Philip Pilkington’s The Reformation in Economics to be published in October

Philip Pilkington has a forthcoming book called The Reformation in Economics: A Deconstruction and Reconstruction of Economic Theory, which is due out in October.

See more details here:

Philip Pilkington, “Achtung! My Book is Coming Out Soon: Here is a Brief Overview and Some Media Links,” Fixing the Economists, May 31, 2016.

There is also a fascinating interview on the book here, well worth listening to.

Philip Pilkington on the Labour Theory of Value

Philip Pilkington (who, alas, is now no longer blogging on Fixing the Economists) has some interesting critiques of Marx and the labour theory of value here:

Philip Pilkington, “Marx, Hegel, the Labour Theory of Value and Human Desire,” Fixing the Economists, August 13, 2013.

Philip Pilkington, “Was Marx Right?,” Fixing the Economists, March 31, 2014.

Philip Pilkington, “Joan Robinson and the Labor Theory of Value,” Fixing the Economists, August 7, 2013.

Philip Pilkington, “Why Sraffa’s Theory Does Not Contain a Labour Theory of Value,” Fixing the Economists, May 6, 2014.

Also, very interesting are his arguments in debates with Marxists on the labour theory in the comments sections of these blog posts:

Matias Vernengo, “Sraffa and Marxism or the Labor Theory of Value, what is it good for?,” Naked Keynesianism, August 14, 2012.

Vienneau, Robert. “Vocabulary For Marxism,” Thoughts on Economics, July 8, 2012.

One of his good examples of how subjective value and advertising have a major role in explaining price is as follows:

“I recall pointing to advertising a number of times and saying that this added value to commodities without any additional human labour.

I had a long argument with two Marxist economists about this and came up with a great example:

Two pairs of runners are made in the same Chinese factory. The inputs are identical -- including labour time. However, one pair gets a little tick stitched onto it and are seen in magazines being worn by Michael Jordan. The other have a little star stitched onto them and are sold in WalMart.

The pair with the tick are sold for four times as much as the pair with the star.

The Marxist economists couldn’t really fault my logic. Without recourse to the idea of false consciousness, or some other moral/metaphysical concept, the labour theory of value can say nothing about any of this.”
Philip Pilkington, July 10, 2012
http://robertvienneau.blogspot.com/2012/07/vocabulary-for-marxism.html?showComment=1341935604166#c1327734235898167917

Some Marxists might reply that the “use values” of the two shoes are different: the one worn by the famous sports star now has a different use value because it is a status symbol.

While one might defend that idea, subjective and intersubjective value are the major forces driving and underlying this difference in demand and price.

And even if a Marxist wants to defend the “use value” explanation, it simply will not work, because Marx says clearly that exchange value is not determined by use value. When Marx explains why two commodities have a given exchange value, he argues they are equal and have a common element but the exchange values are not caused by differing use values, but labour value:

“This common element cannot be a geometrical, physical, chemical or other natural property of commodities. Such properties come into consideration only to the extent that they make the commodities useful, i.e. turn them into use-values. But clearly, the exchange relation of commodities is characterized precisely by its abstraction from their use-values. Within the exchange relation one use-value is worth just as much as another, provided only that it is present in the appropriate quantity. Or, as old Barbon say: ‘One sort of wares are as good as another, if the value be equal. There is no difference or distinction in things of equal value … One hundred pounds worth of lead or iron, is of as great a value as one hundred pounds worth of silver and gold.’

As use-values, commodities differ above all in quality, while as exchange-values they can only differ in quantity, and therefore do not contain an atom of use-value.

If then we disregard the use-value of commodities, only one property remains, that of being products of labour.” (Marx 1982: 127–128).

We can see the argument better in a translation from the German that is more idiomatic English:

“‘This common factor,’ … ‘cannot be a geometrical, physical, chemical or other natural property of the commodities. Their physical properties come into consideration for the most part only in so far as they make the commodities useful, and so make them values in use. But, on the other hand, the exchange relation of commodities is obviously determined without reference to their value in use. Within this relation one value in use is worth just as much as any other, if only it is present in proper proportion.’” (Böhm-Bawerk 1949: 10).

For Marx exchange value is not determined by use-value, but by abstract labour time. If two different types of shoes as goods have the SNLT, then they ought to have the same exchange value. But that is clearly not the case.

The business can charge a larger mark-up on one pair of shoes worn by a celebrity and people will buy it because of subjective and intersubjective value and demand.

The SNLT is irrelevant here, and does not determine price. In commodity after commodity, you could demonstrate the same thing too.

BIBLIOGRAPHY
Böhm-Bawerk, Eugen von. 1949. “Karl Marx and the Close of His System,” in Paul. M. Sweezy (ed.), Karl Marx and the Close of His System and Böhm-Bawerk’s Criticism of Marx. August M. Kelley, New York. 3–120.

Marx, Karl. 1982. Capital. Volume One. A Critique of Political Economy (trans. Ben Fowkes). Penguin Books, Harmondsworth, England.

Philip Pilkington on the Natural Rate of Interest

In a great Levy Institute working paper here:

Philip Pilkington, “Endogenous Money and the Natural Rate of Interest,” Levy Institute Working Paper No. 817, September 2014.

More background here.

The paper looks at endogenous money theory and the deficient and flawed way this was been incorporated into the “New Consensus Macroeconomics” (mainstream neoclassical theory), through the use of the natural rate of interest.

Philip Pilkington on Austrian Capital Theory

A great post here by Philip Pilkington on what can be salvaged from Austrian capital theory:

Philip Pilkington, “Capital Theory: An Austrian-Marxian Synthesis,” Fixing the Economists, August 27, 2014.

Here are some of my own posts on this subject below:

“Marshall on Menger’s Orders of Capital Goods,” June 24, 2013.

“Why the Austrian Business Cycle Theory is Wrong (in a Nutshell),” August 3, 2013.

“Hayek on his Simplified Capital Theory Assumptions in Prices and Production,” October 15, 2012.

Discussion of Philip Pilkington’s Reformation in Economics

Some interesting discussion in the video below of Philip Pilkington’s forthcoming book Reformation in Economics. More discussion of the video and the book by Philip here.

Philip Pilkington Interviews

Some very interesting interviews here with Philip Pilkington on economic methodology, aggregate demand and various other subjects.

The first can be found here:

Entitled Thoughts: Philip Pilkington on Modern Economic Methodology, Part 1.

The second is below.

Philip Pilkington on the Financial Sector in the Guardian

Philip Pilkington has a great article in the Guardian on the UK financial sector:

Philip Pilkington, “The Left needs a Deft Touch in Tackling the Financial Sector’s Dominance,” Guardian.com, 4 April 2014.

There are some further comments here.

He reviews the decline of British manufacturing after Thatcher’s disastrous economics policies and the rise of the financial sector, and how reform of the financial sector must be accompanied by policies to reduce the trade deficit by rebuilding British manufacturing to address any possible balance of payments imbalance.

I would suggest a state-funded industrial policy that could be designed to use automation and increasingly cheap robotics to re-shore manufacturing from overseas (re-shoring is already a clear trend in the US, though not perhaps because of explicit government support), accompanied with increased Keynesian stimulus on public infrastructure and social spending plus the MMT Job Guarantee.

Philip Pilkington Interviews Philip Mirowski

Here:

Philip Pilkington, “An Interview With and Overview of the Work of Philip Mirowski,” Fixing the Economists, February 21, 2014.

The interview ranges widely over many fascinating subjects, but, above all, the origin of neoclassical economics in the late 19th century marginalist revolution and its questionable derivation of fundamental ideas, such as general equilibrium, from classical physics, when those ideas are not warranted in a social science like economics.

Philip Pilkington on the Myth of Hyperinflation

First, you need only look at the video below to see the kind of hysterical craziness that was unleashed after the crisis of 2008 and the turn in the Western world to that most misunderstood of policies: quantitative easing.



According to the Austrian economics-inspired crank Marc Faber, hyperinflation in the US was “100% certain,” no less!

Well, we are still waiting for that alleged hyperinflation.

Philip Pilkington has an old but wonderful post here that really is one of the best refutations of this nonsense I have ever seen:

Philip Pilkington, 2013. “Hyperinflation! The Libertarian Fantasy That Never Occurs,” Nakedcapitalism.com, March 6.

The answer is, quite simply, that Austrians and hyperinflation cranks do not – and have never – understand real world capitalism.

Their economic models and assumptions are virtually worthless, and they have never understood the role of administered prices/mark-up prices, excess capacity, and stocks/inventories in modern economies.

I advise them to read Nicholas Kaldor’s classic Economics Without Equilibrium (Armonk, N.Y., 1985), simply one of the best short introductions to real world capitalism you will find.

Philip Pilkington Blog: “Fixing the Economists”

Philip Pilkington is blogging again at his blog “Fixing the Economists”:

Philip Pilkington, Fixing the Economists
http://fixingtheeconomists.wordpress.com/

The latest post is a great discussion of Knightian versus Keynesian concepts of uncertainty in relation to probability theory, and ties in nicely with my last post of extended links to Lars Syll on probability and economics:

“Born Blind: Lars Syll, Uncertainty and the Question of Truth Versus Relativism,” Fixing the Economists, July 8, 2013

Philip Pilkington on Hayek and the Origins of Neoliberalism

Philip Pilkington was recently interviewed here in an insightful discussion on Hayek’s later career and ideological role in the emergence of neoliberalism:

“The Origins of Neoliberalism Part IV: A Map of Hayek’s Delusion,” January 30, 2013.

One crucial point brought out here is how Hayek’s research program in economics essentially failed by the 1940s, and he turned to political and ideological posturing, in, for example, the Mont Pelerin Society.

Why did Hayek virtually give up on serious technical work in economics, you might ask?

The answer is given eloquently by Ingrao:

“The very critique of general equilibrium theory that Hayek advanced … undermined his own research project on equilibrium and [sc. the] business cycle as structured in the early 1930s. In the programme to build a dynamic approach inspired by general equilibrium theory (such was the original intention and aspiration), reconciliation between equilibrium and cycle proved impossible, since there appeared to be no way to incorporate disappointed expectations and change into equilibrium models. The result was reached by Hayek himself as also by Lindahl and Hicks, while they were rethinking a common core of analytical questions about equilibrium left open by the Lausanne school. It turned out to be not the provisional weakness of an incomplete research project, but a substantial theoretical difficulty, which brought the project to a dead end. In 1937 Hayek’s efforts to embody expectations and change in the structure of equilibrium models was not so much a solution to the insoluble problem as the beginning of new investigation, which brought Hayek practically to abandon the equilibrium scaffolding.

In the 1940s Hayek’s research project ran aground due to difficulties in the theory of capital. A Pure Theory of Capital … marked another critical point on the ambitious path to merging equilibrium and cycle, starting from the Austrian vision of capital as investment of resources in structured time sequences. Complexity prevailed and Hayek gave up the project to incorporate monetary theory into his capital theory ... Meanwhile Hayek was moving in other directions, new tasks absorbed him, leaving the earlier research programme to take second place in his mind. Actually, it was never resumed.” (Ingrao 2005: 244–245).

When Hayek’s economics essentially failed, he turned to a different program: social and political theorising.

BIBLIOGRAPHY

Ingrao, B. 2005. “When the Abyss Yawns and After. The Correspondence between Keynes and Hayek,” in M. C. Marcuzzo and A. Roselli (eds.), Economists in Cambridge. A Study Through their Correspondence, 1907–1946. Routledge, London. 236-256.