An Introduction to Post-Keynesian and Marxian Theories of Value and Price

Peter M. Lichtenstein

• Publisher: Routledge
• Year: 2017
• ISBN:
  9781351965620
• Edition: 1
• Topic: Commerce
• Subtopic: Commerce Général

Peter M. Lichtenstein believes that any social-economic theory of capitalism must begin with a theory of value and price. Dismissing the neoclassical school, he turns to post-Keynesian and Marxian economics with their coherent and consistent theories of value and price based on concrete objective circumstances. The development of these theories in the author's aim because he believes that this approach comes much closer than neoclassical theory to capturing the essence of a capitalism economy.

This book, first published in 1983, is addressed to economics students, especially to those studying microeconomics or the history of economic thought, and to economists seeking an overview of these issues.

Part I
Competing traditions

1
A methodological introduction

The trouble isn’t what people don’t know; it’s what they do know that isn’t so.

Will Rogers

1.1 The objectivity of economic theory

It is essential that we begin this chapter with a rather simple point. This point is that the theories which together constitute the main body of traditional economics are interpretations of social reality as seen through the eyes of economists. Now, on the surface this point may seen rather innocuous. It is not. How we interpret the world around us determines what we perceive to be the important social problems of the day and dictates the methods to be used (and to be avoided) in solving these problems. In other words, our perceptions of reality guide our social actions. If our perceptions are wrong, so too will be our actions.

Economic theories, as we shall see, are formal expressions of these perceptions of the world. Because there are many different ways of perceiving reality, it follows not only that there will be many competing economic theories, but that these competing theories will rarely be capable of being disproved in a detached and scientific manner. The best theory will therefore rarely succeed in completely supplanting its competitors, largely because the criteria for a “good” or “best” economic theory are rather vague.

This suggests that many people often subscribe to theories not because they are “scientifically” valid, but because theories somehow appeal to their personal feelings and their sense of what is just. These feelings and senses are, of course, themselves rooted in popular ideologies. For this reason, a theory may continue to be accepted even if it can be proved false, for proving a theory incorrect may threaten people’s loyalties. This is true not only of the social sciences, but of the physical sciences as well. For example, Galileo was persecuted by church authorities in the early seventeenth century for claiming that the earth revolved around the sun. This fact was subject to proof, but proving it did not make it so. People did not want to believe that the sun was the center of the universe, and so they didn’t. No amount of proof could sway their conviction.

Economists are, of course, just like everyone else. We are all raised in a particular social environment and we internalize its values, beliefs, and customs. As a group, economists are therefore unlikely to construct theoretical models which cast doubt upon these values, beliefs, and customs. This is understandable and quite natural; no matter how objective an economist tries to be, he or she is still governed to some extent by a set of beliefs which may in fact have little to do with current conditions.

Although the modern economist perhaps comes better equipped with analytical tools and may be capable of summoning a variety of sophisticated intellectual resources unavailable to others, this does not mean that he or she produces the only accurate interpretations of reality. If the student approaches the study of economics with this false expectation in mind, as indeed many do, he or she is bound to be bitterly disappointed. But perhaps more dangerous than being merely disappointed, the student may fail to perceive the tentative nature of all economic theories and therefore proceed as though TRUTH had been revealed. In this book, there will be no pretense of revealing TRUTH. We simply hope to provide an introduction to an alternative body of economic theory which views capitalism quite differently.

It is essential, therefore, to point out at the very outset that economic theory has a very subjective, ideological aspect to it. Only if this were not true could economics be described as “value-free.” To say that a particular study is value-free implies that these ideological elements have been purged. This is rarely, if ever, the case with economics. The observer is inextricably involved with, and has an immediate interest in, the subject matter under observation. Although we can attempt to be objective, we can never fully succeed in being so.

1.2 Ideologies and economics

In spite of the fact that economic theory cannot portray reality with perfect accuracy, its study can nevertheless provide substantial insight into the world around us and how we relate to that world. However, in order to gain this insight, we must fully understand and appreciate the social perspectives that economic theory represents. It is, after all, the process of critically examining these perspectives that will ultimately reveal these insights to us.

The formal theory of Post-Keynesian and Marxian economics presented in this book is useful, therefore, because it translates the ideological components of a given social perspective into a logically manageable form and permits us to obtain a tentative picture of society that can be subjected to our personal scrutiny. In the sections that follow we delve more deeply into the ideological character of economic theory, in an effort to grasp the full meaning of the economic tradition to be presented in this book. Our first task is to examine the structure of ideologies, the role they play in society, and the extent to which they dominate our perceptions of social economic reality.

1.2A Ideology defined

The word “ideology” once meant the study of ideas. Modern usage of the term is somewhat different, however. Although ideology still refers to ideas, today we think of it as a set of doctrines which a certain group or class of people holds in common. It consists of values, attitudes, social and religious beliefs.¹

Although more than one ideology may coexist in a given society, it is typical to find a single dominant ideology that serves as a point of reference. Because the ideas that make up that ideology specify “correct” or socially acceptable values, beliefs, and attitudes, the dominating ideology gives direction and purpose to the activities undertaken by members of society. These ideas may be embodied in social customs and taboos, religious doctrines, civil laws, and political views. In fact, they shape all social institutions. Moreover, the values, preferences, and attitudes of individuals within a society are rooted in the ideology to which society as a whole collectively subscribes. By “rooted” is meant learned and enforced. The same social institutions which share an ideology tend, in their normal functioning, to perpetuate that ideology. And this perpetuating process is in fact a learning proces.² Any individual who learns but still fails to subscribe to the dominant ideology, or some subset of it, may be referred to as a heretic.

It is very difficult, if not impossible, to catalog with precision all the ideas which constitute an ideology. This is due to the fact that ideologies are never officially documented or codified. They are only partially incorporated into the laws, regulations, and customs of a society. Moreover, ideological elements are often implicit in the things we do and the things we say. Such elements cannot be easily observed or articulated because we are not always fully conscious of our attatchment to them.

1.2B Ideological propositions and economics

As we have just seen, an ideology is said to contain sets of ideas which define what a group of people believe to be the correct or proper modes of individual and collective behavior. A given ideology may be said to be “layered,” with very abstract, general ideas on the top layers and more specific and concrete ideas on the bottom layers.

On the highest or most abstract level are those ideas which relate to broad philosophical issues such as destiny, existence, human nature, and good and evil. On a lower and more concrete level we find more specific ideas about democracy, individualism, free enterprise, private property, competition, and economic freedom, Moreover, ideas on this level usually flow from higher level ideas. For example, the general higher level belief that the nature of human beings is to be greedy and acquisitive will most likely result in a lower level economic belief in competition and in the necessity of material rewards as an incentive for productive activi...