Wednesday, January 01, 2020


I study economics as a hobby. My interests lie in Post Keynesianism, (Old) Institutionalism, and related paradigms. These seem to me to be approaches for understanding actually existing economies.

The emphasis on this blog, however, is mainly critical of neoclassical and mainstream economics. I have been alternating numerical counter-examples with less mathematical posts. In any case, I have been documenting demonstrations of errors in mainstream economics. My chief inspiration here is the Cambridge-Italian economist Piero Sraffa.

In general, this blog is abstract, and I think I steer clear of commenting on practical politics of the day.

I've also started posting recipes for my own purposes. When I just follow a recipe in a cookbook, I'll only post a reminder that I like the recipe.

Comments Policy: I'm quite lax on enforcing any comments policy. I prefer those who post as anonymous (that is, without logging in) to sign their posts at least with a pseudonym. This will make conversations easier to conduct.

Saturday, June 16, 2018

A Country Worse Off With Trade In Capital Goods

Figure 1: PPFs in Portugal
1.0 Introduction

This post continues these two posts. I change the model here to have wages advanced, not paid out of the surplus at the end of the year.

I here consider an example of a model of stationary states in which two countries can trade in produced commodities to be used for consumption. The countries face given prices on international markets for traded commodities. (They are small open economies, in the jargon.) I take the rate of profits as given in each country. They may differ, since I assume that finance capital cannot be traded internationally. I also assume labor is immobile between countries.

I contrast the model with and without foreign trade being possible in capital goods. Paul Samuelson calls the supposed gains from trade in capital goods the Sraffian bonus. This post demonstrates that the Sraffian bonus can be negative. The inhabitants of a country might be better off, in the sense that the total bundle of consumption goods is larger, if international markets do not exist in capital goods.

2.0 Parameter Values

I assign the numeric values in Table 1 to coefficients of production. For those who do not want to click, a unit of steel can be made in England from a direct and unassisted labor input of l2, C, E person-years. A unit of corn can be made from one unit of steel and l1, C, E. A unit of linen is made from l1, L, E person-years of direct and unassisted labor.

Table 1: Technology for the Example
l1, C, n37
l2, C, n22
l1, L, n12

I take the endowments of labor - LE and LP person-years, respectively - as given. Production Possibility Frontiers (PPFs) are constructed per worker.

I also take rates of profits, rE and rP, as given. I do not strive for realism. But, if you are concerned by the sizes of the rates of profits, pretend that my "year" is actually a decade or so.

3.0 Stationary States with and without Trade in Capital Goods

I now consider what prices could be consistent with stationary states.

First, suppose foreign trade is not possible in capital goods. Only corn and linen can be traded on international markets. Suppose prices are as in Table 2. The cost of producing linen in England:

l1, L, E wE (1 + rE) = 1 (1/6) (1 + 3) = 2/3

If firms in England manufacture linen for both domestic consumption and for foreign trade, they make the going rate of profits. The cost of producing corn in England is:

[l2, L, E (1 + rE) + l1, L, E] wE (1 + rE) = [2 (4) + 3](1/6)(4) = 22/3

Firms in England will not want to produce corn. They would be undercut by foreign competition. You can do the analogous calculations for Portugal. Portuguese firms will produce corn and the needed steel to continue production. They will not produce linen. With these prices and this specialization, consumers in both countries can consume baskets of commodities containing both corn and linen. And firms will be minimizing costs.

Table 2: Example with Foreign Trade in Corn and Linen
Cost of producing corn22/36
Cost of producing linen2/312/7
SpecializationLinenCorn and Steel

Suppose now that international markets exist in corn, linen, and steel. Table 3 shows prices for consideration in this case. One tabulates the cost of producing corn with the steel input evaluated at the international price. For example, the cost of producing corn in England is:

(PS + l1, C, E wE) (1 + rE) = [1 + 3 (1/6)](4) = 6

Going through these tabulations, one will find that the firms in England specialize in producing corn and linen. The cost of producing steel in England exceeds its price. Likewise, firms in Portugal specialize in producing steel. Cost-minimizing firms in Portugal are unwilling to produce either corn or linen.

Table 3: Example with Foreign Trade in Corn, Linen, and Steel
Cost of producing corn617/2
Cost of producing linen2/31
Cost of producing steel4/31
SpecializationCorn and LinenSteel

Notice that the international prices of corn and linen are unchanged between Tables 2 and 3. Steady states are here shown as resulting in an increased wage in Portugal when foreign trade is possible in steel. But rates of profits and the wage in England are shown as constant.

3.0 Production Possibility Frontiers

What about physical quantities of commodities? I restrict myself to stationary states. Figure 2 shows PPFs in England. The PPF under autarky is constructed from technical data on coefficients of production and the endowment of labor in England. When only linen is produced in England, whether foreign trade is possible or not, the same amount of linen is produced as under autarky. Consequently, all three PPFs are shown as rotated around the same intercept in Figure 2.

Figure 2: PPFs in England

Consider England when foreign trade is only possible in corn and linen. Since England specializes in linen, the maximum amount of corn consumed by the English is (LE/l1, L, E)(PL/PC). In this example, that quantity is less than LE/(l1, C, E + l2, C, E), the maximum quantity of corn consumed in England without foreign trade.

When foreign trade is also possible in steel, the maximum quantity of corn manufactured in England is (LE/l1, C, E) units. But not all of this corn can be consumed. Steel must be purchased from Portugal to continue production on the same scale. That is, (LE/l1, C, E)(PC - PS) numéraire units are available for consumption. So the maximum corn consumption in England is (LE/l1, C, E)(PC - PS)/PC units of corn. For England, the Sraffian bonus is positive. The possibility of foreign trade in steel has left the PPF for domestic consumption rotated outwards, even beyond the maximum consumption under autarky.

The situation in Portugal, as illustrated by Figure 1 at the top of this post, is quite different, however. Foreign trade in consumer, but not capital goods, results in a PPF rotated outwards from the autarkic PPF. This conforms to the nonsense long-suffering students in economics taught out of mainstream textbooks must endure. At the prices considered above, Portugal produces only steel when foreign trade is possible in all produced goods. The maximum amount of linen that can be consumed in Portugal is (LP/l2, C, E)(PS/PL) units. Neither intercept with an axis for this PPF is equal to the corresponding intercept for autarky. Furthermore, the PPF with foreign trade in all goods is strictly inside the PPF with foreign trade only in consumer goods. The Sraffian bonus is negative. Suppose one compares the PPF with foreign trade in all goods to the autarkic PPF for Portugal. Whether or not there are gains from trade is ambiguous. It depends on the consumption basket.

4.0 Conclusion

So this post has extended long-ignored proofs that the theory of comparative advantage does not provide a valid a-priori argument for so-called free trade. Opening up markets in capital goods may not provide a country with more goods, setting aside problems of adjustment.

I know of some empirical work purporting to demonstrate gains from trade. I do not know of any that addresses the issues brought forth in this post.

  • Paul A. Samuelson (2001). A Ricardo-Sraffa Paradigm Comparing Gains from Trade in Inputs and Finished Goods. Journal of Economic Literature 39, 4: 1204-1214.
  • Ian Steedman (1980). Trade amongst Growing Economics. Cambridge University Press.

Thursday, June 07, 2018

More On Foreign Trade In Consumer And Capital Goods

Figure 1: Rates Of Profits for Specialization in Consumer Goods
1.0 Introduction

This post is a continuation of this example. How a country specializes in foreign trade depends on distribution. And foreign trade can reduce the consumption basket to be divided among the inhabitants of a country, as compared with autarky.

2.0 Patterns of Specialization

Assume that the consumption basket in both countries contains both corn and linen. In a steady state, international prices and the distribution of income in both countries must be such that at least one country produces each one of the three commodities. Table 1 lists the six possible patterns of specialization in which each commodity is produced in exactly one country. If foreign trade is possible in consumer goods, but not in capital goods, steel must be produced in the same country in which corn is produced. Only cases 2 and 5 are possible. All six cases must be analyzed if foreign trade is possible in both consumer and capital goods.

Table 1: Patterns of Specialization
1CornLinen, Steel
2LinenCorn, Steel
3SteelCorn, Linen
4Linen, SteelCorn
5Corn, SteelLinen
6Corn, LinenSteel

A pattern of specialization is compatible, given the technology, with certain rates of profits between the trading countries. Under the assumption that financial capital does not flow between countries, the rate of profits may vary between countries. Insofar as the determinants of distribution is unspecified, the model is open. A neoclassical closure would specify intertemporal utility-maximizing consumers in each country

Disequilibrium transitions paths are also not considered here. Firms could find their expectations, with which they have produced or bought capital goods, disappointed. Presumably along such paths, trade might be unbalanced, and exchange rates could vary. Keynesian considerations of effective demand come into play. The elasticities of the demands for imports and exports might be of some importance, as reflected in the Marshall-Lerner conditions. The convergence of such transition paths to steady states does not seem assured.

3.0 Trade in Consumer Goods

Consider the model under the assumption that international markets do not exist for steel. Suppose England specializes in the production of linen, and Portugal specializes in the production of corn, as in case 2. Then the international prices of linen and corn must be related:

l1, L, E/(vC, E + l2, C, E rE) < PL/PC
PL/PC < l1, L, P/(vC, P + l2, C, P rP)


l1, L, E/(vC, E + l2, C, E rE) < l1, L, P/(vC, P + l2, C, P rP)


rP < (l1, L, P l2, C, E rE + l1, L, P vC, E - l1, L, E vC, P)/(l1, L, E l2, C, P)

A specific region in the space for the national rates of profits corresponds to each pattern of specialization. Figure 1, above, shows these two regions, as divided by the upward-sloping line. The figure is drawn under the assumption that England has a comparative advantage in producing linen.

4.0 Production Possibility Frontiers (PPFs)

A production possibility frontier (PPF) shows the upper limits on how much linen or corn can be consumed in a given country in a stationary state. Let YC, n represent bushels corn consumed, and let YL, n be the square-yards of linen consumed, where n = E or P for England or Portugal. Let LE and LP be the endowments of labor in England and Portugal, respectively.

I want to consider three PPFs. Here is the PPF for autarky, when a country does not have the possibility to engage in foreign trade:

l1, L, n YL, n + vC, n YC, n = Ln

The PPF for a country specializing in the production of corn is:

vC, n (PL/PC)YL, n + vC, n YC, n = Ln

The PPF for a country specializing in the production of linen is:

l1, L, n YL, n + l1, L, n (PC/PL) YC, n = Ln

Figure 2 graphs these PPFs. The possibility of foreign trade rotates the autarkic PPF, with the pivot on an axis, depending on which product the country specializes in. I have drawn the PPFs such that when the country specializes in the production of linen, it is worse off as a whole. If any corn is consumed at all, foreign trade results in a smaller commodity basket than under autarky.

Figure 2: Production Possibility Frontiers for One Country

4.1 Comparison of PPFs for Autarky and Specialization in Corn

For a country specializing in corn, the ratio of the international price of linen to the international price of corn is bounded above:

PL/PC < l1, L, n/(vC, n + l2, C, n rn)

For a non-negative rate of profits, the right-hand side cannot exceed l1, L, n/vC, n. Hence:

PL/PC < l1, L, n/vC, n


(Ln/l1, L, n) < (Ln/vC, n)(PC/PL)

The left-hand side is the maximum consumption of linen for this country under autarky. The right-hand side is the corresponding maximum consumption when the country specializes in producing corn. Thus, in this simple model, specialization in corn when no foreign markets in steel exist, unambiguously rotates the PPF outwards. In a comparison of stationary states, foreign trade gives the country specializing in producing corn a greater consumption basket to distribute among its inhabitants.

4.2 Comparison of PPFs for Autarky and Specialization in Linen

On the other hand, specialization in linen could make a country worse off. For the PPF to be rotated inward, one must have:

(Ln/l1, L, n)(PL/PC) < (Ln/vC, n)


PL/PC < l1, L, n/vC, n

So a country experiences a loss from trade when it specializes in linen and the following condition holds:

l1, L, n/(vC, n + l2, C, n rn) < PL/PC < l1, L, n/vC, n

Notice a loss from trade is not possible when the rate of profits is zero.

Suppose rates of profits and prices are such that England specializes in the production of linen. Prices can be such that England can gain from trade if and only if:

l1, L, E/vC, E < l1, L, P/(vC, P + l2, C, P rP)


rP < (l1, L, P vC, E - l1, L, E vC, P)/(l1, L, E l2, C, P)

The right-hand side can be positive if and only if England has a comparative advantage in producing linen when rates of profits are zero in both countries.

5.0 Conclusion

So in this simple model, when international markets exist in consumer goods, but not in capital goods:

  • Which country specializes in producing corn and which in producing linen depends on domestic rates of profits.
  • Only one pattern of specialization for a given pair of rates of profits is possible.
  • For each pattern of specialization, a pair of rates of profits exists for that specialization.
  • If a country specializes in producing corn, its PPF is rotated outwards.
  • If a country specializes in producing linen, its PPF may be rotated outwards, but only if:
    • The country has a (technologically-defined) comparative advantage in producing linen.
    • The relative price of linen on international markets is high enough.
  • The PPF may be rotated inwards when a country specializes in producing linen; the terms of trade matter.

I am finding it non-obvious how to complete this analysis when steel can be traded in foreign markets. Also, I should create numerical examples just to confirm my results.

Saturday, June 02, 2018

Ideological Innocence Of The Fox News Viewer

1.0 Introduction

This post deals with a set of ideas that I find appealing, but contradictory. I know I do not fully understand many of them. Perhaps somebody who understands more can either agree with me that there are contradictions here or point to some way of resolving them. This post is also more about current events than is typical of my posts.

2.0 Ideological Thinking, Ideological Identification, And Party Identification

Consider Philip Converse's claim that a mass majority of the public is innocent of ideology, as opposed to elites. I know these ideas best as filtered through Kinder and Kalmoe (2017).

Ideological thinking is not a defect, in Kinder and Kalmoe's account. An ideology, such as liberalism or conservatism in contemporary America, structures how you understand and retains facts. Otherwise, the world, in at least its political aspects, will appear as a blooming, buzzing, confusion. Ideological thinking can be seen in a couple of ways. First, when surveying people about issues, you can listen to how they justify their stance. Do they refer to liberalism or conservatism? Second, do they exhibit a certain constraint on issues. For example, if they are against abortion generally being illegal, are they also for the death penalty? (Kinder and Kalmoe define issues narrowly. They do not consider a take on whether a larger or smaller government is desirable as an issue, as opposed to a more philosophical issue.)

Kinder and Kalmoe note that being informed about politics takes quite a bit of work. I think their take goes along with some of Ahler and Broockman's findings on so-called moderates. It is not that moderates necessarily take middle-of-the road positions on issues. Rather, they may take extreme sides on different issues, with no awareness of how they go together, including in prevailing ideologies among those who pay more attention to politics. Apparently, survey questions to test your knowledge of politics are fairly rudimentary. Common practice is to base an assessment on less than twenty multiple-choice questions like: How long is a senator's term? What is Paul Ryan's position? What party was Franklin Delano Roosevelt a member of?

Kinder and Kalmoe distinguish ideological thinking (non-innocence) from both ideological identification and party identification (also known as partisan identification). In the period of their data they find a closer correlation between ideological identification and partisanship, but there are still plenty of people who call themselves conservatives and Democrats. After taking into account of partisanship and stands on issues, ideological identification counts for little.

3.0 Pyschological Traits of Liberals and Conservatives

I think the literature on social psychology about traits among liberals and conservatives is meant to apply to mass publics. John Jost and Jonathan Haidt are the most prominent writers I know of here.

Jost claims liberals are more open to experience; tolerant of uncertainty; have less need for order, structure, and closure; more tolerance of ambiguity and less dogmatism; less fear of death, threat, and loss; and higher self-esteem. Conservatives are otherwise. Haidt says that liberals moral intuitions emphasize the avoidance of harm/the provision of care and fairness and reciprocity. Conservatives include these moral concerns. But they also worry more about in-group loyalty, respect for authority, and purity and sanctity.

How does this literature relate to ideological thinking, ideological identity, and partisanship among mass publics in the United States? As I understand Kinder and Kalmoe, they recognize this contrast. They argue that Jost misunderstands their work, and his traits only gets you to ideological identification. I can see how one could be authoritarian, in personality, and be a strong Democrat or even further left. Could an anti-authoritarian be a strong Republican in the current conjecture?

Do those who have read these literatures think more could be said here?

4.0 Marshall McLuhan And Media

How is all of the above modified by contemporary events? Once upon a time, those on the left decried the biases of the corporate media. They wanted more explicitly class-based channels that was not afraid to affirm a point of view. It is not what they meant, but we now have Fox News. And they explicitly treat "liberal" as a swear word. How much will a regular viewer get a message, which, if accepted and absorbed, will lead to issue constraint, in Kinder and Kalmoe's sense? (Chemtrails are not an issue.)

But if one worries about the message on Fox News, could one accept Marshall McLuhan's take on media? Supposedly reading encourages analytical, linear thought, while television extends your nervous system to be irritated by going-ons throughout the global village. Would this not be just as true for messages on other television channels? Should one just reject McLuhan's approach?

5.0 Some Caveats

In looking at international data, Kinder and Kalmoe convert "liberal" and "conservative" to "left" and "right". I would not call myself a liberal - I would say I'm more somewhere between a democratic socialist and a social democrat. Those who reject the labels "Liberal" and "Conservative", Kinder and Kalmoe classify as non-ideological. I do not know how I would have answered those survey questions. By the way, I voted on a certain resolution on the New York State ballot last time without knowing much about it, but on the grounds that labor unions were opposed. This group-based approach is not ideological thinking, as I understand Kinder and Kalmoe. A Catholic paying attention to the Church's teaching might endorse both making abortion illegal and getting rid of the death penalty. So they would not exhibit, at least on this issue, the kind of constraint Kinder and Kalmoe take as demonstrating ideological thinking. I doubt that many non-elites fall outside their classification, but how could one know?

  • Douglas J. Ahler and David E. Broockman (2015). Does Polarization Imply Poor Representation? A New Perspective on the "Disconnect" Between Politicians and Voters
  • Pierre Bayard (2007). How to Talk About Books You Haven't Read
  • Philip E. Converse (1964). The Nature of Belief Systems in Mass Publics
  • Jesse Graham, Jonathan Haidt, and Brian A. Nosek (2009). Liberals and conservatives rely on different sets of moral foundations. Journal of Personality and Social Psychology, V. 96, no. 5: pp. 1029-1046.
  • Jonathon Haidt (2013). The Righteous Mind: Why Good People are Divided by Politics and Religion
  • John J. Jost et al. (2003). Political Conservatism as Motivated Social Cognition
  • Donald Kinder and Nathan P. Kalmoe (2017). Neither Liberal nor Conservative: Ideological Innocence in the American Public
  • Marshall McLuhan (1962). The Gutenberg Galaxy
  • Marshall McLuhan (1964). Understanding Media: The Extensions of Man

Saturday, May 26, 2018

Foreign Trade In Capital And Consumer Goods

Figure 1: Specialization In A Single Country
1.0 Introduction

This post considers how the firms in a small open economy will specialize, given prices on international markets and the domestic rate of profits. The example would only be interesting as part of a larger argument, which I have not yet worked out.

2.0 Technology

Consider a small, open economy which has a flow-input, point-output technology for producing two consumption goods, corn and linen. Corn is manufactured from inputs of direct labor and steel. Steel and linen are each manufactured from inputs of direct, unassisted labor. Table 1 shows an input-output table for the technology. The technology is thus specified by three coefficients of production, (l1, C, n, l2, C, n, and l1, L, n).

Table 1: Example Technology
Laborl2, C, n Person-Yrsl1, C, n Person-Yrsl1, L, n Person-Yrs
Steel01 Ton0
Output1 Ton1 Bushel1 Square-Yd

Comparative advantage when the rates of profits is zero in each country is determined by relative ratios of labor embodied in each commodity. The labor value of steel is:

vS, n = l2, C, n

The labor value of corn is the sum of the labor embodied in steel used in producing corn and the direct labor used in producing corn:

vC, n = l1, C, n + l2, C, n

The labor value of linen is:

vL, n = l1, L, n

For a technology in which dated labor inputs extend for a larger number of time periods, finding labor values can require the calculation of sums with a greater number of terms.

3.0 Autarky

In this section, I assume foreign trade is not possible for the country being analyzed.

Let pC, n, pL, n, and pS, n be the domestic prices of corn, linen, and steel when no foreign trade is possible. Let wn be the wage paid for a person-year of labor, and let rn be the rate of profits. Assume labor is advanced and wages are paid out of the surplus at the end of the year.

Under these assumptions, prices, with labor-commanded as the numeraire, are:

pS, n/wn = l2, C, n = vS, n
pC, n/wn = vC, n + l2, C, n rn
pL, n/wn = l1, L, n = vL, n

4.0 Trade in Consumer Goods

Now suppose foreign trade is possible in consumer goods, but not in capital goods. In terms of the example, the firm can trade in corn and linen, but not in steel. Let PC and PL be international prices of corn and linen, respectively.

Two patterns of complete specialization are possible. Suppose the firms in the country want to produce linen (and the required steel), but not corn. Linen is sold on international markets, and corn is purchased. For firms to be unwilling to produce corn, the cost of producing a unit of corn, at the going rate of profits, must exceed the given international price:

[l2, C, n( 1 + rn) + l1, C, n] wn > PC

In a steady state, the cost of producing linen must be equal to its price:

l1, L, n wn = PL

Solving for the wage and substituting, one obtains the following inequality.

PL/PC > l1, L, n/(vC, n + l2, C, n rn)


PL/PC > pL, n/pC, n

For domestic firms to want to specialize in producing corn, the above inequality is reversed. In words, the country specializes in producing those goods whose international prices exceed autarkic prices.

5.0 Trade in Capital and Consumer Goods

In this section, I assume that the country can trade steel on international markets, as well as corn and linen.

Suppose the country specializes in producing linen. The following inequalities and equalities must be satisfied in a steady state:

l2, C, n wn > PS
PS ( 1 + rn) + l1, C, n wn > PC
l1, L, n wn = PL

Following my usual practice of solving for wages and substituting, I obtain two inequalities:

PL > (l1, L, n/l2, C, n) PS
PL > (l1, L, n/l1, C, n)[PC - PS ( 1 + rn)]

When the country specializes in corn, the system of inequalities and equalities is modified in a way that I hope is obvious. As above, two conditions characterize prices on international markets. The same is true for when the country specializes in the production of steel. For the country to specialize in linen, it is necessary but not sufficient that the country would have specialized in linen in trade in steel were impossible. This is not so for specialization in corn. For some combinations of international prices, the country will specialize in corn even when the country would not have so specialized when trade in capital goods was not possible. Likewise, a set of prices exists in which the country specializes in steel when the country would have specialized in corn without the possibility of trade in steel.

6.0 Conclusion

Figure 1, at the head of this post summarizes the analysis. The upward-sloping line extending from the origin divides regions of specialization under the assumption that foreign markets exist for consumer goods, but not for capital goods. When the international prices of corn and linen are in the region above this line, the country specializes in producing linen. When they are in the region below this line, the country specializes in producing corn.

With the possibility of international trade in steel, additional regions appear. If prices of linen and corn are low enough, for a given price of steel, they fall in the rectangle at the lower left in the figure. The country specializes in steel. All of each year's output of steel is sold in foreign trade, and linen and corn are bought with the revenues thereby obtained. A wedge appears in the upper right. If prices are in this region, the country does not specialize in producing linen. It becomes more cost-effective to produce corn, with inputs of steel purchased on international markets.

Friday, May 18, 2018

Can A Nazi Be Rational?

Hilary Putnam has long argued that facts and values, or ends and means, cannot be neatly separated. In 1981 he proposed a thought experiment, I assume not to be of contemporary political relevance:

What troubled us earlier was that we did not see how to argue that the hypothetical 'perfectly rational Nazi' had irrational ends. Perhaps the problem is this: that we identified too simply the question of the rationality of the Nazi (as someone who has a world view or views) with the rationality of the Nazi's ends. If there is no end 'in' the Nazi to which we can appeal, then it does seem odd to diagnose the situation by saying 'Karl has irrational goals.' Even if this is part of what we conclude in the end, surely the first thing we to say is that Karl has monstrous goals, not that he has irrational ones.

But the question to look at, if we are going to discuss Karl's rationality at all, is the irrationality of his beliefs and arguments, not his goals.

Suppose, first, that Karl claims Nazi goals are morally right and good (as Nazis, if fact if not in philosophers' examples, generally did). Then, in fact, he will talk rubbish. He will assert all kinds of false 'factual' propositions, e.g., that the democracies are run by a 'Jewish conspiracy'; and he will advance propositions (e.g. that, if one is an 'Aryan', one has a duty to subjugate non-Aryan races to the 'master race') for which he has no good arguments. The notion of a 'good argument' I am appealing to is internal to ordinary moral discourse; but that is the appropriate notion, if the Nazi tries to justify himself within ordinary moral discourse.

Suppose, on the other hand, that the Nazi repudiates ordinary moral notions altogether... I argued that a culture which repudiated ordinary moral notions, or substituted notions derived from a different ideology and moral outlook for them, would lose the ability to describe ordinary interpersonal relations, social events and political events adequately and perspicuously by our present lights. Of course, if the different ideology and moral outlook are superior to our present moral system then this substitution may be good and wise; but if the different ideology and moral outlook are bad, especially if they are warped and monstrous, then the result will be simply an inadequate, unperspicuous, repulsive representation of interpersonal and social facts. Of course, 'inadequate, unperspicuous, repulsive' reflect value judgments; but I have argued that the choice of a conceptual scheme necessarily reflects value judgments, and the choice of a conceptual scheme is what cognitive rationality is all about.

Even if the individual Nazi does not lose the ability to use our present moral descriptive vocabulary, even if he retains the old notions somewhere in head (as some scholars, perhaps, still are familiar with and able to use the medieval notion of 'chivalry'), still these (our present moral descriptive notions such as 'considerate', 'compassionate', 'just', 'fair') will not be notions that he employs in living his life: they will not really figure in his construction of the world.

Again, I wish to emphasize that I am not saying that what is bad about being a Nazi is that it leads one to have warped and irrational beliefs. What is bad about being a Nazi is what it leads you to do. The Nazi is evil and he also has an irrational view of the world. These two facts about the Nazi are connected and interrelated; but that does not mean the Nazi is evil primarily because he has an irrational view of the world in the sense that the irrationality of his world view constitutes the evil. Nevertheless, there is a sense in which we may speak of goals being rational or irrational here, it seems to me: goals which are such that, if one accepts them and pursues them one will be either be led to offer crazy and false arguments for them (if one accepts the task of justifying them within our normal conceptual scheme), or else one will be led to adopt an alternative scheme for representing ordinary moral-descriptive facts (e.g. that someone is compassionate) which is irrational, have a right to be called 'irrational goals'. There is a connection, after all, between employing a rational conceptual scheme in describing and perceiving morally relevant facts and having certain general types of goals as opposed to others.

Hilary Putnam (1981). , Cambridge University Press, pp. 211-214.

But this a thought experiment that takes an obvious consensus for granted. Fascism is bad.

Saturday, May 05, 2018

Neo-Ricardianism: A Marxist Insult

Today is the 200th birthday of Karl Marx.

My favorite school of thought in economics is sometimes called Neo-Ricardianism, instead of Sraffianism. As I understand it, the label "Neo-Ricardianism" was invented in 1974, as an insult, by Bob Rowthorn. Basically, he claimed to more closely follow Marx, and claimed that the Neo-Ricardians were, like neoclassicals, bourgeois economists. Other Marxist economists at the time offered arguments along the same lines. Franklin Roosevelt III, for example, did not use the label "Neo-Ricardian", but rather described Sraffians as in the grip of commodity fetishism.

(This Roosevelt is the grandson of FDR, the United States president. According to Wikipedia, he is a Du Pont on his mother's side, and therefore a descendant of the famous physiocrat. I've also recently read one in the series of Elliot Roosevelt's mystery novels, in which his mother Eleanor is the detective.)

One aspect of the Marxist argument against Sraffians harkens back to J. S. Mill. The claim is that, in Mill, production is taken as a matter of natural law, while distribution is a matter of social laws that can be freely changed, if we collectively decide so, perhaps through government. According to Marxists, production and distribution cannot be separated like that. You can see why this might be described as commodity fetishism, in which social relations are taken as natural relations.

This argument also provides a context for understanding some chapters in Steedman (1977). Sraffa, for some purposes - e.g., internal criticism of neoclassical economics - takes quantity relations as given, while considering what prices would be if some distributive variable were at a different level. But, Steedman argues, that, in principle, one can relax what is taken as given. The length of the working day or the intensity with which laborers work might be varied in the analysis. This is not just a matter of, say, increasing all inputs in a production process by some proportion. You would want to consider how fuel, oil, or other elements of working capital vary with output, how output varies with concrete production processes, and whether or not these variations have an impact of the efficiency on machinery of various ages. I suppose I ought to also mention Steedman's polemics, especially his labeling of some anti-Sraffa Marxists as "obscurantists".

Of course, many arguments have been developed on both sides over the nearly half-century since these charges and counter-charges were first offered. Does Sraffa provide a constructive alternative, as well as an internal criticism of neoclassical economics? Do Sraffian interpretations of classical economics hold up as history? How do issues of money enter? Is Sraffian economics confined to logical - not historical - time? How do market prices relate to prices of production? And what does this all have to do with Marx?

Another famous adoption of "Neo-Ricardism" as an insulting label for Sraffianism comes shortly later from Frank Hahn, who was no Marxist.

  • Frank Hahn (1982). The Neo-Ricardians, Cambridge Journal of Economics, V. 6, iss. 4: 353-374.
  • Frank Roosevelt (1975). Cambridge economics as commodity fetishism. Review of Radical Political Economics, V. 7, no. 4. (Reprinted in Growth, Profits, and Property: Essays in the revival of political economy, (ed. by E. J. Nell) Cambridge University Press, 1980.)
  • Bob Rowthorn (1974). Neo-Classicism, Neo-Ricardianism, and Marxism. New Left Review
  • Ian Steedman (1981, first edition 1977). Marx After Sraffa, Verso.