A Brief Overview of Some Aspects of Marx

In starting heteconomist, my central purpose was simply to help, along with many others, to disseminate an understanding of the basics of Modern Monetary Theory (MMT) and its implications for current policy debates and the social potentialities of sovereign currency systems. This objective struck me as paramount in view of the pressing economic and political circumstances in which we live. Although MMT in itself is reformist in its policy prescriptions, some aspects of the understanding it makes possible seem significant whether the aim is social democratic reform or socialist revolution, defense of capitalism or radical opposition to it. One of my secondary purposes is to explore some of the connections between MMT and other heterodox approaches to economics. Of particular interest to me are connections, if any, between MMT and the so-called ‘temporal single-system interpretation’ (TSSI) of Marx. So far, although I have touched on Marx in numerous posts (for example, here, here, here, here and here), I have held off exploring possible connections with MMT other than in a cursory fashion. This post does not get to these connections either, but is a first, preliminary step toward redressing this shortcoming.

The main reason for holding back on a consideration of Marx in relation to MMT has been a concern that such posts would be inaccessible to any readers who do not already have some background in Marx. It seemed important to provide some basic introductory posts on Marx before getting into the topic, which so far I have not done. Since lately it seems that I am running out of things to write about MMT that would not just be repeating myself, the thought occurs that now is as good a time as any to discuss in an elementary way certain aspects of Marx.

The scope of these introductory posts, however, will be quite limited. My intention is to provide just enough background to enable me to begin exploring connections between Marx and MMT in a way that is hopefully accessible to all readers. For a much more comprehensive treatment of Marx as well as a treasure trove of links to other resources, I highly recommend Brendan Cooney’s blog, Kapitalism 101.

In this particular post, my purpose is especially modest. I simply introduce in very broad brush strokes some basic aspects of Marx’s approach that will serve as background to later posts. In a post or two after this one, I will explain, in simple terms, his theory of value. After that, the way will be clear to explore connections between aspects of MMT and Marx (in particular, Marx according to the TSSI). The extent of these connections is not clear to me at this stage, but at least the option will be there to explore the topic if and when the mood strikes.

 
Marx in Relation to the Classical Political Economists

Marx was both influenced by the classical political economists, especially Smith and Ricardo, and a critic of them. (For a brief background on classical political economy, see this post.) Marx compared classical analysis favorably with what he regarded as the approach of the ‘vulgar economists’. The vulgar economists argued that value was determined by ‘supply and demand’ rather than costs of production. For Marx, this was superficial. If supply was temporarily unequal to demand, this could obviously cause the market price to change. But what effect could supply and demand have once they were equal, so that the market price ceased to change? At that point, supply and demand are mute. Marx praised the classical political economists for considering what determines price at the point where supply equals demand, and criticized the vulgar economists for focusing merely on the surface phenomena of supply and demand, which caused price fluctuations but could reveal nothing about the price to which these fluctuating market prices converged. Following Ricardo, Marx developed a theory of value based on labor time, although his version of the theory differed significantly from Ricardo’s. As mentioned already, I will defer an explanation of Marx’s theory of value to a later post.

Marx also approved of the centrality of class in the classical theory as a useful way of characterizing the key antagonisms within the capitalist system. For Marx, conflict between the classes was fundamental both to the dynamism of capitalism, which gave rise to high rates of accumulation and growth, but also to its susceptibility to periodic crises and recessions.

The central class antagonism for Marx was the conflict between capitalists and workers. By his day, the conflict between landlords and capitalists was decreasing in importance. Capitalists had gained the ascendancy and were turning their attention to the battle with the working class. Substantial improvements in productivity had been enabled through mechanization, dramatically expanding the manufacturing sector and reducing the relative importance of agriculture, and hence the class of landlords.

 
The Source of ‘Surplus Value’

Marx criticized the classical economists for not perceiving the source of profit, rent, interest and other income categories going to capitalists, landowners and creditors. For Marx, all these categories were simply different forms of a more general category: ‘surplus value’.

Marx identified the origins of surplus value in the treatment, under capitalism, of ‘labor power’ as a commodity. Labor power is the human capacity to perform labor (or work). Under capitalism, the distinguishing feature of the working class was that its members owned no means of production. For instance, those workers who had been peasants had previously had access to land, which they were permitted to work, partly for their own subsistence and partly for the benefit of the feudal lord. Once their access to land had been denied, they were forced into the cities in search of a livelihood. Since they possessed no means of production, they could do little else than offer to work for a capitalist, who owned the means of production and dictated its use. In this way, workers could sell their labor power as a commodity, in exchange for a wage – the so-called ‘free labor exchange’, which still exists today, of course, for essentially the same reason (i.e. a large class of people exists for which survival requires selling labor power in exchange for a wage or salary).

Marx maintained that a fundamental principle of capitalism, or in fact any exchange system, is the notion of ‘equal exchange’, or exchange of equivalents. For instance, when a consumer buys a commodity from a seller with a $10 note, it is implicit that both seller and buyer regard the commodity as in some sense equivalent to $10. As Marx saw it, his task was to explain how surplus value could arise out of equal exchange. That is, if workers exchange labor power that, in some sense, is equivalent to the wage they receive, how can a surplus remain for the capitalist?

Marx derived his answer from a starting point that was basically shared by the classical political economists before him: namely, the value of any commodity – i.e. any good or service that is produced for the purpose of exchange in a market – is determined by the cost of its reproduction. Marx did not intend to suggest that this notion of ‘value’ is the only possible definition, or even necessarily a good way of assessing the value of something. The argument, rather, was that this is the way things get valued under capitalism, to the extent production is commodity production. That is, the measure of value that matters to capitalists – whose purpose is not first and foremost to create beautiful objects, or extremely useful things, but instead to make profit and expand capital – is the cost of reproduction.

In relation to the origin of surplus value, Marx’s major step was to apply this notion of (capitalist) value to the commodity labor power. If the value of any commodity is its cost of reproduction, then the value of labor power, Marx reasoned, would have to be the cost of reproducing the worker’s labor power. Thus, ‘equal exchange’ would entail workers being paid the wage that is necessary to reproduce themselves (and their dependents), and hence their labor power. So, according to Marx, a culturally determined subsistence wage constitutes the value of labor power. Under capitalism, competition will tend to ensure that this is the amount capitalists have to pay for this commodity.

Having paid the value of labor power, what a capitalist receives in return is a worker’s exertion of labor power for the duration of the working day. If it turns out that a worker’s exertion of labor power over a day results in the production of more output (value) than is necessary to reproduce the worker (and the worker’s dependents), a surplus is left over for the capitalist. Put simply, the source of surplus value, for Marx, derives from the fact that:

Workers produce more than it costs to reproduce themselves

Or expressed differently:

Workers produce more than the value of their own labor power

What Marx stressed was that this result strictly obeys the capitalist principle of ‘equal exchange’. The capitalist pays the ‘value’ of labor power; workers sell their labor power. It is an ‘equal’ exchange. However, it is an exchange that takes place within a particular social system and pattern of property ownership: namely, one that gives the capitalist the (socially sanctioned) right to work employees for longer than is necessary for their own reproduction. Workers ‘freely’ enter such a (contractual) arrangement. They are free, if they prefer, not to work … and not to be reproduced.

 
Some Basic Implications of Marx’s Analysis of Surplus Value

From Marx’s conception of the origin of surplus value – i.e. that the working class can produce more than is required for its own reproduction – numerous antagonisms logically follow:

1. Capitalists will want to reduce real wages as much as they can, which, for Marx, is possible once the subsistence wage has been raised above mere physical subsistence as a result of workers’ collective efforts to win wage increases. A reduction in the culturally determined real wage – i.e. a reduction in the value of labor power – will increase the amount of surplus value, since it will take less of a working day for workers to reproduce their own existence and leave more of the working day devoted to building up the capitalist’s profit, which can then be reinvested to accumulate more capital.

Conflict over the real wage, then, is a central part of Marx’s conception of capitalism. Unless workers deliberately and collectively fight against capitalists’ interests, there will always be a tendency for the real wage to fall towards the strict physical subsistence level. On the other hand, by acting collectively (either industrially through unions or politically through liberal-democratic institutions), workers can hope to achieve substantial improvements in the real wage.

Even holding real wages constant, Marx pointed to various other antagonisms within the system:

2. Capitalists will wish to extend the working day as much as they can. The more workers can be made to work beyond the time needed for their own social reproduction as a class, the more surplus value will accrue to capitalists. The same reasoning concerning the working day applies to the working life, as we are seeing today with attempts to raise the retirement age in some countries.

3. Capitalists will strive to raise labor productivity – e.g. through mechanization, intensification of the labor process (harder and faster work), superior organization of production, etc. These measures reduce the amount of labor time needed to reproduce the working class. At the same time, productivity improvements make it possible for real wages to rise, but only if workers win such increases through collective struggle.

4. ‘Fixed capital’ – e.g. plant, machines, equipment – grows as the result of past surplus value being reinvested by capitalists. These machines appear as the result of past labor (‘dead labor’). That is, ‘dead labor’ appears as the adversary of ‘living labor’ (newly expended labor power). For Marx, fixed capital becomes the adversary of living labor in a double sense: first, machines and other means of production, which are adopted at the discretion of capitalists, not workers, dictate the way in which work is carried out; second, by raising productivity, increased mechanization is a chief means of periodically creating temporary technological unemployment, which weakens workers’ bargaining power in disputes over wages.

Which brings us to …

 
Marx’s View of Unemployment

There is an important dynamic dimension to Marx’s analysis. In relation to unemployment, mechanization acts to slow the rate of growth of labor demand relative to the growth in labor supply. Labor supply tends to rise over time due to immigration or increased labor-force participation. The labor-force participation rate increases, for instance, when wage labor is drawn from previously non-capitalistic spheres of the economy. As a result of the mechanization process, some workers are constantly being expelled from their current employment and left standing ready (as a ‘reserve army’) to step back into the fray as required by capitalists when further expansion calls for more labor.

 
Marx’s Rejection of Say’s Law

Also relevant to unemployment is Marx’s rejection of Say’s Law, which in some respects anticipated the later arguments of Keynes and Kalecki. According to most classical economists (with some exceptions, e.g., Malthus), supply was always supposed to create its own demand. The supplier of a commodity would receive income in exchange for its sale which could then be used to purchase another commodity. For Marx, supply would only tend to create its own demand to the extent that production was for the purposes of consumption. This is the case, for instance, when workers sell their labor power (a commodity) in exchange for a wage income with which they can obtain consumption items. However, under capitalism a significant amount of activity – specifically, capitalist investment activity – is for the purposes of accumulating profit, not for consumption per se.

Marx analyzed this distinction in terms of two circuits. In one circuit, a commodity is sold for money in order to be able to purchase a different commodity of the same monetary value. Marx denoted this circuit C-M-C (meaning Commodity-Money-Commodity). In this circuit, the purpose of production and exchange is consumption, and supply does create its own demand, except to the extent that there are interruptions in the process, due for instance to temporary shortages or mismatches of supply and demand patterns.

However, under capitalism, Marx maintained that much activity follows a different circuit M-C-M’. The aim in this case is to use money to purchase commodities for the purposes of production in order to obtain more money (M’ > M) at the end of the process. This is a depiction of the activity of capitalists, who invest in production in the hope of making a profit in exchange at the end of the process.

For activities involving this latter circuit to succeed, in which a sum of money is turned into a larger sum (adjusting for inflation), a surplus must be produced in production and then realized as a monetary profit through exchange. Since there is no certainty that the capitalist will be able to sell the output at the end of the production process at a price sufficient to realize the surplus in monetary form, the level of investment and production is sensitive to past profitability and current profit expectations.

Marx’s analysis suggests that when profitability is strong, investment demand will also be strong and the probability of a generalized demand deficiency low. In contrast, when profitability fails, due to disappointed expectations, investment levels are likely to collapse resulting in falling production levels and therefore also falling consumption levels. The likely outcome is then a generalized demand deficiency or ‘general glut’.

 
Disproportions or ‘Anarchy of Production’

Another element of Marx’s theory is relevant to his understanding of unemployment: that of disproportions between sectors. At any point in time there may be a mismatch between the goods and services supplied and those demanded. Marx paid particular attention to the balance between consumption-goods production and capital-goods production:

(A) If production of capital goods is too great relative to the production of consumption goods, productive capacity will tend to outstrip actual output.

(B) Conversely, if consumption-goods production and demand outstrips capital-goods production, a limit to the growth of actual output will emerge.

Problem (A) will tend to give rise to unemployment due to excess capacity (now often referred to as ‘Keynesian unemployment’). Problem (B) will tend to cause unemployment due to productive capacity being too small to employ the entire labor force (sometimes called ‘classical unemployment’).

 
Summary of Marx’s Perspective

1. Capitalism is adversarial, exploitative and undemocratic. Workers are, in practical terms, compelled to accept employment conditions that involve working a large part of the day to produce surplus value (exploitative) and have little say in how it is invested (undemocratic).

2. This adversarial nature of capitalism makes it conducive to economic growth and innovation because of the pressure for capitalists to press for productivity improvements, mechanization, etc., that temporarily aid them in their class struggle with workers.

3. Capitalism is prone to recurring unemployment and crises stemming from technical innovation, demand deficiency and disproportions in production and consumption.

19 thoughts on “A Brief Overview of Some Aspects of Marx

  1. excellent short analysis Peter, bravisimo x100, I can’t wait for your later posts on relating marx to MMT.

  2. Peter, this is fantastic, exactly was I was looking for. Lots of material here for me to digest. And I was thinking how I could go about nudging you (because you know how difficult you can be) to provide similar summaries for the other economic schools of thoughts when I came across your link to ‘classical’ economics. In it you say:

    “This post provides a very brief introduction to the approach of the classical political economists. In later posts, I will hopefully give similarly brief overviews of Marx, the neoclassical tradition and Keynesian economics. I say “hopefully” because self-discipline is not always the greatest forte here at heteconomist.”

    So, just about one year later we now have your overview of Marx. As I’ve said before, please don’t ever change.

    PS. Thanks for the link to Kapitalism101. Because that’s just yummy:

    “&#%* you, clown.”

    http://kapitalism101.wordpress.com/2012/01/09/are-corporations-people-is-romney/

  3. Great summary Peter. I have a few questions:

    1. Why did Marx support even the the limited version of Say’s Law applied only to consumption? Firms generally produce consumption products to respond to what they perceive as pre-existing market demand for what they are producing. It seems to me that cases in which the production of additional products actually creates the demand for those products is, while important, relatively rare.

    2. Is the concept of “equal exchange” essential to his story in any way? I’m inclined to thing the later, post-classical account of an asymmetry between the exchanging parties in the values for them of the things that are exchanged provides a better account of why exchanges occur in the first place.

  4. Excellent intro to Marx.

    I’m thinking that perhaps the dynamics of capitalist competition are far more complex than we often realize, given not only the near complete separation of ownership and control but the near complete diversification of that ownership.

    A key question, I think, is at what level does competition take place. No doubt that workers are forced into horrible competition and that individual firms compete for market share and earnings, although in our oligopolistic world, not so much on the basis of price. But when we advance upwards to the level of the “capitalists”, those who basically own society, the idea of competition becomes more problematic. Capitalists own everything and their holdings are completely diversified, in accordance with portfolio theory. At the highest levels, capital doesn’t seem to compete at all, it just owns. Example: Pepsi and Coke compete at the corporate level, but the owners of these corporations are the same diversified group. They really don’t care who wins, they just own the sector. So, in that respect, the capitalists themselves really have no real interest in the wage level or in working conditions. No matter what the wage level, everything just recirculates. It’s a basic Keynesian insight (of course influenced by Marxian thought).

    My take on this is that it just emphasizes even further the class nature of the whole thing. The pure “economic” laws of today’s diversified ownership capitalism don’t, I don’t think, force the wage levels down. Only the political fear of democracy and egalitarianism.

  5. Thanks for the comments, everyone.

    Dan and Jim raise excellent points for further clarification. I’ll address Dan’s questions in this comment, and Jim’s in a following one.

    In terms of Say’s Law, addressed by Dan, output (income) will only create its own demand to the extent that it is used for consumption expenditure. This is a point that comes out similarly in Keynes’ work, in that the marginal propensity to consume is an indication of how much of additional income will go to consumption expenditure. To the extent this occurs, production induces demand.

    Keynes (and National Income Accounting) distinguish the household sector from the business sector, which is not quite the same as “workers” and “capitalists”. For Marx (and the classicals) it was assumed that private saving out of wages, in aggregate, would be zero, because it was argued that real wages would tend toward a culturally determined level of subsistence. That implied that wages, in aggregate, were spent on consumption items. To the extent this did not occur, though, Dan is correct that supply would not have created its own demand.

    A point that comes out strongly in Marx, Kalecki and Keynes, and which is stressed today by Post Keynesians, is that investment and other injections are the independent variables. It is the autonomous decisions of capitalists (and government and foreigners) that determine the level of demand (since consumption is largely induced through a multiplier process, which is implicit in Marx’s analysis and explicit in Keynes, Kalecki and Post Keynesian approaches). So in the simple two-sector closed economy framework without government, it is really the distinction between investment and saving that is critical for understanding why Say’s Law is flawed.

    I’ve seen it argued that the classicals didn’t distinguish clearly between saving and investment, and that in this sense, Ricardo’s adherence to Say’s Law was actually a more logical position than Malthus’s critique of Say’s Law. But once a distinction is made between production for the purposes of consumption and production for the purposes of investment, the potential incompatibility of investment and saving intentions invalidates Say’s Law, as stressed in Keynes-influenced approaches. As with Keynes, Kalecki and the Post Keynesians, it is investment that generates income (and saving) in Marx. Weak investment and profitability can result in a general demand deficiency (glut) in Marx, just as in Keynesian analysis.

    Dan also asks how significant the notion of “equal exchange” is to Marx’s argument. There are a few different aspects to consider. First, unequal exchange would not alter Marx’s conclusions regarding exploitation. His argument, which will be explained in the post(s) on his theory of value, is that even if there is equal exchange, surplus value is the result of surplus labor. It can be produced even without any violation of “bourgeois morality”, in particular, without anyone having to pay less than the “value” of anything.

    Second, Marx attempts to explain the sense in which exchange can be said to be based on “equal exchange”. He argues that it is in the specific sense that commodities will tend to exchange at prices that reflect their costs of reproduction. This does not mean that a consumption item, for example, is subjectively worth the same to two different people. Marx, like the classical economists, distinguished between use value and exchange value. Use value refers to the usefulness or subjective worth of something to an individual or society. Exchange value refers to the value that attaches to the commodity in exchange. The reason Marx (and the classical economists) focused on exchange value is that they considered this to be the relevant consideration in explaining how commodities are valued under capitalism.

    Third, Marx argued that value cannot be gained or lost in exchange. If a buyer pays above value, the buyer’s loss is matched by the seller’s gain, and vice versa. So commodities were conceived as entering into the sphere of exchange with pre-existing values based on labor time (to be explained in a later post). This meant that although individual commodities would not necessarily be bought and sold on the basis of “equal exchange” (in the sense explained by Marx), in aggregate total value of all commodities would reflect their total values entering exchange. So, in this sense, “equal exchange” is not necessary to Marx’s argument. He is just saying that even in the case of “equal exchange”, his argument concerning the basis of surplus value holds.

  6. Jim highlights the concept of competition. For Marx, following the classical economists in this respect, the key condition for competition was free mobility of money capital. Unlike the neoclassical definition of competition, there is no suggestion in this definition that firms are small relative to their industries or that they are price takers with no monopoly power. What matters, from this perspective, is that investment will flow to sectors offering the highest rates of return on productive activity. If this can occur, then sectoral outputs will tend to respond to persistent alterations in sectoral demand levels, and prices will tend to converge to levels reflecting costs of reproduction.

    As Jim’s comment makes clear, there can certainly be barriers to competition, even in Marx’s sense of the term. To the extent that there are restrictions in the mobility of money capital, this will create special advantages for some firms and super-normal profits in the form of economic rents. There can also be other forms of rent that deliver above-normal profits to some corporations or sectors. Marx argued that barriers to capital mobility would tend to be broken down in the long run, but new barriers can arise as old barriers disappear.

  7. Peter,

    Maybe I didn’t clarify my point well enough. My point about competition is that at the highest level, i.e. the level of the owners / capitalists, the whole concept of competition breaks down. The concept of competition must necessarily break down once the notion of ownership does. Ownership today is completely divorced from control but even more importantly, it’s divorced from the company itself. My example of Coke and Pepsi I think is useful. The firms compete as do the workers, but the owners of the firms clearly don’t. They’re the same people – the diversified market portfolio. The owners of the individual firms don’t really care how the firms perform relative to each other since they’re completely diversified. They own the “sector” but it doesn’t even stop there as the sector is but a small part of the much wider diversified market portfolio.

    I think it’s a real important but under-appreciated fact. The owners of the great corporations really don’t care how the individual firms do. There is no competition at the level of ownership. It’s a different world when capitalism is viewed from a high level perspective. Suddenly it’s not about competition or profit, it’s all just circulation and class relations.

    The key, I think, is to view the capitalist class as a unity. When we do, then we realize that profit is nothing other than capitalized cash out (i.e. investment) and nothing more. Everything spent returns to capital and it’s just circulation.

  8. Peter, I think I still don’t understand what Marx’s justification is for maintaining the C-M-C version of Say’s Law. I don’t see why one needs to advance to Keynesian considerations to see that there can be no guarantee simply from the production of a commodity that the commodity will find a market. Commodities generally do find a market because people make decisions on what to produce based on their perceptions of existing human desires. But this is certainly not a case of supply creating demand. Rather it is a case of demand causing the production of the supply which in turn satisfies the demand.

  9. “But this is certainly not a case of supply creating demand. Rather it is a case of demand causing the production of the supply which in turn satisfies the demand.”

    ‘Supply’ probably means income in return for labour. It’s a linearisation of a circular process, and as usual it is impossible to find the actual starting point.

    I’d say labour effort is the commodity in question here – you must work before you get anything.

  10. Dan, adherents to Say’s Law were not claiming that there would be no mismatches between demand and supply for particular commodities. Such mismatches cause temporary disruptions in the process of income inducing consumption (which is circular, as Neil notes). But they were contending that there could never be a general glut (lack of demand, in aggregate, relative to supply). Marx argued that this was incorrect, as of course did Keynes and Kalecki.

    I agree with your observation that it is demand that determines the level of output, and this view is also shared at least implicitly by Marx because, for him, investment drove the production cycle. The multiplier process in which rising income results in rising consumption and saving is also implicit in Marx’s analysis, especially in volume 2 of Capital. See, for example, this paper by Trigg.

  11. Very good post, PeterC

    I think you should be a teacher 🙂

    Some time ago, I prepared some material about labour theory of value. The posts are probably too long, surely boring and perhaps even confusing, but if you feel curious, for your amusement or amazement (yeah, right) you can find them here:

    Land, Rent and Wages (iii)
    http://aussiemagpie.blogspot.com.au/2011/01/land-rent-and-wages-iii.html

    The idea was to compare how profits are generated under capitalism and under simple mercantile exchange (that is the previous post: ii), in an attempt to facilitate the readers’ understanding.

    Dan,

    I believe your comment is quite relevant.

    Let’s review Peter’s reply: when it comes to C-M-C, if I understood Peter rightly, we have equal exchanges. This means that the money-value of the commodity sold by workers (labour power left-side C) is the same as the money-value of the means of subsistence the workers need to purchase (right side C): $M. Therefore, by hypothesis, if income is spent, means of subsistence of the same value are sold.

    The key is the assumption that all income is spent. To the extent that subsistence level means to barely fulfill physiological needs (which was a pretty good description during most of the 19th century in Europe and the US, or even today, in many parts of the world), workers didn’t have much choice: they lived from hand to mouth, so to speak. So, there was no saving: all income was spent.

    As I see it (and I want to clarify that I am no expert or anything and Peter could disagree), though, subsistence is socially determined, which means it can exceed physiological needs. To the point that some of the subsistence items might be left out of the consumption basket, without compromising physiological needs, then there could be a saving, I’d say.

    Further, to the point that the consumption basket exceeds the income available, if there is a source of credit, then the excess could be temporarily covered by debt.

    I interpret this “partial Say’s law” as a simplifying assumption.

    From my point of view, which might not be shared by Peter, I speculate that this is quite useful, because it allows Marxists to play in the same field, under the same rules, as other economists, without being necessarily bound by an unconditional acceptance of Say’s Law.

    Hope this makes sense (Peter, you can correct me, if I am mistaken).

  12. Thanks for the link, Magpie. I liked it. I am yet to read back through the earlier posts in the series, but will do so, and then re-read part III in context.

    Regarding Say’s Law, I didn’t mean to suggest that Marx partially accepted it any more than Keynesian economists. The point is simply that income does induce some expenditure. But that is not sufficient to validate Say’s Law. Marx, Keynes and Kalecki all rejected Say’s Law, but they still understood of course that income does induce some expenditure.

  13. “Thanks for the link, Magpie. I liked it.”

    No, thank you for having a look.

    If you find anything there you could use in your own post, feel free.

    “Regarding Say’s Law, I didn’t mean to suggest that Marx partially accepted it any more than Keynesian economists.”

    My comment was only meant to say that I was commenting on my own, not on your behalf. 🙂

  14. re. Say’s law

    Jean-Baptiste Say is still relevant when considering the assumption that products are commoditized. Increased supply of wheat doesn’t affect the demand for wheat in any way other than price because it’s a commodity, however the invention of new products can create a demand for these new products (though not the Sinclair C5). Over time products tend to become commoditized as there are more competitors for the new demand. Invention of semi-conductor technology certainly affected the demand for semi-conductor technology.

    The assumption of commodity products goes right across economics and it’s a major flaw. Mathematically, the real economy is a process of heuristic information gain, not an equilbrium system, hence the constantly increasing surplus.

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