Commentary on Political Economy

Sunday 16 October 2011

Addendum to Krugman on Minsky Moment

Now that our review of Krugman's treatment of "the Minsky Moment" has jumped to the top of the "Google Search" list, let us reflect a moment on the significance of Krugman's monumental lapse of reasoning skills. You will recall that Krugman begins his article with an "endowment economy". An "endowment economy" is the basis and foundation - the very raison d'etre - of all bourgeois economics because it "assumes" that "individuals" in a society "start" operating in that economy with a "given" set of "endowments". This means that bourgeois economics takes for granted what any "economic science" even remotely worthy of the name should explain!! And that is how and why the "economy" that it analyses reaches the stage where individuals have "endowments" and how and why these "endowments" are measured. If one begins with the assumption that Steve Jobs was endowed with "genius", it follows that everything he did in his rotten life was..."genial"! Bourgeois economics assumes what it needs to explain: and that is - how and why certain "individuals" in the economy it analyses have acquired their endowments!!

In this regard, one must immediately acknowledge the heuristic superiority of the New Institutional Economics (from Coase to Williamson through Douglass North and Demsetz - also reviewed on this site - just search using "search" facility) because at least it acknowledges that capitalist "endowments" have a lot to do with "the institutions of private property of capitalism", which allows to inquire about how, when and why "individuals" came to be either "capitalists" or "workers" and not just "individuals"!

But Krugman has not even reached this "critical" point. His "goody-goody", "conscience-of-a-liberal" type of "humanism" has not reached that far. Instead, he starts with "individuals" who are either "patient" (lenders) or "impatient" (borrowers). But the question we must ask is: - "patient" or "impatient" for what??!! WHAT IS IT that these "individuals" are striving for? WHY do they "lend and borrow"? WHAT do they "lend and borrow"? And then it turns out that they are "patient or impatient"....TO MAKE PROFITS!!

So. WHAT these "individuals" lend and borrow is....CAPITAL! Capital that is "invested" in the hope that it will realise "profits" out of which both the patient lender and the impatient borrower will be able to accumulate more value or capital - which is the entire aim of the game!! And more "value or capital" means more political control and command over living labour and over social resources!!!

This is the bit that Paul Krugman does not wish to admit or acknowledge - unless we "extract" it from his mouth just like a dentist would extract one of his teeth! (You see, all these Princeton professors like to sound "enlightened", and so they throw us "rabble" some crumbs of wisdom while they indulge in their "enlightened divine serenity"! - Well, we say "Pikes to that!") But Krugman simply "has" to confront this problem - and he does, as we saw, when he acknowledges that "debt-deleveraging" (or Fisherian debt-deflationary) "shocks" occur when our dear "patient and impatient" capitalists "suddenly realise" (shock and awe!!) that the assets they have been investing in - and therefore the capital they have lent and borrowed, respectively - are....(wait for it!)....OVER-VALUED!! OVER-VALUED!! (This is the so-called "Minsky Moment" or "Wile E. Coyote Moment". For the incorrectness and self-contradictory nature of Minsky's underconsumptionist approach, search our site for "Minsky".)

But hang on a minute, Paul!! Professor!! Nobel Prize "genius"!! What is this new "thing" you mention: VALUE??!! Our answer is what Krugman will never admit or allow: Value is political command and control (historically and institutionally acquired - not "endowed"!!) on the part of capitalists over social resources that allow them to reproduce and expand their political command over the living labour of yours truly, US WORKERS!!

In our next intervention we will look at how this "endowment economics" is presented to us as a "science of choice" in the "society of capital".

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