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Sunday, August 6, 2017


I was more or less ignorant of economics until the late 1970s [notice that I have learned from previous comments about the proper use of the apostrophe], despite having read my way through some edition or other of Samuelson's textbook during the fall of 1954, while on my European wanderjahr.  Once I began serious study of micro, macro, and other arcana of the Social Sciences, I became puzzled by something and stopped an Economics Department graduate student one day for enlightenment.  "I have noticed something odd," I said to this budding wunderkind.  "There doesn't seem to be any variable for profit in the general equilibrium models.  What am I missing?"  'Of course not," he answered, obviously convinced that he was speaking to an idiot.

I was too embarrassed to ask why not, so I brooded on this for a while, and finally decided that I wasn't cut out for that discipline.  When I began reading the mathematical reconstructions of the Political Economy of Smith, Ricardo, and Marx, I was pleased to see that each of the equations had a little Greek letter pi, which stood for the profit rate.

Eventually, I came to understand that the centerpiece of Marx's economic theory is his claim that capitalism rests on the exploitation of the working class, from whom profit is extracted by capitalists in the form of surplus labor value.  Despite my theoretical criticisms of the concept of surplus value, I clung tightly to the notion of exploitation as the source of profit, inasmuch as it seemed to me to be the deepest and most fundamentally true idea I had encountered in my long autodidactic study.

How could the manifestly brilliant men [mostly] in the discipline of academic economics have missed a truth that struck me as virtually self-evident?  I reminded myself of Upton Sinclair's oft-quoted observation:  "It is difficult to get a man to understand something, when his salary depends upon his not understanding it!"


s. wallerstein said...

Economists are special.

I recall in my freshman year in a general survey course of Western civilization I had an economist for a professor. Early in the semester I realized that from my high school age reading of Will Durant, the Story of Philosophy, I knew about as much about the great thinkers as he did, although, unlike him, I was interested in learning more.

I did suppose that he knew economics, and so one day after class I asked him how profits would occur (I was not born anti-capitalist) in a world where machines did all the work (remember that the utopia of the machines doing all the work was in fashion in the 60's). He answered brusquely and curtly that that was not his field.

I bet that if a freshman who was curious about a philosopher whom you knew nothing about asked you about him or her, you'd make a bit more of an effort to be helpful, suggest further reading, invite him or her to your office to converse more, etc.

No, a economist does not function like a philosopher does.

Since then, I've worked with lots of economists as a teacher of English as a foreign or second language. The government bureaucracy is full of them, and they are high IQ, but with zero curiosity about the world and with less than zero curiosity about the humanities
and about the great philosophical ethical and political questions. Unlike philosophers, they seem to be proud of how conventional their minds are.

howie b said...

I think you could call economics not a theoretical science but a practical science intended to manage and exploit and maintain the economy and businesses and sectors within it
I don't get it either, especially the stock market

F Lengyel said...
This comment has been removed by the author.
David Auerbach said...

from the wikipedia entry on The Midas Plague:
"The Midas Plague" (originally published in Galaxy in 1954). In a world of cheap energy, robots are overproducing the commodities enjoyed by mankind. The lower-class "poor" must spend their lives in frantic consumption, trying to keep up with the robots' extravagant production, while the upper-class "rich" can live lives of simplicity. Property crime is nonexistent, and the government Ration Board enforces the use of ration stamps to ensure that everyone consumes their quotas. The story deals with Morey Fry, who marries a woman from a higher-class family. Raised in a home with only five rooms she is unused to a life of forced consumption in their mansion of 26 rooms, nine automobiles, and five robots, causing arguments. Trained as an engineer, Morey modifies his robots to enjoy helping to consume his family's quota. He fears punishment when his idea is discovered, but the Ration Board—which has been looking for a way to abolish itself—quickly implements Morey's idea across the world.

F Lengyel said...
This comment has been removed by the author.
F Lengyel said...

Your remarks on profit remind me of a dialogue on the efficient market hypothesis that I intend to illustrate.

A: In an efficient market, all the information about a commodity is reflected in its price.
B: Is that so? Suppose I were to offer you three commodities. Which would you prefer?
A: What are they?
B: The first is 99 cents, the second $1.99 and the third is $99.99.
A: But what are they?
B: I already told you: 99 cents, $1.99 and $99.99!
A: You only told me their price!
B: And those prices contain all the information about them!

TheDudeDiogenes said...

An excellent recent defense of philosophy is Rebecca Newberger Goldstein's Plato At The Googleplex.

AXEC / E.K-H said...

Philosophy: From Plato’s Academy to Trump’s Academy
Comment on Robert Paul Wolff on ‘A comment on the comments’

You ask: “How could the manifestly brilliant men [mostly] in the discipline of academic economics have missed a truth that struck me as virtually self-evident?”

If you were a philosopher you would know that, first of all, there is NO such thing as self-evidence. The sun goes up is self-evident but turns out to be an optical illusion. The very least a self-declared philosopher should have taken notice of is Plato’s cave metaphor which clearly says that what you call self-evident are only the shadows of reality on the cave wall.#1

Being utterly ignorant of the problem of epistemology, your brain-dead explanation for the failure of profit theory consists in simply imputing a motive: “It is difficult to get a man to understand something, when his salary depends upon his not understanding it!”

For the genuine philosopher, this is NOT an answer to the original question of what profit is. Obviously, you do not know it either. Are you also paid to not understand it?

The aim of the philosophical discourse ― in contradistinction to sitcom gossip ― is to advance knowledge: “Remember: occasionally, it may be an interesting question to ask why a man says what he says; but whatever the answer, it does not tell us anything about whether what he says is true or false.” (Schumpeter).#2

Take notice that Marx’s profit theory, which you find self-evident, is provably false.#3 You have simply not done your philosophical homework which is to pierce through the appearances and not to be content with flimsy self-evidence. All philosophers, except those from Trump Academy, of course, know: “But all science would be superfluous, if the appearance, the form, and the nature of things were wholly identical.” (Marx)

Egmont Kakarot-Handtke

#1 Economics, Plato’s Cave and the Silver Blaze Case

#2 Schumpeter’s two axioms of discourse

#3 Profit for Marxists

F Lengyel said...

Your polemics are hardly beyond debate. There are some philosophers who believe that philosophy has a more modest aim than the advancement of knowledge: that of therapeutics. Perhaps in the age of Trump this is not such a modest aim.

I began reading through your #3. Offhand, you might have engaged with John E. Roemer, for example. If, as you waste no opportunity to point out, you wish to enlighten dunderheads, you might have included illustrative examples. The paper claims to make an advance on profit, though I see your sneering presumption is no advance on Marx's--this, at least, is traditional. I may refer your paper to I. M. Flaud, who is mathematically more capable and energetic than myself, and with whom I often agree--only partly because he is a pseudonym of mine.

AXEC / E.K-H said...

F Lengyel

You say: “There are some philosophers who believe that philosophy has a more modest aim than the advancement of knowledge: that of therapeutics.”

Yes, philosophy has been re-branded recently by the Trump Academy and is now essentially a wellness program on a par with Yoga or Neurotics Anonymous. This is, indeed, a far cry from Plato’s Academy where only the mathematically and mentally fit were allowed to enter.

What is a bit curious, though, is that the therapeutic philosopher occasionally forgets his modest aim and engages in a discussion about profit theory which is far beyond his modest intellectual means. To recall, after 200+ years “A satisfactory theory of profits is still elusive.” (Desai, Palgrave Dictionary) This includes Marx’s profit theory, which the therapeutic philosopher finds self-evident. This is self-debunking.

You criticize my working paper: “If, as you waste no opportunity to point out, you wish to enlighten dunderheads, you might have included illustrative examples.”

This is a misunderstanding. My philosophy is similar to Socrates’ who famously said: I know that you know nothing. This is better than the other way round and therefore I have no reason to enlighten anybody.

Egmont Kakarot-Handtke

s. wallerstein said...

It was Wittgenstein who rebranded philosophy as therapeutics. He wasn't so recent.

F Lengyel said...

E K-H, if you're going to strip the Socratic irony away from Socrates, then it was his accusers who said, "We know that you know that we know nothing."

You may have no reason to enlighten anyone--you do it for no reason or entirely by accident, and for this non-reason a meeting of the minds is possible. However, I cannot guarantee the swiftest turnaround in my reading, which I intend to pursue when time and circumstances permit.

F. Lengyel

Anonymous said...

May I make a suggestion?

Let's take Professor Egmont Kakarot-Handtke seriously. He wants people to read him. Why not give him that? It's the least one can do.

His papers don't seem particularly obscure or intractable in a mathematical sense. They are freely available for download. He has scattered his wisdom in multitude of comment threads all over the Internet.

I am sure he will appreciate his life's work be given the same treatment he applied to lesser mortals' work. I repeat: the same treatment.

In fact, many other bloggers could be invited to a kind of seminary on Prof. Kakarot-Handtke's pathbreaking findings. Off the top of my head, I believe the folks from Econospeak and Real World Economic Review could be interested.

What say you?