Sunday, February 10, 2013

Marx, Barter and Say's Law.

Prof. David Ruccio (University of Notre Dame) on Marx, Say's Law and barter:
"But anyone who has studied even a bit of the history of economic thought knows that Marx criticized Say’s Law long before Keynes wrote the General Theory. It’s right there, in volume 1 of Capital—and, even before that, in Part 2 of Theories of Surplus-Value. In fact, Marx chides David Ricardo for relying on the 'childish babble of a Say', which he considered not 'worthy of Ricardo'.
"Marx develops his critique of Say’s Law almost at the very beginning, even before introducing capitalist production per se. All he needs is commodity production and the “metamorphosis” of the commodity into money. It’s precisely the introduction of money that, in Marx’s view, both expands and destabilizes exchange, because it is now possible to sell without purchasing (and thus to hold onto the money until the time is right to turn around and make another purchase).
"Therefore, the only world in which Say’s Law might hold is non monetary or barter exchange". (See here. My emphasis)
Prof. Bill Mitchell, on Marx, and Say's Law:
"However, the essential elements underpinning the critique of Say’s Law and the modern understanding of involuntary unemployment in a monetary capitalist economy can be found in the work of Karl Marx, particularly in his – Theories of Surplus Value.
Marx, in particular, provided a strong critique of Classical economist David Ricardo, who in his major work – On the Principles of Political Economy and Taxation – had championed the ideas of J.B Say, which denied the possibility of generalised over-production in a monetary economy.
"In Theories of Surplus Value, Marx launched an attack on Say’s Law, which is the proposition that there could be no general overproduction in a capitalist economy. Marx was intent on showing that a money-using, capitalist economy was prone to economic crises (which we now call recessions) and that unemployment was a inherent tendency of such a system.
"Marx was thus opposed to the Classical denial that persistent unemployment could occur. He noted that in denying the possibility of a general glut, Ricardo assumed that consumers had unlimited needs for commodities and any particular saturation (having too much of one good or service) would be quickly overcome by increased demands for other commodities.
"Marx started from the proposition that capitalists aim to accumulate ever increasing wealth by extracting surplus value, which is production value in excess of what the workers receive in the form of wage payments. The generation of profit thus requires two actions: (a) surplus value creation as the object of production which aims to reduce the payments to labour (limit their consuming power); and (b) Sale of commodities in market which is limited by the consuming power of society."
(See here. My emphasis)

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