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Political Economy

from Asad Zaman

This is a sequence of posts on “New Directions in Macroeconomics“, which discusses the numerous directions of research which must be incorporated to create a viable Macroeconomics for the 21st Century. We have previously discussed “Post-Keynesian Economics“, and “Modern Monetary Theory“. This post discusses the necessity of re-incorporating politics into economics.

Once we recognize the importance of history and institutions, it becomes clear that economic problems cannot be separated from politics and society. The interplay of class interests, and their relative power, is of essential importance in understanding political and economic structures of society. Current commitment to methodological individualism has blinded economists to these aspects, and left them unable to explain burning issues like the rapid rise of income inequality in the wake of financial de-regulation. There are many different perspectives from which the inter-relationships between politics and economics can be analyzed.  read more

  1. Ikonoclast
    October 3, 2020 at 1:28 am

    The notion that money, via the medium of markets, measures the value of goods and services and rewards economic actors for productiveness, is nonsense. Money does not serve these functions. The value and reward thesis utilizing prices in money is exploded by Bichler and Nitzan in “Capital as Power”. Under the assault of their empirical theory and empirical investigations, classical economic value theory crumbles. Utils and SNALTs (utility value and socially necessary abstract labor time respectively) are exposed as non-stable, non-measures of value. It turns out the money, markets and prices do not measure value but rather instantiate power; the power to acquire, control, reorder and so on. I leave the reader here to follow up by reading the works of Shimshon Bichler, Jonathan Nitzan and related thinkers like Blair Fix and Ulf Martin.

    Marxists (other than dogmatists who have read no more than Volume 1 of Das Kapital) need not be concerned about Bichler and Nitzan’s discovery It IS an empirical discovery with extensive real world data support and accompanying elucidation. Marx himself in the “Fragment on Machines’ from the Grundrisse (notebooks) already posited that machine production, including automatic machine production utilizing non-human and non-animal energies, would surpass other forms of production and he implicitly demonstrated (in “notes toward” form) that it would dialectically supersede the labor theory of value. That labor (mostly) created value – after taking the free gifts of nature as given and justly an endowment for all – was a condition and situation located concretely in history; in pre-industrial and early industrial times. The development of manufacturing powers under capitalist realtions and conditions of science and technology would create a new dialectical movement to supersede the need for great amounts of socially necessary labor: first in physical and mechanical work and then in thinking or control work which also would be progressively superseded. Marx saw crude and advancing mechanical (not electronic) control automation occurring and foresaw higher developments of this: almost to the point that one can say he foresaw computer-standard automation without foreseeing computers per se.

    The burgeoning obsolescence of physical labor and now of intellectual labor of at least some types by machines and computer automation respectively, dialectically obsoletes the crude labor theory of value. To re-iterate, Marx himself foresaw this. Marx foresaw that with leisure, plenty, flexibility and social regulation; “each can become accomplished in any branch he wishes, society regulates the general production and thus makes it possible for me to do one thing today and another tomorrow, to hunt in the morning, fish in the afternoon, rear cattle in the evening, criticise after dinner, just as I have a mind…” What Marx perhaps did not envisage was the extent of capitalism’s capacity to keep transforming itself and keep stimulating over-consumption to soak up over-production. While Marx saw and analyzed ecological system problems, he termed the issue “metabolic rift” as a rift between the metabolism of the real economy system and natural systems as separate but linked systems with transfer of mateials and energies. Marx analyzed soil exhaustion issues by reading the science of agricultural and biological chemistry scientist Justus von Liebig, among others. He foresaw the potential for the exhaustion in nature in general terms from his researches involving soils, trees, vegetation and even a consideration of at least regional climate changes. I am not aware that he foresaw, in any sense, global climate change dangers.

    Coming to the contemporary, the covid-19 pandemic has revealed to us the problems of becoming a self-indulgent leisure society rather than a productive and self-improvement society which is clearly what Marx envisaged. To unpack that, we can say, for example, that health care and aged services are productive in that they produce good health, well-being and amenity for people; often lifting them out of the pain and misery which would be their lot otherwise. Just look at the pain and misery in under-funded aged care homes in many countries even before the current pandemic. More resources should be devoted to such sectors and away from promotion and consumption in what are more selfish and self-indulgent sectors of the economy. Opportunity cost calculations would suggest that, as a society, if we built half the number of pubs, clubs, bars and taverns that we do build and staff now, we could build and staff more and better aged care homes and maybe even have them permanently ready to counter epidemic and pandemic challenges.

    There is also a difference between self-improving, constructive leisure and self-indulgent and even self-destructive leisure. The under-regulated advertising-consumer nexus for indulgent goods, from soft drinks to elite sports, to tourism and even super yachts, promotes in the main self-indulgent, self-destructive and ecologically destructive leisure. It does so by, among other things, manipulating the dopamine reward system of the human brain with electronic media and using targeting algorithms. Under the current system, which I call capitalism but which we can also simply call an under-regulated mixed economy, the social engineering and control performed by advertising and media influencing is grossly under-regulated. The resulting economy is one in which hedonistic goods are over-produced along with exclusion and alienation for those who cannot afford the requisite quantities of hedonistic goods and satiation plus physical and psycholoical ills for those who can. The evidence abounds that this system is deleterious to humans and to the literally collapsing environment.

    We need to effect a radical change to what is a profoundly sick political economy system, sick in all senses; physical, moral, social, economic and ecological. This is what the novel zoonosis covid-19 pandemic shows us in clear colors. This is what the death of the Great Barrier Reef (Australia), insectageddon, the sixth mass extinction and climate change are all showing us.

    All these things indicate we need to retreat from (falsely) valuing almost everything in money and personal wealth. The money valuation system is in many ways the root of our ills. There are two other value-measuring systems we need to advance the use of. The first is impact science for objective material-energetic measurements of the real natural systems we depend on all the way up to complex ecologies and the climate and biosphere systems). The second set of value systems is to be found in moral philosophy. It is there that value must be contested and established. Of course, this is a complex discussion involving among other things the debates of deonotological versus consequentialist ethics. There are ways for these major camps to find substantial agreement, but that would take another long post to explore.

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