SteveKeen:Marx's excellent argument against Say's Law
Care to debate that?
Peace
Regrettably I have had as little luck in convincing committed Marxists of this as I will apparently have in convincing committed Austrians of the falsity of Say's Law.
Yeah, "regrettably".
Freedom of markets is positively correlated with the degree of evolution in any society...
SteveKeen:It is also possible, please, for someone who has a flaw in part of his analysis to be right in another. The very proposition that because I used Marx's excellent argument against Say's Law, the critique must therefore be false because it quotes Marx, is a sign of the painful ideological divide that has made economics far more a set of competing religions than a candidate for science.
Sir,
The argument in the OP is not an ad hominem attack on Marx. This should be crystal clear from even a cursory reading. You do your cause no good when you swoop in from out of the great blue and attack an argument which was never even forwarded, then just as quickly drop away as if nothing further was necessary.
If you'd like to challenge an ad hominem argument, here's one: It's no wonder your economics are so confused.
The observations that I "swoop[ed] in from out of the great blue" and made a " cursory reading" are both correct, and I apologise for them. There were both time and content issues, which I'll come back to when I have time to do a more customary solid read and engage properly with the arguments. This will be no earlier than the first week of May.
SteveKeen:There were both time and content issues, which I'll come back to when I have time to do a more customary solid read and engage properly with the arguments.
I look forward to it.
At the very least, Keen gets bonus points for humility.
============================
David Z
"The issue is always the same, the government or the market. There is no third solution."
I've been waiting for Steve Keen to return and finish up here. It is now the end of the second week of May.
Paging Steve Keen. We'd like to an answer to the critique of "Nudge Nudge, Wink Wink, Say No More"
My apologies but you'll need to wait a bit longer. I have an invited paper for the Australian Economic Review that has to be completed by next Friday--May 23rd. That is currently taking priority and I won't be able to spend the time needed for my reply until I finish it.
I wonder if your article is based upon the same premise that is being challenged here?
We'll wait Steve. I'll remind you in a couple weeks.
Firstly I want to thank Astroglide for critiquing my paper on Say on this site. One thing that happens all too rarely in economic debate is for adherents from one position to even read the arguments put forward by another. As one who has spent a lifetime doing reading across the spectrum of economic thought, I'm glad to see Astroglide engaging with my non-Austrian ideas here.
I will respond to his critique in a spirit that I hope encourages more such cross-pollination. I will also make my next entry in my own blog a direct and detailed consideration of the topics I raise here, because I know that I can't cover all the issues as deeply as they need to be within the confines of an email-style discussion.
Let me begin by noting one point raised by another discussant that is a minor misinterpretation best dispensed with: David Z's statement that in talking of M-C-M+, "What Marx is really describing is an arbitrageur, although painted as a thief and usurer". Carefully read, Marx doesn't see this as theft but a legitimate aspect of capitalism. He was at pains to describe even the labour contract as not constituting theft from the worker by the capitalist:
"The circumstance, that on the one hand the daily sustenance of labour power costs only half a day's labour, while on the other hand the very same labour power can work during a whole day, that consequently the value which its use during one day creates, is double what he pays for that use, this circumstance is, without doubt, a piece of good luck for the buyer, but by no means an injury to the seller." (Capital I, p. 188 [Progress Press edition])
The argument that JonBostwick made--"He's wrong becuase adding money doesn't actually change anything. Profit and interest are not monetary phenomenons, they exist with in barter economies as well"--doesn't undermine the critique of Say's Law either. I'll argue below that there are at least three perspectives in which the "C--M--C/M--C--M+" insight operates, and in one of them the presence of profits in a barter and/or subsistence economy is unremarkable.
Thanks also to mash for getting rid of the notion that my critique of Say's Law depends on Marx's "Labour theory of value". As mash notes, arguing that Marx's own logic contradicted the labour theory of value (LTV) was my first major contribution to economics. So as Astroglide later concedes--and just before I mistakenly "swooped in" on this very point--the fact that the LTV is false doesn't undermine my support for Marx's critique of Say's Law.
Thus Marx's critique of Say's Law is independent of the LTV--though it's still arguably dependent on a difference in theories of value. I say arguably because, as seemed to develop in discussion here, you could also make the proposition that the M--C--M+ notion exists in Austrian economics as well, as a way to characterise what Austrian theory argues is the temporary excess profits that an entrepreneur earns by innovating or exploiting a mis-pricing phenomenon. I think that's a very good insight, by the way--a productive way to bring an insight in from a rival approach to economics and thus enrich your own.
The distinction that a theory of value then brings is to this issue as to whether the M--C--M+ circuit is temporary or permanent, not as to whether it exists at all. The difference then becomes one of degree: entrepreneurial profit is seen essential to capitalism from an Austrian point of view, but also as temporary in duration. Marx sees the M-C-M+ circuit as essential to capitalism too, but as permanent.
I would hope this point would be accepted here, because it then means that while the "100% Say's Law" argument is strictly wrong, maybe a "99% Say's Law" is OK. Then Austrians and Marxists (non LTV ones--those who still hold with the strict LTV aren't worth the energy of discussion) could get down to a sensible debate. I wouldn't see concession on this point as being an "I win, you lose" outcome by the way: I'm not out to defeat one ideology in the name of another, but to find a cogent means to understand capitalism.
Astroglide's critiques of my version of Marx's theory of value then comes down to this question of degree. The Austrians (and in this sense their companions the Neoclassicals) have a theory of value in which profit opportunities come into being but are then quickly eliminated by the process of competition. Since these profit opportunities pop up and are then eliminated all the time across the whole economy, the M--C--M+ circuit is a permanent (but small) aspect of capitalism. I have a theory of value in which competition doesn't eliminate M--C--M+, though it will limit it to being not enormously more in one sector of the economy than it is in another.
On this point Astroglide, some more reading is required. You challenge my exposition of this theory of value as you read it in the "Marx for Post Keynesians" paper. In fact I give a fuller exposition of the origins of that theory in my unpublished Masters thesis on Marx (Use, Value and Exchange: The Misinterpretation of Marx), which is linked on my blog.
You should also read my critiques of the Neoclassical theory of competition, because while the Neoclassical theory differs from the Austrian theory in degree--through the Neoclassical myth that the market will be in equilibrium, as opposed to the Austrian realism that it will normally not be so, giving rise to the prospect of entrepreneurial profit--it is also a "supply and demand" theory which argues that competition will drive price towards a level set by the intersection of a demand and a supply schedule.
This argument is false, even when working within a subjectivist theory of value. If firms are competitive non-colluding profit maximisers, then price at the market level will tend to the point at which market-level marginal cost equals market-level marginal revenue. The Neoclassical (and Austrian) belief that this outcome will only apply under monopoly (and that free competition will undermine monopolies so that they too are transient) is incorrect.
So what does a "99% Say's Law" argument do to Austrian theory and its analysis of money, etc.? I'll leave that for my own blog entry on this topic, but I think you can best see that from your own literature by taking a look at Schumpeter's Theory of Economic Development (yes, I know Schumpeter is an Austrian that most Austrians prefer to disown, but his argument stems from considering what happens to Neoclassical theory once one allows for entrepreneurial profit in a distinctly if not explicitly M--C--M+ framework). In my opinion, it transforms Austrian thought completely--and makes Schumpeter the ultimate Austrian.
Finally, on the nature of the M--C--M+ insight. There are at least three aspects to it: individual behaviour, characterisation of the nature of industry, and the role of money and whether a credit economy is just a modified barter system.
On the individual behaviour front, it's sensible to characterist capitalist behaviour as predominantly M--C--M+, and worker as C--M--C--even though capitalists of course consume and workers of course save (sometimes, anyway!). I've heard people try to characterise the behaviour of capitalists as primarily driven by consumption (as Say does), and even rationalise away the fact that mega-capitalists like Bill Gates could never consume what they have accumulated in their lifetime by suggesting that they're actually saving so that their children can consume.
That's nonsense. Propose that to one of these people when they're not in danger of being quoted, or to people who know them well. and they'll laugh in your face. As an old professor of mine put it, "The Golden Rule is that He Who Dies With The Most Gold Wins". The primary motivation of capitalists is the accumulation of wealth (and the power that comes with it), not consumption--though of course an opulent level of consumption is a nice side-effect of accumulation.
On the industry front, it's a reasonable way to characterise some industries as primarily concerned with consumption, and others as primarily with investment. This was the basis of Keynes's own clumsy critique of Say's Law in The General Theory. Of course, in both industry classifications, profit will be earned.
On the monetary front, it raises the issue of what is aggregate demand and how is it financed in a growing economy. 100% Say's Law says that supply is demand; 99% or less Say's Law says that demand is supply plus the change in debt. This monetary vision sees it as possible to have profit in an economy with a constant level of output, but in an economy that is growing through time, there must also be growing debt. It doesn't have to grow disproportionately to income--though it clearly has in the financial crisis that capitalism is now engulfed by--but it does have to grow. The scale of the change in debt is thus one indicator of what percentage score should be put in front of your Say's Law theory.
Say's law explains that the real demand for 'shoes' is limited to being somewhere between zero and the sum of all the other economic goods currently existant (the supply). how does 'debt ' come into this?
or to put it another way, as a shoemaker with a stock of produced shoes, and other personal effects accumulated over a lifetime, the demand the shoe maker can make for products produced by others in the market could be no-more than these such things. what about this needs critiquing exactly?
I'm not sure how M-C-M type analysis is even relevant.
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
Fools! not to see that what they madly desire would be a calamity to them as no hands but their own could bring
SteveKeen:As an old professor of mine put it, "The Golden Rule is that He Who Dies With The Most Gold Wins". The primary motivation of capitalists is the accumulation of wealth (and the power that comes with it), not consumption--though of course an opulent level of consumption is a nice side-effect of accumulation.
Can you substantiate this assertion with more than cliches from an old leftist professor?
To claim that you know the primary motivation of capitalists is very insincere. That you claim that it is accumulation of power, one might counter that it is the accumulation of prosperity, in a praxeological sense the increase of personal satisfaction, defined subjectively by each individual.
Opulent consumption is value laden. If the consumption is paid for by voluntary free trade, then how it is consumed is of no concern to any third party, except where one wants to perpetuate a stereotype.
Shame you had to take an otherwise decent post and rubbish it up with this.
Good grief, as Charlie Brown might say. Of course I can substantiate at it with more than that.
But I saw no need to go name dropping about the capitalists about whom I have heard such reactions to naive attempts to describe their behaviour as motivated by the desire to consume rather than to accumulate wealth and power.
I was also not so much criticising their individual consumption (talk about reading into my post what you wanted to perceive) as pointing out that it alone couldn't explain the level of wealth they accumulate.
And if you can't cope with a bit of humour being thrown into an exposition of an intellectual argument mate, then you should get out more often.
SteveKeen:But I saw no need to go name dropping about the capitalists about whom I have heard such reactions to naive attempts to describe their behaviour as motivated by the desire to consume rather than to accumulate wealth and power.
This was really shoddy argumentation. Correct it by specifying names.
SteveKeen:I was also not so much criticising their individual consumption (talk about reading into my post what you wanted to perceive) as pointing out that it alone couldn't explain the level of wealth they accumulate.
No, you were making a backhanded criticism of all capitalists as being motivated by a hunger for power. It was cheap.
SteveKeen:And if you can't cope with a bit of humour being thrown into an exposition of an intellectual argument mate, then you should get out more often.
Personalizing your response to me won't help your unbacked assertions. First it was anecdotal. Then you refrained from being specific. Then you were misunderstood, and now it was a bit of humour that's beyond my capacity to understand.
You're going to wear out those dancing shoes.
Kerry Packer and Rupert Murdoch.
SteveKeen:Kerry Packer and Rupert Murdoch.
You name two oligarchs as representing capitalists? People who have likely collaborated with the state, made and bought politicians to gain regulatory monopoly and advantage, and in any moral society would have been imprisoned for fraud and coercion? And do you really expect me to believe that out of a potential 6 billion capitalists on this planet, two make the rule?
Are you the Steve Keen with the Debt blog? If so, I was under the impression that you were a professor, and thus would know that capitalists are anyone engaging in capital accumulation (savings) in a system where there is some semblance of private property rights. A property rights system that necessarily includes competition, and a legal framework to stop violence and fraud (theft).
I am a capitalist. I produce, under consume, save (accumulate capital) which I reinvest in more production or productive gains, to produce, under consume and save again. My ultimate goal is not power, it is to satisfy my future needs and wants, whether it be to send my kids to college, or to travel the world in my retirement. How ever I choose to spend my gains from market activity (aka voluntary trade, aka satisfying the wants/needs of my fellow man) is my business, regardless if you feel it is appropriate or not, it is acquired honestly, legally and morally.
Why you would stereotype all capitalists big and small with claims about power fetishes and opulence are beyond me. I find it terribly disappointing.
I can understand a leftist Humanities professor saying things like this about capitalism, they are institutional socialists (which is why we hide them away from the people who actually make things and produce value), we don't expect them to understand economics. Sort of like the old chap who gave you the nonsense about the Golden Rule, inferring that capitalism and profit are synonymous with violence and coercion when we know full well that statism and socialism kill millions more people than free trade.
saying that capitalists are out to get the most wealth and that it is irrelevant that the wealth is 'consumable or not' is about as absurd as any statement could be. wealth that can not be consumed hardly meets the standard of wealth. if it was true they would have spent their lives through telescopes buying up 'gold planets' in the fartherst reaches of the galaxy and died happy knowing that their miserable lives living in mudhuts with their starving children was worth it because they had found and claimed considerably more space-gold that was inconsumable than most of the other 6 billion on the planet.
I understand that you wish to save time, but could you expand upon this. As essentially I see as doing the following: person A makes claim X, claim X is similar to group C, group C is wrong, therefore claim X is wrong. Is this a correct interpretation or am I missing something? Furthermore can someone still make a similar claim, which resembles a particular political group and yet not be politically motivated, or politically apathetic and therefore not ‘tainted’?
"You name two oligarchs as representing capitalists? People who have likely collaborated with the state, made and bought politicians to gain regulatory monopoly and advantage, and in any moral society would have been imprisoned for fraud and coercion? And do you really expect me to believe that out of a potential 6 billion capitalists on this planet, two make the rule?"
As I understand it, we can distinguish between Oligarchs and Capitalists. Whilst both may be motivated to satisfy future needs and wants. The former do so outside the confines of ‘voluntary’ exchange and therefore cannot be capitalists as their behaviour is outside your definition of what the capitalist system is? I may have misinterpreted you, but this is what I understood. A question I have from is, is given your definition of capitalists (agents who produce, under consumer, save, reinvest etc within a property rights system), is it not possible to further distinguish the degrees to which they are motivated to produce, save, reinvest etc.? If this is true, then I fail to understand how this disproves Keen. As essentially we have a capitalist who places a higher emphasis on saving and reinvesting, with the ultimate aims of further savings/accumulation (as the M-C-M+ circuit suggests).
----
Regarding capitalists as having the ultimate goal of satisfying their future needs and wants, don’t you find this definition as being so general that it is essentially useless. It is similar to saying agents are motivated by self interest or to maximise utility. It doesn’t add anything new. An economic joke I’ve heard is “why did the chicken cross the road? To maximise its utility, Why didn’t the chicken cross the road? To maximise its utility”. Utility maximisation doesn’t add anything new, and by extension neither does suggesting that agents ultimate goal is to satisfy needs and wants.
On needs and wants. I am unfamiliar with Praxeology, so perhaps you can clear up the following: Are preferences (needs) required for an action to occur? Are a number of means consciously selected for, or does a large part of action fall into the ‘habit’ framework. In which agents do not consciously select amongst competing means, but largely rely on previous learnt behaviour.
This might also provide me with greater insight as to how market activity can be characterised by ‘voluntary action’. I do not wish to invoke the old determinism, vs free will vs Compatibilism debate but I am sceptical of ‘voluntary trade’. I am largely within the compatibilist camp or more specifically I am seduced by methodological holism/collectivism and therefore see such claims of ‘voluntary action’ as being baseless as, there are to certain extents causes and effects but also degrees of free will, which would suggest that something ‘voluntary’ can only be held if we ignore deterministic influences on our actions.
"I can understand a leftist Humanities professor saying things like this about capitalism, they are institutional socialists (which is why we hide them away from the people who actually make things and produce value), we don't expect them to understand economics. Sort of like the old chap who gave you the nonsense about the Golden Rule, inferring that capitalism and profit are synonymous with violence and coercion when we know full well that statism and socialism kill millions more people than free trade"
I would love some further explanation on the claim that socialism is statism and secondly that they have killed millions more than free trade. I have assumed here that by free trade you mean, the free market, but I was under the impression that we haven’t had a free market?
One last point, I hope that we can partake in a civil discussion. My posting is a genuine attempt to further my understanding of a perspective that I am unfamiliar with.
Hi mash, you have lots of questions, and they dont seem to fit the thread which has a specific purpose..., why dont you post your questions one at a time in order of urgency in the newbie forum. You are more likely to get positive responses.
Mr. Keen,
You forward several points which require careful investigation and analysis to address. I will do my best to respond to your post, however this will take time. For now, here's my reply to your specific characterization of Joseph Schumpeter as being an Austrian school economist.
SteveKeen:...I think you can best see that from your own literature by taking a look at Schumpeter's Theory of Economic Development (yes, I know Schumpeter is an Austrian that most Austrians prefer to disown, but his argument stems from considering what happens to Neoclassical theory once one allows for entrepreneurial profit in a distinctly if not explicitly M--C--M+ framework). In my opinion, it transforms Austrian thought completely--and makes Schumpeter the ultimate Austrian.
I myself hold but a passing familiarity with the work of Mr. Schumpeter. Thus, here I must rely upon and refer you to the work of Murray Rothbard (i.e. Mr. Rothbard being one of the intellectual pillars of Austrian economics, and himself steeped in economic intellectual history). In short, Mr. Rothbard argues that Mr. Schumpeter was decidedly NOT an Austrian economist:
"Joseph Schumpeter's valuable and monumental History of Economic Analysis (New York: Oxford University Press, 1954), has sometimes been referred to as 'Austrian'. But while Schumpeter was raised in Austria and studied under the great Austrian Bohm-Bawerk, he himself was a dedicated Walrasian..."
(Rothbard, Classical Economics: An Austrian Perspective on the History of Economic Thought, Volume II, p. xiii)
And
"Most mainstream economic theorists are content to spend their time elaborating on the general equilibrium state, and simply to assume that this state is an accurate presentation of real world activity. But some economists have not been content with contemplating general equilibrium; they have been eager to apply this theory to the real world of dynamic change. For change clearly exists, and for some Walrasians it has not sufficed to simply translate general equilibrium analysis to the real world and to let the chips fall where they may.
As someone who has proclaimed that Leon Walras was the greatest economist who ever lived, Joseph A. Schumpeter (1883-1950) faced this very problem. As a Walrasian, Schumpeter believed that general equilibrium is an overriding reality; and yet, since change, entrepreneurship, profits, and losses clearly exist in the real world, Schumpeter set himself the problem of integrating a theoretical explanation of such change into the Walrasian system. It was a formidable problem indeed, since Schumpeter, unlike the Austrians, could not dismiss general equilibrium as a long-run tendency that is never reached in the real world. For Schumpeter, general equilibrium had to be the overriding reality: the realistic starting point as well as the end point of his attempt to explain economic change."
(Rothbard, "Breaking Out of the Walrasian Box: The Cases of Schumpeter and Hansen", Review of Austrian Economics, Vol.1 Num.1, pp. 97-98)
Thanks Astroglide.
I have a reasonable familiarity with both Walras and Schumpeter, and unfortunately I find Rothbard's portrayal of Schumpeter's relationship to Walras to be specious.
It is true that Schumpeter did regard Walras as the greatest economist--and this partly reflected Schumpeter's inferiority complex towards those who appeared to be able to reason mathematically (I say appeared to be able to do so because Walras wasn't actually able to solve the mathematical problems he set himself).
But what Schumpeter did in his Theory of Economic Development was to take Walras's general equilibrium as a starting point, and then show that as soon as one considered the process of economic evolution, every conclusion in Walras was wrong.
This included Walras's Law by the way, which is simply a restatement of Say's Law.
Therefore Schumpeter didn't "apply this theory [general equilibrium] to the real world of dynamic change", but instead showed that once one considered dynamic change, everything in the static framework of general equilibrium was overturned. This is why Schumpeter is seen as the father of evolutionary economics today, which is one of the main challengers to the neoclassical hegemony that still dominates the discipline.
If you'd like an overview of Schumpeter's work, you could check out my lectures in Managerial Economics, which are accessible from here.
mash:I would love some further explanation on the claim that socialism is statism and secondly that they have killed millions more than free trade. I have assumed here that by free trade you mean, the free market, but I was under the impression that we haven’t had a free market?
Mash, definitely copy/paste this to a new thread and I would be happy to discuss it further.
If you want me to split this post off, I would be happy to do so. Just reply to this post.
Libertystudent,
Thank you for the offer, but I will start an expanded thread on the matter and clear up the point I was trying to make. Although this probably won't be for a while, as I am more interested in understanding the other points I raised (which I'll also make threads for).
NirgrahamUk,
Although I think the questions raised are related to the topic, I'll start new a new thread as you suggest. Thank you.
SteveKeen:But what Schumpeter did in his Theory of Economic Development was to take Walras's general equilibrium as a starting point, and then show that as soon as one considered the process of economic evolution, every conclusion in Walras was wrong...Therefore Schumpeter didn't "apply this theory [general equilibrium] to the real world of dynamic change", but instead showed that once one considered dynamic change, everything in the static framework of general equilibrium was overturned.
Thanks.
This is interesting, and stands in direct opposition to Rothbard's view on Schumpeter from above - namely, that
"...Schumpeter set himself the problem of integrating a theoretical explanation of such change into the Walrasian system."
I will read what you say on Schumpeter from the link you provide above, and also do some additional investigation of Austrian opinions on Schumpeter.
You really need explanation on this? What is your knowledge of history like? Check out the Black Book of Communism (or look for the site "death by government" or whatever it's called.) The only way anti-capitalists can try to match the toll is to include colonialism as a form of capitalism, and use the number of natives killed by disease in the case of Spanish colonists to somehow (magically) show capitalism killed millions. Besides having nothing to do with free market capitalism as opposed to imperialist states, the tally still doesn't come close. The fact that genuine free markets have been far and few between and have not been characterised by such brutality is an argument in their favour, not against...
Jon Irenicus,
What I meant was I was under the impression that a lot of people on this forum had the view that we haven't had a free market. it then follows that statist and socialist systems would obviously have to have had more killed more people.
---
I would really be interested to read a reply by Liberty Student regarding his definition of a capitalist. He stated that capitalists are concerned with future needs and wants and then stated that a capitalist: produce, under consume, save (accumulate capital), to reinvest in more production or productive gains, to produce, under consume and save again.All within a market system with property rights.
If we accept this as our definition can we then not further distinguish between say a capitalist that produces and consumes to the extent that they have small savings (if anything) and a capitalist which produces, saves, and reinvests, with the ultimate purpose of accumulating wealth? If these two distinctions are acceptable then it seems like the two circuits proposed by Marx and Keen are valid.
'capitalist which produces, saves, and reinvests, with the ultimate purpose of accumulating wealth'
does the wealth have purchasing power?, and is that why they want more of it?. or do they just like it because mommy said they need lots of it to be good, ,and if mommy had said they should collect sand they would have lots of those instead?
Normal 0 false false false EN-US X-NONE X-NONE MicrosoftInternetExplorer4
does the wealth have purchasing power?, and is that why they want more of it?. or do they just like it because mommy said they need lots of it to be good, ,and if mommy had said they should collect stamps they would have lots of those instead?
You are asking me why someone wishes to accumulate wealth? How am I meant to know what their motivation is, there are a range of factors and reasons. I do not need to say why it occurs, other than that it does occur. Ultimately though it is a subjective preference, so at best all I can do is offer some reasons or factors which would influence a person to accumulate wealth.
I think it’s important to note that humans are not the rational creatures as suggested in rationalist theories of human action. I do not have the knowledge to comment on praxeology other than from what I understand ‘free will’ is derived from the action axiom. As I stated previously I do not accept free will and I do not accept determinism but compatibilism. I also said I have been seduced by methodological holism/collectivism, although I more than likely hold a position close to the middle of methodological holism and methodological individualism.
To begin, I’m quite proud you’ve mentioned to identify one factor. Well done. So we have Institutional factors. Which is of course Mommy but don’t forget Daddy, of course there are other family members to, who is to say that Poppy or Nanna aren’t more influential?... Individuals are born into a social structure which influences and to an extent creates the identity of the individual. It then follows that, that individual action and motivations will also be influenced by social structures. I should note here that social structures are also created by and influenced by individuals. Both possess powers and capabilities that cannot be reduced to one or the other.
An uncertain future. I’ll quote Keynes on this. Regardless of your opinion of him, I believe he identifies one of the motivations behind the accumulation of wealth:
Money, it is well known, serves two purposes. By acting as a money of account it facilitates exchange without its being necessary that it should ever itself come into the picture as a substantive object. In this respect it is a convenience which is devoid of significant or real influence. In the second place, it is a store of wealth. So we are told without a smile on the face. But in the world of the classical economy, what an insane use to put it! For it is a recognised characteristic of money as a store of wealth that it is barren, whereas practically every other form of storing wealth yields some interest or profit. Why should anyone outside a lunatic asylum wish to use money as a store of wealth?
Because, partly on reasonable and partly on instinctive grounds, our desire to hold money as a store of wealth is a barometer of the degree of our distrust of our own calculations and conventions concerning the future. Even tho this feeling about money is itself conventional or instinctive, it operates, so to speak, at a deeper level of our motivation. It takes charge at the moments when the higher, more precarious conventions have weakened. The possession of actual money lulls our disquietude, and the premium which we require to make us part with money is the measure of the degree of our disquietude.
- Keynes, 1937, The General Theory, The quarterly Journal of Economics. pp 215 – 216
This quote further highlights why money is also a store of wealth. Which is incompatible with Say’s Law, which only considers money being a medium of exchange.
Adam Smith suggests that individuals are motivated by recognition (Theory of Moral Sentiment). The recognition that the wealth brings may also be a factor. This can be extended further and apply to the desire to climb the social ladder and the power and opportunities it brings.
Other reasons could be that they are getting such a huge inflow of money that they do not know what to do with it.
I’ve tried to make a list of various motivations why. Obviously there are more. One thing I fail to understand is for a school which stresses subjectivity and the unknowingness of why man acts, why then would you suggest that I would have the answer as to why someone would accumulate wealth? I think the question should be, is there a group of people within society whom desire to draw more out of the system then they put in. Do they desire to produce and invest with the desire to accumulate wealth; expand the gap between their supply and demand. If there is then the circuit (M- - C - - M+) holds and Say’s law is rejected.
One other point. I just searched 'accumulate wealth' and literally the first page was filled with various methods on how to accumulate wealth. Is this just an aberration or is does this represent a desire by people to accumulate wealth?
Btw, maybe my google-fu is not up to scratch tonight, but I couldn't find any relevant results for 'mommy' and 'accumulating wealth'.
p.s take that as a light hearted joke into what no doubt has been a very serious discussion.
firstly, i am compatabilist also. compatabilism finds free will and determinism compatable. so saying you find them incompatible makes you an incompatabilist.
methodological holism is ridiculous, meth ind, is all you need.
the point about money is its wealth storing ability is what makes it worthy as a medium of exchange, read up mises regression theorem.
you need not know more about someones motivation to accumulate wealth other than that it is wealth they are accumulating : i.e they are building a store of value, of purchasing power, of real demand, consumptive potential etc etc. this is wholly consistent with Say's law.
Upon further investigation, it appears that Mr. Schumpeter clearly and unequivocably was NOT an Austrian economist. Failing a direct analysis of Schumpeter's work itself, again here I must rely upon and refer you to the work of (yet another Austrian theorist and historian) Jorg Guido Hulsmann. I apologize for this appeal to authority, but my abounding ignorance of Schumpeter requires it. Suffice it to say that I am far from alone in holding the work of Mr. Hulsmann in very high regard. I thus consider the following excerpts from his work Mises: The Last Knight of Liberalism to be sufficient evidence contra Schumpeter:
Two years younger than Mises, Joseph Alois Schumpeter immediately rose to international fame when, barely twenty-five years old, he published a 600-page treatise on economic methodology with the title Wesen und Hauptinhalt der theoretischen Nationalökonomie (The Nature and Essence of Theoretical Economics). p. 162
For Schumpeter, the only basis for scientific propositions was observation of the exterior world. And the only suitable method of economic enquiry was to follow the approach that had proven successful in the natural sciences. In short, he was a positivist who believed that the only method that could yield “facts” was observation of the exterior world. p. 166
He advocated the same views that Milton Friedman presented more than forty years later in his famous essay on economic methodology. But while Friedman’s presentation was sketchy and detached from the presentation of the actual doctrine, Schumpeter’s Nature and Essence made a 600-page case for positivism in economics. p. 167
In short, Mr. Schumpeter's methodological positivism stands in direct opposition to praxeology, the methodological fount of all Austrian economics, properly defined.* Austrian economists have always eschewed, indeed heavily criticized, methodological positivism. Thus, it is impossible to correctly conceive of Mr. Schumpeter as being an Austrian economist. (Regardless, moreover, of whether or not Mr. Schumpeter can be properly characterized as a Walrasian theorist.)
*On methodological distinctions within Austrian economics, and the definition of what properly constitutes Austrian economics, see Murray Rothbard's “The Present State of Austrian Economics”, 1992.
To enforce their harebrained schemes, yes.
In short, Mr. Schumpeter's methodological positivism stands in direct opposition to praxeology, the methodological fount of all Austrian economics, properly defined.* In short, it is impossible to correctly conceive of Mr. Schumpeter as being an Austrian economist.
He shares positions with Austrian economists but I think his views on business cycles and his methodological precepts exclude him from belonging to the school. He's more of a fellow-traveller. Is this really important for a discussion of Say's Law though?
Jon Irenicus:Is this really important for a discussion of Say's Law though?
Mr. Keen believes so. Do you have a point here?
Yeah. I want to know how whether Schumpeter is or isn't an Austrian relates to the validity of Say's law. That's the "point" of what I said.
mash:I would really be interested to read a reply by Liberty Student regarding his definition of a capitalist.
A capitalist is someone who engages in capitalism, which is a value free activity as far as I am concerned.
I wrote the rest of my post, somewhat irritated that Mr. Keen included my humour and or social life as part of the discussion, while avoiding a clear answer for his sloppy use of the term capitalist. It may or may not be 100% accurate, I'm not going to go back and read it.
Mr. Keen is certainly entitled to his thoughts and opinions on wealth, but I am somewhat taken aback that an "Associate Professor of Economics & Finance" would make the sort of offhand mischaracterizations of capitalists and capitalism in the manner of a sensationalist like Naomi Klein, and not a trained economist.
The issue with your conclusion, is that you presume to know what wealth is. It could be an abundance of free time. It could be freezers loaded with food. It could be a fleet of classic cars. It could be adopting 100 street urchins and sending them to school.
Mr. Keen took it one step further, and said
The primary motivation of capitalists is the accumulation of wealth (and the power that comes with it), not consumption--though of course an opulent level of consumption is a nice side-effect of accumulation.
We'll forget the bit about opulence for a minute because it's Mr. Keen's value judgment, not part of an objective definition. Mr. Keen is claiming that capitalists are not just people engaged in capitalism, but they are doing so for the accumulation of wealth and power. Since praxeologically speaking, everyone is trying to improve his circumstances, ie. increase wealth, then we're left with a definition of someone who seeks power, presumably over others. To tighten up this definition, when prompted to name two such capitalists, Mr. Keen names the uber wealthy and politically fascist.
So this leads me to a question.
If a capitalist is someone who seeks power (presumably based on the examples, political power, power over the property of others) then what is someone who uses private property ownership to engage in exchange for the purpose of improving his personal satisfaction with no political aspirations whatsoever? That is to say, someone who engages in peaceful, moral, personal market exchange, coupled with production exceeding consumption, leading to capital accumulation, reinvested for higher productivity.
What is an efficient political atheist market actor by the definitions of Mr. Keen?
Mr. Keen believes so. This is clear in his argument above.
Is it not?
ha ha, priceless.
how could it be?
Not really. It seems like a side discussion. That is why I asked how it relates.