implied coincidence, in Kliman’s account, that financial capital had grown to an unchecked leviathan before the Great Depression, and before the 2007.), Kliman goes all conservative neoclassical economist, including denying that economic inequality a) is in anything but equilibrium, and b) has any effect on economic systems. He tries to imply that this view on the trivialness of inequality is Marx’s view; I will refute that as I construct this blog entry over time. Although to deny inequality Kliman attacks MR and economists as illustrious as Saez and Piketty, sociologists also need to take note of his manoeuvers, which he will claim he does to ward off fascism. In his bustle to deny, deny, deny the economic impact of inequality, Kliman is disingenuous about both how he treats data and his own “prophetic” identity as well.

Tonight, I’m not going to get to a blow-by-blow analysis of Kliman’s shenanigans in his chapter 8; but suffice it to say, his much-proclaimed loyalty to the actual words of Marx falls hollow in this chapter, where he pretends that Marxists are saying only that underconsumption happens because workers consume more than rich people do. No. That is not at all only what Marx or Marxists say on this topic.

Triumphantly, and really pulling out the conservative econ dogma, Kliman declares that capitalism can proceed without workers’ consumption. This is not a revelation that Kliman is making; this is a dogma that conservative economists and politicians were steadily insisting throughout the last bubble. [See  Citigroup “Plutonomy” corporate report on how all consumption will exclude the working class now: Part 1. Part 2.]

…Only before 2007, the conservative economists also held that economic equilibrium proved that inequality is non-existent or trivial. This article shows that all recent US income growth has gone to the top 1%. It is probably no accident Kliman’s book emerges now, when capitalists can say that they have the system under perfect control, and by implication what is happening to the conditions of accumulation–what is happening to the working class economically (austerity, primitive accumulation) and the state (debt overload, via making real and public the private money debt the financial sector “innovented”) (not to mention the natural conditions of accumulation) is immaterial or restorative to the smooth functioning of capitalism.

Marx has something emphatic to say about this: No. Capital cannot proceed by exploiting other capital. The rate of profit falls because it is dependent upon the creation of value, and in capitalism, value derives solely from exploiting labor, although that derivation depends on using nature and human reproductive services as if they were an “inexhaustible” Plains bison herd. (Anglos always have difficulty with this. Recall why England had to implement reforms in the Progressive Era–because the Boers were kicking the asses of the underfed, undergrown, ricketts-plagued English cannon fodder.)

While there are many ways to eff up your capacity to exploit labor, Marx says specifically that forcing down workers wages (which should be measured relative to the basket of real costs–which include housing, education, health care, corporate tax expenditures, privatized costs–such as transportion– that could be delivered more efficiently publicly) is a major way to eff up exploitation capacity. Kliman wants to conservative-econ away capitalist contradiction.

Q. Why do a number of Marxist-identified economists cling to neoclassical econ’s dogma that economic inequality is trivial?

A. The answer is given here: Inequality and Power: The Economics of Class by Eric A. Schutz (London: Routledge, 2011), and summarized in Yates’ “The Great Inequality“.

As well, In his study “Does Income Distribution Matter for Effective Demand? Evidence from the United States,” Christopher Brown (2004) recalls that it was the conservative economists Friedman (1957) and Modigliani (1966) who established modern consumption theory, attributing no (0) importance to income distribution, and ensuring that economics textbooks maintain a nearly-complete blackout on the topic.

Other economists see inequality’s economic impact:

  • Robert H. Frank: How economic inequality inflates the prices of status goods (education, housing, etc.)
  • Dean Baker, Mark Wiesbrot & John Schmitt at CEPR: the percentage of junk jobs in your economy creates high inequality, social immobility. (Agrees with the Scandianavian power resources tradition.)
  • Monthly Review (Michael Yates)
  • Saez & Picketty
  •  Christopher Brown (2004) and S. Presssman (1997) cite the Cambridge school, including especially Kalecki (1943, 1954) as well as Robinson (1954), and Kaldor (1960), as the source for theory about the relationship between income distribution and consumption.
  • Brown (2004) shows mathematically that “income distribution can have very significant implications for effective demand (298). Then, citing Keynes, he argues that people who accumulate wealth can and do defer economic decision-making, including deferring spending. Using the Thiel index to measure economic inequality, Brown shows that increases in the Theil index correlate with slowing household spending (about 12% between 1967 and 1986) (302), and [finish with discussion of debt].

I think Kliman doth protest too much at the start of chapter 8 in The Failure of Capitalist Production, and I don’t believe he’s going to be straight up (in the conclusion) about what political result he’s hysterically trying to circumvent.  TBD… Kliman’s chapter 8 doesn’t give me much confidence about his falling rate of profit argument; but since I’m inclined to find Dumenil & Levy, et al’s argument against it also distorts the Marxist theory and misinterprets the data, I will see if that earlier portion of the study is more reliable.

I was listening to a talk by the unprepossessing Andrew Kliman yesterday. While I was intrigued and impressed by his argument that all the Marxists would measure the fall in the rate of profit incorrectly (But why would they? Ideological and conceptual infection by conservative econ, at least partly, I think.), I have objections to Kliman’s accompanying refutation of underconsumption crisis–his measurement of the distribution of production proceeds between capital and labor. His story is that since 1960 in the US, although the ratio of capitalists’ aggregate profit to aggregate income (both workers’ & capitalists’ wages) has been constant in the US (indicating in his view a capacity to consume in equilibrium), capital’s rate of profit (s/c+v) declined.

By this Kliman concludes that the falling rate of profit theory is correct, but underconsumption crisis is incorrect. Crisis is strictly an effect of falling profit. Capitalist profit suffers, though workers continue to have the same capacity to consume. (I am as yet unclear how the Wall Street crash of 2007/2008 and the ongoing austerity and European Union crises resulted from mere falling profit, in Kliman’s account. Why would workers default on loans en masse if their consumption capacity remains robust?)

I think a major implication of his analysis is that neoliberalism has done a terrible job managing capital’s interest, if the profit motive is declining though the working class share of the social wealth is a constant. The problem with capitalism in Kliman’s view is simply too much built-up fixed capital, due to excess state intervention. Like Pyne’s bourgeois story of the state suppressing fire and creating tinder, in Kliman’s account, built-up fixed capital is what’s impinging on profit, and it needs to be destroyed; hence, the “crisis” is just voluntary capitals destruction.

On this basis, Kliman argues that there is nothing distinctive about global monopoly capitalism, or financialization. In Kliman’s account, trade is in equilibrium, financial capital is not overgrown and does not reduce productive investment, and introducing more able Surplus Recycling Mechanisms–ameliorating excessively-skewed distribution–cannot defer crisis.

Indeed, if Kliman is right, and the only problem is excess fixed capital, shouldn’t austerity be a lot more effective in restoring profitability than anything else (eg. the Iceland solution), or than it’s looking, when we compare the impact of austerity in the UK and Ireland to the capital accountability approach in Iceland?

I’m dubious about what Kliman’s measuring.


  • To support this argument, Kliman does not disaggregate wages going to capitalists from wages going to people dependent on wages. 
  • I do not think he measures consumption v. profits, but rather wages (+ benefit costs) v. national income.
  • He counts increasing health care costs as income going to wages and consumption. He treats all increasing commodity costs uniformly as increased working class share of national income and consumption. Servicing debt does not detract from working class consumption in his account. He counts housing price inflation as increased worker income/consumption, rather than an anti-Surplus Recycling Mechanism stripping working class income and sending it directly to the black hole of Wall Street unproductive speculation. 
  • Kliman’s finding of a constant working class share of national income is not a per capita measurement, but an aggregate ratio, that does not take into account population increase. It is not immaterial (as feedback) to the rate of profit that the economy is not growing fast enough or distribution is not occurring broadly enough (these are interchangeable, although they switch the system qualitatively from capitalism to socialism) for workers to consume at a constant or increasing individual or family rate without borrowing money from financial capital.
  • To be continued…

Questions for reading Kliman:

Is a commitment to rejecting underconsumptionist / distributive crisis helpful or necessary? Why is Kliman intent to try to argue that the only economic squeeze in the US is on capitalists, and that squeeze has not been deferred to working class Americans in such a way as to impact the economy?

A distributive crisis does not mean you have to have a Keynesian analysis. The fall in the rate of profit is all about the excessive ratio of dead labor (constant capital) to exploited live labor. In capitalism, which is what we’re talking about, that implies a history of market-rational, productivity-increasing, social wealth maldistribution.  For a capitalist, increasing productivity by replacing humans with machines or oil is awesome for profits, up to a point, and so long as no one else replaces humans with machines or oil, which is not a possibility. Meanwhile, in capitalism, for workers, the only thing worse than being exploited is not being exploited. That history results in a falling rate of profit, and meets up with the pre-programmed accumulator’s response to a declining rate of profit: 1)  ratcheting up the rate of exploitation by any means necessary, and 2) primitive accumulation.

 I don’t see why we want to strive so hard to divorce the tendency to the falling rate of profit from underconsumption crisis. Marx didn’t. Productivity-maximizing behaviour is a competitive, collective phenomenon. It’s not as if the tendency to falling profit is important as a threat to the individual capitalist’s profit (There’s a reason we measure it aggregately.) whereas only underconsumption crisis is an irrational effect of aggregated individually-rational capitalist behaviour.

Refusing to acknowledge worsening social wealth maldistribution does not really support the falling rate of profit hypothesis; and it unnecessarily implies that global monopoly capitalism and predatory financial capital are not distinctive, logical, systemic late-capitalist developments. Rather, financialization and accompanying imperialism are surely the non-trivial, corrupt and corrupting products of aging capitalist cores.

Because it allows us to dance around the fantasy that dead labor is exploitable in capitalism (As if you can get increased value-controlling profit without human exploitation.), and thereby creates mystified fictitious capital, financial capital is very important in that it allows capitalist elites to use speculation with fictitious capital to pursue primitive accumulation. You need to primitive accumulate if capitalists have lost confidence in the whole capitalist investment thing, and yet won’t quit their capitalist order, as they will not. Capitalists are typically ideologically convinced  that workers are superfluous to an economy; so capitals destruction is a byproduct of this, not, to capitalist minds, a sufficient condition of profitable investment. (Verify with Hilferding and Sweezy/Baran on this. See note on Varoufakis and Freeman on the role of global war–a form of both primitive accumulation and an SRM–in resuscitating capitalism, below.)

We have to ask ourselves: Are capitalists really always concerned to re-establish the profit incentive per se, as many Marxist-identified economists assume? Or are capitalists primarily concerned to promote and dominate accumulation, in whatever way the system currently permits? Because the profit incentive is not always the only or most currently-exploitable way accumulation can occur. Think about primitive accumulation. Think political economy, not economistically.

What if Over Time, Distribution Becomes Essential to Functioning Economies, and Capitalism Has Severe Issues with Distribution?:
Surplus Recycling Mechanisms

The Marxist argument is that the capital-flow incentive system tends to break down, on multiple levels, as capitalist accumulation develops. Accumulation creates uneven development on many scales, and that clogs up capital. If capital liquidity is a problem, how does capital normally flow? Ideally, in capitalism, capital flows via profitable productive investment incentives (exploitation potential).

Marx (Capital v. III chapter 14 on countermeasures to the fall in the rate of profit), Harvey, and Varoufakis explain how this endemic capitalist structural problem, capital clotting, can be addressed, partly with variable, political, capitalist collective actions delegated to the state–we can call these GSRMs or SRMs (Global Surplus Recycling Mechanisms, or any Surplus Recycling Mechanisms), distinguished from and a crutch to the built-in (and preferred, because it is based in capitalist autonomy) and dysfunctional-tending profit motive. SRMs will vary with elite ideology. Dependent upon that ideology and their own capacity, state regimes perform a variably vigorous, more or less able role in looking out for the mid-term interest of capital, or defibrillating capitalism. 

As well, from a Marxist viewpoint, you can argue that each defibrillation (SRM reform) defers a growing contradiction between capitalist accumulation and the dispossession and depletion of the growing mass of humanity and the environment, possibly reducing SRM capital-defibrillation effectiveness and options in the future. Perhaps we’re there. Perhaps we are not experiencing elite ideology-based failure; perhaps the twitching, tattered remains of the inadequate SRMs at the bottom of the barrel are all that is left to us at this point in history.

However, I tend to agree with Dumenil & Levy and Varoufakis that one problem with current GSRMs is that they are subordinated to the hegemony and violent coercion of the 20th century capitol of capitalism, the US. I also agree with Varoufakis and Alan Freeman that the only SRM that class-conscious capitalists will reliably submit to is global war. Perhaps because global war is not just a GSRM and a destroyer of excess capitals, but also a primitive accumulation bonanza. Global war is a triple threat. (Quadruple, if you also count that it fosters working class patriotism and acquiescence, and targets, takes out, and disrupts wide swaths of working class and peasant humanity.) Although Varoufakis argues that US capitalists were open-hearted in the Global Plan GSRM, more typically SRMs are highly begrudged by capitalists, and insufficiently supported, or opposed. In that way, capitalists are risk averse; they just want to grab as much surplus as they can right now, and use it to stay on top of the heap, whatever the hell may come.

More and more I get the feeling that the Left’s economic illiteracy is not ameliorated by the fact that Marxist-identified economists today are all overly infected by the conservative neoclassical econ tradition they’ve been immersed in, including both its incompatible methods and its prejudices. These economists’ partial analytics cannot see both falling rate of profit and underconsumption–And primitive accumulation and what it means, politically and economically, is hopelessly off their radar. Increasingly, while I find their partial debates of intellectual interest, economist-kings I suspect are not what the Left needs today.

Fragmented: The contemporary version of Marx.

Given C. Brown, then F. Barager & R. Chernomas: Increased debt servicing = increased rate of exploitation (greater proportion of the working day going to the capitalist class). The capitalist class has greater income, the working class less. What does the consumer do with the income?
Q. i) If the capitalist class, per Kalecki-Sweezy can uniquely “defer” consumption, and the way it did so was to use excess profits to speculate (instead of using their increased consumer demand to create a larger capitalist consumer market to replace the working class consumer market)–then isn’t speculation the capitalist consumer market that neoclassical economists see replacing the working class consumer market?  ii) If “consumption” occurs in speculation when speculators lose, then iii) governments that bail out failed speculation, in effect, are governments preventing consumption to occur, thereby creating a crisis of consumption, preventing investment growth.

The Politics of Western Bank Failures

“Public money and public institutions are bailing out a private banking industry that is not solving its own problems… Fundamentally this is a struggle to take a crisis caused by the business community and the governments they support and make the mass of people pay for it. That’s what austerity means. And the real test here is whether the mass of people will absorb it and accept it” –Richard D. Wolff, “The Mating of Our Dysfunctional Political-economic Systems.”

This is a great interview on the repeated political failures in the wake of the failure of economic leaders.

Iceland’s president Olafur R Grímsson: “The difference is that in Iceland we allowed the banks to fail. These were private banks and we didn’t pump money into them in order to keep them going; the state did not shoulder the responsibility of the failed private banks.” Quoted in “Iceland Exits Recession” (Dec 2011).

"Markets" are Confident When They’re Flaunting Moral Hazard

 “In Italy, the key programmatic points were listed last summer in a letter (meant to remain secret!) from the European Central Bank to the Berlusconi government. To restore market ‘confidence’, it was necessary to proceed rapidly down the road of ‘structural reforms’, an expression now used as a synonym for social devastation: in other words, wage cuts, attacks on workers’ rights over hiring and firing, increases in the pension age, and large-scale privatization.” –Marcello Musto, discussing the replacement of elected governments with technocracies, on the occasion of the bank failures. 

“Restore market confidence”–this causal explanation and imperative begs for a new, blistering Marxist critique.

How does an institution “gain confidence”? Well, there actually is a small group of “confidence”-craving humans behind the institution. We’ll call them the Confidence Men. Recall “effective demand,” which means that the market most certainly does not register billions of preferences. The market registers the preferences of whomever holds the majority shares in it, that is, whomever has the most control over the wealth, however this Confidence-man minority commandeered that wealth, which is certainly not by abstaining from any of the following: exploitation, dispossessing others, despoiling nature, maintaining totalitarian work conditions, corrupting politics, and generally abusing power. It is this small group of effectively-sociopathic Confidence Men that demand that their staff in governments reassures them that it’s all for them, by for example, transferring the massive costs of their confidence schemes and failures to the rest of society.

David Harvey on crisis-explanation points from The Enigma of Capital.

What’s the alternative to endlessly pouring money down the black hole of “restoring market confidence”? The state could transfer the task of supplying credit to responsible, accountable institutions, such as cooperative credit unions or national banks.

We are considering undertaking a study of the responses to the initial 2007-2008 financial crisis voiced by prominent members of the North American left, looking not to out poor responders, but to name reliable commentators who had the political literacy to know that in a crisis you forward alternative policies, rather than join the conservative drumbeat for TINA policies (like bailouts). There’s been much recent  handwringing (by leftists trained in econ) about economic illiteracy on the left. Arguably, political-economic illiteracy is the problem we need to be wrestling with.

Richard Peet takes a small stab at it in his article “Contradictions of Finance Capital” (Monthly Review 12/ 2011):

“Finance capitalist agents exercise power by controlling access to the markets through which capital accumulations become investments, directing flows of capital in various forms—as equity purchases, bond sales, direct investment, etc.—to places and users that are approved by the financial analytic structure of the Wall Street and City of London banks and investment firms. 

The gaze of the “investment analyst” representing the “confidence of the market” is the active form taken by the financial capitalist interest, although “investor confidence” is presented as somehow neutral and technical, in the best long-term interest of everyone—“professional economics” is to blame for this misrepresentation

The accumulation of surplus in the relatively few hands of the super-wealthy intensifies the financial component of capitalist growth and increases the power of the financial capitalist class fraction over not just the industrial fraction, but everyone else as well. Control over investment capital and financial technical expertise gives finance capital and its banking representatives tremendous power—over policy making, over economies, over employment and income, over advertising and image-production…over everything. Production, consumption, economy, culture, and the use of environments are subject to a more removed, more abstract calculus of power, in which the ability to contribute to short-term financial profit becomes the main concern” (Peet).

Radicalized Keynesian Paul Krugman has been a great chronicler of the various grotesque, pathetic exploits of the undead Confidence Fairy.

Most recently, from Krugman’s “The Austerity Debacle” (1/29/2012):

“How could the economy thrive when unemployment was already high, and government policies were directly reducing employment even further? Confidence! ‘I firmly believe,’ declared Jean-Claude Trichet — at the time the president of the European Central Bank, and a strong advocate of the doctrine of expansionary austerity — ‘that in the current circumstances confidence-inspiring policies will foster and not hamper economic recovery, because confidence is the key factor today.’

 Such invocations of the confidence fairy were never plausible; researchers at the International Monetary Fund and elsewhere quickly debunked the supposed evidence that spending cuts create jobs. Yet influential people on both sides of the Atlantic heaped praise on the prophets of austerity, Mr. Cameron in particular, because the doctrine of expansionary austerity dovetailed with their ideological agendas” (Krugman, explaining how it came to be that the British conservative government’s obliging extension of capitalist class warfare resulted in that country’s economic decline).

 Don’t be fooled by the cuteness. She’s undead, and she’ll destroy your economy.

The Revolution Will Not Be Pomo-icized

Why Critics of Economics 
Can Ill-afford the “Postmodern Turn”
Yanis Varoufakis (University of Athens and University of Sydney)
Reposted from Post-autistic Economics Review 2002 Issue 13.

 The dissident’s nightmare 

 It is a sad irony when the activities of dissidents help shore up the establishment they set out to subvert. The point of this piece is to warn the ‘economic’ dissident: Beware the Postmodern Turn! The argument will turn on the thought that postmodern criticisms of economics serve the twin purpose of (a) releasing pent-up frustration with the profession while, at once, (b) reinforcing its ideological backbone.

 Every era has a tendency surreptitiously to guide young dissidents toward a specific ‘umbrella movement’; one that ends up shaping their milieu. Existentialism, structuralism, neo-Marxism, etc. have given their place, in our era of devalued political goods, to Postmodernity and Deconstruction. Without wishing to discuss the ‘postmodern condition’ generally, I shall concentrate entirely on its likely effects on the struggle to ‘civilise’ economics. In this regard, the problem with postmodern thinking is that it stands no chance of success.

 Postmodernity’s criticism of grandiose Theory may be terribly satisfying to those who adopt its grandiose pronouncements. However, the satisfaction at having lambasted all Theory is momentary and the ensuing subversion short-lived. To paraphrase Marx, the subverters will be, eventually, subverted and, tragically, the neoclassical establishment will come out stronger and better equipped to obfuscate social reality than ever before.(2) If I am right, the task of the PAE movement must be to clear the way for radical criticism that avoids the postmodern trap as resolutely as it opposes economic autism. 

Dissidents or the economists’ handmaidens? 

 Modernity marginalised Religion, but retained religious transcendence by worshipping Theory. Economics emerged as the highest form of this secular creed and enchanted all of its practitioners; free-marketeer and protectionist, liberal and Marxist, Keynesian and monetarist. It now seems that some economists are breaking ranks; joining the ‘other’, the postmodern, side which defines itself in anti-theoretical tones that exude an atheist’s anti-religious fervour. The danger is that the legitimate anger of students (which has given rise to the PAE movement) will draw them to an apostasy without a future. For despite its considerable oeuvre, postmodern criticisms of economics are doomed to shrivel and be absorbed by mainstream economics; the predator turning into unsuspecting prey. I risk this prediction for two reasons.

 First, postmodernists allow economics to parade as equally scientific as the natural sciences (albeit on the grounds that no discipline is truly scientific). They are right of course to think that all theory resembles religion, since it also seeks to give meaning to the practices and expectations of whole communities. However some theories are capable of transcending religion and approaching objectivity better than others. Nature’s habit of working independently of our beliefs about it means that the natural scientist can devise experiments which have the power disinterestedly to discard falsity and thus forge knowledge and progress. Society, on the other hand, is corrupted to the very marrow of its bones by our collective beliefs about it, and can therefore provide no objective test of social theory (the latter being part of the very web of beliefs that society is made of). Thus social theory, unlike thermodynamics, is condemned to remain untestable, and stuck in the realm of opinion. Economics valiantly attempts to extricate itself from this fate with a touching commitment to mathematics but, sadly, it only ends up as a religion with equations.

 Postmodernity errs in thinking of this as the inevitable failure of all Modernist enterprises. It lambastes economists’ churlish reliance on an Outer Wall of Algebra and an Inner Wall of Statistics but overlooks their success at never even coming close to the nature and the dynamics of contemporary capitalism, thus shielding the latter from rational criticism. But such is the fate of all idealisms which give language an existence independent of the material conditions of social life and reproduction. If only postmodernist critics understood theology and mathematics a little better! Perhaps they would have recognised in economics the greatest proof that Modernity is saturated with its negation.

 Which brings me to the second part of the argument: Postmodernity not only lets neoclassical economics off the hook but, more worryingly, reinforces it copiously before dissolving into it. Consider what the postmodern rejection of metanarratives means at the individual level: It means the loss of any capacity to scrutinise one’s private urges rationally on the basis of some collectively constructed notion (or metanarrative) of the Good. Stripped of those capacities, the individual fragments into a community of selves, a bundle of ordinal preferences, and ends up with no one self whose preferences those are.

 In this Empire of Ordinal Preference the only possible data that social theory can go to work with are the differences in individual whims and freely-chosen identities. These data are then, courtesy of their ordinal properties, impossible to compare across persons (for this would require a metanarrative) or procure a view of capitalism as a system. Thus in a fully-fledged postmodern schema, social relations are confined to interplay, voluntarism, tolerance and exchange; society is the playground where the latter unfold; and discussions of the General Will, exploitation and developmental freedom make no sense. Does this all sound familiar?

 If it does, the reason is that neoclassical economics went down that alley decades ago. The asymptotic limit of postmodern fragmentation is the neoclassical general equilibrium economic model. Both Neoclassicism and Postmodernity espouse a radical egalitarianism which is founded on the rejection of any standard or value by which either individual action or the institutions of late capitalism (e.g. the labour and capital markets) can be subjected to rational criticism. In short, whereas the problem with modernist mechanism was that its view of our world excluded value from the outset, the problem with Postmodernity is that it ends up having no view of the world and becomes easy-pickings for a similarly viewless/valueless tradition, one which bears the additional weaponry of intricate mathematics and endless econometric ‘evidence’.

 For Oscar Wilde the supreme vice was shallowness. For Postmodernity it is the New Jerusalem. Its playfulness allowed it to thrive in the friendlier waters of literary and cultural studies at a time when ‘margins’ were becoming central and classical stuffiness was going out of fashion. But now postmodernists have entered shark-infested territory. Neoclassical economics, another purveyor of shallowness, threatens to bend them to its will,(3) gain strength from them and subsequently reinforce hierarchies more oppressive and totalising than those the postmodernists set out initially to dismantle. 

When the IMF dictates its policies to some hapless Third World country, there is a strong whiff of the radical egalitarianism shared equally between general equilibrium and Postmodernity. The same whiff accompanies, and legitimises, the inexorable devaluation of political goods, the vulgar commodification of human bodies and values, the impossibility of conceptualising freedom-from-the-market, the depiction of Central Banks as ‘independent’ only when under the thumb of financial capital, the confusion of liberty with the freedom to exploit and to demean and, above all else, the portrayal of coercion as tâtonnement. Thus Postmodernity unwittingly blows fresh wind in the sails of neoclassicism, the undisputed champion of the deconstructed human agent. While warning us correctly that new authoritarianisms will be born when we get caught up in our own rhetoric, it offers no resistance to the current authoritarianism of neoclassical economics and, more so, the socio-economic system that it serves.

 Conclusion: The dissidents’ dilemma 

 When a fresh wave of criticism is unleashed, it picks up along the way pre-existing discontents, hitherto bopping along hopelessly near the surface, and propels them toward the shores of exposure and respectability. Lonely dissidents suddenly find a new ‘movement’ that will have them. New hope of escaping obscurity is thus born.

 In recent years many dissident voices had to adapt themselves to postmodern-speak in an attempt to be ‘included’ on the postmodern bandwagon. The PAE movement must release such voices from this obligation. Social criticism of economics must reclaim an awareness that to reject the scientific status of economics is not to reject science in general or to espouse postmodernism.

 Indeed irony and ambiguity were utilised, long before Postmodernity, by thinkers eager to come to what a more confident past once knew as the truth. To re-establish irony, ambiguity and indeterminateness in the discourse of economists would be a triumph of the spirit. But it would not be a postmodern turn. For the latter has no monopoly on an appreciation of the radical indeterminacy of social processes (as Hegel would be all to eager to remind us) or the importance of not taking our selves, and our theories, too seriously. On the contrary, Postmodernity undermines itself by offering Modernity’s most awful purveyor another means of extending its dominance.

 So, we have arrived at the dissident’s dilemma. The postmodern kernel within neoclassical economics forces a stark choice: Submit to homo economicus and model our messy world’s dynamic as if a series of suburban disputes between postmodern neighbours. Or, seek an historically-grounded understanding of how systematic patterns of power and economics are the joint products of the continual feedback between technological developments and evolving social formations. The difference between the two options is not theoretical; it is ideological. The postmodern turn will be chosen by pseudo-dissidents whose prime interests lie in acquiring a chic image; one that the self-effacing postmodern criticism is good at imparting. The less-fashionable option of working towards historically-grounded knowledge will appeal to the truly ‘unreasonable’ dissidents; those driven by an unbending commitment to a rational transformation of society.

1. Department of Economics, University of Athens, 8 Pesmazoglou Street, Athens 10596 and Department of Economics, University of Sydney, Sydney, Australia. Email: yanisv@econ.uoa.gr
2. Recently, Routledge published a volume on the nexus of Postmodernity with economics edited by Jack Amariglio, Stephen Cullenberg, and David Ruccio (2001). The following thoughts have been extracted from my review of that book (forthcoming in the Journal of Economic Methodology)
3. Courtesy of a more sophisticated take on the same type of philosophical shallowness.
Cullenberg, S., J. Amariglio and D. Ruccio (2001). Postmodernity, Economics and Knoweldge, London and New York: Routledge
Varoufakis, Y. (2002). ‘Deconstructing Homo Economicus?’, Journal of Economic Methodology, forthcoming.

The reason why political economists see idealist postmodernism as superficial and epiphenomenal is because there’s no ontological depth to idealism, see the critique in critical realism & Bhaskar.  In a 2-D world of epistemological surface viewed from different points on that surface, liberation looks methodological individualist, methodological instrumentalist, and in methodologically-imposed equilibrium. But that is exactly what bondage looks like in a critical realist, historical materialist world of ontological depth.

A further note to self–explore this hypothesis:
The Kantian rejection of ontology and elevation of epistemology does not solve the problem of human reflexivity, when studying social relations.

Coming attraction:

Though engaging or convincing postmodernists is not germane to my life’s intellectual (or otherwise) projects (I’m simply not in that social location–though I am in that geographic location.), I’ll post notes on Zizek, Badiou & Agamben’s niche efforts to explain leftist traditions to postmodernists. Unlike other leftists, I don’t mind the Z-B-A niche. There’s a real problem in the Anglosphere with superficially-liberatory postmodern misunderstandings and distortions of leftist thought that bolster the hegemony of ideological conservative economics and the adoption and diffusion of neoliberal governance. …Just as there’s the persistent problem of the neocon swerve (from a leftist base) within the Anglo-American Zionist intellectual community. Where there’s network, status- and/or resource-access incentive, humans are great at rationalizing, even if it is ugly; and how they do it, how they are motivated, and the demonstrable telos of those rationalizations are of some interest.

Throwing off the Yoke: CED, currency, credit access

‎”A map of the world that does not include Utopia is not worth even glancing at.” 

Oscar Wilde (1854–1900)

Establishing a local currency, together with taking over credit union boards (to gain access to credit), can provide the complement to Community Economic Development (social enterprises including cooperatives, and social enterprise networks) to fortify the working class against capital strike, blackmail and dysfunction.

Common Good Finance in Ashfield, Massachusetts.

“We need to re-democratize the monetary system, to have a set of alternatives for issuing credit outside the banking oligarchy. Alternative currencies can play a vital role in that”  
Josh Ryan-Collins, the New Economics Foundation.

This Guardian article, “Currency stays close to home,” reviews the successful rise of the local chiemgauer currency in Rosenheim-Traunstein, Germany. The chiemgauer was designed and operates to stimulate spending in the local economy, as well as to provide a work-around (or strategic counter to) financial capital illiquidity.

Yes! Magazine covers local currency innovations in “Dollars with Good Sense: DIY Cash.”

Other promising social movement initiatives that OWS has opened up space for:

Revoke corporate personhood.

Worker occupation of enterprises.

“Long Shadows” by Josh Ritter (video by James Holland)

Note on UK cooperatives:

 There are some quite big co-ops in the UK. They’re not perfect, and still run on similar lines to normal corporations. On the other hand they are far better than corporations, treat their workers better (who after all are technically the owners of some of them – others are owned in theory by shoppers) and tend to take social responsibility quite seriously. Executive pay, while still too high, is far lower than comparable private companies.

 Along similar lines, Building Societies in the UK were owned by customers (so essentially non-profit) and for the most part were run fairly well. They offered a better service, better rates and were fairly conservatively run. They were famirly limited in the activities they were allowed to engage in. They were strictly a consumer financing deal (mostly houses). Most of them were force-privatised by the conservatives, but the remaining ones have mostly weathered the crisis fairly well. In comparison to their private breathren, none of whom now survive. The bank which endured the bank run in the UK, Northern Rock, was an ex building society.

 W. L. Gore and Associates is perhaps an example of an interim culture existing in the US. Far far from perfect, but hints of what might be nonetheless.

Economic Value: A Sociological View

I think one of our problems right now is that we don’t know how to think about value. There is an excess of  hurried, automatic, breathless dismissal of Marx’s classic political-economy theory of value, including by Marxists and other leftists; but I think we ought to stop for a moment, and reconsider the common-sense dismissal we’ve arrived at, at this point in history. It’s blinding us to things we need to think about.

I think we’re missing Marx’s point about value, which perhaps requires a sociological perspective (and, Varoufakis, is not incompatible with theories of value that recognize entrepreneurial activity as the locus of value in an economy). Paul Burkett (Marx and Nature 1999) is one of the clearest contemporary writers on the Marxist understanding of value.

Simply, economic value is a social product, created through creative, reflexive, semi-deterministic/semi-voluntaristic relational, social (human) work upon nature.  Value isn’t something that is made within the capitalist market, when profits are realized in the sphere of circulation. That production-circulation separation is maintained through money, so that value can be controlled by capitalists–but price and value cannot be identical. Value is a product of creative, active human relations. Price is a product of capitalist control of value.

That economic value is produced by creative, active human relations is why capitalists are always trying to privatize, to mine the public and the commons–there’s value in them thar human creations.

People, even leftists, who are overly trained in marginalism and other modern conservative economics get caught up in the price calculation mode, and so sometimes fail to see that people coming together to build alternative economic institutions is creating value, and creating independence from capitalist coercion. Didn’t capitalists once create institutions that afforded them independence from the feudal value system, when the contradictions of that feudal system created crisis?