Marx’s Capital, Volume 1, Chapter 1: A Critical Summary, Part 1 (Updated)

Chapter 1 of volume 1 of Capital is called “The Commodity,” and presents Marx’s theory of the commodity and labour value.

Chapter 1 is divided into four sections:

(1) The Two Factors of the Commodity: Use Value and Value

(2) Dual Character of the Labour embodied in Commodities

(3) The Value-Form, or Exchange-Value

(4) The Fetishism of the Commodity and its Secret.

Interpreters of Marx admit that the first few chapters of Capital are made difficult to understand because of Marx’s use of a Hegelian style of argument (Brewer 1984: 21).

Let us now turn to a summary of the first two sections. I will examine the last two sections in the next post.

(1) The Two Factors of the Commodity: Use Value and Value
Capitalist production is a system founded on production of commodities for sale, and the commodity is the elementary form or thing in capitalism (Marx 1990: 125). For Marx, capitalism is the commodity form of production (Foley 1986: 12), and ultimately only a transient system of production in human history.

Marx’s definition of the commodity is as follows:

“A commodity is, in the first place, an object outside us, a thing that by its properties satisfies human wants of some sort or another. The nature of such wants, whether, for instance, they spring from the stomach or from fancy, makes no difference. Neither are we here concerned to know how the object satisfies these wants, whether directly as means of subsistence, or indirectly as means of production.” (Marx 1906: 41–42).

At the heart of Marx’s analysis of commodities is his idea that they have a dual nature, as follows:

(1) as qualitative things called use values, and

(2) as quantitative things called labour values and manifested in exchange values.

A use value of a commodity is determined by its usefulness to human beings as derived from its properties, and use values are realised in use or consumption (Marx 1990: 126). A society can produce things with use values without being capitalist or producing commodities for sale (Brewer 1984: 22). That is, a good can be a use value without being a commodity (Brewer 1984: 22).

Commodities also bear exchange value, but this is quantitative. Marx assumes that, when one commodity exchanges for another, this entails an equality (Marx 1990: 127). But since Marx will later admit in volume 3 of Capital that most commodities do not exchange at their labour values, Marx has not even properly proven that commodity exchange constitutes such an equality in the first place.

Marx’s “proof” of labour value, as presented in Chapter 1 of Capital, is grossly inadequate:

“Let us take two commodities, e. g., corn and iron. The proportions in which they are exchangeable, whatever those proportions may be, can always be represented by an equation in which a given quantity of corn is equated to some quantity of iron: e. g., 1 quarter corn = x cwt. iron. What does this equation tell us? It tells us that in two different things—in 1 quarter of corn and x cwt. of iron, there exists in equal quantities something common to both. The two things must therefore be equal to a third, which in itself is neither the one nor the other. Each of them, so far as it is exchange value, must therefore be reducible to this third.

A simple geometrical illustration will make this clear. In order to calculate and compare the areas of rectilinear figures, we decompose them into triangles. But the area of the triangle itself is expressed by something totally different from its visible figure, namely, by half the product of the base into the altitude. In the same way the exchange values of commodities must be capable of being expressed in terms of something common to them all, of which thing they represent a greater or less quantity.

This common ‘something’ cannot be either a geometrical, a chemical, or any other natural property of commodities. Such properties claim our attention only in so far as they affect the utility of those commodities, make them use-values. But the exchange of commodities is evidently an act characterised by a total abstraction from use-value.” (Marx 1906: 43–44).

“As use-values, commodities are, above all, of different qualities, but as exchange values they are merely different quantities, and consequently do not contain an atom of use-value. If then we leave out of consideration the use-value of commodities, they have only one common property left, that of being products of labour. But even the product of labour itself has undergone a change in our hands. If we make abstraction from its use-value, we make abstraction at the same time from the material elements and shapes that make the product a use-value; we see in it no longer a table, a house, yarn, or any other useful thing. Its existence as a material, thing is put out of sight. Neither can it any longer be regarded as the product of the labour of the joiner, the mason, the spinner, or of any other definite kind of productive labour. Along with the useful qualities of the products themselves, we put out of sight both the useful character of the various kinds of labour embodied in them, and the concrete forms of that labour; there is nothing left but what is common to them all; all are reduced to one and the same sort of labour, human labour in the abstract.

Let us now consider the residue of each of these products; it consists of the same unsubstantial reality in each, a mere congelation of homogeneous human labour, of labour-power expended without regard to the mode of its expenditure. All that these things now tell us is, that human labour-power has been expended in their production, that human labor is embodied in them. When looked at as crystals of this social substance, common to them all, they are—Values.

We have seen that when commodities are exchanged, their exchange value manifests itself as something totally independent of their use-value. But if we abstract from their use-value, there remains their Value as defined above. Therefore, the common substance that manifests itself in the exchange value of commodities, whenever they are exchanged, is their value.” (Marx 1906: 44–45).

Harvey (2010: 17) sees this argument as an a priori one; he is right and that is part of the problem. The labour theory of value needs to be empirical, and requires an empirical argument to support it, not an a priori proof. Secondly, Marx thinks that all commodities are products of human labour, but this need not be so: commodities might be the product of animal labour or in theory purely of machines or robots, as I point out here. Thirdly, this leaves us with the problem of the products of slave labour: are products produced by slaves and sold for money profit commodities in Marx’s sense of the term?

Fourly, another serious problem is that it is not obvious at all that commodity exchanges constitute an equality in the way Marx sees them. Marx actually admits later in Chapter 1 that in some human societies commodities may simply exchange as use value for use value:

“But to be equated to linen, and again to iron, is to be as different as are linen and iron. This form, it is plain, occurs practically only in the first beginning, when the products of labour are converted into commodities by accidental and occasional exchanges. …. ” (Marx 1906: 75).

And later in volume 3 of Capital Marx will admit that most commodities do not exchange at their true and equal labour values. So why should we think that there must be a common quantitative basis for exchange in labour values?

Now there is an equality in exchanges in the sense in which, say, 2 sheep might exchange for 1 cow, and only two sheep and nothing more are exchanged, and vice versa. But this is a trivial sense of equality. It does not help Marx. Marx’s leap to the conclusion that there must be an additional, fundamental unit of homogeneous labour time in which both commodities can be measured quantitatively and by which they can both be shown to be equivalent simply does not follow. It is a non sequitur. Marx’s argument was shoddy and commits a straightforward logical fallacy.

Now exchange value, for Marx, is an “expression” or “form of appearance” of labour value (Marx 1990: 128), but how do we measure value? What is the “measure of its magnitude”? According to Marx, we measure it by the quantity of labour-time needed to produce a commodity (Marx 1990: 129).

However, it is not raw or concrete labour hours that count in determining value, but abstract socially necessary labour time:

“Some people might think that if the value of a commodity is determined by the quantity of labour spent on it, the more idle and unskilful the labourer, the more valuable would his commodity be, because more time would be required in its production. The labour, however, that forms the substance of value, is homogeneous human labour, expenditure of one uniform labour-power. The total labour-power of society, which is embodied in the sum total of the values of all commodities produced by that society, counts here as one homogeneous mass of human labour-power, composed though it be of innumerable individual units. Each of these units is the same as any other, so far as it has the character of the average labour-power of society, and takes effect as such; that is, so far as it requires for producing a commodity, no more time than is needed on an average, no more than is socially necessary. The labour-time socially necessary is that required to produce an article under the normal conditions of production, and with the average degree of skill and intensity prevalent at the time. ….

We see then that that which determines the magnitude of the value of any article is the amount of labour socially necessary, or the labour-time socially necessary for its production. Each individual commodity, in this connexion, is to be considered as an average sample of its class. Commodities, therefore, in which equal quantities of labour are embodied, or which can be produced in the same time, have the same value. The value of one commodity is to the value of any other, as the labour-time necessary for the production of the one is to that necessary for the production of the other. ‘As values, all commodities are only definite masses of congealed labour-time.’” (Marx 1906: 44–46).

This answers some common objections to the labour theory of value (such as, for example, the criticism that, if more concrete labour is taken to produce an individual commodity by a slower or less experienced worker, then the more value it must be). Labour must be necessary and not wasted. However, Marx’s ideas here lead to serious problems as well, such as how to reduce all heterogeneous forms of human labour to such socially necessary labour time. Another problem is joint production: if a production process produces more than one commodity but two or several, then how does one calculate socially necessary labour time? (Brewer 1984: 23; Nitzan and Bichler 2009: 101–102). In particular, Ian Steedman has argued that joint production leaves open the possibility that some labour values of commodities produced in joint production can be undefined, nil, or negative (Nitzan and Bichler 2009: 101).

Next, Marx examines productivity. The greater the productivity of human labourers, the less socially necessary labour time is needed to produce a given commodity (Marx 1990: 131).

Marx even attempts to explain the high price of diamonds by reference to the great socially necessary labour time needed to produce diamonds:

“The same labour extracts from rich mines more metal than from poor mines. Diamonds are of very rare occurrence on the earth’s surface, and hence their discovery costs, on an average, a great deal of labour-time. Consequently much labour is represented in a small compass.” (Marx 1906: 47).

At the same time, Marx seems to doubt that gold and diamonds actually do fetch an exchange value equal to their socially necessary labour time (Marx 1990: 130), but this point is quickly passed over.

Marx makes an interesting point which is later taken up in Chapter 3:

“A thing can be a use-value, without having value. This is the case whenever its utility to man is not due to labour. Such are air, virgin soil, natural meadows, &c. A thing can be useful, and the product of human labour, without being a commodity.” (Marx 1906: 47–48).

That is to say, things that are not produced by human labour have no real value (e.g., air, uncultivated soil, natural meadows) and, according to Marx in Chapter 3, and only fetch an “imaginary” money price. (Marx 1906: 115).

The final passage in section 1 contains an admission that undermines Marx’s “proof” of the labour theory of value earlier in the section:

“Whoever directly satisfies his wants with the produce of his own labour, creates, indeed, use-values, but not commodities. In order to produce the latter, he must not only produce use-values, but use-values for others, social use-values. Lastly, nothing can have value, without being an object of utility. If the thing is useless, so is the labour contained in it; the labour does not count as labour, and therefore creates no value.” (Marx 1906: 48).

As I have pointed out here and here, this admission is a devastating contradiction, because Marx cannot claim that he can deduce that labour time is the common quantity determining value totally independently of use value. Marxists like Harvey (2010: 22) fail to notice how badly this undermines Marx’s argument.

Another fundamental problem is this: is Marx’s labour theory of value meant to be (1) an empirical phenomenon Marx has discovered or (2) a mere analytic concept and definition he has formulated to analyse capitalism? (the problem is noted by Brewer 1984: 24). This is crucial issue.

Marxists frequently claim that Marx in volume 1 of Capital merely assumed as a simplifying assumption that commodities exchange for true labour values (Brewer 1984: 25), but I find it hard to take this seriously. For one thing, Marx never makes such a claim in Chapter 1 or Part 1 of volume 1 of Capital, and secondly as we read Chapter 2 and Chapter 3 of volume 1 we find that Marx makes explicit statements about how labour values do govern individual exchange values of commodities, which are simply rendered nonsensical if all this was only a “simplifying assumption.”

(2) Dual Character of the Labour embodied in Commodities
Just as a commodity has a dual nature (as a use-value and an exchange value), so does the labour embodied in the commodities. Marx thinks he was the first to identify the dual nature of labour as embodied in commodities (Marx 1990: 132).

To produce a specific use-value, one needs labour of a particular type (Marx 1990: 132). So labour comes in qualitatively different forms:

“As the coat and the linen are two qualitatively different use-values, so also are the two forms of labour that produce them, tailoring and weaving. Were these two objects not qualitatively different, not produced respectively by labour of different quality, they could not stand to each other in the relation of commodities. Coats are not exchanged for coats, one use-value is not exchanged for another of the same kind.

To all the different varieties of values in use there correspond as many different kinds of useful labour, classified according to the order, genus, species, and variety to which they belong in the social division of labour. This division of labour is a necessary condition for the production of commodities, but it does not follow conversely, that the production of commodities is a necessary condition for the division of labour. In the primitive Indian community there is social division of labour, without production of commodities. Or, to take an example nearer home, in every factory the labour is divided according to a system, but this division is not brought about by the operatives mutually exchanging their individual products. Only such products can become commodities with regard to each other, as result from different kinds of labour, each kind being carried on independently and for the account of private individuals.

To resume, then: In the use-value of each commodity there is contained useful labour, i. e., productive activity of a definite kind and exercised with a definite aim. Use-values cannot confront each other as commodities, unless the useful labour embodied in them is qualitatively different in each of them. In a community, the produce of which in general takes the form of commodities, i. e., in a community of commodity producers, this qualitative difference between the useful forms of labour that are carried on independently by individual producers, each on their own account, develops into a complex system, a social division of labour.” (Marx 1906: 48–49).

So the “social division of labour” is Marx’s version of the division of labour from Classical economics.

Labour, then, comes in two forms:

(1) qualitatively different types of concrete, useful labour that produces specific use values, and

(2) abstract socially necessary labour that is the quantitative source of value, and is reducible to a homogeneous single unit of measurement (Brewer 1984: 23–24).

Social labour, the labour required to produce commodities, is the only thing that produces value (Foley 1986: 16). But labour of different qualitative, concrete types is a “natural necessity” for the creation of use values, and use values are the result of a combination of (1) material provided by nature and (2) human labour (Marx 1990: 133). In this sense, labour is not the only source of use values:

“The use-values, coat, linen, &c, i. e., the bodies of commodities, are combinations of two elements—matter and labour. If we take away the useful labour expended upon them, a material substratum is always left, which is furnished by Nature without the help of man. The latter can work only as Nature does, that is by changing the form of matter. Nay more, in this work of changing the form he is constantly helped by natural forces. We see, then, that labour is not the only source of material wealth, of use-values produced by labour. As William Petty puts it, labour is its father and the earth its mother.” (Marx 1906: 50).

By contrast, values of commodities are produced only by labour and are quantitative:

“On the one hand all labour is, speaking physiologically, an expenditure of human labour-power, and in its character of identical abstract human labour, it creates and forms the value of commodities. On the other hand, all labour is the expenditure of human labour-power in a special form and with a definite aim, and in this, its character of concrete useful labour, it produces use-values.” (Marx 1906: 54).

If we take an exchange of a coat with linen, then

“So far as they are values, the coat and the linen are things of a like substance, objective expressions of essentially identical labour. But tailoring and weaving are, qualitatively, different kinds of labour.” (Marx 1906: 50).

But in order to argue that values are just homogeneous unit quantities of labour, Marx has to demonstrate how this is so.

His answer is that all the different qualitative forms of labour can be reduced to a common unit of simple labour power:

“Productive activity, if we leave out of sight its special form, viz., the useful character of the labour, is nothing but the expenditure of human labour-power. Tailoring and weaving, though qualitatively different productive activities, are each a productive expenditure of human brains, nerves, and muscles, and in this sense are human labour. They are but two different modes of expending human labour-power. Of course, this labour-power, which remains the same under all its modifications, must have attained a certain pitch of development before it can be expended in a multiplicity of modes. But the value of a commodity represents human labour in the abstract, the expenditure of human labour in general. And just as in society, a general or a banker plays a great part, but mere man, on the other hand, a very shabby part, so here with mere human labour. It is the expenditure of simple labour-power, i.e., of the labour-power which, on an average, apart from any special development, exists in the organism of every ordinary individual. Simple average labour, it is true, varies in character in different countries and at different times, but in a particular society it is given. Skilled labour counts only as simple labour intensified, or rather, as multiplied simple labour, a given quantity of skilled being considered equal to a greater quantity of simple labour. Experience shows that this reduction is constantly being made. A commodity may be the product of the most skilled labour, but its value, by equating it to the product of simple unskilled labour, represents a definite quantity of the latter labour alone. The different proportions in which different sorts of labour are reduced to unskilled labour as their standard, are established by a social process that goes on behind the backs of the producers, and, consequently, appear to be fixed by custom. For simplicity’s sake we shall henceforth account every kind of labour to be unskilled, simple labour; by this we do no more than save ourselves the trouble of making the reduction.” (Marx 1906: 51–52).

Skilled or experienced labour is, then, a multiple of simple abstract labour (as noted by Harvey 2010: 29). All labour is reducible to a meaningful, common homogeneous unit of labour (Foley 1986: 16). It follows that all concrete labour can be reduced to units of simple abstract labour and aggregated too.

But how does the market do this reduction of all heterogeneous types of labour power to homogeneous units of simple labour? Marx does not explain how, but merely assumes it does: “[e]xperience shows that this reduction is constantly being made.” But how? Marx says that the process is not even consciously known or understood by capitalists:

“Experience shows that this reduction is constantly being made. A commodity may be the product of the most skilled labour, but its value, by equating it to the product of simple unskilled labour, represents a definite quantity of the latter labour alone. The different proportions in which different sorts of labour are reduced to unskilled labour as their standard, are established by a social process that goes on behind the backs of the producers, and, consequently, appear to be fixed by custom.” (Marx 1906: 51–52).

But this is a lazy statement and a serious problem with Marx’s theory. Even a Marxist like Harvey notes that this passage has not explained how heterogeneous types of labour are reduced to homogeneous units of simple labour:

“Notably, Marx never specifies what ‘experience’ he has in mind, making this passage highly controversial. In the literature it is known as the ‘reduction problem:’ because it is not clear how skilled labor can be and is reduced to simple labor independently of the value of the commodity produced. Rather like the proposition about value as socially necessary labor time, Marx’s formulation appears cryptic, if not cavalier; he doesn’t explain how the reduction is made. He simply presumes for purposes of analysis that this is so and then proceeds on that basis.” (Harvey 2010: 29).

In the same vein, Brewer (1984: 24) rightly notes that critics of Marx find the argument flawed. First, if exchange of the products of skilled labour for products of unskilled labour can be used to determine the value of skilled value as a multiple of simple labour, then the argument is circular. Exchange values determine labour values, but labour values are supposed to be a source of exchange values.

Secondly, this part of the argument contradicts the previous idea stated by Marx that the reduction of skilled labour to a simple unit of abstract labour can be conducted in a physical or scientific manner by examining the “expenditure of human brains, nerves, and muscles.” If the only actual way we can determine the value of skilled value is by looking at the actual market exchange of the products of skilled labour for products of unskilled labour, then why bother with explaining the difference in terms of “expenditure of human brains, nerves, and muscles”?

And what if exchanges of the products of skilled labour for products of unskilled labour lead to radically inconsistent measures of the value of skilled labour as a multiple of simple labour?

These are severe problems with the theory. We are still left with the question: how are all heterogeneous forms of human labour power meaningfully reduced to simple homogeneous labour units?

Marx ends section 2 by pointing out that productivity changes can change the quantity of goods produced by labour, but not the duration of simple labour per se:

“Productive power has reference, of course, only to labour of some useful concrete form; the efficacy of any special productive activity during a given time being dependent on its productiveness. Useful labour becomes, therefore, a more or less abundant source of products, in proportion to the rise or fall of its productiveness. On the other hand, no change in this productiveness affects the labour represented by value. Since productive power is an attribute of the concrete useful forms of labour, of course it can no longer have any bearing on that labour, so soon as we make abstraction from those concrete useful forms. However then productive power may vary, the same labour, exercised during equal periods of time, always yields equal amounts of value. But it will yield, during equal periods of time, different quantities of values in use; more, if the productive power rise, fewer, if it fall. The same change in productive power, which increases the fruitfulness of labour, and, in consequence, the quantity of use-values produced by that labour, will diminish the total value of this increased quantity of use-values, provided such change shorten the total labour-time necessary for their production; and vice versa.” (Marx 1906: 53–54).

In essence, the value of one hour of abstract socially necessary labour time is always the same, but changes in labour productivity change the quantity of use values that can be produced in one hour (Brewer 1984: 24).

BIBLIOGRAPHY
Brewer, Anthony. 1984. A Guide to Marx’s Capital. Cambridge University Press, Cambridge.

Foley, Duncan K. 1986. Understanding Capital: Marx’s Economic Theory. Harvard University Press, Cambridge, Mass. and London.

Harvey, David. 2010. A Companion to Marx’s Capital. Verso, London and New York.

Marx, Karl. 1906. Capital. A Critique of Political Economy (vol. 1; rev. trans. by Ernest Untermann from 4th German edn.). The Modern Library, New York.

Marx, Karl. 1990. Capital. A Critique of Political Economy. Volume One (trans. Ben Fowkes). Penguin Books, London.

Nitzan, Jonathan and Shimshon Bichler. 2009. Capital as Power: A Study or Order and Creorder. Routledge, Abingdon, UK and New York.

Gillies’ Philosophical Theories of Probability, Chapter 1

Donald Gillies’ Philosophical Theories of Probability (2000) is an excellent overview of probability theory.

The book is of great interest, because Gillies (2000: xiv) has knowledge of Post Keynesian work on probability and uncertainty, and also sees his “intersubjective” theory of probability as a compromise between the theories of Keynes and Ramsey.

Probability has both a mathematical and philosophical/epistemic aspect.

The earliest “Classical” interpretation of probability of Pierre-Simon Laplace (1749–1827), which was based on earlier work from the 1650 to 1800 period, is now of historical interest only, and has no supporters today (Gillies 2000: 3).

Gillies (2000: 1) identifies five major modern interpretations of probability, which are in turn divided into two broad categories, as follows:

(i) Epistemological/Epistemic probability theories

(1) the logical interpretation;
(2) the subjective interpretation (personalism, subjective Bayesianism);
(3) the intersubjective view.

(ii) Objective probability theories

(4) the frequency interpretation;
(5) the propensity interpretation.

The “intersubjective” interpretation of probability is developed by Gillies (2000: 2) himself.

The epistemological/epistemic group of probability theories take probability to be a degree of belief, whether rational or subjective (Gillies 2000: 2).

The objective probability theories take probabilities to be an objective aspect of certain things or processes in the external world (Gillies 2000: 2).

Gillies (2000: 2–3) argues that all the major theories of probability may be compatible, as long as they are limited to their appropriate domains: for example, objective probabilities are usually appropriate for the natural sciences and epistemological/epistemic probabilities for the social sciences.

Serious study of probability began with mathematical theories of probability, often inspired by interest in gambling games (Gillies 2000: 4, 10), and these mathematical theories emerged in the 17th and 18th centuries, and famously in the correspondence between Blaise Pascal (1623–1662) and Pierre de Fermat (1601/1607–1665) in 1654 (Gillies 2000: 3), Jacob Bernoulli’s (1655–1705) treatise Ars Conjectandi (1713), the work of Abraham de Moivre (1667–1754), and of Thomas Bayes (c. 1701–1761) (Gillies 2000: 4–8).

BIBLIOGRAPHY
Gillies, D. A. 2000. Philosophical Theories of Probability. Routledge, London.

John King’s A History of Post Keynesian Economics since 1936, Chapter 1

John King’s wonderful book A History of Post Keynesian Economics since 1936 (2002) is as close as one can get to a reference work on the history of Post Keynesianism.

A summary of Chapter 1 follows.

In Chapter 1, King discusses the reactions to Keynes’ General Theory of Employment, Interest, and Money (1936), which went to the publishers in January 1936 and appeared in print a month later (King 2002: 12).

There was a struggle between Walrasian and non-Walrasian interpretations of the General Theory from the beginning (King 2002: 12).

The core of the General Theory is the principle of effective demand: the level of output and employment are determined by aggregate demand, not the supply-side factors emphasised by neoclassical marginalism (King 2002: 13).

King points to contradictions in the General Theory and the fact that it was not entirely consistent. King also notes that some early drafts of the book were rather more radical than the published version (King 2002: 14–15).

In Chapter 12 of the General Theory, Keynes stressed the role of uncertainty in causing instability in the aggregate level of investment in market economies, and also in thwarting any reliable mechanism by which investment is equated with saving in a full employment equilibrium (King 2002: 13). Keynes thus denied the loanable funds interpretation of the interest rate, and instead argued that interest is a monetary – not a “real” – phenomenon. Interest rates are determined by liquidity preference, not the “real” forces of productivity and thrift (King 2002: 13).

But King (2002: 12) points out that Keynes still equated the real wage with the marginal product of labour (Keynes’ “first classical postulate”), and in Chapter 18 of the General Theory summarised his ideas in a way that glossed over the role of fundamental uncertainty, and allowed subsequent marginalists to reformulate the General Theory as a general equilibrium system where the rate of interest has a crucial equilibrating role (King 2002: 14).

This general equilibrium interpretation, through the IS-LM model, was developed by a number of authors, including David Champernowne, Roy Harrod, James Meade, Brian Reddaway, and John Hicks (King 2002: 15).

There were a number of early reviews of Keynes’ General Theory as follows:

Hicks, J. R. 1936. “Keynes’ Theory of Employment,” The Economic Journal 46.182: 238–253.

Pigou, A. C. 1936. “Mr. J. M. Keynes’ General Theory of Employment, Interest and Money,” Economica n.s. 3.10: 115–132.

Lerner, A P. 1936. “Mr. Keynes’ ‘General Theory of Employment, Interest and Money,’” International Labour Review 34: 435–454.

Kalecki, M. 1936. “Pare uwag o teorii Keynesa,” Ekonomista 3: 18–26.

Targetti, F. and Kinda-Hass, B. 1982 [1936]. “Kalecki’s Review of Keynes’ General Theory” [translation of Kalecki 1936], Australian Economic Papers 21: 244–260.

Reddaway, W. B. 1936. “General Theory of Employment, Interest and Money,” Economic Record 12: 28–36.

Townshend, Hugh. 1937. “Liquidity-Premium and the Theory of Value,” The Economic Journal 47.185: 157–169.

Many had a tendency to interpret the General Theory within the neoclassical tradition.

In contrast to this were those like Joan Robinson, Nicholas Kaldor and Hugh Townshend who started to develop the view that the General Theory was a revolutionary work, and not a “special case” of neoclassical theory (King 2002: 18).

Paradoxically, King finds that the roles of Robinson and Kaldor in pursuing a non-neoclassical approach to the General Theory in the 1930s were considerably less clear-cut than modern Post Keynesians might think (King 2002: 18–22). King even concludes that by the late 1930s “the battle lines between the neoclassicals and the [sc. early] Post Keynesians were far from clearly drawn” (King 2002: 30).

For example, Kaldor’s repudiation of general equilibrium theory as a legitimate method for interpreting the General Theory was rather slow, even though he early on developed an endogenous money theory and critique of neoclassical capital theory that took him “halfway” to the issues of the Cambridge capital controversies (King 2002: 23–24).

And King remarks that the first edition of Joan Robinson’s Introduction to the Theory of Employment (1937) could be regarded as the “original bastard Keynesian text” (King 2002: 25).

An important exception, however, appears to be Hugh Townshend. In Townshend (1937), he attacked the idea of any long-run tendency to equilibrium and criticised John Hicks and his use of a version of loanable funds to interpret the General Theory (King 2002: 22).

Keynes himself encouraged both neoclassical and non-neoclassical approaches to his work (King 2002: 31–32, 43), but King also notes that Keynes’ heart attacks and his burden of work related to the Second World War stopped him from making systemic, point-by-point responses to all the controversy caused by the General Theory (King 2002: 30).

However, according to King, Keynes “never once repudiated the IS-LM interpretation of the General Theory” but “endorsed it warmly” (King 2002: 31) – although Kriesler and Nevile have pointed out in their paper “IS-LM and Macroeconomics after Keynes” (Kriesler and Nevile 2002) that the early IS-LM models of Roy Harrod and W. B. Reddaway were not exactly the same as that of John Hicks (1937).

Nevertheless, when Keynes came to his famous article “The General Theory of Employment” (Quarterly Journal of Economics 51 [1937]: 209–223) – which was a statement of the central message of the General Theory – he stressed the role of fundamental uncertainty, subjective expectations and the instability of investment (King 2002: 31) – points which lie at the heart of modern Post Keynesian theory.

King concludes that the most important early non-neoclassical interpreter of Keynes’ General Theory was none other than Michał Kalecki (King 2002: 34).

Update
Philip Pilkington has a post on ISLM and Roy Harrod here:

Philip Pilkington, “Keynes’ General Theory, the ISLM and Roy Harrod’s ‘Dynamics,’” Fixing the Economists, July 15, 2014.

BIBLIOGRAPHY
Hicks, J. R. 1936. “Keynes’ Theory of Employment,” The Economic Journal 46.182: 238–253.

Kalecki, M. 1936. “Pare uwag o teorii Keynesa,” Ekonomista 3: 18–26.

Keynes, J. M. 1937. “The General Theory of Employment,” Quarterly Journal of Economics 51: 209–223.

King, J. E. 2002. A History of Post Keynesian Economics since 1936. Edward Elgar Publishing, Cheltenham, UK and Northampton, MA.

Kriesler, Peter and John Nevile. 2002. “IS-LM and Macroeconomics after Keynes,” in Philip Arestis, Meghnad Desai, and Sheila Dow (eds.), Money, Macroeconomics and Keynes: Essays in Honour of Victoria Chick, Volume One. Routledge, London and New York.

Kriesler, Peter and John Nevile. 2002. “IS-LM and Macroeconomics after Keynes.”
http://www.asb.unsw.edu.au/schools/economics/Documents/P.%20Kriesler%20and%20J.%20Nevile%20-%20IS-LM%20in%20Macroeconomics%20After%20Keynes.pdf

Lerner, A P. 1936. “Mr. Keynes’ ‘General Theory of Employment, Interest and Money,’” International Labour Review 34: 435–454.

Pigou, A. C. 1936. “Mr. J. M. Keynes’ General Theory of Employment, Interest and Money,” Economica n.s. 3.10: 115–132.

Reddaway, W. B. 1936. “General Theory of Employment, Interest and Money,” Economic Record 12: 28–36.

Robinson, Joan. 1937. Introduction to the Theory of Employment (1st edn.). Macmillan, London.

Targetti, F. and Kinda-Hass, B. 1982 [1936]. “Kalecki’s Review of Keynes’ General Theory” [translation of Kalecki 1936], Australian Economic Papers 21: 244–260.

Townshend, Hugh. 1937. “Liquidity-Premium and the Theory of Value,” The Economic Journal 47.185: 157–169.

Colin Rogers’ Money, Interest and Capital, Chapter 1

Colin Rogers’ Money, Interest and Capital: A Study in the Foundations of Monetary Theory (Cambridge, 1989) is a Post Keynesian study of monetary theory and a critique of neoclassical monetary and interest rate theory.

A quick summary of Chapter 1 follows in this post.

Rogers notes that the post-WWII neoclassical synthesis attempted to reconcile the theories of Wicksell and Walras with Keynes’ General Theory, but the result was either incoherent Wicksellian theory or a Walrasian theory that does not have a proper role for money (Rogers 1989: xvii).

In essence, modern neoclassical monetary theory is divided into two strands, as follows:

(1) Wicksellian/neo-Wicksellian general equilibrium theory, and

(2) neo-Walrasian general equilibrium theory.

The Wicksellian/neo-Wicksellian general equilibrium theory is subject to devastating problems through the Cambridge Capital critique, for Wicksell’s capital theory is the basis of his idea of the natural rate of interest, and once Wicksell’s capital theory is exploded, his natural rate of interest concept is also destroyed (Rogers 1989: 5).

Since the natural rate of interest is also the fundamental basis of classical loanable funds theory, the latter too must fall (Rogers 1989: 5), a point missed by economists who have interpreted Keynes’ work like Kohn (1986) and Leijonhufvud (1981).

Rogers (1989: 5) contends that neo-Walrasian models do not use the Wicksellian concept of capital, but are utterly flawed by the way they assume money away and effectively reduce to models of perfect barter (Rogers 1989: 5).

Various strands of neoclassical theory (even the neoclassical Keynesian tradition) draw on either the Wicksellian or neo-Walrasian traditions but both are equally flawed.

Neoclassical monetary theory, in all forms, is real analysis because non-monetary factors are what determine long-period equilibrium positions and money is reduced to a neutral veil in the long run (Rogers 1989: 4), and even if monetarists and neoclassical Keynesians are willing to recognise the short-run non-neutrality of money, they remain fixated on the unrealistic long-run implications of their general equilibrium models (Rogers 1989: 7).

Moreover, even credit money – the predominant form of money in modern economies – is reduced to having the same properties as commodity money in general equilibrium models (Rogers 1989: 4). This is a serious mistake, for credit is not a commodity and the Wicksellian natural rate of interest is worthless, except as a purely logical concept in an empirically irrelevant abstract model with one commodity (Rogers 1989: 10).

A genuine monetary theory, by contrast, sees money as fundamentally non-neutral, and real and monetary forces will determine any long period equilibrium positions (Rogers 1989: 4, 8).

The key is that the money rate of interest in a modern economy with credit money cannot be usefully explained by means of either classical or neoclassical theory (Rogers 1989: 9), and must be seen as an exogenous variable (Rogers 1989: 12).

Rogers (1989: 10–11) adopts Marshallian partial equilibrium analysis and what he calls a “monetary equilibrium” approach which describes the relationship between the rate of interest and the marginal efficiencies of all assets: in short, a “monetary equilibrium” is equality between the rate of interest and the marginal efficiency of capital (Rogers 1989: 11).

In this model, the long-term money rate of interest sets the rate of return to which other marginal efficiencies adjust in the long run, and the money rate of interest plays a significant role in the production of capital goods, and hence on aggregate investment and the level of employment (Rogers 1989: 12). Since in the market economy, there is no mechanism that will adjust the exogenous rate of interest to the right investment level to create effective demand and full employment, the rate of interest must be determined by government monetary policy (Rogers 1989: 13).

Rogers’ model is dependent on Keynes’ General Theory and Kregel (1983), but differs from other Post Keynesian models, and assumes an initial static equilibrium model in which short and long period expectations are realised (Rogers 1989: 14).

But one should note the problems even with Keynes’ analytical model – and by implication with Rogers’ own – that some Post Keynesians have identified:

(1) the marginal efficiency of capital (MEC) idea. Keynes, in developing the MEC, failed to free himself from the neoclassical marginal productivity of capital (King 2002: 209). As Joan Robinson notes,

“[sc. Keynes] made a fatal mistake in offering a quasi-long-period definition of the inducement to invest as the ‘marginal efficiency of capital’, that is, the profit that will be realised on the increment to the stock of capital that results from current investment and, still worse, identified the profitability of capital with its social utility. This was an element in the old doctrine from which he failed to escape. He had an alternative concept of the inducement to invest as the expected future return on sums of finance to be devoted to investment. Minsky (1976) points out that he did not seem to recognise the difference between the two formulations. If he had stuck to his short-period brief, he would have used only the second.” (Robinson 1979: 179–180).

The MEC seems to suggest that there exists a rate of interest which is low enough to induce full utilization of capital goods. But this is just smuggling in the Wicksellian natural rate of interest, when Keynes had wanted to abandon the natural rate.

A number of Post Keynesians reject the MEC, because it is based on the neoclassical or marginalist theory of distribution.

(2) Keynes did not sufficiently stress the role of uncertainty and expectations in undermining the coordinating role of interest rates (King 2002: 14). In Chapter 18 of the General Theory, Keynes played down the role of uncertainty (which he had stressed in Chapter 12) and, if he had really maintained the crucial role of uncertainty as he did later in Keynes (1937), this would have “ruled out any stable functional relationship between investment and the interest rate” (King 2002: 14). The door was thereby left open for neoclassical synthesis Keynesians to reformulate the General Theory as a general equilibrium model where the interest rate has a pivotal role (King 2002: 14).

It seems to me that one must read Rogers’ Money, Interest and Capital with these caveats in mind too.

BIBLIOGRAPHY
Keynes, J. M. 1937. “The General Theory of Employment,” Quarterly Journal of Economics 51: 209–223.

Kohn, M. G. 1986. “Monetary Analysis, the Equilibrium Method and Keynes’s General Theory,” Journal of Political Economy 94.6: 1191–1224.

Kregel, J. A. 1983. “Effective Demand: Origins and Development of the Notion,” in J. A. Kregel (ed.), Effective Demand and International Economic Relations. Macmillan, London. 50–68.

Leijonhufvud, Axel. 1981. “The Wicksell Connection: Variations on a Theme,” in Axel Leijonhufvud, Information and Coordination: Essays in Macroeconomic Theory. Oxford University Press, New York. 131–202.

Rogers, C. 1989. Money, Interest and Capital: A Study in the Foundations of Monetary Theory. Cambridge University Press, Cambridge.

Schwartz’s A Brief History of Analytic Philosophy: From Russell to Rawls: Chapter 1

Stephen P. Schwartz’s A Brief History of Analytic Philosophy: from Russell to Rawls (2012) is very useful treatment of the origin and development of modern Anglo-American analytic philosophy, and is one of a number of recent general histories of the subject (see Beaney 2013; Glock 2008; Martinich and Sosa 2006; Stroll 2000; Soames 2003a; and Soames 2003b).

The background that Schwartz provides in Chapter 1 of his book actually illuminates Keynes’s own early philosophical ideas and the context of Keynes’s famous A Treatise on Probability (1921). I sketch the main points of Chapter 1 from Schwartz’s study in what follows.

Bertrand Russell (1872–1970) was the founder of analytic philosophy, but he drew on important work in mathematical logic by the German Gottlob Frege (1848–1925).

Russell and George E. Moore (1873–1958), another founder of analytic philosophy, attended Cambridge University in the 1890s, and came under the influence of British Hegelian philosophers.

Russell went through a number of philosophical phases as follows:

(1) a period of influence from British idealism;

(2) a period of Platonist realism (1901–1904);

(3) the period of logical realism (1905–1912), and

(4) the period of logical atomism (1913–1918).

When Moore and Russell broke with Idealism, they had a brief flirtation with Platonic realism (Schwartz 2012: 28), and then Russell moved towards “logical atomism,” which is recognisably an early form of analytic philosophy.

In 1903, two important books appeared. Both of these works profoundly influenced the young John Maynard Keynes. The first (and most important to Keynes) was Moore’s Principia Ethica, an influential treatise on ethics; the second was Russell’s Principles of Mathematics (1903) (written in the latter’s Platonic realist phase).

Russell’s book was concerned with the foundations of mathematics, and in it Russell argued that mathematics could be deduced from a very small number of principles, a view which is the hallmark of the philosophy of mathematics called logicism.

But the ground for Russell’s logicist interpretation of mathematics had already been laid by Gottlob Frege in his Begriffsschrift (1879), Die Grundlagen der Arithmetik (The Foundations of Arithmetic; 1884), and the Grundgesetze der Arithmetik (Basic Laws of Arithmetic; vol. 1: 1893; vol. 2: 1903), in which works Frege founded modern logic and argued against Kant’s view that arithmetic statements were synthetic a priori knowledge. Against this Kantian view, Frege held that arithmetic was analytic a priori, and tried to demonstrate how a new logic could be used to deduce mathematics from a set of given axioms.

Russell’s early work uncovered a flaw in Frege’s system called Russell’s paradox, but Russell continued his work in the 1900s in an attempt to solve this paradox and complete Frege’s vision.

Russell and Alfred North Whitehead (1861–1947) worked on the culmination of their logicist program in mathematics, the three-volume book Principia Mathematica (the volumes of which were published in 1910, 1912, and 1913 respectively). In the Principia Mathematica, Russell and Whitehead attempted to construct a set of axioms and rules by means of symbolic logic from which all mathematics could be proven.

Though it is generally thought that Russell’s strict logicist program failed (given the problems raised by Gödel’s incompleteness theorems), nevertheless the consensus today is still that most of classical mathematics can be derived from pure logic and set theory (Schwartz 2012: 19), so in one important respect the essence of Russell’s logicist program was successful.

Thus the main legacy of Russell’s logicism was the rejection of Kantian synthetic a priori knowledge. For after it was shown that mathematics was not an example of synthetic a priori knowledge, one of the greatest arguments made by Rationalist apriorists was undercut and refuted.

Another influence that Russell’s logicism had was on John Maynard Keynes. Keynes’s own “logical theory of probability” was itself a logicist attempt to put probability and inductive inference on a sound footing by using a system of formal logic (Gillies 2000: 27). It is notable that Russell himself was deeply involved in helping Keynes with his work on probability (Gillies 2000: 27), although the initial inspiration for Keynes’s work on probability came from Moore’s Principia Ethica (Gillies 2000: 28).

The other major philosophical achievement of Russell covered by Schwartz is Russell’s article “On Denoting” (Mind 14 [1905]: 479–493), a landmark in the analytic philosophy of language. In this, Russell developed a theory of “definite descriptions,” or phrases that pick out one specific object, such as the “30th Prime Minister of the United Kingdom” or “my copy of Keynes’s General Theory.” These are distinguished from proper names, and philosophical problems arise when definite descriptions refer to non-existent objects, such as “the present king of France” or the “current president of Canada,” and propositions such as “the present king of France is bald.”

For Russell, these “definite description” propositions were merely informal ways of expressing existential statements: for example, the proposition “the present king of France is bald” is really to be understood as “there is one and only one present king of France and that one is bald” (Schwartz 2012: 24). Such existential statements are clearly false in terms of their truth value, so that Russell was able to reject the questionable theory of definite descriptions developed by Meinong (Schwartz 2012: 23).

By the time Russell turned to actual philosophy in the 1910s, he continued the British empiricist tradition of Locke, Berkeley and Hume (Schwartz 2012: 34), and modern analytic philosophy, for better or worse, has continued largely to shun both Hegelianism and modern Continental philosophy.


Links
“Bertrand Russell,” Stanford Encyclopedia of Philosophy, 1995 (rev. 2010)
http://plato.stanford.edu/entries/russell/

Carey, Rosalind. “Russell’s Metaphysics,” Internet Encyclopedia of Philosophy, 2008
http://www.iep.utm.edu/russ-met/

Klement, Kevin C. “Russell’s Paradox ,” Internet Encyclopedia of Philosophy, 2005
http://www.iep.utm.edu/par-russ/

“Gottlob Frege,” Stanford Encyclopedia of Philosophy, 1995 (rev. 2012)
http://plato.stanford.edu/entries/frege/

Klement, Kevin C. “Gottlob Frege (1848–1925),” Internet Encyclopedia of Philosophy, 2005
http://www.iep.utm.edu/frege/

“Frege’s Theorem and Foundations for Arithmetic,” 1998 (rev. 2013)
http://plato.stanford.edu/entries/frege-logic/

Lotter, Dorothea. “Frege and Language,” Internet Encyclopedia of Philosophy, 2005
http://www.iep.utm.edu/freg-lan/

“Philosophy of Mathematics,” Stanford Encyclopedia of Philosophy, 2007 (rev. 2012)
http://plato.stanford.edu/entries/philosophy-mathematics/

“Principia Mathematica,” Stanford Encyclopedia of Philosophy, 1996 (rev. 2010)
http://plato.stanford.edu/entries/principia-mathematica/

“Logicism,” Wikipedia
http://en.wikipedia.org/wiki/Logicism

BIBLIOGRAPHY
Beaney, Michael. 2013. The Oxford Handbook of the History of Analytic Philosophy. Oxford University Press, Oxford.

Gillies, Donald. 2000. Philosophical Theories of Probability. Routledge, London and New York.

Glock, Hans-Johann. 2008. What is Analytic Philosophy?. Cambridge University Press, Cambridge, UK and New York.

Keynes, John Maynard. 1921. A Treatise on Probability. Macmillan, London.

Martinich, A. P. and David Sosa (eds.). 2006. A Companion to Analytic Philosophy. Blackwell, Malden, Mass. and Oxford.

Preston, Aaron. 2012. Review of Stephen P. Schwartz, A Brief History of Analytic Philosophy: From Russell to Rawls
http://ndpr.nd.edu/news/36378-a-brief-history-of-analytic-philosophy-from-russell-to-rawls/

Russell, Bertrand. 1905. “On Denoting,” Mind 14: 479–493.

Schwartz, Stephen P. 2012. A Brief History of Analytic Philosophy: From Russell to Rawls. Wiley-Blackwell, Chichester, UK.

Soames, Scott. 2003a. Philosophical Analysis in the Twentieth Century. The Age of Meaning. Volume 2. Princeton University Press, Princeton, N.J. and Oxford.

Soames, Scott. 2003b. Philosophical Analysis in the Twentieth Century. The Dawn of Analysis. Volume 1. Princeton University Press, Princeton, N.J. and Oxford.

Stroll, Avrum. 2000. Twentieth-Century Analytic Philosophy. Columbia University Press, New York.

Lee’s Post Keynesian Price Theory: Chapter 1

Frederic S. Lee’s Post Keynesian Price Theory (Cambridge, 1998) is – as the name suggests! – a standard account of the theory of prices in Post Keynesian economics.

I present a brief summary below of Chapter 1.

Chapter 1 deals with the work of Gardiner C. Means, an American Institutional economist and researcher. In the 1920s, while he was involved in a textile manufacturing business, Means noticed that the prices of cotton and wool yarns and the way he set his own prices did not match the price theory of economic textbooks (Lee 1998: 19). He also became interested in the causes of depressions.

In 1924, Means began research as a graduate student at Harvard, but found it difficult to take seriously the neoclassical theory he learned as compared with his actual experience as a businessman (Lee 1998: 20). After his MA, Means collaborated with Adolf Berle on research and co-authored The Modern Corporation and Private Property (1932).

Means came to note how the modern corporation can affect prices without being a monopoly (Lee 1998: 26), and how its prices were administered, like other parts of its internal administration, and set before transactions and held constant sometimes for years on end (Lee 1998: 27–28).

Means also noted how industrial prices in the Great Depression were not as flexible as agricultural prices, since the industrial sector was where administered prices were most predominant (Lee 1998: 28). He also formulated a pre-Keynesian explanation of the Great Depression, emphasising the way in which firms cut production and employment, rather than prices, in particular in response to initial demand shocks (Lee 1998: 34–36, 37). Thus Means grasped that the adjustment process as theorised in neoclassical economics was unrealistic for an economy like the United States and other advanced industrial economies.


BIBLIOGRAPHY
Lee, Frederic S. 1998. Post Keynesian Price Theory. Cambridge University Press, Cambridge and New York.

Robert Murphy’s Politically Incorrect Guide to the Great Depression, Chapter 1: A Critique

I have recently bought a copy of Robert Murphy’s The Politically Incorrect Guide to the Great Depression and the New Deal (Washington, DC, 2009), an Austrian interpretation of the greatest crisis in modern capitalist history.

The book is an object lesson in why most analysis of this period by Austrians is fundamentally unsound.

Let us review the problems with “Chapter 1: The Crisis,” in a number of points as follows:

(1) From the beginning, we find quite brazen, questionable statements.

Murphy tells us that Franklin Roosevelt’s New Deal “failed to lift America out of the worst economic times in our history” (Murphy 2009: 5).

When Roosevelt was inaugurated and after he turned to moderately expansionary fiscal policy (Murphy’s [2009: 21] claim that Roosevelt engaged in “massive deficit spending” is not even true), both real US GDP and real per capita GDP grew and expanded at quite high rates historically, as we can see here:

Year | GDP* | Growth Rate
1929 | $977,000
1930 | $892,800 | -8.61%
1931 | $834,900 | -6.48%
1932 | $725,800 | -13.06%
1933 | $716,400 | -1.29%
1934 | $794,400 | 10.88%
1935 | $865,000 | 8.88%
1936 | $977,900 | 13.05%
1937 | $1,028,000 | 5.12%
1938 | $992,600 | -3.44%
1939 | $1,072,800 | 8.07%
1940 | $1,166,900 | 8.77%
* Millions of 2005 dollars
http://www.measuringworth.com/datasets/usgdp/result.php

Next, real per capita GDP:

Real US Per Capita GDP 1870–2001
(in 1990 international Geary-Khamis dollars)
Year | GDP | Growth rate
1929 | 6899 | 5.02%
1930 | 6213 | -9.94%
1931 | 5691 | -8.40%
1932 | 4908 | -13.75%
1933 | 4777 | -2.66%
1934 | 5114 | 7.05%
1935 | 5467 | 6.90%
1936 | 6204 | 13.48%
1937 | 6430 | 3.64%
1938 | 6126 | -4.72%
1939 | 6561 | 7.10%
1940 | 7010 | 6.84%
(Maddison 2003: 88).

So how exactly does Murphy explain the actual real output data? Murphy asserts that the “recovery was sluggish” (Murphy 2009: 12), but the GDP figures do not support him: the years of recovery under Roosevelt, when fiscal expansion occurred, saw some of the highest real GDP growth rates ever seen in American history, with rates of about 8% in three years, and one year with a 13% growth rate.

By 1936, real GDP had surpassed its 1929 level, and in 1937 real per capita GDP was close to reaching its 1929 level as well – until Roosevelt listened to advocates of fiscal austerity and the economy plunged back into recession.

Furthermore, Murphy has clearly never read M. R. Darby’s “Three-and-a-Half Million U.S. Employees Have Been Mislaid: Or, an Explanation of Unemployment, 1934–1941” (Journal of Political Economy 84.1 [1976]: 1–16). If he did, he would know that official unemployment statistics badly overestimate unemployment under Roosevelt, because of nothing more than ridiculous bias on the part of Lebergott, who compiled the figures. Lebergott failed to include employment provided by emergency and relief work in US federal government programs in his figures (Darby 1976).

When employment provided by relief work is included in the employment figures, unemployment under Roosevelt came down from 25% in 1933 to just under 10% by 1937, on the eve of his turn to austerity. This is a much better record on unemployment than the official statistics reveal. Before austerity hit the US economy in 1937, unemployment was no longer at double digit figures. The unemployment rate soared again when Roosevelt cut government spending from 1937, but the adjusted figures show it rising from under 10% to about 12.5% in 1938, and not to around 19% as in the old figures.

What is particularly amusing is that later in Chapter 1 Murphy contradicts himself on whether Roosevelt’s stimulus helped the economy: he asserts that “the economy seemed to respond to FDR’s bold measures, at least for a while” and it “looked as if the New Deal was working” (Murphy 2009: 12). Then by p. 21, Murphy backtracks, and claims that “massive deficit spending during the 1930s” went “hand-in-hand with chronic double-digit unemployment” – as if unemployment never fell at all under Roosevelt. Then we read that the 1930s was a “failed decade of deficit spending” (Murphy 2099: 24).

At this point, we come to the crux that destroys Murphy’s analysis. At pp. 13–14, Murphy notes that the economy returned to depression in 1938 (the “depression within the Depression”), but never asks why that happened. The major failing of Murphy’s chapter is his unwillingness to explain why America returned to depression in 1938. If he had bothered to do so, he would have found strong evidence that contradicts his Austrian interpretation of the Great Depression.

The answer is that the economy plunged back into depression because in 1937 and 1938 Roosevelt turned to budget balancing. The result was that the federal deficit was virtually eliminated by fiscal year 1938 by the raising of taxes (which contracted private spending power) and the reduction in overall federal spending. In June 1936, the Revenue Act passed Congress and caused a significant increase in income tax rates, as well as the tax on undistributed profits. The main effect of the tax on undistributed profits was to adversely affect the cost of investment for small and medium-sized firms. There is a reasonable case to be made that this tax increased business uncertainty about profitability of investment. Furthermore, the collection of the Social Security tax began in January 1937, another tax measure contracting private spending power.

When fiscal expansion occurred, the economic data show a significant recovery from depression in the 1930s – if not to full employment – but, if anything, they would strongly suggest that the US economy in 1937 was on the road to full employment, if not for the disastrous austerity and fiscal contraction induced by deficit hawks of that era.

Roosevelt was to blame because he listened to them and became a deficit hawk himself. But this lesson is lost on Murphy.

Furthermore, if fiscal expansion clearly promoted recovery, then it follows that more radical fiscal expansion would have led to a faster and better recovery.

Another dismal failing of many Austrian discussions of the Great Depression is the contemptible unwillingness to look at what happened outside the US.

As I have shown here, we have clear evidence that fiscal expansion and stimulus lead to strong and relatively rapid recoveries from depression in New Zealand, Germany and Japan:

“Keynesian Stimulus in New Zealand: 1936–1938,” September 23, 2011.

“Takahashi Korekiyo and Fiscal Stimulus in Japan in the 1930s,” August 27, 2011.

“Fiscal Stimulus in Germany 1933–1936,” September 3, 2011.

(2) On p. 9, Murphy discusses margin trading and its role in the stock market bubble of the 1920s, but totally fails to prove his point: in fact, he does nothing but reinforce the old conclusion that unregulated margin trading had a major role in financial market instability. Murphy’s attempt to pin the blame mainly on the Federal Reserve’s cheap money policy ignores the fact that financial market regulation was precisely what was needed to put curbs on speculative lending.

(3) On p. 11, Murphy notes business opposition to Roosevelt’s New Deal, but ignores the important point that American business was divided in its view of Roosevelt: some opposed him and some supported him. Intense business opposition was restricted to certain sectors:

“While encouraging the growth of big labor and ministering to the needs of the elderly and the poor, the New Deal also provided substantial benefits to American capitalists. Business opposition to Roosevelt was intense, but it was narrowly based in labor-intensive corporations in textiles, automobiles, and steel, which had the most to lose from collective bargaining. The New Deal found many business allies among firms in the growing service industries of banking, insurance, and stock brokerage where government regulations promised to reduce cutthroat competition and to weed out marginal operators. Because of its aggressive policies to expand American exports and investment opportunities abroad, the New Deal also drew support from high-technology firms and from the large oil companies who were eager to penetrate the British monopoly in the Middle East. Sophisticated businessmen discovered that they could live comfortably in a world of government regulation. The ‘socialistic’ Tennessee Valley Authority lowered the profits of a few utility companies, but cheap electric power for the rural South translated into larger consumer markets for the manufacturers of generators, refrigerators, and other appliances.” (Levy et al. 1986: 447-448).

(4) On p. 15, Murphy repeats the myth that Hayek predicted the Great Depression. But that simply isn’t true, as I have shown here:

“Lionel Robbins and the Myth of Hayek’s Prediction of the Great Depression,” February 5, 2012.

“Hayek and the Stock Market Crash of 1929: So Much for His Predictive Powers,” December 28, 2011.

(5) At p. 18, Murphy briefly discusses Milton Friedman, in order to dismiss the latter’s monetarist views on the cause of the Great Depression. Friedman argued that the depth of the depression was caused by the inaction of the Federal Reserve when it allowed the money supply to collapse from 1929 to 1933.

But Murphy fails to mention that a somewhat similar view can also be found amongst certain Austrian economists: Hayek came to believe that an unnecessary and disastrous “secondary deflation” could affect an economy in recession:

“Hayek on Secondary Deflation,” January 24, 2011

“Hayek on Monetary Stabilisation in a Secondary Deflation,” August 6, 2011.

Hayek even expressed agreement with Milton Friedman later in life:

“There is no doubt, and in this I agree with Milton Friedman, that once the Crash had occurred, the Federal Reserve System pursued a silly deflationary policy. I am not only against inflation but I am also against deflation! So, once again, a badly programmed monetary policy prolonged the depression” (Pizano 2009: 13).

Hayek and Ludwig Lachmann even endorsed limited Keynesian stimulus during a depression, but one would never know that from Murphy’s book. Murphy appears to represent one extreme subset of the Austrian school: the Rothbardians.

By p. 24, Murphy acknowledges that the US money supply did indeed “shrink by a third from 1929 to 1933.” But then we read that “there was nothing unprecedented about the speed of the collapse in the money supply .. of the 1930s” (Murphy 2009: 24). Yet Murphy provides no empirical data to support this claim. Can Murphy really point to a period when money supply in America collapsed with this speed and depth, and when there was no recession or depression?

(6) At 23, Murphy badly misrepresents American economic history. He asserts that:

“America’s free market economy had always rebounded from its previous depressions – usually within two years and at most within five years” (Murphy 2009: 23).

On p. 25, we read that before the creation of the Federal Reserve “somehow depressions always managed to sort themselves out fairly quickly.” First, even if it were true that the US economy, before 1914, always recovered within five years of a recession, a five year period can hardly be considered short.

Secondly, the statement is not even true. America had two periods of severe economic malaise in the late 19th century, which lasted more than five years: the 1873–1879 period and 1893–1899 era. In the 1870s, America had a seven year period of economic crisis: a recession (from 1873–1875) and then rising unemployment until 1878, which remained high until 1879.

In the 1890s, America had a double dip recession (the first from 1893–1894 and second in 1896) and then high unemployment up until 1899 – another seven year period of economic malaise.

The interested reader can find more on these periods here:

“US Unemployment in the 1890s,” January 24, 2012.

“Rothbard on the US Economy in the 1870s: A Critique,” September 24, 2012.

Since we do not really have decent estimates for early and mid 19th century GDP and unemployment, we cannot say whether there were periods as bad as the 1870s/1890s in those times.

(7) A final, latent failing of this first chapter and the book in general is the unwillingness to clearly differentiate Keynesian economics from the New Deal: the two were not the same. Conflation of modern Keynesian policies and the New Deal is simply misleading.

The New Deal did indeed have some deleterious aspects, and they were opposed and criticised by Keynes himself, as I have pointed out here:

“Keynes on the New Deal in 1933,” September 2, 2011.

In particular, Keynes criticised the National Industrial Recovery Act (NIRA) and attempts at raising prices by restricting output. Not every program in the New Deal was constructive, and pointing to the failure or harmful nature of some programs does not discredit modern Keynesian theory.

All in all, Chapter 1 of The Politically Incorrect Guide to the Great Depression and the New Deal does not inspire much confidence in Murphy’s analysis, or his questionable Rothbardian school myth-making about the 1930s.

BIBLIOGRAPHY

Darby, M. R. 1976. “Three-and-a-Half Million U.S. Employees Have Been Mislaid: Or, an Explanation of Unemployment, 1934–1941,” Journal of Political Economy 84.1: 1–16.

Levy, L. W. et al. (eds). Encyclopedia of the American Constitution (vol. 1). Macmillan, New York.

Maddison, Angus. 2003. The World Economy: Historical Statistics. OECD Publishing, Paris.

Murphy, Robert. 2009. The Politically Incorrect Guide to the Great Depression and the New Deal. Regnery Publishing, Inc. Washington, DC.

Pizano, D. 2009. Conversations with Great Economists. Jorge Pinto Books Inc., New York.

Chapter 1 of Huerta de Soto’s Money, Bank Credit and Economic Cycles: A Critique

Jesús Huerta de Soto is author of Money, Bank Credit and Economic Cycles (3rd edn.; trans. M. A. Stroup, Auburn, Ala., 2012). It is one of those appallingly long Austrian tomes (like Human Action), whose sheer length seems designed to bludgeon the reader into submission.

But don’t be fooled by the length and prima facie scholarly tone of Money, Bank Credit and Economic Cycles: it is a terrible book, badly flawed.

In what follows I use and cite the 3rd edition of 2012 in a critique of Chapter 1.

You will need a basic understanding of the mutuum contract and the irregular deposit (depositum irregulare).

Huerta de Soto’s book seems to be the most recent and extensive treatise by an anti-fractional reserve banking Austrian. Reading it, I am struck by the many following errors in his interpretation of Roman contract law in Chapter 1 (and I have incorporated an earlier post here):

(1) Huerta de Soto misunderstands the nature of the mutuum contract. He defines the mutuum contract in these terms:

“Mutuum (also from Latin) refers to the contract by which one person—the lender—entrusts to another—the borrower or mutuary—a certain quantity of fungible goods, and the borrower is obliged, at the end of a specified term, to return an equal quantity of goods of the same type and quality (tantundem in Latin). A typical example of a mutuum contract is the monetary loan contract, money being the quintessential fungible good. By this contract, a certain quantity of monetary units are handed over today from one person to another and the ownership and availability of the money are transferred from the one granting the loan to the one receiving it. The person who receives the loan is authorized to use the money as his own, while promising to return, at the end of a set term, the same number of monetary units lent. The mutuum contract, since it constitutes a loan of fungible goods, entails an exchange of “present” goods for “future” goods. Hence, unlike the commodatum contract, in the case of the mutuum contract the establishment of an interest agreement is normal, since, by virtue of the time preference (according to which, under equal circumstances, present goods are always preferable to future goods), human beings are only willing to relinquish a set quantity of units of a fungible good in exchange for a greater number of units of a fungible good in the future (at the end of the term).” (Huerta de Soto 2012: 2–3).

The trouble with this definition is that there is no reason why the mutuum contract – legally, morally, economically or historically – should be limited to a specific time period. Certainly in ancient Roman and Anglo-American law there is no such restriction.

Huerta de Soto is adamant that the mutuum contract is repaid by means of fungible goods of the same type or value, but at the end of a specified term or “at the end of a set term.”

But why must there even be a specified term at all? One can freely contract to lend a fungible good to another person, but both agree that the lender can recall the loan on demand, without any specific date being set.

And this does not even need or involve money: e.g., I lend my neighbour a chicken. My neighbour has a dozen chickens, but would like another one. We both agree I can come to my neighbour in a week, month or several months or at any time I want, and say “can I get back a chicken that will repay your loan to me?”

My neighbour may well have eaten the chicken in the meantime but provides a healthy chicken of the same age, size and value, which was all part of the original agreement. Or we may have contracted for some interest, say, 3 eggs with the chicken.

This sort of transaction can be applied to chickens, cows, animals, capital goods, and, above all, money: there is no reason whatsoever why a specified time element need be part of a mutuum contract.

Even looking at the legal history of contract in the Roman Republic and Roman empire, I see no evidence that the mutuum contract from its early history in Western civilization in ancient Rome ever required strict set dates or fixed term contracts (Zimmermann 1990: 155–156).

In Roman law, a loan of money was a mutuum, but interest and a set date (if the two parties wanted one) for repayment would be by additional stipulatio (= stipulation). In fact, without such an additional stipulatio, Roman law said that the lender could recall his loan at any time:

“A loan transaction can hardly achieve its purpose if the capital has to be repaid immediately after it has been handed over by the lender to the borrower. Yet this was, strictly speaking, the case where the mutuum was not accompanied or reaffirmed by a stipulation. For it was the datio [the act of giving over the thing borrowed – LK] that gave rise to the obligation to repay the capital, and this obligation came into effect immediately.” (Zimmermann 1990: 156).

That is to say, the default legal form of a mutuum in Roman law was a callable loan, even callable immediately.

Let us turn to English law. We can cite the The Laws of England: Being a Complete Statement of the Whole Law of England (vol. 2; 3rd edn.; 1964) on the mutuum:

“The contract of mutuum differs from that of commodatum, in that in the latter a bare possession of the chattel lent, as distinguished from the property in it, vests in the borrower, the general property in it still remaining in the lender; where in mutuum that property in the chattel passes from the lender to the borrower. Mutuum is confined to such chattels as are intended to be consumed in the using and are capable of being estimated by number, weight, or measure, such as money, corn, or wine. The essence of the contract in the case of such loans is, not that the borrower should return to the lender the identical chattels lent (for such specific return would ordinarily render the loan valueless), but that upon demand or at a fixed date the lender should receive from the borrower an equivalent quantity of the chattels lent.” (Halsbury 1964: 112).

This explicitly states that, in the case of a mutuum contract, even a demand deposit in a fractional reserve bank, the loan can be repaid either at a fixed future date or on demand.

And it should be noted that, as early as the 18th century, the mutuum contract is also defined in the same terms as seen above by Thomas Wood (1661–1722), an English Doctor of Civil Law (New College, Oxford) and author of the leading work on English law in that era. In the 4th edition of A New Institute of the Imperial or Civil Law (1730; 1st edn. 1704), we have this definition of the mutuum:

“Mutuum (a Loan simply so call’d quod de meo tuum fiat [sc. “because let what is mine become yours”])

It hath no one particular name in the English Language.

is a Contract introduced by the Law of Nations, in which a Thing that consists in weight (as Bullion,) in number (as Money,) in measure (as Wine,) is given to another upon condition that he shall return another thing of the same Quantity, Nature and Value upon demand. More than Consent is required, for the Thing, viz. Money, Wine, or Oil ought to be actually delivered, and more than what was delivered cannot be repaid; but less may be repaid by Agreement. This Contract forces men to be industrious and promotes Trade, and for this reason it may be greater charity to lend than to give. Creditum is a more general Word. In the case of Money, Silver may be repaid tor Gold, unless the Creditor is to be damnified by it; for it shall be understood to be the same kind of Money when it is of the same” (Wood 1730: 212).

So even in the early 18th century in the law of the United Kingdom the mutuum is a loan repayable upon demand: a specific and strict time period (or term) for the loan is not required, though obviously the mutuum can involve a fixed term or a set date for repayment by contract.

Over a century later in America in 1848, a case is recorded in the Court of Appeals of the State of New York, involving Benjamin C. Payne, Executor vs. William Gardiner. In this case, the American court defined the mutuum in relation to deposit banking:

“In cases of mutuum the party borrowing was not held to pay interest upon the money lent; but in cases of irregular deposit, interest was due by the depositary, both ex nudo pacto and ex mora. This distinction between the two classes of deposit, as to interest, is not recognized by our law. The depository being liable in each for interest, in the event of a breach of duty.

A deposit of money with a bank or private person is what is known in the civil law as a mutuum or irregular deposit—the distinction between the two kinds of deposit not being recognized by the common law.

When money is borrowed, and no time of payment is fixed by the contract of loan, the debt, as already stated, is instantly due, and an action may be brought without demand — the bringing of the action being a sufficient demand to entitle the lender to recover. (Chitty on Contracts, 734; Norton v. JEUam, 2 M. & W. 461.)

Even if the debt is by the terms of the agreement to be paid on demand, yet no special demand is necessary; the money being due without it.” (Tiffany 1865: 168).

“In Story on Bailments (p. 66 § 88), it is said that ‘in the ordinary cases of deposits of money with banking corporations or bankers, the transaction amounts to a mere loan or mutuum, or irregular deposit, and the bank is to restore not the same money but an equivalent sum whenever it is demanded.’” (Tiffany 1865: 169).

So American law follows English law on the mutuum: a loan under such a contract can be repaid on demand, without a specific time being set.

(2) The Classical Roman jurists include Gaius (c. 115–180 AD), Papinian (142–212 AD), Ulpian (c. 170–228), Paul (fl. 228–235 AD), and Modestinus (fl. 250 AD).

In later Roman law by the time of Justinian, there appears to have been a type of contract that modern scholars call the depositum irregulare (or irregular deposit), a term invented by the fifteenth century jurist Jason of Maino. This contract, when involving money, allowed the transferral of ownership (dominium) of money deposited in a bank to the banker. Thus the money could be used by the bank and lent out to provide a return in interest for the “depositor,” and the “depositor” received back the same quantity (or tantundem) of money, not the same money itself that had been deposited (Zimmermann 1990: 215–216). Note how the word “deposit” is highly misleading here, because the irregular deposit is very much like a mutuum (a loan for consumption).

Indeed, in the time of the Roman jurists Ulpian (c. 170–223 AD) and Papinian (142–212 AD), it appears that the depositum irregulare was merely considered to be a type of mutuum, and it may well be that the whole legal concept of depositum irregulare is a development of later legal theorists, unknown to jurists of the second or third century AD (Oudshoorn 2007: 135–136). Admittedly, there are a number of dissenting modern legal scholars these days who do think that the Classical Roman jurists recognised the depositum irregulare (Evans-Jones and MacCormack 1998: 133), but even if so, it was almost the functional equivalent of the mutuum, and the question is still controversial.

The depositum irregulare (or irregular deposit) is sometimes also called the “improper deposit” or “general deposit” in modern legal terminology, and as a legal concept has been most influential on the civil law systems on Continental Europe, rather than in Anglo-American law.

Now Huerta de Soto has a very questionable definition of the irregular deposit. He asserts that the classical Roman jurists

“had already recognized the irregular deposit contract, understood the essential principles governing it, and outlined its content and essence as explained earlier in this chapter.” (Huerta de Soto 2012: 26).

By the latter clause, Huerta de Soto seems to mean that Roman classical jurists defined the irregular deposit contract in the terms he himself describes it on pp. 4–20. But Huerta de Soto’s definition of the irregular deposit (depositum irregulare) includes these two characteristics that are highly dubious:

(1) there is no interest on the money “deposited” in the irregular deposit, and
(2) the bank is required to keep what Huerta de Soto misleadingly calls a tantundem always available in full for all holders of irregular deposits.

These two aspects make Huerta de Soto’s definition of the irregular deposit utterly unorthodox. He cites certain Spanish legal sources and Spanish legal scholars for his definition, but it is clearly eccentric and aberrant, certainly with respect to Roman law and Anglo-American law.

Huerta de Soto’s assertion that the classical Roman jurists defined the irregular deposit in the way he does (and perhaps in the way certain Spanish legal scholars do) is untrue.

First, as we have seen above, the question whether the classical Roman jurists even had a concept of the “irregular deposit” is intensely problematic (Zimmermann 1990: 217): many scholars think that the irregular deposit (depositum irregulare) was not even recognised by the classical Roman jurists (Schulz 1951: 520), who interpreted “deposit” banking in terms of the mutuum contract. Some scholars also feel that many of the texts in Justinian’s Digest from earlier jurists that seem to refer to the irregular deposit are interpolated and hence unreliable (Schulz 1951: 520).

Secondly, contrary to Huerta de Soto, the irregular deposit by the time of post-Classical Roman law in Justinian’s Digest regularly paid interest (Buckland 1963: 470):

“the so-called ‘irregular’ deposit primarily concerned deposits of money upon the terms that the recipient - often but not necessarily a banker - was bound to restore not the same coins but an equivalent, ownership of the deposit being transferred to him. As he was owner the depositee could use the money, in which case it was usual to pay interest on it to the depositor. There are clearly similarities between this contract and mutuum.” (Evans-Jones and MacCormack 1998: 133).

Thirdly, there was absolutely no obligation that the banker had to keep a tantundem always available in full for all holders of irregular deposits at all times. If Huerta de Soto were correct, then no institution taking irregular deposits could ever be a bank or pay interest: it would be the equivalent of a mere warehouse facility. Yet even in late Roman law the irregular deposit paid interest.

In short, Huerta de Soto’s definition of the irregular deposit is at variance with Roman law.

(3) Jesús Huerta de Soto cites Justinian’s Digest 16.3.24 and argues that whenever anyone made an irregular deposit of money in Roman times, he received a written certificate or deposit slip. In fact, the relevant passage of the Digest says nothing of the sort. Here it is in full:

“Lucius Titius to Sempronius
Greeting: ‘I notify you by this letter written by my own hand, that the hundred pieces of money which you loaned to me this day, and which have been counted by the slave Stichus, your agent, are in my hands, and that I will pay them to you on demand, when and where you desire me to do so.’ The question arises whether any increase by way of interest is to be considered? I answered that an action on deposit will lie, for what is the loaning of anything for use but the depositing of it? This is true, if the intention was that the very same coins should be returned, for if it was understood that only the amount should be paid, the agreement exceeds the limits of the deposit. If, in the case which has been stated, an action on deposit will not lie, since it was only agreed to pay the same sum, and not the identical coins, it is not easy to determine whether an account of the interest should be taken. It has, in fact, been established that, in bona fide actions, it is the duty of the judge to decide that, with reference to interest, only such can be paid as the stipulation provides for. But is contrary to good faith and the nature of a deposit, that interest should be claimed before the party who granted the favor by receiving the money, is in default in returning it. If, however, the agreement was that interest should be paid from the beginning, the condition of the contract shall be observed.” (Digest 16.3.24).

This text merely refers incidentally to a letter that Lucius Titius wrote to Sempronius, by which the former informed the latter of the money he had received from him: there is absolutely nothing here to lead us to infer that, when someone made an irregular deposit of money, that person regularly or formally received a written certificate or deposit slip in Roman times.

(4) On pp. 29–30, de Soto commits a quite clear error:

“[sc. Digest 16.3.24] … reveals the immediate availability of the money to the depositor and the custom of giving him a deposit slip or receipt certifying a monetary irregular deposit, which not only established ownership, but also had to be presented upon withdrawal.

The essential obligation of depositaries is to maintain the tantundem constantly available to depositors. (Huerta de Soto 2012: 29–30).

But we have already seen that Digest 16.3.24 does not establish at all that the depositor received a written certificate or deposit slip when money was left on irregular deposit or even regular deposit (or bailment).

Huerta de Soto’s statement that the “essential obligation of depositaries is to maintain the tantundem constantly available to depositors” when applied to Roman law is utterly wrong and confused, as I have also noted above.

Huerta de Soto has imported questionable legal definitions of the irregular deposit from the various Spanish legal scholars that he cites which do not apply to Roman law, or indeed to Anglo-American contract law. Frankly, I doubt whether his definition of the irregular deposit even applies to interpretations of that concept in many other Continental European civil law systems either.

A tantundem applies to the mutuum loan or irregular deposit (depositum irregulare), and is the quantity of fungible goods of the same value, quality or amount returned to the creditor when he (1) requests repayment (as in a callable loan) or (2) when his loan is due (as in a loan with a set term/time limit). Despite Huerta de Soto, the debtor is not obliged to maintain a “tantundem constantly available to depositors” at all: he is only obliged to repay a tantundem when he is asked or when the debt is due.

On p. 35, Huerta de Soto makes the very same error:

“However, the [sc. medieval] codes do not include the important clarifications made in the Corpus Juris Civilis to the effect that, though ownership is “transferred [sc. in the case of the irregular deposit],” the safekeeping obligation remains, along with the responsibility to keep continually available to the depositor the equivalent in quantity and quality (tantundem) of the original deposit.” (Huerta de Soto 2012: 35).

Huerta de Soto is wrong. The Medieval codes did not include any such “clarifications” because they did not exist in Roman law, even in the post-Classical period. In Roman law, no such obligation occurred in the case of the irregular deposit: it was in essence the functional equivalent of a mutuum, and the tantundem was required to be paid when due or (if it was in the contract) on demand. The banker was not obliged to engage in some safekeeping obligation in which he had to “keep continually available to the depositor the equivalent in quantity and quality (tantundem) of the original deposit.”

On p. 31 and p. 34, Huerta de Soto misuses the word tantundem again: he applies the term tantundem to a regular deposit (depositum regulare or bailment), where it is inappropriate.

(5) On pp. 30–32, Huerta de Soto conflates the terms of the regular deposit (depositum regulare) with irregular deposit (depositum irregulare).

All in all, Chapter 1 of Huerta de Soto’s Money, Bank Credit and Economic Cycles has incredible and shocking errors. And this is just the first chapter.

BIBLIOGRAPHY
Buckland, William Warwick. 1963. A Text-book of Roman Law from Augustus to Justinian (3rd edn.). Cambridge University Press, Cambridge.

Evans-Jones, R. and G. MacCormack. 1998. “Obligations,” in E. Metzger (ed.), A Companion to Justinian’s Institutes. Cornell University Press, Ithaca, N.Y. 127–207.

Halsbury, H. S. G. 1964. The Laws of England: Being a Complete Statement of the Whole Law of England (vol. 2; 3rd edn.; ed. G. T. Simonds), Butterworth, London.

Huerta de Soto, J. 2012. Money, Bank Credit and Economic Cycles (3rd edn.; trans. M. A. Stroup). Ludwig von Mises Institute, Auburn, Ala.

Oudshoorn, J. G. 2007. The Relationship Between Roman and Local Law in the Babatha and Salome Komaise Archives: General Analysis and Three Case Studies on Law of Succession, Guardianship and Marriage. Brill, Leiden and Boston.

Schulz, F. H. 1951. Classical Roman Law. Clarendon Press, Oxford.

Tiffany, J. 1865. Reports of Cases Argued and Determined in the Court of Appeals of the State of New York (vol. II), Weare C. Little, law Bookseller, Albany.

Wood, Thomas. 1730. A New Institute of the Imperial or Civil Law (4th edn.), J. and J. Knapton, London.

Zimmermann, Reinhard. 1990. The Law of Obligations: Roman Foundations of the Civilian Tradition. Juta, Cape Town, South Africa.