Allen Taylor

I must admit, you did a more thorough job than I did explaining what monetary policy actually can do. I have one nit-picky detail that I think you probably just chose to omit. In Friedman’s discussion of how monetary policy cannot peg an unemployment rate, you say that aggregate supply/demand analysis indicates that there should be a rise in real wages as a result of an increase in prices. I’m not entirely sure this is the case, as an increase in prices would decrease real wages, but nominal wages would eventually adjust so real wages would be more or less at the same place they were before the Fed decided to play with unemployment. Perhaps I’m overcomplicating it, but that’s how I understood the process.

One of the things I read previously (Phillips Curve, I think?) suggested that firms actually do assume that nominal changes in price are real for a period of time, and then cut back on their spending once they realize that real prices haven’t changed at all. You do a good job of ruining the beautiful simplicity of that statement for me by slathering it with the messy details of reality. Indeed, it would be careless for a firm to abandon a long term investment upon realizing that they misread the price level. Instead of these markets continuing to expand despite the stagnation of real prices, perhaps they operate on a lag and tend to invest when nominal prices increase for a period of time (or maybe they figured out how cycles work). Instead of cutting back on spending as the Phillips Curve statement suggested, perhaps they accumulate a considerable debt during the downward slope of the business cycle which they then have to account for when conditions start to improve later. Regardless, I think you’re on to something!

Thanks also for the recommendations on books to learn about monetary policy! I do have trouble with this one, and ANY additional things I can read would be excellent. I’m still waiting for the day when I actually get through a monetarist theory book and realize that business cycles are caused by unicorns or some nonsense like that. That absurd belief alone is enough reason to never finish a book.

Well done, sir!
Sierra

I suppose I should first say that this summary has one uncited reference, and that is the short paper I wrote on Marx in philosophy last year. It concerned the argument about which was a better or “more correct” notion of value - utility or imbued labor. Much of my discussion concerning the philosophical foundations of economics are based on that, and not on the article, which avoided - I think - the less economic and more philosophical question of whether or not neoclassical economics gets value “right.”

So with respect to 1), you’re right, of course. Hume escaped nothing, but seemed rather only to recognize the inherent contradictions of the thought-currents in which he was caught up. However, I’m disinclined to think that we’ve moved beyond pre-Kantian philosophy when we consider how scienctific knowledge is obtained. No scientist, performing (say) titrations on an unknown compound, is interested in the question of the underlying substance of that compound, only in how said compound exhibits characteristics of known elements and molecules (or, if they fail to exhibit those characteristics, in finding a way to fit the results into the existing superstructure of scientific thought, i.e. by identifying the new element or molecule under observation). In any event, the only aspects of “hard” science that might require a post-Kantian perspective is quantum mechanics or perhaps relativity. Subject-object dichotomies are just what the doctor ordered, otherwise. I think by and large, economists are devoted to this notion, as well. We even go the extra mile by using model humans in the way that chemists use the model atom, the only difference being that we might include a stochastic error term. I don’t think you need Kant to do that.

2) See I always understood Marx, leaving everything else aside for a moment, as saying that our purposeful productive activities were what made us human (as opposed to, say, animals), and that what we produced was not merely the fruit of our labor, but remained part and parcel of us; Marx may have struggled with essentialism, but I don’t see that he ever moved past it. Anyway, when we sell our labor to the capitalists, we are alienated from ourselves, and - as our products are bought and sold and mediate our relationships - alienated from one another. I think Marx’s version of the labor theory of value was such that what we produced was almost invaluable; an object’s market ‘worth’ was irrelevant. But that does nothing to advance a theory of markets under capitalism; Marx was a lot of things, but a good economist (defined in modern terms) he was not. I don’t think LTV is “wrong,” but Marx, by taking it to its utter extreme, seems to have hammered the final nail into its coffin as a theory of value. Again, I think its really hard to argue that anyone, no matter how they use LTV, is not implying some sort of essentialism.

In conclusion, what I find most fascinating from the philosophical perspective is that despite the fact that neoclassical economics clings to essentialist notions of humanity, it is still able to shine a bright light on the function of markets. Like it or not, you and I understand the function of markets primarily from a neoclassical perspective and usually find that those theories work well to one extent or another. I’m inclined to think that since it is primarily upon and within the neoclassical perspective that most of our markets are built, policed, and innovated, that those markets and the actions of participants will necessarily reflect - or at least be construed to reflect - those principles. If such is true, then it certainly does not follow that neoclassicism is the “correct” perspective; rather, it would be evidence that neoclassical economists hold the authority to advise those with the power to make markets in society, and through that mechanism the perspective is actualized and reproduced. I believe this would be the analysis of the cutting edge in the other social sciences, inspired by the work of Foucault (and by extension Nietzsche) among others. To simply provoke discussion, I’ll go so far as to suggest that the modern mainstream economist is a member of an ad hoc priestly class in our society.

1) I agree with you so much Isaac, especially about economics being done from a limited, essentialist view point. I’m just going to run through some philosophy stuff, in part because I’m bored. Marx does lodge an attack on capitalism beginning from the assumptions of the labor theory of value, but imagine this model instead for a second. With all of his distrust of “knowledge,” “essence,” and “theology,” in terms of economics, I feel that Hume’s contribution was in line with many of his predecessors—namely Descartes. Not in the details of course (i.e. the cogito), but rather in their shared approaches to the question of human relatedness to objects, that is, as subjects. The world is what it is as a bunch of objects, and here we are as subjects confronted with “world”; thought and world remain like two separate and mutually exclusive categories of beings. I see what you mean though: Hume crushed many of the Cartesian arguments for “unity,” and made the way for Kant and Hegel. Maybe however, Hume was too early and Kant would be a better candidate.

2) Marxian thought proceeded Hume, and embodied the struggle against subject/object, “substantial/accidental” dualism that Hume implicitly condones; I am not saying that Hume agrees with Aristotle or substances or essences, rather, I am saying that because Hume precedes Kant and Nietzsche and all that Copernican stuff, he is actually arguing from within the framework that he is critiquing. He fails to recognize this weakness, however, because he only looks at one piece at a time, like “substances,” or “time.” It was Hegel and Marx that broke from this tradition of subject/object dualism’s, because they define these terms as co-dependent. Following Hegel, Marx proposes an alternative conception of history, in which material forces are the primary movers of self-awareness. Individuals will only understand themselves as they can relate to others; insofar as the human is essentially productive, then only from within the visceral production process can we expect to define our relationships. Under Capitalism however, the production process has been alienated from the producer and therefore the producer from himself, in so far as production is self-actualizing for the worker.

So man has no essence besides being-social. S/he is defined by relationships, but the exchange and production of commodities define relationships. If man defines value, then value is also socially defined. Where does that leave us? In capitalism, value can only manifest itself in the social relations of commodity to commodity, where relations of exchange appear to supercede the original social relations between men, and this is a bad thing. In this situation we have only “material relations between persons, and social relationships between materials.” I don’t think Marx means to imbue a commodity with an essence, rather, I think he wants to show the impact of commodities on us, who also do not have essences.

3) Anyway, I really agree with what you said about neo-classical approach. I think your right in saying that “marginal” economic approach has its foundations in Humean thought, and that neo-classical thought cannot reconcile Marxism; and I think you might agree with me that Cartesian tradition is essentialist, and the Marxian tradition that has been ignored. You really nailed this point, when you see that economics is a science, and also must carry with it certain assumptions about man being a “rational” animal, as a subject confronted with objects, as a thing that defines his/her surroundings but will not be defined by those surroundings. How Cartesian! Anyway, really cool discussion of the ideas.