Why, Thank You Mike Begg: Yes, the Argument Back in 2009 That Fiscal Expansion Would Lead to Large Rises in Interest Rates and Be Offset by Crowding Out

Mike Begg:

Zombie Marx: [O]n the point at issue, [DeLong] was right – it is a question of interest rates, not of the number of bonds that can be sold. When Harvey went on to clarify his argument, it was only with some casual empiricism of his own. He noted that he was hardly the only one to be making the argument that East Asian central banks could stop collecting US Treasuries, so that “the track of long-term treasury interest rates may go the way of the housing market data in just a couple of years (if not months).” This was an argument you could read in mainstream business pages; there was nothing particularly Marxist about it. Now that we are more than a couple of years down the track, DeLong still looks right: the yields on long-term Treasury bonds are, as I write in July 2011, about the same as they were in February 2009, when the exchange took place. The limits to stimulus have been political, not financial.

Many Marxists see mainstream economics as a degenerate mirror-image of what they think Capital provides for them: a systematic model of capitalism built up from first principles…. So for Harvey the ultimate charge he can throw is that [non-Marxist economics] is “based on a tautology”: a logical flaw was discovered in the 1960s that should have spelled its end; everything since is “casual empiricism.”… Criticism of the incoherence or unrealistic assumptions of neoclassical economics can be easily deflected – most economists will freely admit they are simply heuristics and would be quite happy to be considered pragmatic “casual empiricists.”…

There are generations of economists who would call themselves Marxists, or admit Marx as a major influence, who have taken a similar approach. They have engaged with other strands of economic thought and folded them into their worldview, have worried little about dropping from their analyses those aspects of Marx’s argument they believed to be wrong or unhelpful, and have felt no need to pepper their writing with appeals to authority in the form of biblical quotations.

But in each generation, there are others who have defended an “orthodox” Marxian economics as a separate and superior paradigm, which can only be contaminated by absorbing ideas from elsewhere. The pugnacious Andrew Kliman, for example, opens his Reclaiming Marx’s Capital with the line “The economists have changed Marx, in various ways; the point is to interpret him – correctly.” Accordingly, he unabashedly spends a chapter on hermeneutic method, and the book is devoted to proving the internal logical consistency of a method for transforming the values of Volume I into the production prices of Volume III. This, at least, is more sophisticated than what we might call Frankenstein Marx – the stitching together of an argument from authority by stringing together famous quotations torn out of context. Criticizing Frankenstein Marxism is like campaigning for motherhood and apple pie – no one will disagree.

What I call Zombie Marx is different – the reanimation of a corpse which still holds organically together in some way. This is the reconstruction of Marxist economics as a coherent body of thought, not a collection of quotations. That this work is dogmatic is not my complaint…. Rather, it is scholasticism that is the problem – the need to ground everything in a 140-year-old text…. Reanimating Marx can be very fruitful at times…. However, Limits [to Capital] is a book written at the high tide of Marxian intellectual confidence, in the wake of a flowering of radical political economy. It could admit frankly in its first chapter that the “critics of value theory have mounted a quite successful campaign against traditional interpretations” of the “labor theory of value”, and the rest of the book was a testament to how little that mattered.

Thirty years on, that intellectual confidence has receded…. Modern neoclassical economics is the overwhelmingly dominant paradigm in a mature, prestigious academic discipline. Students are introduced… proceeding through textbooks, with exercises at the end of each chapter, with each section building on the ones before, and with each year’s textbooks adding complications and refinements…. Marxian economics is united mainly through shared adherence to a political tradition – a very fractious political tradition. It is academically marginal…. Instead, its history shows a succession of writers, occasionally coalescing for a time into schools, who have developed in one direction or another, only to be ignored or rejected by those who came after. There is a tendency for productive debates, which drive analysis forward, to peter out and be forgotten as the tradition repeatedly circles back to its founding text, its only common ground. Interpretation of a text has trumped interpretation of the world.

But there is a problem…. Capital is a work of the 1860s, through and through…. Holding a fundamentalist reading of Capital against modern economics often involves anachronistically defending the concerns and framing of mid-Victorian political economy rather than any particularly radical criticism of economics past or present….

By “supply and demand” most classicals referred simply to quantities supplied or demanded, and in this context it makes perfect sense for Marx to complain that “supply and demand” settled nothing…. But the marginalists’ apparatus of supply and demand schedules was a framework for answering this question. Marx could not be expected to have engaged with this literature in the 1860s, for the simple reason that it did not appear widely until the 1870s….

Another example… is Marx’s criticism of the quantity theory of money, which held that the quantity of money in circulation determined the price level. Marx reversed the direction…. Much of his criticism of the classical quantity theory remains valid. But as a positive theory of the price level, it is bound to the historical conditions of the gold standard, in which convertibility anchored the price level in the long run….

A side effect is that we learn to think for ourselves again about how capitalism works, to be able to answer the kinds of question DeLong raised against Harvey, no longer lost without the appropriate quotation. We come to meet the challenge Joan Robinson posed to a Marxist friend in her 1953 “Open Letter from a Keynesian to a Marxist”:

What I mean is that I have Marx in my bones and you have him in your mouth… Again, suppose we each want to recall some tricky point in Capital, for instance the schema at the end of Volume II. What do you do? You take down the volume and look it up. What do I do? I take the back of an old envelope and work it out…

As undead Marxes go, I would rather have the kind of Marx in Joan Robinson’s bones than either a Frankenstein Marx pieced together from scraps of quotations, or a Zombie Marx, embalmed in the 1860s and reanimated whole. That is a spirit that might haunt again.