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Mike Beggs: "On the Point at Issue, [DeLong] Was Right": Yet More Fama's Fallacy Freshman Macroeconomic Mistakes Weblogging

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I see that today, in the Journal of Australian Political Economy, Mike Beggs has taken his 2011 Jacobin essay up to the top of the Temple of Huitzilpochtil, ripped its heart out with an obsidian knife, and left it dead on the ground. The most important paragraph--and my favorite paragraph--is missing. The paragraph reads, as Beggs evaluates my critique of David Harvey's word-salad:

[O]n the point at issue, [whether boosting government spending would boost employment, DeLong] was right – it is a question of interest rates, not of the number of bonds that can be sold. When Harvey went on to clarify his argument, it was only with some casual empiricism of his own. He noted that he was hardly the only one to be making the argument that East Asian central banks could stop collecting US Treasuries, so that “the track of long-term treasury interest rates may go the way of the housing market data in just a couple of years (if not months).” This was an argument you could read in mainstream business pages; there was nothing particularly Marxist about it. Now that we are more than a couple of years down the track, DeLong still looks right: the yields on long-term Treasury bonds are, as I write in July 2011, about the same as they were in February 2009, when the exchange took place. The limits to stimulus have been political, not financial.

With that paragraph in place, Beggs's argument that David Harvey and others should abandon their Zombie Marx was powerful and compelling: Beggs argued--correctly!--that their obedience to Zombie Marx led them to say things that were wrong, silly, and eminently mockable by people like me.

With that paragraph gone, the heart is missing from Beggs's essay. Beggs's argument that David Harvey and others should abandon their Zombie Marx is now--what? It is aesthetic--that Beggs's is "a more elegant treatment of relative prices"--and careerist--"I have discussed aspects of how this integration could take place, through an engagement with the Keynesian concept of liquidity preference and particularly post-Keynesian structuralist versions of it (Beggs, 2011: chapters 3, 10)"--and thus much, much weaker.

Thus these edits strike me as a big mistake on Beggs's part: to argue that people should change how they think to avoid saying things that are wrong is praiseworthy, to argue that people should change how they think because Beggs thinks that his way is prettier and because it would boost Beggs's citation count has much less point…

Here is the rubber meeting the road: the openings of Mike Beggs today in the Journal of Australian Political Economy http://media.wix.com/ugd/b629ee_f932d14d32a6f274cc2c92c89e103f44.pdf (in bold), and Mike Beggs in the summer of 2011 in Jacobin http://jacobinmag.com/2011/07/zombie-marx/ (in italics):

In 2009, UC Berkeley Economics Professor and former Clinton adviser Brad DeLong took a pot shot at David Harvey on his blog. Headlined ‘Department of “Huh”?’, and beginning ‘Why neoclassical economics is an absolutely wonderful thing’, the post quotes eleven straight paragraphs from a Harvey essay, which DeLong proceeds to ridicule.

For DeLong, the essay is contentless waffle. It strings together economic concepts without making an economic argument. He would call it ‘intellectual masturbation’, he writes, except that it ‘does not feel good at all’. Only in the eleventh paragraph does he find ‘the suggestion of a shadow of an argument’. Here Harvey argues that the US stimulus package is bound to fail because the deficit needs to be financed by foreign powers, and the amount of Treasury bonds it will be able to sell to the likes of the Chinese central bank will not fund a big enough stimulus. DeLong responds that this is a question that requires a theory of the bond market and interest rates, which Harvey does not provide: ‘The question is thus not can government deficit spending be financed... the question is at what interest rate will financial markets finance that deficit spending’ (DeLong, 2009).

Harvey responded with some anger at the arrogance of neoclassical economists:

I would have thought that in a profession dominated by neoclassical and increasingly neoliberal theory these last thirty years, that there might have appeared at least some sliver of humility. They have collectively provided us with no guidance on how to avoid the current mess and now, when faced with a crisis, they can only say, as Marx long ago presciently noted, that things would not be so if the economy only performed according to their textbooks. Maybe it is time to revise if not change the textbooks (Harvey, 2009).

He goes on to bring up Sraffa and the ‘Cambridge capital controversies’ of the 1960s, which, he argues, showed that ‘all of neoclassical theory is based on a tautology’. DeLong’s argument was ‘a bit of casual empiricism about the current low and seemingly stable rate of return on long-term treasuries’. ‘Why bother’ with neoclassical economics at all, he asks.

Many will already be laughing and mocking along with Harvey. And perhaps DeLong deserves no better. Yet on the point at issue, he was right – it is a question of interest rates, not of the number of bonds that can be sold. When Harvey went on to clarify his argument, it was only with some casual empiricism of his own. He noted that he was hardly the only one to be making the argument that East Asian central banks could stop collecting US Treasuries, so that 'the track of long-term treasury interest rates may go the way of the housing market data in just a couple of years (if not months)'. This was an argument you could read in mainstream business pages; there was nothing particularly Marxist about it. Now that we are more than a couple of years down the track, DeLong still looks right: the yields on long-term Treasury bonds are, as I write in July 2011, about the same as they were in February 2009, when the exchange took place. The limits to stimulus have been political, not financial.

DeLong’s attack was unfair and indeed arrogant, and deserved a forthright response. Unfortunately, Harvey missed the opportunity. DeLong would have welcomed his dismissive response, because it reinforced his image of the otherworldly nature of Marxian economics. It would have convinced no-one not already well-disposed to Harvey’s way of thinking. Criticism of the incoherence or unrealistic assumptions of neoclassical economics rolls off like water from a duck’s back – most economists will freely admit they are simply heuristics and would be quite happy to be considered pragmatic ‘casual empiricists’.

Many Marxists see mainstream economics as a degenerate mirror-image of what they think Capital provides for them: a systematic model of capitalism built up from first principles. The main difference is that mainstream economics is ideological and apologetic, hopelessly inadequate for understanding the true nature of capitalism. So for Harvey the ultimate charge he can throw is that it is “based on a tautology”: a logical flaw was discovered in the 1960s that should have spelled its end; everything since is “casual empiricism.”

Here I argue that there is much for Marxists to learn from modern economics, even neoclassical economics. Further, I argue that there are aspects of Marx’s Capital widely seen to be at its theoretical core that should not survive this engagement. Yet, I think, the project Marx undertook in his own time is still as relevant today – in fact it is only by jettisoning much of the content of ‘Marxian economics’ that the form will survive.

I take for granted here that economic theory is a worthwhile pursuit for Marxists and socialists more broadly, and that the more scientifically valid the theory the better. There are those who argue that by subtitling Capital ‘a critique of political economy’ Marx had only negative criticism in mind – that economic theory of any kind is misguided because it reifies historically-bound social relationships. But it is hard to read Capital and not find it full of positive economic theory alongside the ruthless criticism of everything existing. By ‘critique’ Marx meant essentially what Kant did vis-à-vis pure, practical and aesthetic reason – not to dismiss political economy, but to enquire as to what makes it possible, and what these conditions of its existence mean for how it should proceed. The historically, socially contingent nature of capitalism has profound implications for the validity of various approaches to studying it, but it can still be studied. Positive (but not positivist!) economic theory is important both because there is value in understanding the economic dimension of social life so as better to change it, and because it is politically useful to present persuasive explanations for economic phenomena.

There really are neoclassical economists who insist on building a system from axioms, who believe, among other things, that no macroeconomics is worthwhile until it has been grounded in the “micro-foundations” of formally modeled rational individual action. But this is a minority, academic pursuit that has little to do with the pragmatic economics involved, for example, in analyzing the relationship between the US federal government’s deficit and long term interest rates. Criticism of the incoherence or unrealistic assumptions of neoclassical economics can be easily deflected – most economists will freely admit they are simply heuristics and would be quite happy to be considered pragmatic “casual empiricists.” Textbook epigraphs and departmental websites quote Keynes:

The Theory of Economics does not furnish a body of settled conclusions immediately applicable to policy. It is a method rather than a doctrine, an apparatus of the mind, a technique of thinking, which helps its possessor to draw correct conclusions.

There is nothing new in my basic message – what I propose is already standard practice for many people. Generations of economists who would call themselves Marxists, or at least admit Marx as a major influence, who have taken a similar approach. They have engaged with other strands of economic thought and folded them into their worldview, have worried little about dropping from their analyses those aspects of Marx’s argument they believed to be wrong or unhelpful, and have felt no need to pepper their writing with appeals to authority in the form of biblical quotations.

But in each generation, others have defended an orthodox Marxian economics, as they see it, as a separate and superior paradigm, which can only be diluted or contaminated by absorbing ideas from elsewhere. The pugnacious Andrew Kliman (2007: xiii), for example, opens his book Reclaiming Marx’s Capital with the epigram ‘The economists have changed Marx, in various ways; the point is to interpret him – correctly’. Accordingly, he unabashedly spends a chapter on hermeneutic method, and the book is devoted to proving the internal logical consistency of a method for transforming the values of Volume I into the production prices of Volume III…

The explanation of the differences that Beggs offers is "a cut-down version of this article appeared in Jacobin, 3-4, Summer 2011". But up to "transforming the values of Volume I into the production prices of Volume III", there are four paragraphs in Jacobin which do not show up in JoAPE and three paragraphs in JoAPE which do not show up in Jacobin. The Jacobin version is, in its opening, not cut-down. Rather, it is a bit longer than the JoAPE version.

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