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July 11, 2013



Naturally, I agree with you that the classical 'political economists' have a lot - probably more - to offer than modern economists.

I think a crucial point where classical and neoclassical economics differ is the theory of value. Classical economists, most of all Marx, used labour to explain how economic value became embodied in commodities and measurable by the same yardstick (money). Marx's system did not attempt to explain all of the day to day fluctuations of prices but merely the total amount of exchange value in an economy. Classic political economy considered use-value to be inherent and unquantifiable.

On the other hand, the subjective theory of value tries to explain individual purchases by quantifying use-value as utility. This model has some good aims but doesn't seem to have much predictive value, as it is either circular, 'revealed' ex ante, or completely deterministic based on how the model is constructed.

Meanwhile, what explains the total production and value in neoclassical theory? Not much, past some massively fudged 'production functions' that have all sorts of problems, not least of all exactly which units they're supposed to represent.

Therefore, the capability of explaining therefore lost in neoclassical economics, while for all practical purposes utility theory doesn't seem to offer much more than saying 'use-value cannot be formalised' does. The result is that by choosing neoclassical over classical economics, we lose some predictive power and gain none, at least as far as value is concerned.


«In fact, in one sense economists are only now rediscovering what the classics knew.»

Well, "rediscovering what the classics knew" is how Keynes described his attitude when he started to leave behind Marshall.

And those people who in academia still call their subject "political economy" and don't pursue the self-interest of seeking generous sponsorships from property interests have never abandoned the classics, usually in countries outside the anglo-american culture (or at Cambridge UK).

They study the Classics and Keynes and Kalecki and Kahn and Sraffa and several less known italians and Minsky and Galbraith.

«All of them, from Smith with his invisible hand through to Marx, were concerned with the question of how some kind of order emerged from what looked like a chaotic process of millions of people exchanging millions of goods.»

To me this seems a grossly a-historical point of view: they assumed as obvious that it worked. They did not have the same "computational" point of view we have now, they had more a "mechanical" point of view.

Their main concerns were what drove the distribution of income, as you noted, and what drove development, or almost equivalently capital formation.

Because the "classics" you mention had parents and grandparents whose living memory still was of a largely unchanging economy, and lived in countries in large parts of which the economy still had not substantially changed since Roman times (or regressed both quantitatively and quantitatively from those times).

Therefore their great wonder was why and how what Keynes called "the Manchester system" (probably echoing Marx who was also [horridly] fascinated with Manchester) arose, and who got the fruits of that immense change.

«To Smith, this order was benign, to Marx less so.»

I think this pithy summary is a bit of a betrayal of both, especially Marx, who tried to maintain some separation of his description of the Manchester system and of his outrage over its effects on the poor.

But many propertarians, especially those with a Social Darwinist, Spencerian/Galtonian orientation, make the same analysis as Marx does of the Manchester system and its effects, and *applaud* them. BTW I think that Mankiw, Ferguson and others of that ilk belong to that "elitist" line of thought.

As to that I recently read this engaging article on native american political thought:


with this part:

«But as a topic in political theory, rather than the history of the Supreme Court, slavery suffers from being so utterly indefensible. The way different churches split on the biblical warrant for slavery is deeply interesting historically, but the argument is over.

Nonetheless, it isn't strictly true that nobody put up a secular defence of slavery that is worth reading today: two interesting, neglected and deeply rebarbative thinkers did, but trying to get 21st-century students to take John C. Calhoun or George Fitzhugh seriously is an uphill struggle.

Yet the former at least deserves the label of "the Marx of the master class" that Richard Hofstadter applied to him. Arguing in good Marxist fashion - without himself reading Marx - that civilisation depended on extracting the necessary resources from the class who do the productive work, Calhoun thought the only question was whether to have wage slaves as in the industrial North or black slaves as in the South.»

BTW I think that Marx, in his descriptive capacity, was also himself the "the Marx of the master class"; he just abhorred what he described.

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