I have every reason to be sympathetic with David Graeber’s review, “Against Economics” (NYRB 12/5/2019). After teaching the history of economic thought in the top-ranked UC Berkeley Economics Department for six years, I fell victim to two of my departments leading monetarists, Marty Olney and Christy Romer, who personally took it upon themselves to oust me, ostensibly because I am not “an economist”; which, of course, they had known for six years. I should have been sympathetic with Graeber’s review. I was not. Here’s why.
At the most general level, money is a socially and historically specific social form. Therefore, while I have no problem with someone writing a transhistorical history of, say, debt, I do have serious problems with writing this history as though he was always talking about the same thing; which, anthropologically speaking, would be absurd. Money comes to be what it is in contemporary capitalist political economies beginning in roughly the fourteenth century. But it is not really until the seventeenth century that it “comes into its own” so to speak. What does this mean?
With the mature Karl Marx of Capital, I assume that prior to the emergence of capitalism social action was mediated by a wide variety of social forms. (Obviously, the young Marx of, say, the 1844 Economic and Philosophical Manuscripts or the Communist Manifesto was still too taken by Hegel’s concept of “species being,” and, to this extent, was himself a victim of transhistorical human ontology.) Or, as French medieval historian Geoff Le Goff noted over a half-century ago, capitalism was born when the value of productive human action was measured in the equal units of time marched out on mechanical time pieces; which was in the parish of St John, Ghent, in 1324. This does not mean that money, labor, and time suddenly snapped into place. As EP Thompson has noted, social actors fiercely resisted the new regime of time and labor. Yet, enough of the new regime was in place by the seventeenth century for natural philosophers to appreciate some of the new patterns it was generating across society, where it was beginning even to penetrate the otherwise stable landed estate.
By the time we reach Locke and Hume, we are therefore already a good ways into the journey. But the issue is not, as Karl Polanyi believed it to be, whether the landed estate of gentry and peasantry should be deemed “natural” and — I don’t know — “non-fictional” (!?) when compared to the artificial and fictitious arrangements of the late seventeenth century. On the mature Marx’s assumptions, all social formations are — well — social; i.e., none is natural. The issue is: how are we to account for the “anomalies” that have begun to proliferate across the Western European social landscape; anomalies of which William Blake or Bernard Mandeville’s Grumbling Hive can only give us a taste. Natural philosophers were reaching for straws; but it is interesting the straws they selected.
If, as Marx argues, time is the category upon which capitalism turns, then the laser focus on material forms of appearance, no matter the commodity, will never give rise to a satisfying analysis. Late seventeenth and early eighteenth century critiques of mercantilism were, to this extent, spot on. If the central category is time — or, more precisely, MPL = Δ Q / Δ L, the change in some quantity of any thing, or no thing, over the change in the amount of labor (or capital) that corresponds to that change in quantity — then fixation upon surface forms of appearance, be they even the surface form of specie, missed the point entirely. So long as equal, abstract units of time dominate the social landscape, it does not even matter whether a good is or is not itself a product of labor: Karl Polanyi’s error.
And, yet, it was not until the 1860s that the capitalist social formation was sufficiently integrated and extensive for economic thinkers to “see” the “substance” that all commodities shared: abstract value.
It hardly matters who hit upon the insight first; was it William Stanley Jevons in 1858? Jevons thinks so. Was it Karl Marx in his Grundriße? Was it Leon Walras? Clearly by the 1860s all economic thinkers, including Marx, recognized the comprehensive, integrated, quasi-rational character of the capitalist social formation. Once recognized, it no longer made sense to qualitatively differentiate among the many expressions of value — interest, rent, wages, investment, land, stocks, insurance, etc. All expressions had come to be differentially related to one another in such a manner that each could be measured in terms of the others; the money commodity not excluded.
(By the way, anyone wishing to tackle John Maynard Keynes’ General Theory might just as well read his professor, Alfred Marshall’s, Principles of Economics (1890), since Lord Keynes really says nothing that Marshall had not already said.)
Graeber is surely correct to deny money the independent status granted to it by pundits for the Washington consensus. Money is no less, but also no more, flexible than any other commodity. But he is incorrect to think about the flexibility of money apart from the capitalist social formation, as though the value or quantity or distribution of money were merely a matter of policy. Because the capitalist social formation — which includes its laws and regulations and institutions — is thoroughly integrated; because policy enjoys “value” in precisely the same sense as a race or immigration status or stock or gender enjoys “value” (i.e., in its relations to all other commodities, individually and in aggregate); any change in “the universal equivalent” sends waves throughout the social formation. In this sense, I would go further than Graeber. Neoclassical economists are not too mathematically rigorous, but insufficiently rigorous. In a thoroughly integrated capitalist society, all things, including things that are not things, have value. (See, e.g., opensecrets.org). These values are differentially related to one another, such that, for example, investors in the Central Valley of California know that fruit pickers earning .25/hr. make manual harvesting more efficient than automation (where automation costs roughly $500K/year); they know that both a porous southern border and laws restricting immigration maintain wages at .25/hr.; and therefore they know the value of campaign contributions that promise to stigmatize brown complexioned, Spanish-speaking, migrant laborers. Since the value of California’s ag product is roughly $60B, this is not a negligible figure.
Stated differentially, a blight on California’s Central Valley could be expected to give rise to shifts in a whole range of complimentary and substitute goods and, caeteris paribus, give rise to shifts in investors’ asset preferences accordingly.
Which is not the same thing as “fairy dust.” In fact, it strikes me that it is the opposite of “fairy dust.”
There is a totally bizarre chapter in economic history that illustrates precisely this point. Many Marxian social theorists are familiar with Oskar Lange, whose On the Economic Theory of Socialism became the “bible” of economic policy for much of the Comintern from 1948 forward. Many are also familiar with Friedrich von Hayek, the Austrian School author of (among other atrocities) the Road to Serfdom. Few know that von Hayek was Lange’s dissertation advisor at LSE and that the dissertation he advised was “On the Economic Theory of Socialism.” In his Socialism, Lange proposed an objectivist approach to monetary theory. Under capitalism, Lange claimed, the value of money was relative to market fluctuations, which the decisions of the central monetary authority would then attempt to take into account. Under socialism, market fluctuations would disappear, leaving the central planning committee free to establish any relationship they liked between the monetary unit and the goods to which that unit applied.
Von Hayek, too, was a monetary objectivist. In a series of editorials written to the London Times in 1938, he and other LSE economists debated with Lord Keynes and his Oxbridge colleagues over the merits of relativist and objectivist monetary policy. The relativists held that it really didn’t matter where you picked up this hydra, since all of its heads were the same beast. Expand the monetary supply, loosen interest rates, raise wages — it did not matter. Not so the objectivists. Goods had real, objective, values, which Keynes and his colleagues were treating as mere toys. Objectivism lost in Western Europe. It won in Eastern Europe, Russia, and among the Comintern partners, with, I would argue, disastrous results.
The disaster followed from the thoroughly integrated character of the fully elaborated capitalist social formation — even in its Soviet form — on account of what I would call the imperfect correspondence between any commodity’s value and its material form of appearance. In his notes, Marx captured this imperfect relationship as follows:
Circulation bursts through all the temporal, spatial and personal barriers imposed by the direct exchange of products, and it does this by splitting up the direct identity present in this case between the exchange of one’s own product and the acquisition of someone else’s into the two antithetical segments of sale and purchase (Capital, vol. 1, p. 209).
This is where Lange and his Comintern friends believed they could intervene: at the point of sale and purchase.
To say that these mutually independent and antithetical processes form an internal unity is to say also that their internal unity moves forward through external antitheses. These two processes lack internal independence because they complement each other. Hence, if the assertion of their external independence [äusserliche Verselbständigung] proceeds to a certain critical point, their unity violently makes itself felt by producing — a crisis (Ibid.).
Here Marx took the argument from Hegel’s Logic and reembedded it back into the social formation, capitalism, in which it enjoys social validity.
There is an antithesis, immanent in the commodity, between use-value and value, between private labour which must simultaneously manifest itself as directly social labour, and a particular concrete kind of labour which simultaneously counts as merely abstract universal labour, between the conversion of things into persons and the conversion of persons into things; the antithetical phases of the metamorphosis of the commodity are the developed forms of motion of this immanent contradiction (Ibid.).
To be clear, much like other neoclassical economic thinkers in the 1860s and 1870s, Marx theorized that the capitalist social formation formed a comprehensive, integrated totality. And, like them, Marx drew a distinction between abstract value and its material forms of appearance. But, unlike his contemporaries, Marx took the immanent contradiction between any commodity’s value and its material forms of appearance as an historical and social anomaly, whereas they took it to be a feature of general, universal social ontology.
In the case of the money commodity, it is therefore not the case — at least not on Marxian grounds — that the value of the money form is arbitrary. (Oddly, this was both von Hayek’s and Lange’s position. But they differed over the arbiter whose arbitrium would arbitrate — market or council — over the monetary unit’s value.) When we shift the quantity or the value of the monetary unit, we also simultaneously change the values of all other commodities. As Marx noted, this is not a flaw, but a feature.
The possibility, therefore, of a quantitative incongruity between price and magnitude of value, i.e. the possibility that the price may diverge from the magnitude of value, is inherent in the price-form itself. This is not a defect, but, on the contrary, it makes this form the adequate one for a mode of production whose laws can only assert themselves as blindly operating averages between constant irregularities (Capital, vol. 1, p. 196.).
Graeber, by contrast, notes the apparently (but only apparently) arbitrary relationship between value and its material forms of appearance, but fails to grasp the internal, social identity between the two; which, for Marx, was the ground not only for crisis, but also for social transformation.
These forms therefore imply the possibility of crises, though no more than the possibility. For the development of this possibility into a reality a whole series of conditions is required, which do not yet even exist from the standpoint of the simple circulation of commodities (Capital, vol. 1, p. 207).
Upon this reading the crises to which Graeber calls attention could instead be taken as instances where value and its material forms of appearance displayed their social dependence upon one another, but also displayed the wheel around which their dependence turned: the universal valuation of productive social action in terms of abstract time and abstract value.
From this vantage-point, absent radical changes in social mediation — reflected, for example, in the distribution of the social product, the independence of the social product from labor time, the independence of health, education, and welfare from abstract labor time — a change in monetary policy cannot give rise to the kind of emancipatory social change we have reason to value.
It is not, as Skidelsky claims, that economists are drawing upon “a shed full of broken tools.” As Marx noted:
The categories of bourgeois economics . . . are forms of thought which are socially valid, and therefore objective, for the relations of production belonging to this historically determined mode of social production, i.e. commodity production (Capital, vol. 1, p. 169).
The tools work exceedingly well so long as they are used. My objection to my colleagues at Berkeley and Harvard is not that neoclassical economic theory is obsolete, but that its practitioners are. Lord Keynes was sufficiently circumspect to recognize the historically and socially embedded (and therefore constrained) character of the tools he was using. But he also used them in a manner that, say, Alfred Marshall and, certainly, Arthur Cecil Pigou, had not. That is, he recognized the social character of value; which, in the end, made him a far better, more rigorous, mathematical economist. My colleagues at Berkeley, by contrast, keep their noses to the ground, noting every detail, but without ever lifting their heads to view the worlds in which these details fall. To use Skidelsky’s tool shed metaphor, they keep tightening and loosening the screw on the plane (raising and lowering interest rates, increasing and decreasing the volume of the currency), and are confounded when their actions fail to produce a useable piece of furniture.
So, yes, economists need to reflect critically on “how to deal with increasing technological productivity, decreasing real demand for labor, and the effective management of care, without also destroying the Earth.” And when they do so, they will use the tools of “bourgeois economics”; though I hope they will do so with better awareness of the socially and historically specific nature of the capitalist social form.