Commentary on Political Economy

Tuesday 12 July 2011

Explicatory Note On the Krugman Criticism Below

PS: For those friends who are entirely innocent of economic studies, perhaps a further word of explanation on the Krugman criticism below is warranted. Orthodox (bourgeois or capitalist) economic theory cannot explain the very "existence" of money except as a "means of exchange", as the result of "frictions and imperfections" (Krugman's idiotic description below) in the process of "exchange" of utilities that - were ot not for these "frictions and imperfections" - would be "frictionlessly and perfectly" described by the Walras-inspired Walrasian general equilibrium analysis in the homonymous work by Gerard Debreu and Kenneth Arrow ("Debreu-Arrow" as indicated by Krugman below).
Capitalists know that their essential aim is to make their "investments" profitable in "monetary" terms - so that at the end of the investment cycle they end up with more "money" than they had at the beginning. Yet because they cannot admit to themselves, and most of all to their workers and the rest of society, that "more money" means simply more "political" control over social resources, they delude themselves and seek to delude us that the entire purpose of production is the "pure exchange" of goods and services (or the "utility" contained in them) so that capitalist production serves to maximise the use of available social resources in the most efficient manner "economically" possible.
As a result, there is absolutely "no role whatsoever" that money can play in this "exchange" - except "to facilitate" the exchange itself! (Arrow put it in terms as simple as these.) The problem is, however, that every "exchange", taken in isolation, can be described ONLY in terms of "relative prices" (one orange equals half an apple) - but NEVER in terms of "A COMMON MEASURE OR STANDARD OF VALUE" for all the "exchanges" that take place in the capitalist economy!
It is precisely because in a capitalist economy there are NO such "relative prices" but rather a "common measure or standard of value".... that MONEY IS NEEDED! As Don Patinkin once put it, quite insightfully, in a capitalist economy (one of generalised exchange) goods buy money and money buys goods: but goods DO NOT buy goods!
So what Krugman, like every good bourgepois economist, is trying to do here is TO DENY THE EXISTENCE OF VALUE, that is, to deny that the aim of capitalist enterprise is not and never was and never will be simply "to exchange" goods with goods! Rather, it is "to accumulate money as a store of value" soas to be able "politically" (through the process of production in the workplace and sale in the "market") to control increasing quantities of social resources - chief among them the "living labour" of workers! It is this "deception" (self-inflicted in Krugman, but moreoften malicious in other "economists") that prompted us to expose Krugman's intellectual failings here. Cheers to all.

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