Market Choice and Economic Science - Money as 'Measure' of

Social Antagonism
In this series so far we have seen how money can play no role in bourgeois economics because it is an
institutional measure of the level of social antagonism in capitalist society - not just between workers and
capital, but also between capitalists and, in the guise of exchange rates, between national bourgeoisies. The
antagonism between workers and capital is over the share of wages and profits in total output, and that
between capitalists is over the distribution of profits amongst themselves. It is clear that because capitalism
is based on the exploitation of living labour, on its violent reduction to abstract labour that can be "measured"
fictitiously in terms of money wages! which then represent e"ually fictitious ali"uot shares of "total output" -
because of this violent "political" need of capital to transmute magically what are use values living labour
and social resources! into fictitious abstract values monetary calculations of social resources!, capitalists
must isolate and alienate individual workers from one another and from the means of production so that the
entire fiction of the "free market", based on "free labour" and "free choices", can be maintained#
$ut the social antagonism of the wage relation infects not just workers. %bove all it infects the capitalist class
itself because the antagonistic "push" from workers expressed in wage and conditions demands! forces
individual capitals not necessarily individual capitalists! into"competing" with one another not just over the
distribution of profits, but also what amounts to the same thing! over the distribution of the wage
antagonism# In other words, each capital wants its own workers to be paid less and the workers of other
capitals to be paid more so that they can consume more. The ideal for capital would be a pricing system in
which the money wage could reflect as closely as possible the level of wage and social antagonism in a
particular area of production. The reason why this cannot be done is "uite simply that it is physically
impossible to e"uate wages and antagonism because they are two categorically different things. $ut
capitalists always try to mediate these potential conflicts in terms of all sorts of "policies" incomes policy,
investment policy, regulations over government spending, employment, industrial and environmental
policies, and so on!. Internationally, these inter-capitalist rivalries take the shape of disputes over trade and
exchange rate policies - which is what we are witnessing right now between the &' and (hina and )urope
*ermany especially!.
%t a more theoretical level, we can see that capital always presents social activity in a dichotomy+ on one
side is the total level of "inputs" social resources! which it claims are "uantitatively and scientifically
"scarce" and "measurable", on the other are the "free choices" of consumers "households"! and investors
"firms"! which determine the "relative distribution" of this total pile of "inputs" according to the "market price
mechanism" - in terms of "supply and demand". -e know that this is pure fiction because the "inputs" of an
economy cannot be "priced" independently of their "relative market prices", which we do not and cannot
know until "the market" consumers and investors! decide by way of supply and demand what those "prices"
are going to be# In other words, the "absolute constraint" of the "available inputs" can only be determined by
the "free choice" of market participants### )ven $lind .reddie could see the glaring contradiction in this
proposition#
-hat we are arguing here is that bourgeois economics claims to be able to determine "scientifically"
through relative prices! the allocation of social resources to various uses for production....by means of the
"free choices" of individual market participants# That this "miracle" is not possible is proven by the fact that
the capitalist economy - far from being "scientifically" analysable and "managed" - is prone to very violent
cycles and crises that are the product of the "undemocratic" manner in which the decisions about the
allocation of social resources are made# %nd the lack of democracy extends to more than just workers, but to
the entire society, including capitalists themselves whose "fratricidal" rivalries are increasingly threatening
world peace.
The upshot of this discussion is to show that the capitalist economy is intrinsically antagonistic, and that this
antagonism spreads from the base - the violence of the reduction of living labout to abstract labour that can
be rewarded with dead objectified labour through the money wage - to the very vertex of the pyramid of
suffering and exploitation that is capitalism. $ecause at the top of the pyramid are extreme and very violent
rivalries between capitalists about the distribution of "profits", that is to say about who can appropriate the
greatest amount of "monetised" social resources with the least amount of antagonism from workers and
society# This is why all the national bourgeoisies in the world, as the conflicts among them mount, come to
resemble a gang of bandits or a band of robber barons - from the (hinese dictatorship to the /ussian
oligarchs, from the 'audi sheikhs to the %merican plutocrats, from the 0exican narco-trafficants to the
.rench and Italian prima donnas, from the *erman descendants of the pro-1a2i elite to....you name it.
(heers and good week-end.
Prices, Inflation, and Conflict in the Society of Capital
-hen we say that money "measures" the level of antagonism centring on the money wage and "prices"
generally, we mean that the capitalist system starts with a "given" level of prices that represent a particular
"balance" of forces in particular "sectors" of capitalist enterprise. These various "balances" represent a
certain degree of "stability" in those sectors or industries. 3oan /obinson famously sought to replace the
concept of "e"uilibrium" with that of "tran"uillity" - which, although she may not have known it, was first
adopted by the mediaeval humanist 0arsilius of 4adua to indicate the "health" of the "body politic".! In other
words, we accept the basic premise of "the 1ew Institutional )conomics" that capitalism is a series of
institutions that "regulate" politically the effective functioning of the system. The "system" therefore is not one
that owes its "regularities" to "mechanical" and "scientific laws" that link the various ""uantities" involved in
the utilisation of social resources. /ather, these "regularities" are the result of a current "tran"uillity" that is
always threatened by the political and dynamic nature of the social antagonism that capitalism engenders.
%s 0ichal 5alecki realised, pricing in capitalist industry reflects the "degree of monopoly" of control! that the
various capitalist firms involved in a given sector economists would say "market"! can command and that is
subject to regulatory checks from the collective capitalist, the 'tate. That is why "price stability" is so
important to monetary authorities - because the faster prices change in times of high inflation, for example,
or because of supply or demand disruptions!, the harder becomes the maintenance of tran"uillity in that
sector and conse"uently in adjacent sectors of industry. The concentration of capitals in key sectors of
capitalist industry is absolutely essential to governments for them to be able to co-ordinate the economy as
a whole. 6owever much governments may condemn monopolisitc behaviour and collusion in certain
industries, the reality is that capitalist industry would be impossible without "price leadership" or "price fixing"
- for the simple reason that "prices" can never be set by the mythical "market" but rely instead on the pre-
existing regulation of a particular "market". -here new "markets" arise that affect the functioning of capitalist
industry in other sectors, the 'tate intervenes to regulate them before they become dysfunctional and pose
"systemic risks" to the reproduction of the entire "society of capital".
7f course, even the absence of inflation may be problematic. This is what happened with the *reat
0oderation+ real wages were kept up and wage inflation down in the -est through the ferocious exploitation
of (hinese workers by the dictatorship of the (ommunist 4arty of (hina with the complicity of -estern
capital chief among them %pple Inc., run by that "saint" and "genius" 'teve 3obs#!. $ut what seemed like a
period of "tran"uillity" or "moderation" was in fact occasioned by the disastrous expansion of credit to
-estern workers, which kept up artificially profitability for finance capital as asset prices swelled into a
bubble - until it burst in 899: and 899;# The disruption to the entirety of capitalist industry was such that only
enormous political intervention by -estern governments and their state machineries has managed to avert
the collapse of capitalist society. $ut the shock waves are still reverberating and it is proving to be extremely
hard to settle the intercapitalist rivalries about who should "pay" for the crisis and the necessary
"adjustments" in terms of the devaluation of previously-inflated assets and other price disruptions. 1owhere
is this more so than at the inter-national level, especially within the )uropean &nion where the crisis has
shown the limits of *erman domination of )uropean industry.
'o our next task will be to look at how the wage relation is reproduced through the essential, pivotal
"mediation" of the very means of production from which living labour is "separated" by capital. This is where
capitalist "entrepreneurship" plays a vital role through technological and managerial "innovation" in ensuring
the perpetuation of the "command" of capital over workers. <et it is also the area of analysis in which the first
signs of the possible liberation of living labour from the yoke of capital first become visible.
The Minsky Moment !o" Paul #rugman $ell Into !is %"n
&i'uidity Trap
This paper by 5rugman and )ggertsson both of 4rinceton &niversity - though the latter currently at the 1<
.ed! offers a clear illustration of what we have been arguing here is the utter and complete stupidity of even
the most enlightened bourgeois economists. -e have already examined )ggertsson=s "4aradox of Toil"
search this site!, so we will not trouble with that particular specimen of exemplary idiocy.
3ust take a look at this, friends, and tell us if 4aul 5rugman is not the greatest imbecile south of the 6udson
/iver#
6ere is the paper+ http+>>www.scribd.com>doc>?@8??9A:>Bebt-Beleveraging-and-the-Ci"uidity-Trap-%-.isher-
0insky-5oo-approach
%nd here is the incriminating evidence.
5rugman and )ggertsson, who is the junior clown in this comedy sketch! starts with a "general e"uilibrium
model" which we will call "the 0uddle"! in which in an economy at e"uilibrium there are two kinds of
producers, "the impatient" and "the patient" producers. 1ow, anyone will tell you that what 5rugman means
is that "the impatient producer" is really "the greedier" capitalist who wants to make more "profits" by
"borrowing" social resources it should be "money", but 5rugman is still fumbling with "natural interest
rates"## 'o this is a barter economy after all#! from the "patient" capitalist, who is either less greedy or less a
speculator than the "impatient" one. 6ere is 5rugman+
1.Debt and interest in an endowment economy
Imagine a pure endowment economy in which no aggregate saving or investment is possible, but
in which individuals can lend to or borrow from each other. 'uppose, also, that while individuals
all receive the same endowments, they differ in their rates of time preference. In that case,
"impatient" individuals will borrow from "patient" individuals. -e will assume, however, that there
is a limit on the amount of debt any individual can run up. Implicitly, we think of this limit as being
the result of some kind of incentive constraint, however, for the purposes of this paper we take
the debt limit as exogenous.
1ote how 5rugman substitutes "individual" for "capitalist" - this tendency is precisely what we have been
exposing in our series on "7rigins of $ourgeois Individualism". 'o in other words for 5rugman the "motive"
for capitalist investment is not the political need of capitalists to retain and expand command over the living
labour of workers - that is, to accumulate capital - but rather a simple matter of "difference in patience"# -ell
done, 4aul# I always thought you were a great friend of workers#
The second thing to notice most important! is that 5rugman takes "the debt limit" for the "impatient
capitalist" as "exogenous". In other words, 5rugman cannot see a "limit" to the amount of debt that
"impatient" capitalists can "borrow" from the "patient" ones - for the simple reason that his "economy" is an
unreal one in which "debt" is "uite simply a ""uantity" that can expand indefinitely and infinitely on a nominal
basis depending on the "patience" of individual capitalists# If indeed "debt" is only a matter of more or less
"patience", then just as with 5eynes=s "animal spirits"! there is indeed no "limit" political or material! to the
amount of "debt" that capitalists can "lend " or "borrow" to one another##
%nd that is why 5rugman simply "must" make "the debt limit...exogenous" because his general e"uilibrium
economy is one that is built on psychology and not on the real needs of real workers and capitalists
confronting one another over the use of social resources#
1ow, because the debt limit is "exogenous" - because "debt" for 5rugman is merely a psychological matter
as vapid and imaginary as 5eynes=s "animal spirits" - it follows that this "debt leveraging" could proceed
forever ad infinitum were it not for....you guessed it#! an e"ually exogenous "deleveraging shock"### %
"0insky 0oment" in which both the lender "patient capitalist"! and the borrower "impatient capitalist"! finally
realise that theirs is sheer "speculation" and that the "profits" they anticipated from production are not going
to materialise because there is only so much that you can s"uee2e out of living labour and then turn into
more political command what we call "value"!## 6ere is 5rugman again#
8. The effects of a deleveraging shock
-e have not tried to model the sources of the debt limit, nor will we try to in this paper. (learly,
however, we should think of this limit as a proxy for general views about what level of leverage on
the part of borrowers is "safe", posing an acceptable risk either of unintentional default or of
creating some kind of moral ha2ard.
The central idea of debt-centered accounts of economic instability, however, is that views about
safe levels of leverage are subject to change over time. %n extended period of steady economic
growth and>or rising asset prices will encourage relaxed attitudes toward leverage. $ut at some
point this attitude is likely to change, perhaps abruptly D an event known variously as the -ile ).
(oyote moment or the 0inksy moment.
8
In our model, we can represent a 0insky moment as a fall in the debt limit from B
high to some lower level Blow, which we can think of as corresponding to a sudden reali2ation
that assets were overvalued and that peoplesE collateral constraints were too lax. In our flexible-
price economy, this downward revision of the debt limit will lead to a temporary fall in the real
interest rate, which corresponds to the natural rate of interest in the more general economy weEll
consider shortly.
$ut rather than a "0insky 0oment", 5rugman is having a "dumb episode" because nowhere does he explain
why our dear capitalists should have...."a sudden realisation that assets were overvalued"#####
% sudden realisation### 666eeellloooo 4aul# <ou are a patented 07/71# 1o# <7& are the "-ile ). (oyote"
in this caricature of intellectual rigor that you have engaged in here## 7f course, 5rugman, like the perfect
bourgeois economist he is, has not even realised that he has fallen into the most abysmal trap or bottomless
canyon like -ile ). (oyote! simply by admitting that the mysterious "sudden realisation" is based on the
"fact" that "assets were 7F)/-F%C&)B"##
$ut 4aul, -6%T B7)' "7F)/-F%C&)B" 0)%1GG It means that the whole business of "borrowing" and
"lending" has 17T6I1* to do with "patience and impatience" and )F)/<T6I1* to do with F%C&), with
4/7.IT## $ur value and profit represent precisely the "command" of capital over living labour - which is what
you wish to avoid talking about##
75. .riends. I will not take this any further. I will just go outside and F70IT from the bile that has been
surging inside me# I will return later with other pieces, once I have calmed down# (iao.
Capital And Technology - To"ard an Alternati(e Indi(iduality
%s we just saw in our fierce but devastating short criti"ue of 5rugman and )ggertsson below, bourgeois
economics simply does not allow us even to mention the notion of "profit" or worse still! "value". $ecause in
bourgeois economic "science" there is no concept, let alone explanation, of "value and profit", even
"progressive economists" such as 4aul 5rugman have to present capitalist crises as the result of
"exogenous shocks". In other words, the present crisis of the capitalist "system" is not and cannot be due to
the social antagonism intrinsic to the wage relation and therefore "endogenous" indeed at the very "core
and centre"! of capitalism. Instead, any "crises" must be the result of "disturbances" that are external to the
"market mechanism" because this mechanism is seen as a simple "distributive device" for the pure
exchange of "endowments" that "individuals" possess at the start of the "exchange". 1ote here how
bourgeois economics pre-supposes the existence of "endowments" prior #! to the beginning of the market
exchange that will determine and fix the relative "prices" of the goods to be exchanged on the market in
accordance with the "free choice" of the "individual consumers".
The most fundamental and imprescindible condition for the existence of capitalist social relations of
production, of the capitalist "system", is that there be workers that provide the living labour for the capitalist
to exploit and that these workers be absolutely "free from" #! any social or other "bond or link" from either
the means of production or the pro-duct of living labour itself. 1ote how this "freedom" is defined in purely
"negative" terms+ the workers are "free from" all links and bonds and "rights" that may interfere with their
"alienating" or "selling" their living labour - their "positively free living activity", which is the birthright of every
human being - to the capitalist "individually" not as a "class" or in union with other workers through "social
labour"!. That is why capital understands "freedom" in this purely "negative" sense - as utter destitution, as
absolute poverty -, and also "individualism" in this purely formal sense, of the human being totally separated
and alienated both from the means of production "endowments" he does not possess! and from the pro-
ducts of his living labour - which he can only purchase as a "free consumer" on the "free market".
$ut how "free" is the worker as a "consumer" in choosing to re-purchase from the capitalist the pro-duct of
his own living labour which now, in the form of a "money wage" paid to him, stand in opposition to him as an
alien power that is "dead, objectified labour"G Cet us recall that the worker is not "free" to decide what he
produces in the labour process or when or how. This is because "before" the worker gets to re-purchase the
pro-ducts of his living labour it is the capitalist #! who decides what the worker can "consume" the product!
and how he produces it what means of production in the shape of machinery and technology are utilised in
the production process! and how the worker "consumes" the product of the worker=s living labour. That utter
beast that went by the name of 'teve 3obs is perhaps the most illustrious and horrid recent example of how
the capitalist completely arrogates to himself the right to make all these decisions - all the while exploiting
millions of workers in (hina and winning accolades for being such a "genius" in the process#!
'o, not only is the not worker "free" to decide "what" he produces, he is not therefore "free" to decide "how"
he produces# %nd that is because remember! the means of production - the machinery and technologies
and materials used in production - are all "owned and designed" by the capitalist## This is a point of
paramount importance# The whole notion of "the captain of industry", of the "entrepreneurial spirit", of
"capitalist innovation" from 'chumpeter onwards depends on this# The reason why the capitalist - the
entrepreneur - must retain control over the process of production is that the ability of capital to retain its
violent command and usurpation over living labour depends on what is produced and how and where and
when it is produced!!!
4ut differently, the process of production, which includes both the "technologies" and the "products" that are
ultimately produced for the "free choice of consumption" of the worker, must be controlled by the capitalist
because they are of fundamental importance in determining the degree of control and command that the
capitalist has and retains over the living labour of the worker!! (learly, therefore, the entire concept of
"innovation", of "creative destruction" developed by 3oseph 'chumpeter occupies a central role in the
delineation and specification of a "-ill to 4ower" on the part of capitalists against workers and - more
precisely - in the "isolation" of living labour as the aggregate of "individual labours". It stands to reason that
technologies and products that tend to emancipate living labour workers! from the command and control of
the capitalist - through the labour process and the "mode of consumption" - will be utterly deleterious to the
reproduction of the capitalist=s command over workers, in the workplace and in society at large##
This thoroughly political and antagonistic aspect of capitalist industry is something that bourgeois
economists wish to hide and to mystify with their dual trickstery in terms of, first, presenting the capitalist
production as a "system" that e"uates mathematically ""uantities" or "existing realities" with one another,
and, second, presenting the decision-making process of production as a function of "consumer choice"
freely expressed in the marketplace#
7ne of the salient points we must make in this presentation is that the capitalist must always present the
decision-making unit of the wage relation not as a "group of capitalists" utilising the full power and violence
of 'tate machinery against "individual workers", but rather - because of the essential need of capital "to
isolate" workers individually - as decisions made also by "individual capitalists". The obsession of capitalist
society, of the bourgeoisie, with the deification of "the free individual", of "the personality" - from 'teve 3obs
to Cady *aga - lies entirely in this essential need. -ere the bourgeoisie to encourage any form of social
solidarity, any form of alternative "individuality", it would be digging its own grave because it would
undermine the ground on which the wage relation stands#
In an imminent intervention we will seek to in"uire into the possible "alternative individualities" that we can
develop to oppose the rule of capital and to dissolve the wage relation.
Addendum to #rugman on Minsky Moment
Now that our review of Krugman's treatment of "the Minsky Moment" has jumped to the
top of the "Google Search" list, let us reflect a moment on the significance of Krugman's
monumental lapse of reasoning skills !ou will recall that Krugman "egins his article
with an "endowment economy" #n "endowment economy" is the "asis and foundation $
the very raison d'etre $ of all "ourgeois economics "ecause it "assumes" that "individuals"
in a society "start" operating in that economy with a "given" set of "endowments" %his
means that "ourgeois economics takes for granted what any "economic science" even
remotely worthy of the name should explain&& #nd that is how and why the "economy" that it
analyses reaches the stage where individuals have "endowments" and how and why these
"endowments" are measured 'f one "egins with the assumption that Steve (o"s was
endowed with "genius", it follows that everything he did in his rotten life was"genial"&
)ourgeois economics assumes what it needs to explain* and that is $ how and why certain
"individuals" in the economy it analyses have ac+uired their endowments!!
'n this regard, one must immediately acknowledge the heuristic superiority of the New
'nstitutional ,conomics -from .oase to /illiamson through 0ouglass North and 0emset1
$ also reviewed on this site $ just search using "search" facility2 "ecause at least it
acknowledges that capitalist "endowments" have a lot to do with "the institutions of private
property of capitalism", which allows to in+uire a"out how, when and why "individuals"
came to "e either "capitalists" or "workers" and not just "individuals"&
)ut Krugman has not even reached this "critical" point 3is "goody$goody", "conscience$
of$a$li"eral" type of "humanism" has not reached that far 'nstead, he starts with
"individuals" who are either "patient" -lenders2 or "impatient" -"orrowers2 )ut the
+uestion we must ask is* $ "patient" or "impatient" for what44&& /3#% 'S '% that these
"individuals" are striving for4 /3! do they "lend and "orrow"4 /3#% do they "lend
and "orrow"4 #nd then it turns out that they are "patient or impatient"%5 M#K,
6758'%S&&
So /3#% these "individuals" lend and "orrow is.#6'%#9& .apital that is "invested"
in the hope that it will realise "profits" out of which "oth the patient lender and the
impatient "orrower will "e a"le to accumulate more value or capital $ which is the entire aim
of the game&& #nd more "value or capital" means more political control and command
over living la"our and over social resources&&&
%his is the "it that 6aul Krugman does not wish to admit or acknowledge $ unless we
"e:tract" it from his mouth just like a dentist would e:tract one of his teeth& -!ou see, all
these 6rinceton professors like to sound "enlightened", and so they throw us "ra""le"
some crum"s of wisdom while they indulge in their "enlightened divine serenity"& $ /ell,
we say "6ikes to that&"2 )ut Krugman simply "has" to confront this pro"lem $ and he
does, as we saw, when he acknowledges that "de"t$deleveraging" -or 8isherian de"t$
deflationary) "shocks" occur when our dear "patient and impatient" capitalists "suddenly
realise" -shock and awe&&2 that the assets they have "een investing in $ and therefore the
capital they have lent and "orrowed, respectively $ are-wait for it&25;,7$
;#9<,0&& 5;,7$;#9<,0&& -%his is the so$called "Minsky Moment" or "/ile ,
.oyote Moment" 8or the incorrectness and self$contradictory nature of Minsky's
underconsumptionist approach, search our site for "Minsky"2
)ut hang on a minute, 6aul&& 6rofessor&& No"el 6ri1e "genius"&& /hat is this new "thing"
you mention* ;#9<,44&& 5ur answer is what Krugman will never admit or allow* ;alue
is political command and control -historically and institutionally ac+uired $ not
"endowed"&&2 on the part of capitalists over social resources that allow them to reproduce
and e:pand their political command over the living la"our of yours truly, <S
/57K,7S&&
'n our ne:t intervention we will look at how this "endowment economics" is presented to
us as a "science of choice" in the "society of capital"
Mr. Keynes and the Neo-Classics
%he economic sphere of social life, and therefore that of economic analysis -literally, of
the reflective classification and interconnection of its component concepts2,
concerns the production and e:change of =wealth> "y and "etween human "eings
'n the definition of =wealth> there are o"viously su"jective and o"jective
considerations* the o"jective consideration is that the =wealth> of a society must
"e reproduced -preserved and replaced2 for the survival of its mem"ers? and the
su"jective element is that the =needs> of a society are not purely "iological and
physiological "ut also psychological and cultural
'f we consider a society to "e made up purely of atomic individuals, then it will "e ne:t to
impossi"le to work out the o"jective and su"jective =needs> that constitute the
=wealth> of a society, e:cept as they are made =visi"le> "y the o"serva"le conduct
of those individuals 'n that case, the only possi"le goal of =economic analysis>
will "e to descri"e as simply and comprehensively and =predicta"ly> as possi"le
the pattern of e:changes "etween the individuals in a given society that must "e
e:clusively a market society in which only the market "ehaviour of those
individuals can inform us a"out their o"jective and su"jective needs, called
=utilities>, and not the other way around %his is the framework of Neoclassical
,conomics
.onversely, if we take an =o"jective> view of what the reproductive and su"jective needs
of a society are, then we will look for the type of =resources> that go into the
=production> of the =wealth> of the society @ whether these =resources> are
+uantifia"le and measura"le or else are dependent on cultural factors %he
identification of an =o"jective measure of wealth> was the aim of .lassical
6olitical ,conomy from Smith to Mill, through 7icardo and Mar:, and it found it
in =la"our> Mar: thought that =la"our> was too a"stract a designation "ecause its
=measure> could "e given only "y the political coercion of =the la"our market> so
that ultimately the fundamental measure of economic wealth was the =socially
necessary la"our time> for the production of a given =commodity>
%he pro"lem with this definition, just as with the marginal utility of neoclassical theory,
is that only =the market> can tell us what is =socially necessary la"our time>
"ecause only the market can tell us what commodities are =socially necessary> to
"e produced& .learly, therefore, "oth the =su"jective> definition of =marginal
utility> in neoclassic and the =o"jective> definition of =value> in the .lassics are
defective "ecause they are =circuitous> in that they rely on =the market> @ on what
is o"serva"le @ to explain what is o"serva"le& )ut no o"servation will ever
amount to and provide its own =e:planation>, "ecause =e:planations> must "e
e:pressed in terms that are =significantly different> from the mere =recording> of
the o"servation -'ndeed, the very =means> we employ =to o"serve> phenomena
are su"ject to definition "ecause they already define what is o"served and are
therefore not =o"jective> at all& %his is a restatement of 3eisen"ergAs
'ndeterminacy 6rinciple in physics2
So the most fundamental pro"lem for economic analysis is =to measure> the total wealth
of society "oth =in aggregate> and =in particular> in terms of the production of
goods and services that constitute that aggregate wealth Now, it is clear that if we
take a =su"jective> approach to the definition of =wealth> as the neoclassic do, we
will never "e a"le to calculate the =aggregate wealth> of society for the simple
reason that =su"jective e:changes> of goods and services ="etween individuals>
can "e =measured> only in terms of a =numeraire> that can "e constituted "y =any
of the goods and services> e:changed in the market simultaneously and as a
totality of transactions& -%his is called /alrasian e+uili"rium2 't is also clear that
such a =general e+uili"rium> contains no =su"stantive> definition of =wealth> "ut
can descri"e only a =relative e:change> that occurs simultaneously "ecause all
e:change e+uations -+uantities e:changed and relative prices2 must "e known
"efore we can calculate all the relative prices in terms of a single numeraire -that
can "e any =one> of the goods e:changed2
't is o"vious that neoclassical economics can only =descri"e> a situation -one that is
=timeless>2 of e+uili"rium @ can ascertain =mathematically> only the =e:istence>
of this e+uili"rium? "ut it cannot e:plain how an =e+uili"rium> is reached, nor
how an economy can =get out> of e+uili"rium? and it cannot e:plain how an
economy can =return> to e+uili"rium once it has gone into =dis$e+uili"rium> %he
very notion of =dis$e+uili"rium> is simply im$possi"le "ecause we would have to
know =e+uili"rium relative prices> "efore we could say that an economy was in
=dis$e+uili"rium> in the first place&
%he .lassical 6olitical ,conomists instead approach economic =wealth> in terms of the
=effort> that is needed to reproduce a society on an e:panded scale %his is a more
=o"jective> approach in that it seeks =to e:plain> market prices and not merely to
o"serve or record them, and "ecause market prices are not determined "y
=su"jective evaluations> -marginal utility2 made at a =microeconomic level>, "ut
rather are determined "y the =macroeconomic needs> of the totality of a =society>
regarded as an entity
'f indeed =value> is an o"jective entity so that it determines =market prices>, then it is
o"vious that it can "e e:pressed =independently> of any =one> good or service on
the market in terms of =commodity money> used -a2 as a unit of account, -"2 as a
means of e:change -as a universal e+uivalent2, and -c2 as a store of value, as
=li+uidity>
)ut if no such =value> can "e identified, as the neoclassics insist, then =wealth> cannot "e
defined "y =effort> or any other o"jectively determined =+uantity>, "ut rather "y
su"jective =utility> which is derived from the goods and services e:changed on
the market and from the goods and services -endowments2 that go into their
production 'n that case =la"our> does not have =utility> "ut has =dis$utility>
"ecause its =effort> is re+uired to ac+uire =goods and services> that can satisfy the
=marginal utility> of the worker %he essence of the Neoclassical 7evolution
consists in this* that =la"our> is displaced from the central role it had in the
.lassics to a =negative> role* from the =creator> of value to the =need> for goods
with =utility>&
#nd =money> can serve only as a convenient =medium of e:change> that serves as a
token numeraire for the totality of market e:changes occurring and calculated at
e+uili"rium 'n such a case, money can only "e a nominal or token entity with no
=utility> or =value> whatsoever e:cept that of faithfully indicating =e+uili"rium
market prices> in the =real economy> made up of individual e:changes at
e+uili"rium
.onse+uently, the only way in which money can "e =non$neutral> in a neoclassical
economy is if and only if there is an =e:ogenous> and ar"itrary interference with
its =e+uili"rium supply> so that e+uili"rium market prices and the e:change of
goods and services "etween individuals is =distorted> there"y @ with the result
that the economy is thrown into =dis$e+uili"rium>
%he +uestion therefore "ecomes how =money> as a mere token used to facilitate market
e:change can actually affect the e+uili"rium of the neoclassical market economy
%his is the essential pro"lem that will occupy three of the greatest economists of
the early twentieth century @ /icksell, 3ayek and Keynes 't may "e said that
their answers differ depending on their understanding of =the transmission
mechanism> "etween the issuance of =credit money> and the regulation of interest
rates "y central "anks through the monetary "ase or the money supply, on one
hand, and the allocation of social =wealth> through its production and
consumption regulated "y relative market prices
/e can say that the difference "etween /icksell, 3ayek and Keynes is not at all, or not
mainly, in the philosophical or scientific understanding of economic analysis in its
fundamentals 'nstead, their disagreement was over the effect that the creation and
availa"ility of money -li+uidity2 could have on the "ehaviour of the economy in
terms of the adjustment of prices, of employment and of output
%his =transmission mechanism> has "een the "ane and despair of "ourgeois economic
analysis and theory for the very simple reason that the "ourgeoisie is forever
looking for the paradise in which =money> "ecomes completely =neutral>, in
which it "ecomes a pure =medium of e:change> with no influence whatsoever on
the =real economy> 'n other words, the "ourgeoisie "elieves that there is a =real
economy> in which goods and services are =e:changed> freely "etween
individuals with no connection "etween them -pure competition2 in accordance
with =original endowments> to which they have an unassaila"le =legal right> and
which they e:change until the marginal utilities of each of these endowments are
e+ual @ that is, the last unit of each endowment has the same differential
numerical value -relative price2 in terms of an ar"itrary good that is used as
numeraire -as unit of account2 )ourgeois economics never e:plains how
=individuals> came to have the =endowments> they possess at e+uili"rium&
%he chief aim of "ourgeois economic analysis is to remove the antagonism, the conflict at
the very centre and motor and heart of capitalist society* $ the wage relation -/e
have already descri"ed this in an earlier entry2 )ut to do so it has to present
economic activity as a =pure e:change> "etween =free individuals> of their
=legally held endowments> to the e:isting goods and services, su"jectively
needed -even in the case of the physical reproduction of the individual, "ecause
this reproduction is still left to =individual choice>2 present in society #s we have
seen instead, capitalist society is founded on the coercion of living la"our to
e:change itself for a portion of the goods and services that it produces in such a
manner that this e:change does not =free> living la"our from the need and
coercion to continue to sell itself to capital, and in such a manner that capital can
lay claim, through the portion of the goods that are not claimed "y workersA
money wages, to even more living la"our and social resources for the ne:t round
of production&
%he purpose of capital is therefore to reproduce the wage relation on an e:panded scale
"y =anne:ing> new living la"our and social resources that are not under its
command yet and "y increasing the potential command it has over living la"our
.learly, this means that capital and money$as$capital can only "e understood
=politically>, as =value>, as political command, as will and control of the capitalist
over social resources, over =wealth> intended as all those goods and services and
resources that reproduce the wage relation 't is also o"vious that this political
command occurs through the mediation of the satisfaction of human needs,
whether physiological or social @ none of which can ever "e =measured> directly,
however =Money> therefore must "e understood as =money capital>? and it
cannot "e simply a means of e:change "ut must also "e "oth a measure and a
store of =value> )ut "ecause =value> is not a =+uantity> that can "e =measured>
and is instead a =social relation>, then we say that money cannot =measure> value
"ut it can "e a =social indicator>, a =sym"ol> of the political effectiveness and
effectuality of the sta"ility of the wage relation across the disparate =sectors> of
capitalist and social activity
%he ne:t +uestion then "ecomes* how can such a system =work>, and how =does> it work
in practice4
http://www.newyorkfed.org/research/epr/95v0n!/950"edwa.ht#l -,dwards and Mishkin on decline of
traditional "anking @ BCCD2
http://www.fa$.net/akt%ell/wirtschaft/wirtschaftswissen/$entral&anken-&a%stellen-in-der-
#onetaeren-oekono#ik-'()')5.ht#l -list of #drianEShin, )orio and other articles from 8#F2
http://www.ft.co#/intl/c#s/s/0/(""&"&fa-f&!-e0-&e&e-00''fea&'9a.ht#l*a+$$&,h-+)./ -%ettAs
review in 8% @ weak2
http://www.fa$.net/akt%ell/wirtschaft/&r%ttoinlandsprod%kt-das-wesen-des-wachst%#s-
'9!005.ht#l -Measuring G06 or =growth>2
http://kr%g#an.&logs.nyti#es.co#/!0/0/!!/e%ropean-wage-%pdate/ -Krugman accepts wage
downward rigidity "ut e:cludes it from 'S$9M "ecause it "lames workers for dise+uili"rium&2
http://kr%g#an.&logs.nyti#es.co#/!0/0/09/is-l#entary/
http://www.ft.co#/intl/c#s/s/0/955dcf(-fa5"-e0-&"0d-00''fea&'9a.ht#l*a+$$&,h-+)./ -0e
Grauwe on need for ,.) to act as 95972
%he Neoclassics and Keynes do not differ in any significant manner a"out the political
content of the categories used in neoclassical theory 'n all significant respects, Keynes
remains a neoclassical economist* his /eltanschauung remains identical to that of the
negatives 0enken that lay the foundations of the Neoclassical 7evolution Given his
limited knowledge and understanding of .ontinental thought, Keynes had no cognition of
the epoch$making significance of those theoretical underpinnings and their a"ility to
shape, for "etter or for worse, our very conception of economic reality )y this we mean
that Keynes did not challenge the "asic tenets and principles of neoclassical theory,
e:cept in some =practical> respects that "ring them closer to the =reality> of the
functioning of the capitalist economy %he essential difference "etween Keynes and the
Neoclassics is that whereas the latter consider that the economy will always adjust from
any =e:ternal shocks> to reach e+uili"rium =in the long run>, Keynes acknowledges that
there are important institutional aspects of capitalism, such as money and asset contracts,
that profoundly affect the operation of the economy to a point where =neoclassical
adjustment> may well result in the total political and social "reakdown of =society>*
hence, =in the long run, we are all dead>
%here are two crucial aspects to KeynesAs =turn> in the neoclassical approach to
economics* the first is that money and =li+uidity>, far from "eing =neutral> and therefore
not "eing a"le to have any long$term impact on the =real> economy, that is, on the
allocation of =endowments> in neoclassical theory, are actually e:tremely important as
=signals> providing =information> a"out the =real> state of the economy 'n other words,
Keynes does not dispute that the capitalist economy =fundamentally> functions along the
lines of analysis suggested "y neoclassical theory /hat he does dispute is that =money>
is neutral and therefore can have no =real> effect @ apart from =first round effects> @ on
the functioning of the economy 8or Keynes, money is =a "ridge "etween present and
future>? money provides the link, the =+uantification> of the use of physical resources in
a pro$jected =income stream> that will "e paid as =interest>, in the future, out of future
=real production> %he first distinguo Keynes moves against the neoclassic is therefore
that the e:istence of money and of legal instruments tying the physical production of
assets to their e:pected future monetary income streams crucially conditions the
operation of the =real> capitalist economy "oth in terms of the =rigidity> of prices in
various markets @ mainly the la"our and capital asset markets @ and therefore also in
terms of the e:pected =yield> or =interest> or, more "roadly, of the income streams
flowing from capital assets
%he second point is that the social structure and the structure of markets may not "e
fle:i"le enough to adjust to changes in e:pected economic conditions +uickly enough to
prevent a cascading collapse of the inverted pyramid of contractual o"ligations erected
from a more li+uid "ase to a less li+uid verte:, with the result that if the income stream
from leveraged assets is not reali1ed there will "e wholesale li+uidation of those assets
with their prices not adjusting downward +uickly enough to restore the a"ility of
"orrowers to meet the contracted o"ligations "ased on the original estimate of that
income stream Similarly, and as a corollary, the losses involved in the firesale li+uidation
of assets makes the physical operation of those assets a"solutely unprofita"le, prompting
a hori1ontal and vertical collapse of the financial inverted pyramid with conse+uent
"reakdown in the physical supply for other markets and the generation of price insta"ility
that threatens not just the financial structure "ut the very reproduction of the economy
itself&
G0urkheimH 6ut differently, the economy of a given society may "e seen as an
interdependent =organic> structure -rather than as a homogeneous mechanical structure
whose component parts are simple units that can "e added and su"tracted at will2 that will
implode catastrophically once the price and contract system collapses 'nterestingly,
Keynes is prepared to aggregate the capitalist economy in monetary terms -income,
demand, output, employment, interest2, yet he is unwilling to discuss the differential
impact of interest$rate and money$supply policy "y sector @ whereas 3ayek does the
e:act opposite 'ronically, it is 3ayekAs approach that suggests greater systemic sta"ility
of the price mechanism than KeynesAs aggregate approach which therefore makes
monetary policy far more effective than 3ayekAs precisely "ecause its transmission
mechanism feeds through directly uniformly to all sector markets /ith 3ayek, it is the
sector markets that need to adjust to any shocks from changed e:pectations and monetary
policy can only interfere with this process of adjustment? with Keynes instead monetary
policy and money supply have direct and immediate impact on markets, helping to
sta"ili1e prices -avoiding deflation2 and holding up demand unless the economy falls into
a li+uidity trap, at which stage only direct state intervention through fiscal policy can
restore full employment e+uili"rium
%hese aspects of KeynesAs work are drawn +uite adroitly "y Minsky -=.an I'tA 3appen
#gain4>2 0espite the fact that Keynes -and Minsky2 presents a much more accurate
=institutional> analysis of how capitalism works, he still o"fuscates the centrality of the
wage relation in capitalism and the antagonism on which it is founded and presents
instead an economy that is =motivated> along neoclassical lines "ut that has institutional
features -money and contracts @ li+uidity preference @ price rigidity $ decentrali1ed
decision$making in an interdependent =organic> society prone to =crises of confidence>2
that may result in =underemployment e+uili"rium> with e:cess of savings over
investment and with de"t$deflation and with stagnation due to the li+uidity trap 0e"t
deflation in particular may result in deep depressions
So steeped in the worldview of neoclassical theory was Keynes his entire economic
approach may "e said to rest on two "asic =dysfunctions> of the capitalist economy
-dysfunctions that =Keynesians> of all stripes have sought =to correct> "y suggesting
=appropriate policies of demand management and monetary and fiscal =fine$tuning> that
leave intact the entire =scientific rationale> of neoclassical theory2 %he first dysfunction
is that capitalist crises are due to underinvestment and =li+uidity preference> resulting
from the =declining marginal utility of capital> over time %his decline, in turn, leads to
underinvestment and therefore to lower aggregate demand which then results in the de"t$
deflation downward spiral to which lower wages and unemployment are no answer
"ecause they serve only to suppress aggregate demand further and "ecause money wages
are sticky downwards %he second dysfunction is that money introduces an element of
uncertainty created "y the discrepancy "etween the e:pected returns of de"t$leveraged
investment with contractually$agreed interest rates and the actual income streams that
may lead to widespread li+uidation and implosion of the inverted financial pyramid and
of physical production and employment, with knock$on effects on aggregate demand
)oth these dysfunctions hinge on li+uidity preference or the aversion to risk of capitalists
more intent on =rent$seeking> "ehaviour, which is why Keynes came to share the
=money$less economy> ideas of Silvio Gesell %wo o"vious o"jections can "e raised %he
first is that, as we saw from our study of Schumpeter, Keynes completely overlooks the
a"ility of capitalism to renew and re$invent itself in response to the antagonism of the
wage relation %he second is that Keynes never e:amines the theoretical relation "etween
money and real economy in terms of wage$relation antagonism and therefore of the
creation of =value> and the reali1ation of =profit> as determining investment and
consumption levels in the capitalist economy, save to rely on incantations such as =animal
spirits>, ="eauty contests>, ="ootstraps> -regarding the determinant of interest rates2,
=uncertainty>, ="ridge "etween present and future> and a myriad other e:pressions more
remarka"le for their conceptual vagueness than for any analytical merit
G%he New 0ealH
Keynes 0etween 1he 2ars 3 1heoretical 4rigins of the
Crisis-5tate
%he most important distinguishing mark of neoclassical economic theory is its pure
=su"jectivism> <nder the prete:t of championing =individualism> and contrasting
=collectivism>, the Neoclassical 7evolution is an intransigent and powerful reaction to
the rising tide of working$class movements in ,urope that contrast the rule of the
"ourgeoisie under the "anner of Socialism %he life$and$death pro"lem for ,uropean
"ourgeoisies still tied to feudal and dynastic aristocratic traditions of government is how
=to include> the mass of industrial proletarian workers that the 8irst 'ndustrial 7evolution
has spawned and concentrated =dangerously> in ur"an industrial centres in which the
interdependence of =social la"our> re+uires a level and intensity of political co$ordination
that the old laisse1$faire attitude theori1ed "y #dam Smith and the #nglo$Sa:on
li"eralists simply cannot supply %he threat of socialist revolution is present and growing
"y the hour 'mponent mass parties representing the rights of =la"our> are surging in
every nation and demanding =representation>, even the opportunity to govern in their
own right -&2 in the old =parliaments> that were previously the preserve of the no"les and
nota"les
%he 8rench and #merican 7evolutions have made a return to the old aristocratic order
envisaged "y the .ongress of ;ienna a"solutely untena"le /hen Napoleon declared to
the ageing Goethe that =Nowadays, fate is 6olitics>, what he meant was that the only way
to prevent revolutions and to preserve "ourgeois pu"lic order is to integrate these vast
=la"ouring and dangerous classes> under the political "anner of nationalism %he old
,uropean state armies co""led together and then dis"anded at the whim of local
=princes> will count for nothing and "e ignominiously and definitively defeated and
smashed "y the new Napoleonic Grand #rmee fighting with fervor and fierce conviction
for the ideals of =9i"erteA, ,galiteA, 8raterniteA>
%he Neoclassical 7evolution stu""ornly and cynically refuses to accept this new reality
of the 6olitical Not the 6olitical of the old .lassical 6olitical ,conomy and of 9i"eralism
in which the =e+uili"rium> of the =self$regulating market> ensures simultaneously the
ever$growing rational =growth> of =the wealth of nations>, of their =common$wealths>,
and at the same time preserve a =pu"lic sphere> in which individuals may e:press their
=free political and religious and moral opinions> so long as these do not interfere with the
=operation of the free market> now elevated to a =science> governed "y the =economic
laws> mathematically formali1ed with increasing accuracy and rigor "y the neoclassical
school from Gossen through to Menger and (evons, and then to the opposing e:tremes of
mathematical formalism with /alras and of institutional practice with Marshall
(ust as the real su"sumption of the production process "y the "ourgeoisie re+uires the
accumulation of value the "etter to "e a"le to com"at the antagonism of workers to the
wage relation, so this growing =intensification> of the la"our process to ma:imi1e profit
entails the =rationali1ation> of every aspect of social life @ at first only those aspects
connected with the process of production inside the workplace, "ut later also those
aspects of social conduct that have to do with consumption and distri"ution and also with
the supply of resources hori1ontally and vertically for production %his process of
=rationali1ation> proceeds with the =+uantification> and =measurement> of every aspect
of individual and social life )ecause the satisfaction of the growing needs of the
workforce is seen as the increase of =wealth> due to rationali1ation, "oth .lassical
6olitical ,conomy and the Neoclassics see the discovery of mathematical relationships
"etween production and distri"ution of the product as vital to determining the most
efficient methods of production consistent with the most e+uita"le distri"ution of the
product %he +uestion for economics is to define =wealth>, to descri"e its efficient
distri"ution in proportion to the contri"ution of the various factors of production

'n the "est of his =,ssays 'n )iography>, Keynes descri"es with a "rilliant simile the
peculiarity of MarshallAs approach to the mathematical methods to "e applied to
economics*
Jevons saw the kettle boil and cried out with the delighted voice of a child; Marshall too
had seen the kettle boil and sat down silently to build an engine. (pp.155-!
8or Marshall, (evons has merely suggested a formal mathematical framework of
interpretation of a given social reality @ a =concrete truth> )ut this =framework> must in
no guise "e mistaken for a =universal truth>* it is merely an =economic dogma> "ecause,
as Marshall well knew, =utility> itself is a purely =su"jective> notion and, as such, far
form leading to =concrete truths>, it may well represent the height of irrationalism, it may
amount to nothing more than sheer =metaphysical dogma> #ll one can do is to construct
=an engine>, a =tool> or instrument for the discovery of those =regularities> of social
"ehaviour that can guide enlightened pu"lic policy
"hile attributing high and transcendent universality to the central sche#e of econo#ic
reasoning$ % do not assign any universality to econo#ic dog#as. %t is not a body of
concrete truth$ but an engine for the discovery of concrete truth. (p1&1!
-Keynes himself in the General %heory will not renounce the reactionary irrationalism of
marginal utility theory* instead, he will compound it with his own "rand of mysticism
dragged to the cynical depths of =animal spirits> and =uncertainty> @ and indeed of ="lack
magic> as in his strangely sympathetic portrait of NewtonAs arcane e:perimental practices
in these I,ssaysA2
%he essential point to grasp here is that "oth theories of economics @ the neoclassical and
the socialist $ take =the factors of production> as given* they differ only in how the actual
=output> ought to "e distri"uted -socialism2 and a"out the effects of =political
intervention> on the operation of the market -neoclassic2 'n "oth cases =the economy> is
seen as a =given> set of technologies and a =given> set of =inputs> that can only result in
a =given amount of output> 'n this way, the early reflection on =economic science> is
=locked out of the factory>, as it were? it does not scrutini1e the process of production?
like Marshall, the economic =socialists> -who form in fact the vast majority of
=economists>2 are concerned not so much with the ine+uality of income "ut rather with
the ine+uality of opportunities 'n other words, it is the =interference> with the proper
operation of =the economy> @ the production of goods and services and its =fair> sale on
the market @ that concerns economists* there is no notion on either the socialist or the
=li"eral> side that =the economy> itself, the process of production, involves an
=impossi"le e:change>&
%he economy therefore is seen as a =mechanism> that functions =o"jectively> in terms of
=inputs> and =outputs> whose =+uantity> can "e determined =mathematically> %he
economy can function =automatically> like a machine? it ca" "e operated =scientifically>,
as in a la"oratory e:periment, for the greatest good of the greatest possi"le num"er %he
=utility> of the individual matches therefore the implicit utilitarianism and egalitarianism
of the So1ialismus* it is under this deception that the workersA movement will labour
from its inception to the present day !et it is +uite evident that =the economy> does not
operate automatically "ecause it is su"ject to violent fluctuations and investment cycles
that shake society from "ooms of full employment and prosperity to "usts of high
unemployment and depression 't is e+ually o"vious that these =deviations> from what
ought to "e an =o"jective mechanism> managea"le =scientifically> must "e caused "y
some =interference> that relates not to the process of production itself "ut rather to the
=distri"ution> of the =industrial output>
%he =hiatus>, the =gap>, lies "etween the moment goods are produced and the moment
they are purchased* the process of production itself is not even re#otely put in +uestion
either "y the promoters of Socialism or "y their ="ourgeois> counterparts %he fact that
the means of technology utili1ed in production and the =goods> produced for
consumption -and therefore also the =materials> used for their production2 may "e the
result of political antagonism, that they may =em"ody> the antagonism of the wage
relation, does not in the least surface among the considerations of =economic analysis>
either .lassical or Neo$classical )ut this =hiatus> that leads to the fre+uent =o"serva"le
crises>, to the cycle of "oom and "ust of capitalist industry, and so of output and
employment @ this =hiatus> has to do either with the e:cess of consumption on the part of
workers whose wages are e:cessive or else it is caused "y the e:cess of investment on the
part of capitalists whose unusual =profits> lead straight to =overproduction> or
=underconsumption> on the part of workers whose money wages are insufficient to
consume the product 'n either case it is the presence of =money> that clearly causes the
distortions, the =discrepancies> "etween production and consumption that cause =the
economy> to sway from e:cessive production to e:cessive consumption, with
corresponding falls in profita"ility, investment and employment
'n this framework of analysis of capitalist production and society, whether it is the
Socialists who condemn capitalism for its =anarchical>, =unplanned> e:cesses that cause
misery for the unemployed, or whether it is the laisse1$faire li"erals who "lame =political
interference> and the misguided attempts "y =Socialist> governments to interfere with the
free market operation @ in "oth cases all 'econo#ists( can agree that it is the presence of
=money> as the =veil>, the =intermediary> "etween production and consumption, that is @
as it always was from the dawn of .hristianity @ =the root of all evil>
%wo central features emerge then from the peculiar /eltanschauung that "oth Socialism
and 9i"eralism come to share at the end of the nineteenth century and at the "eginning of
the last one* the first is that =the economy> is a sphere of social activity that can function
=automatically> and that is governed "y =o"jective economic laws> provided that these
are allowed to operate freely? the second is that the o"jective operation of the economy
must "e managed and planned scientifically "y the State, for the Socialists, or, for the
9i"erals, it must "e allowed to work through the self$regulation of the market without
interference from the State %he role of the State =to regulate> the economy is achieved
therefore through the monetary medium, either through the control of the monetary mass
and the interest rate, or else through social policy that redistri"utes income "etween the
social classes, or else still through direct intervention "y the State in the economy through
policies aimed at ="uffering> the e:treme swings of the market economy
Neither in the Socialist vision of ,conomics, nor in the 9i"eral one is there any room for
the State as a rightful =factor> in economic analysis* for "oth political positions, the State
remains =e:ternal> to the operation of what is seen as a =market economy> whose only
=distur"ances> or =crises> are derived not internally from production "ut e:ternally
through distri"ution @ distri"ution that "oils down ultimately to =monetary> factors,
whether in terms of monetary magnitudes or of monetary redistri"ution of income
through fiscal intervention "y the State %he idea of the State as an essential and
necessary co#ponent of the economy was as foreign to laisse1$faire li"eralism as it was
to the most revolutionary mem"ers of the 9inkskommunismus %rue it is that the 9eninist
faction of the Second 'nternational advocates a =dictatorship of the proletariat> )ut this
=dictatorship> is the e+uivalent of changing the drivers of the same vehicle* the idea that
su"tends all Socialist dogma from 6roudhon to Social 0emocracy and )olshevism is that
the proletariat will take over the capitalist machinery of production to run it in its own
interests %here is no suggestion that the social relations of production and, with them,
"oth the means of production and the products and the methods of consumption and
distri"ution will change as well& ,ven 9eninAs e:tensive pronouncements on the strategy
and tactics of the revolutionary party will limit themselves precisely to these =strategies>
in favour of the =skilled workers> who are "eing =supplanted "y machines> and whose
=artisanal skills> are lost to the universal alienation of %aylorism -lampooned "y .harlie
.haplin in IModern %imesA2 and loss of =totality> in the la"our process that only the
proletariat as =the individual su"ject$o"ject of history> can restore& -9ukacs2 't was 9enin
after all, and now the fact should not seem so surprising, that =6olitics is a concentrate of
,conomics>
9enin has no dou"ts that his )olshevik 7evolution represents a leap too far @ such is the
="ackwardness> of 7ussian capitalism that its =economy> will have to "e =upgraded> to
the level of technical and managerial leadership of German industry -see his I%he
0evelopment of .apitalism in 7ussiaA2 )ut the 5cto"er 7evolution of BCBJ will offer
Keynes as early as the ;ersailles %reaty conference -cf his e:plicit reference to 9enin in
I,conomic .onse+uences of the 6eaceA2 with the =challenge> that 9eninism represents
for /estern capitalism* here is the first and most trou"ling epoch$making historical and
social evidence of the fact that =the economy> cannot "e separated from =society> and
that the 6olitical in the final instance can destroy what had seemed until then to "e =the
economic laws> of any social organi1ation -#"surd must have seemed to Keynes the
farcical attempts of ;on Mises and 3ayek =to prove the impossi"ility of a socialist
economy> -&2 in response to )olshevism, written as early as the late BCKLs @cf MisesAs
"ook, )ocialis# and introduction "y 3ayek2
/e will look in more detail at the effect of the New 0eal on KeynesAs *eneral +heory in
our ne:t piece 8or now, let us end this discussion with the interesting parallel of the
effect that the )olshevik 7evolution had on the two highest e:ponents of "ourgeois
economics in the BCMLs @ an effect that was only to "e reinforced "y the advent of the
7ooseveltian New 0eal as a portentous capitalist response to the 9eninist challenge )oth
Keynes and Schumpeter, in fact, who up until that time had confined themselves to
criti+ues of neoclassical theory that were more in the nature of =cosmetic> improvements
or corrections and who had shared un+uestioningly the schema that we have presented
here of a capitalist economic =mechanism> independent of politics and the State,
following these two epochal =revolutions> in the institutional asset of the nation$state @
one 9eninist and the other 7ooseveltian @ transformed their own theoretical approaches
to include precisely the possi"ility @ and indeed the inevita"ility @ of a fundamental role
of the State, of the 6olitical, in the essential operation and functioning of any ,conomy
#fter the 7ed 5cto"er and after the 3undred 0ays, it seems, the old "ourgeois illusion of
the epistemological separation of ,conomics and 6olitics @ of their =homologation> in
separate spheres of social reality @ "ecomes a"solutely impossi"le =9enin is +uoted as
saying,> relates Keynes in the I,conomic .onse+uences of the 6eaceA -"ut the statement
has never "een corro"orated, =that the "est way to undermine a country is to de"ase its
currency>
,ro# Metaphysics % went to -thics$ and thought that the .ustification of the existing
condition of society was not easy. / friend$ who had read a great deal of what are now
called the Moral )ciences$ constantly said0 1/h2 %f you understood 3olitical -cono#y
you would not say that.1 )o % read Mill4s 3olitical -cono#y and got #uch excited about
it. % had doubts as to the propriety of ine5ualities of opportunity$ rather than of #aterial
co#fort. +hen$ in #y vacations % visited the poorest 5uarters of several cities and walked
through one street after another$ looking at the faces of the poorest people. 6ext$ %
resolved to #ake as thorough a study as % could of 3olitical -cono#y. (Marshall 5uoted
in 7eynes$ 8-in9:$ p1;&!
Keynes and the 5tate-6lan 3 Money as a 0ridge &etween
6resent and 7%t%re
'f =the economy> is a =mechanism> that connects automatically a given +uantity of
=inputs> with a given +uantity of =outputs>, it is =a:iomatic> that there must "e a
=scientific and mathematical> way of ensuring that this =economy> functions
=automatically> @ and that can "e o"viously "y eliminating or avoiding any
=distur"ances> -e:ternal shocks2 or =interferences> -political measures and institutions2
from influencing or disrupting its operation =.rises> therefore are not =internal> to the
economy, "ut entirely =e:ternal> 'ndeed it can "e said that if the economic laws of the
marketplace economy are kept in place, its reproduction will "e in large part
=spontaneous> or =automatic> #nd it is e+ually o"vious that for a society to reproduce
the aggregate =savings> of the society must e+ual the aggregate =investments>* this, in a
nutshell, is the meaning of SayAs 9aw* it is what must o"tain to ensure that the sought$
after =e+uili"rium> of the economy is attained, whether one adopts =socialist> or =li"eral>
policies
SayAs 9aw is the tangential point that connects the socialist circle with the li"eral line
#nd it is SayAs 9aw @ the fundamental 9aw of ,conomics @ that makes possi"le the
determination of an =economy> that operates =spontaneously> and =automatically> if the
laws of economics are respected, in such a way that civil society, the ,conomy, can
function entirely independently of the 6olitical, of the State, where the State is a
=negative State>, like the =economy> a mere =machinery>, confined to the protection of
the self$regulating market and ensuring that =pu"lic opinion>, the moral and religious
persuasions of =citi1ens>, do not interfere with the market and are confined to the =pu"lic
sphere> of de"ate and deli"eration %his homologation of the 6olitical, which allows
=citi1ens> to e:ist as moral mem"ers of a dialectical =pu"lic sphere>, and of the
=scientific necessity> of the ,conomy where the =individual> attends to his =self$interest>
according to his needs, as a ="ourgeois> @ this homologation of the conventional sphere
of the 6olitical and the hypothetical mechanism of the ,conomy is what unites "oth
.lassical 6olitical ,conomy with Neoclassical 6olitical ,conomy
'n this schema, universally accepted "efore the Great 0epression, the State is seen as a
=nightwatchman state> -in 9assalleAs phrase2, as a =State of 9aw>, as the enforcer of laws
that protect the homologation achieved "y the 6olitical ,conomy for the efficient
operation of the economy in a free society 'n this schema, the State plays a"solutely no
significant part, if it plays any part at all, in the su"stantive functioning of the economy
e:cept as a =guardian>, e:cept as =police>, ensuring that the =self$interests> of the
individual ="ourgeois> are kept within the am"it of the laws of the market so as to
preserve =life, li"erty and estate> )ut this is precisely where the homologation, the e+ui$
valence of the 6olitical sphere and the ,conomy "reaks down $ )ecause the =self$
interest> of the individual market participants may not necessarily =converge> or "e
consistent with the =self$interest> of other individuals #s Marshall had warned with
regard to (evonsAs mathematical calculations of marginal utility, these assumed that the
individual =utilities> of the =individual> were compati"le with those of other
=individuals> within the sphere of e:change defined and regulated "y the market& Now,
this assumption was mere =economic dogma> and could in no guise lead to the certainty
of =concrete truth> %he =laws of economics> presuppose a:iomatically the e:istence of a
=common utility> "etween all market agents? they postulate the e:istence of a Smithian
=enlightened self$interest> where"y the self$interest of the single "ourgeois is somehow
compati"le with that of every other "ourgeois at least in the sense that they can =co$
e:ist> ,ven assuming the e:istence of =economic laws>, it is evident that the
=agreement> "y all market participants to a"ide "y them is dependent on the =scientific
rationality> of individuals and on the e:istence of a =civil society> in which there is
consensus to "e governed "y a State, "y political institutions, that will enforce the
undistur"ed operation of the =self$regulating market>
't is precisely the assumption in "oth .lassical and Neoclassical economics of the
a:iomatic necessity of the e:istence and of the spontaneous automatic operation of these
=institutions> that Keynes challenges from the very first sentences of the General %heory
% have called this book the General %heory of ,mployment, 'nterest and Money$ placing the e#phasis
on the prefix general. +he ob.ect of such a title is to contrast the character of #y argu#ents and
conclusions with those of the classical <1= theory of the sub.ect$ upon which % was brought up and
which do#inates the econo#ic thought$ both practical and theoretical$ of the governing and acade#ic
classes of this generation$ as it has for a hundred years past. % shall argue that the postulates of the
classical theory are applicable to a special case only and not to the general case$ the situation which
it assu#es being a li#iting point of the possible positions of e5uilibriu#. Moreover$ the characteristics
of the special case assumed "y the classical theory happen not to "e those of the economic society in
which we actually live$ with the result that its teaching is #isleading and disastrous if we atte#pt to
apply it to the facts of experience. (p;!
7ightaway, Keynes invites his readers to reverse the order of analysis of =classical>
-orthodo: "ourgeois2 economic science* the =laws> postulated "y that =science> apply
only as a =limiting point of the possi"le positions of e+uili"rium>? they represent only =a
special case> whose characteristics =happen not to "e those of the economic society in
which we actually live> Gone, therefore, are the =a:ioms> of =economic dogma>? gone
are the postulates of economic science with its neat mathematical e+uations and its
=certainties> of rigorous =e:istence> of =e+uili"rium> %he only =e:istence> that is
relevant is not that of mathematical e+uili"ria, "ut the ec$sistence of this society @ =the
economic society in which we actually live>& %here is no =necessity> to these
=characteristics>* they simply =happen> not to "e those of the e:istential reality in which
we =actually live> 9ife is not mathematics? =concrete truths> are not =universal truth>
)eneath the apparent =automatic> functioning of the market laws there lies a social
reality that is as comple: as human e:istence, as =meta$physical> as the very
=metaphysics> that neoclassical economic science despises&
(ust as ,instein had shattered the =uni$versality> of Newtonian physics, just as Niet1sche
and 3eidegger had =trans$valued> the old values of /estern metaphysics @ so now does
Keynes turn upside down or =reverse> the perspective of Neo$Kantian and Machian
economics Nothing is a"solute* everything is relative %o orient ourselves in this society
we must ensure that the so$called =laws of economics> that supposedly ma:imi1e the
=welfare> of the society do not destroy first in the process of their =theoretical> operation
the very =society> on which they are founded* =with the result that its teaching <that of
orthodox econo#ics= is #isleading and disastrous if we atte#pt to apply it to the facts of
experience(
#nd =the facts of e:perience> teach us instead that there are forms of "ehaviour or
=institutions> that are peculiar to =the economic society in which we live>* not all or
every -&2 =economic society>, then? only the one =in which we live> #nd this =economic
society> is the a capitalist society Society comes first? economics later 'f we wish to
preserve =this> -&2 society @ a =capitalist> one @ we must then adapt e:isting institutions
and adopt new ones that will ensure the survival and reproduction of a specifically
=capitalist> society* we must prescri"e the institutions that can make up a =society of
capital>& %o insist with a"stract =economic laws>, to affirm their =eventual> triumph @ =in
the long run> @ can lead only to the tearing of the fa"ric of this society on which this
=economy> is founded %herefore, =in the long run we are all dead> does not mean -as
many superficially take it to mean2 that =all things must pass>& Keynes is saying instead
that if we choose to adopt =the long run> as an infle:i"le mode of conducting capitalist
society @ then$ in that 'long run($ 'we as capitalists($ the econo#ic$ capitalist society
'as we know it($ 'in which we actually live(>.will die -&2, and =we, the capitalists, will
die with it> Keynes is not referring to =mankind> in general* he is addressing his own
class and this society, which is the only form of civili1ed society that he knows, that he
can conceive as worthy of inha"iting
%hat it is the survival of ="ourgeois society> that Keynes had in mind, that this was the
conte:t in which his famous ma:im was uttered, is illustrated clearly and dramatically "y
3ayekAs direct response to the Keynesian su"version of the nature and content of
=economic analysis>, from =science> to virtual =policy>
' cannot help regarding the increasing concentration on short-r%n effectsNwhich in this conte:t
amounts to the same thing as a concentration on purely monetary factorsN not only as a serio%s and
dangero%s intellect%al error8 &%t as a &etrayal of the #ain d%ty of the econo#ist and a grave
#enace to o%r civili$ationO9t %sed8 however8 to &e regarded as the d%ty and the privilege of the
econo#ist to st%dy and to stress the long-r%n effects which are apt to "e hidden to the untrained
eye, and to leave the concern about the #ore i##ediate effects to the practical #an, who in any event
would see only the latter and nothing elseM -6%., p,PLC2 -my emphases2
%he polemic with Keynes is evident ='n the long run, we are all dead>, of course, "ut
3ayek hankers "y =spontaneous>, =long$term> processes -he would refrain from saying
=natural>, as in the =natural prices> of long$term e+uili"rium2 $ processes that display the
=underlying logic of human action>, $ an =open$ended> notion, to "e sure, "ut one from
which a =pure logic of choice> may "e distilled @ a spontaneous order to "e protected
from the extrinsic =short$term policies> introduced "y =interventionist> governments and
the =distur"ances> that they cause, as displayed "y =the trade cycle> %o interfere with
this =pure logic of choice> or =science of choice> is not only =an intellectual error>, "ut a
="etrayal and a grave menace> to civili1ation itself&
=)ut it is alarming to see that after we have once gone through the process of developing a systematic
account of those forces which in the long r%n deter#ine prices and prod%ction, we are now called
upon to scrap it, in order to replace it "y the short-sighted philosophy of the business #an raised to the
dignity of a science #re we not even told that, "since in the long run we are all dead", policy should
"e guided entirely "y short$run considerations4 ' fear that these "elievers in the principle of apres
nous le deluge may get what they have "argained for sooner than they wish,> -pPBL, my emphases2
8or 3ayek, it is the Keynesian urge to interfere with the =spontaneous order> of social
life as encapsulated in the tenets of economic =science> that represents a nihilistic
"etrayal "oth of science and of civili1ation KeynesAs =General %heory> is the
a"andonment of reason for the very =short$run> preservation of capitalist society @ an
=interference> with =those forces which in the long run determine prices and production>
done in the name of a =short$sighted philosophy> that can only compound and hasten
-=sooner than they wish>2 the decadence and decay and decline of =civili1ation>, that is to
say, of "ourgeois society and its =economy>
Keynes: :ncertainty8 Money8 /a&or
%he Great /ar of BCBP to BCBQ shatters the illusions of the ,uropean ,nlightenment* it is
not simply the a"ility of human "eings to "ehave =rationally>, according to the methods
and laws of science, that is called into +uestion? it is not merely the "elief in a steady
=progress> of humanity toward =peace and prosperity> -it is the motto of the 3a"s"urg
#ustro$3ungarian ,mpire shortly "efore its collapse2 again in the footsteps of science
and technology that tragically confuted? it is a"ove all the very content of =scientific
rationality> that is called into +uestion @ nowhere more so than in the sphere of
economics #lfred Marshall may have e:emplified the faith reposed in science "efore the
/ar*
,ro# Metaphysics % went to -thics$ and thought that the .ustification of the existing
condition of society was not easy. / friend$ who had read a great deal of what are now
called the Moral )ciences$ constantly said0 1/h2 %f you understood 3olitical -cono#y
you would not say that.1 )o % read Mill4s 3olitical -cono#y and got #uch excited about
it. % had doubts as to the propriety of ine5ualities of opportunity$ rather than of #aterial
co#fort. +hen$ in #y vacations % visited the poorest 5uarters of several cities and walked
through one street after another$ looking at the faces of the poorest people. 6ext$ %
resolved to #ake as thorough a study as % could of 3olitical -cono#y. (Marshall 5uoted
in 7eynes$ 8-in9:$ p1;&!
Nothing epitomi1ed the 6anglossian =optimism> of pre$/ar ,urope than the e:istence of
the Gold Standard as a seemingly =automatic> regulation of glo"al trade and industry
3ere was sparkling proof of the harmonious convergence of scientific rigor and welfare
ma:imi1ation 3ere was evidence of the =automatic> functioning of the self$regulating
market mechanism that could reconcile in SayAs 9aw "oth the la"our theory of value of
.lassical 6olitical ,conomy and the marginal utility theory of the Neoclassics %he
general e+uili"rium mathematically identified "y /alras uni+uely "rought together for
economic analysis the =form> of mathematical scientific precision with the =content> of
utility ma:imi1ation for each individual economic agent
Keynes perceives from the end of the /ar that the peace and prosperity of the Golden
#ge had "een "uilt on very shaky foundations Shakier still and ominously dangerous for
him is the insensate credence of the victorious powers at the 6aris .onference of BCBC in
their a"ility to return to the old pre$/ar =e+uili"ria> of the Gold Standard and the 9eague
of Nations %o "e sure, the =elements> of his economic analysis @ to poke irony at his
derogatory criti+ue of the =a:iomatic> character of neoclassical theory @ remain
steadfastly neoclassical )ut one =historical reality>, an imponent presence upsets all the
=e+uili"ria> of the marginalist revolution for Keynes* the e:treme implausi"ility of the
e+uili"rium of savings and investment as a =spontaneous self$regulation> of the market
mechanism @ the 'nvisi"le 3and that decrees that =supply creates its own demand> SayAs
9aw would hold in the =special case> in which supply -investment2 and demand
-consumption2 could adjust instantly and seamlessly to variations in their respective
schedules 'n such a case, there would "e not so much an =e+uili"rium> of =+uantities> as
rather a =harmony> of =information> "ecause the =e+uili"rium> would consist in the
=perfect matching> of =demands> -the informational e+uivalent of =consumption>2 and
=e:pectations> -the mental e+uivalent of =investment>2 'n such an =economy> all
=information> relevant to production and consumption schedules would "e immediately
and omnisciently availa"le to all market participants in such a way that no =discrepancy>
could arise "etween supply and demand* supply would adjust to known demand and
demand would adjust to availa"le supply
8or Keynes, here the neoclassical school has =illicitly> -chK, G%2 allowed the =form> of
the science to rationali1e the =content> of capitalist =economic society>, to justify its
conduct, to certify its legitimacy %he error of all previous theories is that they fail to
distinguish "etween form and content* the form serves merely as a warranty of the
optimality of capitalist activity, of the reality of "ourgeois society& (ust as did 3egel, for
whom the philosophy of history is the history of philosophy "ecause =whatever is real is
rational and what is rational is real>, so has economic science illicitly "ecome the
scientific certification of present =economic conduct and practice>& 't is not so much that
the capitalist economy re+uires =different scientific categories> for its analysis& Keynes
insists that the =tools> of analysis are the same as those that can "e used for =any>
economic society )ut the =actual workings> of the capitalist society are different from
those of other societies in the sense that =the "asic factors of production and distri"ution>
-=;alue and 6roduction>2 work differently in this society Keynes distinguishes "etween
the =tools> of economic analysis and the fa"ric of society* the same scientific tools can "e
applied to different historical economic societies that are made =different> "y their
institutional frameworks %his is the challenge that Keynes throws against =the postulates
of the .lassical ,conomics>*
ost treatises on the theory of !alue and "roduction are primarily concerned with the distribution
of a given volume of employed resources between different uses and with the conditions which#
assuming the employment of this $uantity of resources# determine their relative rewards and the
relative values of their products. %&h.')
The $uestion# also# of the volume of the available resources# in the sense of the si(e of the
employable population# the extent of natural wealth and the accumulated capital e$uipment# has
often been treated descriptively. )ut the pure theory of what determines the actual employment of
the available resources has seldom been examined in great detail*. + mean# not that the topic
has been overlooked# but that the fundamental theory [p.5] underlying it has been deemed so
simple and obvious that it has received# at the most# a bare mention.
%hat is the =destiny> of mathesis* to "e its own fulfillment 'f one defines, as did 7o""ins
and 3ayek with their =Science of .hoice>, the =availa"le resources> as =given> and
therefore =fully employed>, then it follows that economic analysis "oils down to the mere
mathematical selection of the method of allocation and distri"ution of these resources
consistent with the ma:imi1ation of human welfare )ut the pro"lem, as Keynes points
out, is that the =actual employment> may well not "e =full> @ that there may "e
=involuntary unemployment> of the availa"le resources not "ecause of some interference
or distur"ance or shock =e:ternal> to a historical economic society, "ut rather "ecause of
its very modus operandi, of the real institutional =content> of its "ehaviour&
%he task of economic analysis then cannot "e to devise a mathematical description of an
ideal reality, a perfect state, a =general e+uili"rium>, and then to attri"ute all the evident
flaws of this reality to some =distur"ance> or =e:ogenous shock>& %he task of scientific
analysis is to register these =shocks> as part and parcel of the econo#ic syste# under
consideration and then to suggest changes to the current institutional asset to prevent
these =shocks> from destroying the =peace and prosperity>, the =e+uili"rium> of the
economic society in +uestion #s Keynes puts it with a half$derisive tilt at =economic
science>*
The celebrated optimism of traditional economic theory# which has led to economists being
looked upon as &andides# who# having left this world for the cultivation of their gardens# teach
that all is for the best in the best of all possible worlds provided we will let well alone# is also to be
traced# + think# to their having neglected to take account of the drag on prosperity which can be
exercised by an insufficiency of effective demand. ,or there would obviously be a natural
tendency towards the optimum employment of resources in a -ociety which was functioning after
the [p.34] manner of the classical postulates. +t may well be that the classical theory represents
the way in which we should like our .conomy to behave. )ut to assume that it actually does so is
to assume our difficulties away.
%he ultimate goal for Keynes is to preserve society @ =economic society>, bourgeois
society #nd it is clear from the very first lines of the General %heory that the major, most
imminent threat to the e:istence of "ourgeois society is the =involuntary unemployment>
of human resources @ of =la"our> 't is this =discrepancy> "etween the =availa"le
resources> for employment and the =actual employment> of those =resources> that
threatens the sta"ility and the very survival of capitalism and of "ourgeois society* the
+uestion then is to esta"lish why such a discrepancy e:ists ,:isting economics assures
us that any =unemployment> of availa"le resources is either =voluntary> or =frictional>, if
it is not due to =political interference> with the =self$regulating market mechanism> )ut
provided this mechanism is allowed to operate =freely>, then full employment will return
=in the long run>
%wo concepts immediately demand KeynesAs attention here* one is the notion of =long
run>, which re+uires a certainty verging on faith in the a"ility of =the market> to steer a
society to =peace and prosperity>, and the other is the assumption of the =freedom> of
economic agents @ of =individuals> #nd once again it is the e:perience of the Great /ar
that confutes "oth these credos of economic =science> 8or the /ar has destroyed all
=certainties>, scientific and moral, all faith in =values> and replaced them with one
frightening =certainty>* $ the certainty of death 0eath with its finality is the only
=certainty> and =value> that the /ar has "rutally confirmed Not only is the future of =the
long run> not assured? not only is it =uncertain> @ and here =uncertainty> comes to
occupy a central role in KeynesAs economic analysis )ut also the =freedom of choice> on
the part of the =individual> that neoclassical theory and its marginal utility postulate
implies a =rationality> on the part of the =individual> in e:ercising his =choice> or his
economic =conduct> @ a rational =freedom of choice> that the very a"surdity and
irrationality of the =,uropean civil war> and its near annihilation of societies and
civili1ation have +uite simply demolished& 'ndividuals act neither independently of one
another, nor rationally according to the scientific dictates* economic analysis itself, in
seeking to descri"e =rigorously> their "ehaviour and to prescri"e their conduct along
=scientific$rational> lines, shows conclusively that there is no o"vious =o"jective>
definition of =freedom> or indeed of =rationality>&
Nowhere is this more evident than in the determination of the =wage> 3ere Keynes
notices a crucial defect in all prior economic theories in the fact that they confuse =money
wages> with =real wages> 'f indeed =the real wage> could "e defined strictly as =the
marginal product of la"our>, then this =marginal product> could "e =+uantified> so that
the +uantity of employment could "e e:actly e+ual to the +uantity of employment
re+uired for the utility of the real wage to e+ual the marginal disutility of la"our given a
physical and cultural re+uirement )ut the pro"lem is that =the wage> is not paid =in
natura>, in terms of physical product* it is paid =in money> ,ven if it were paid in
=wage$goods>, it would "e impossi"le to determine what amount of wage$goods
represented and =e+ualed the #arginal product of labour> given that such a =marginal
product> would have to "e defined in terms of =market prices> which, in turn, would have
to stand for =physical +uantities> of the =wage$goods> concerned& %he circuitousness of
these definitions is evident Keynes summarises it as follows*
/t different points in this chapter we have made the classical theory to depend in succession on
the assumptions0 %1) that the real wage is e$ual to the marginal disutility of the existing
employment1 %') that there is no such thing as involuntary unemployment in the strict sense1 %2)
that supply creates its own demand in the sense [p.22] that the aggregate demand price is e$ual
to the aggregate supply price for all levels of output and employment. These three assumptions#
however# all amount to the same thing in the sense that they all stand and fall together# any one
of them logically involving the other two.
%he o"vious contradiction is that =the aggregate demand and supply prices> to which
Keynes refers must evidently refer to =monetary entities> and that the e:istence of full
employment depends on their =e+uality at all levels of output and employment> )ut for
this to happen =the real wage must also "e e+ual to the marginal disutility of e:isting
employment> @ and here we have =illicitly> switched from =monetary> magnitudes that
can "e aggregated, to =real> ones that simply cannot "e =aggregated> unless they are
=converted> into =monetary> terms&
Keynes, however, does not =directly> confront this contradiction and vicious circle -it is
in order to avoid contra$diction that the definitions are =circuitous>2 'nstead, he seeks to
show that these =postulates of the .lassical ,conomics> do not correctly descri"e the
=reality> of what in fact =happens to "e the economy in which we live> 8irst of all, these
=classical postulates> do not descri"e at all properly the reality of the institutional
"ehaviour of the workers, acting as a class*
3ow ordinary experience tells us# beyond doubt# that a situation where labour stipulates %within
limits) for a money4wage rather than a real wage# so far from being a mere possibility# is the
normal case. 5hilst workers will usually resist a reduction of money4wages# it is not their practice
to withdraw their labour whenever there is a rise in the price of wage4goods. +t is sometimes said
that it would be illogical for labour to resist a reduction of money4wages but not to resist a
reduction of real wages. ,or reasons given below %p. 16)# this might not be so illogical as it
appears at first1 and# as we shall see later# fortunately so. )ut# whether logical or illogical#
experience shows that this is how labour in fact behaves.
)ut even leaving this to one side, the most crucial o"jection to the =classical postulates>
is that the very presence of =money> and of =monetary aggregates> determines a
fundamental =hiatus> "etween the =present> level of output and employment in the
capitalist economy and the =e:pectations> of what the aggregate levels of consumption
and investment will "e in the future2 # chasm appears therefore in the =predicta"ility and
regularity> -the phrase used "y Keynes to descri"e the statistical endeavours of (evons2 of
the functioning of the capitalist economy in terms of what the =agencies> involved in the
economy =e:pect> to happen in future %hese =e:pectations> are predominantly affected
"y =uncertainty> a"out the income streams that may "e derived in future from the
investment made in the present #nd these income streams are determined "y =the
propensity to consume> 't is the fact that this =propensity to consume> may fall "elow
the =e:pectations> of investors that causes the swings in the investment cycle that can
lead to downward spirals of disinvestment and deflation and turn into outright depression
<ltimately, Keynes attri"utes =uncertainty> to the fact that social life is =unpredicta"le
and irregular>, irrational and =unfree>, as the cataclysms of war and economic depression
demonstrate all too clearly =Money> is the institutional link in capitalist economic
society utili1ed to provide =a "ridge "etween the present and the future> !et it is the
e:istence of money itself that provides the institutional hiatus "etween present and future
levels of output and employment Never and nowhere does Keynes seek to e:plain why
money e:ists and how it can e:ist in capitalism %he need for an e:planation he simply
and mysteriously whisks away "etween the lack of realism of =the .lassical economics>
and the descriptive realism of his own corrections of their theoretical framework 8ar
from "eing a =General %heory>, KeynesAs magnum opus is a very =generic> theory full of
"rilliant institutional insights "ut lacking any intellectual and theoretical coherence
<nlike his opponents in the #ustrian School, KeynesAs intellectual ken and grasp of social
theory and philosophical analysis was far too narrow to allow him to tackle the most
fundamental theoretical =elements> of economic theory
'n the ne:t intervention we will e:amine how Keynes =mystified> the political reality of
the wage relation that is at the centre of capitalism "y camouflaging it @ though
unwittingly @ with his various categories of =marginal efficiency of capital>, =propensity
to consume>, =animal spirits>, =the li+uidity trap> and his account of the rate of interest
GJust a personal note to co##e#orate ?r. %ain Macpherson$ econo#ic historian$ of
*onville and @aius @ollege$ @a#bridge$ who % learned today passed away this year. %
can testify that over the years % was the recipient of ?r. Macpherson:s endless and
spontaneous )cottish generosity$ not less than of his sincere and war# )cottish wit. % will
#iss hi# upon #y return to @a#bridge in a few weeks$ and % shall never forget hi#.
Ae5uiescat in pace.H
%he .artesian cogito "egins with the awareness of thought %here is a co$agitatio, an
activity that can "e called =thinking> #nd this activity has an =o"$ject>, a con$tent or
su"$iectum -a su"ject$matter2 for the re$presentation -;orstellung2 that constitutes the
=thinking> %here must "e therefore a =reality> that is not necessarily a =thing>, "ut an
activity -actus, from agree? hence co$agitatio as thinking2 that re+uires an =agent> -again,
from =agree>2 as the carrier of the =act> of thinking that may not have a =material>
su"ject$matter -su"$iectum2 "ut that is in ec$sistence, that is =there>, that has ="eing>
)eing is simply concealed if it is =in$itself> )eing that is a$ware of itself is a "eing$for$
itself, a consciousness )ut this consciousness has a =memory>, a series of conscious acts
that constitute an =identity> distinct from the =o"$ject> of the consciousness %he
consciousness has a command over the content of some of its perceptions that it lacks
over others 't is =free> to act "ut within a certain sphere called =will> %he /ill is =free>
to will "ut not free to attain the o"ject of its volition %here is a =forum internum> or =the
soul> that is =free> in the e:ercise of its =will>? and a =forum e:ternum> related to =the
"ody> that can =operate> at the "ehest of the =free will> on itself and on other ="odies> in
nature
%he aim of German 'dealism was to overcome the .artesian dualism of )ody and Soul
"y transforming the =o"$ject> of the will into its own =cognition>, into the unfolding of
the will into itself, the e:pansion of the awareness of itself on the part of consciousness*
this is the dialectic of self$consciousness %he =forum e:ternum> is not an$nihilated "y
the /ill "ut is rather gradually =known> -apprivoiseA, =privati1ed>2 until it "ecomes
=internali1ed> "y the will through self$consciousness, "y the Spirit @ and so on until self$
consciousness "ecomes the =#"$solute> in the sense that it "ecomes =free>, =a"$solved>
from any and every =restriction> or con$straint on the scope of its ken, of its knowledge @
knowledge that has now "ecome =power>, =a"solute power> @ thus, vouloir$savoir
"ecomes vouloir$pouvoir until the will a"$solves itself in power
Keynes and the ;ise of the 5ociety of Capital
KeynesAs fundamental #otive for undertaking the entire theoretical project of the *eneral
+heory is made +uite e:plicit in chapter KP of the work %he immediate and pressing need
is to avoid the implosion and collapse of the li"eral parliamentary democracies that seem
now on an unavoida"le course of conflict against the totalitarian dictatorships that have
sprouted across ,urope as a direct result of the human hecatom", destruction and
economic upheaval during and in the aftermath of the Great /ar KeynesAs chief target is
to maintain as near full employment as is possi"le for a li"eral democracy with a State
that safeguards the private property rights of its citi1ens, for he is convinced that it is the
hopelessness and fear inspired "y mass unemployment that foments the racial hatred and
imperialist aggression that these regimes @ whether fascist or communist @ e:ploit to
secure their supremacy %he aim is no"le and admira"le )ut we must point out its
fundamental flaws in the interpretation of the "asic historical categories of the capitalist
economy and therefore also the analysis of its operation
%he General %heory is remarka"le at least in one respect as the first monumental attempt
to conceptualise the capitalist economy as a Monetary -cono#y in which the overall co$
ordination of the system of production "ased on the wage relation affects every aspect of
social life and indeed the very reproduction of society 'n other words, Keynes takes
conscience of the fact that we have passed from a capitalist stage in which industrial
capital is only a part of social reproduction to one in which capital has finally assumed
the role of =social capital> through the real su"sumption of all or most relevant and vital
aspects of social reproduction %he passage from the =competitive capitalism> of the 8irst
'ndustrial 7evolution from BRPL to the early BC
th
century to the phase of what Schumpeter
calls =trustified capitalism> or =social capital> -prophesied "y Mar:, "ut note
SchumpeterAs gracious acknowledgement of his astounding foresight2 with the Second
'ndustrial 7evolution starting in the BQJLAs after the Great .risis @ this =trans$formation>
of capitalist industry and society as a direct of a Great =.risis> is what inspired
Schumpeter to write his own +heorie, and has "een accepted almost universally "y
historians as a clear =periodisation> of the development of glo"al capitalism
Keynes takes conscience of this =trans$formation> of capitalist society, "ut unlike
Schumpeter -who called Keynes =the father of stagnation>2 he does not see the
=innovative> side of capitalism, its revolutionary and trans$formational meta$morphoses*
Keynes sees only this growing =discrepancy> or dislocation "etween the immediate
productive decisions and =choices> of =free individuals>, on the one hand, and the
growing and vital dependence of economic activity @ or =output and employment>, as he
calls them @ on the =monetary> considerations of a vast and fast$growing intense network
of financial inter#ediation "etween "ankers and financiers and "rokers and investors,
and then finally =savers>, whose vital functioning depends almost entirely not just on the
=e:pectations> of future income streams or =yields> from present investments, "ut also on
the a"solute need to ensure that these =e:pectations> do not turn =negative> and then,
given the financial pyramid of =projections> on =e:pected yields or profits>, do not
trigger a financial =implosion>, a panic that 'rving 8isher had already descri"ed -BCML2 as
a =de"t$deflation> to descri"e the Great .rash of BCKC
%hus, Keynes notices a great dis$connection, a dis$location and dis$crepancy @ a
disintermediation @ possi"le "etween the present and the future caused "y the imponent
overwhelming growth of finance capital -what Schumpeter called =the control room of
capitalism>, and a su"ject that had already attracted works "y 3ilferding and 9enin
G='mperialism>H2 5f course, money and finance themselves are a ="ridge "etween the
present and the future> -chKB of G%2, "ut this does not prevent them also from "eing the
reason for their own existence2 6ut differently, although money and finance are
instruments that allow the capitalist to seek to plan the future "y =a"stracting>, "y
=divorcing> himself from the present act of physical production, at the same time money
and finance catastrophically =separate> the activity of human "eings from their
=investment decisions> Social capital, as it were, =connects> every aspect of social life
to the e:panded reproduction of capital @ "ut at the same time it su"jects the =socia"ility>
of human e:istence to the terrific threat of possi"le collapse "y making social
reproduction dependent on the antagonism of the wage relation, "y su"stituting the
=investment decision> "ased on =future profita"ility> for the =productive decision> "ased
on the organic projection of democratically$agreed future needs of a non$antagonistic
society&
%o sum up, what Keynes is first to reali1e in the General %heory is that the very survival
of capitalism depends on bridging the gap or chas# or hiatus introduced by #oney and
finance between present production and future profitability2 %his is the awesome task of
the General %heory* $ first, to show theoretically the =need> for the decisive sei1ure of the
future "y the "ourgeoisie through the State$6lan, and second to lay out a strategy of
political transformation of capitalist institutions that reflect the =political> transformation
occasioned "y the transition from private or competitive or =mercantile> capitalism @ to
the much more imponent and ominous surge of social capital into finance capital and into
=the society of capital> %he role of the State$6lan will "e decisive in all this 5f course,
Keynes the %reasury official, )ursar of KingAs .ollege, .am"ridge, cannot say this in so
plain a fashion 3e needs to disguise his language? camouflage his ideological tools? sell
his strategy %hus, he casts his discourse, he mimetises his concepts with the old leopard$
skin of Neoclassical %heory* nowhere more so than where =the wage> is concerned Ne:t,
we will see how he does this
Keynes and the 2age ;elation 3 1he Money 2age as the 7%nda#ental
:nit of the 5ociety of Capital
='n the long run, weAre all dead> marks an important turning point in the intellectual prise
de conscience of the "ourgeoisie* capitalism is not =the end of history>? its =economics>
does not em"ody =the truth> @ it is not a =revelation> .apitalism is a product of human
history and, like all historical artefacts, its time will come too %he only =certainty> is not
that of the mathematical e+uations of /alrasian general e+uili"rium* the only =certainty>
this side of =death> is =uncertainty> Nothing is a"solute, and nothing is infalli"le or
imperisha"le 'f we wish to preserve this =particular form> of =economic society>, we @
=we> the "ourgeoisie @ must ensure its survival* and survival means =reproduction>, and
reproduction means the co$ordination of economic activity in a manner that remains
fundamentally capitalist "ut that does not threaten the reproduction of the society of
capital, and that means =reproduction of the wage relation> Now, reproduction of the
wage relation means ensuring a level of employment that is as close to full employment
as can "e consistent with the reproduction of the wage relation
%his implies at least two things* first, the wage must not "e so high that wage la"ourers
refuse to alienate their living la"our for capital to e:ploit on an e:panded scale? and
secondly that the wage does not fall so low that the investment decisions of capitalists in
terms of the future stream of income @ in other words, the =profita"ility> of capital @ is
not jeopardi1ed "y making formerly =less profita"le> investments "ecome more
profita"le 'f the =future> of capitalism is to "e secured, then the =profita"ility> of current
capitalist investment must also "e secured ?ifferently put$ the 'financial gearing( of
invest#ent #ust be 'geared( in har#ony or co-ordination with the antagonis# of the
wage relation expressed 'financially($ in #onetary units$ so that the 'expected future
yield( fro# present invest#ent is co#patible with the expanded reproduction of living
labour and therefore with the wage relation2
%he implications of this reali1ation are a"solutely enormous and astounding 8irst among
all "ourgeois economists, in a feat almost e+ualing the political analytical genius of a
Karl Mar:, Keynes perceives that the =financial pyramid> of finance capital must "e
trans$formed from a =casino capitalism> into a co$ordinated and =planned> maintenance
of output and employment "y using the money wage as =the fundamental unit> of
calculation of the total final demand -aggregate demand and, more specifically, =effective
demand>2 of the capitalist system regardless of what individual capitalist might decide or
think& %he very =e:pectations> of individual capitalists, the =animal spirits> of =private
investors> must "e adjusted =socially>, =collectively> through the monetary medium @
through the fundamental =unit> of the money wage @ so that a de"t$deflation, a =financial
panic> is =politically> avoided&& =/e, the "ourgeoisie> must know that, in the words of
6resident 7oosevelt in the 'nauguration Speech of 8e"ruary BCMM* =#99 /, 3#;, %5
8,#7 'S 8,#7 '%S,98&>
0eath is the only =certainty> %his side of death there is only =uncertainty>* from
3eisen"erg to ,instein to 3eidegger, KeynesAs language and thought closely parallels the
=e:istential crisis> not just of the "ourgeois %ndividualitat that even Schumpeter has
a"andoned with his =o"solescence of the entrepreneurial function>, that /e"er had
a"andoned with his =iron cage>, that Niet1sche had prophesised with his /ill to 6ower* if
the only certainty is death and this side of the =long run> is =uncertainty>, then we need a
point of reference @ the e+uivalent of a 3eideggerian 0a$sein, a Bichtung, a "eam of
light, to show us the way in the =world of "eing> that has "een =o"scured> "y the /ar
and the 0epression #nd that =point of reference> can "e only the =actual employment>
of social resources, =the anne:ation of the future>, the control of the monetary ="ridge> to
the future, $ and that must pass through the control of the wage relation whose
fundamental =social institutional e:pression> is the money wage&
%he Great /ar was the last =,uropean civil war> (ust as in the BRPLs when %homas
3o""es was confronted with the ,nglish .ivil /ar at the very dawn of "ourgeois
capitalist society, the only answer to civil war is the a"andonment of =individual choice>
in the face of death (2! in favour of the esta"lishment of a State$Machine, of a 9eviathan,
that can stop us from fearing fear itself&
9et us leap without further ado to 6art %wo of the General %heory, the part on
=0efinitions and 'deas> %here it is& .hapter P on =%he Money /age>, section ''*
%hat the units, in terms of which economists commonly work, are unsatisfactory can "e
illustrated "y the concepts of the National 0ividend, the stock of real capital and the
general price$level* $$
%i) The 3ational Dividend# as defined by arshall [p.38] and "rofessor "igou# [1] measures the
volume of current output or real income and not the value of output or money4income. [2]
,urthermore# it depends# in some sense# on net output17on the net addition# that is to say# to the
resources of the community available for consumption or for retention as capital stock# due to the
economic activities and sacrifices of the current period# after allowing for the wastage of the stock
of real capital existing at the commencement of the period. 8n this basis an attempt is made to
erect a $uantitative science. $ut it is a grave objection to this definition for such a purpose that
the community=s output of goods and services is a non-homogeneous complex which cannot be
measured# strictly speaking# except in certain special cases# as for example when all the items of
one output are included in the same proportions in another output.
=# measure& # measure& My kingdom for a measure&> (ust as ,instein found the speed of
light as the fundamental constant of the universe, just as 3eidegger finds in death the
=>lighting> of 0a$sein -"eing there2, so now does Keynes need a measure, a unit, an
indication of the level of antagonism of living la"our against the wage relation in a
capitalist society that needs to trans-for# itself into a 'society of capital( in which 'the
control of growth beco#es the growth of control>& )ut this must "e a =measure> that is
not indicated in =real> terms "ecause it will "e +uite impossi"le then to relate this
=measure> to the specifically capitalist =condensation> of command over living la"our in
terms of =value>, of e:change value, and then utterly impossi"le to co$ordinate this =real
measure> with the financial pyramid of future income streams from present investments
=7eal wages> will never "e a"le to tell us what the future relations of political power
"etween workers and capital will "e* only the money wage can allow the State to act
=collectively> and =in aggregate> to mediate and negotiate and "uffer and co$ordinate the
political social antagonism that the wage relation generates
(ust listen to Keynes& 7ead carefully please&& )ecause the pro"lem of =measurement>
"ecomes especially dire and dia"olical where =the command of capital over living
la"our> through the wage is concerned with =the future>& #t that level, the real wage
cannot even remotely "e used to homologate and homogeni1e the levels of industrial
antagonism across different "ranches of capitalist production and across =periods> of
investment& %his can "e done =only> -&2 in terms of a =measure> that e:presses =value> @
that is, the homogeni1ed e:pression of antagonism across the aggregate monetary
e:pression of social capital*
%ii) The difficulty is even greater when# in order to calculate net output# we try to measure the net
addition to capital e$uipment1 for we have to find some basis for a $uantitative comparison
between the new items of e$uipment produced during the period and the old items which have
perished by wastage. +n order to arrive at the net 3ational Dividend# "rofessor "igou [3] deducts
such obsolescence# etc.# "as may fairly be called 9normal91 and the practical test of normality is
that the depletion is sufficiently regular to be foreseen# if not in detail# at least in the large". )ut#
since this deduction is not a deduction in terms of money# he is involved in assuming that there
can be a change in physical $uantity# although there has been no physical [p.39] change1 i.e. he
is covertly introducing changes in (alue. oreover# he is unable to devise any satisfactory
formula [1] to evaluate new e$uipment against old when# owing to changes in techni$ue# the two
are not identical. + believe that the concept at which "rofessor "igou is aiming is the right and
appropriate concept for economic analysis. $ut, until a satisfactory system of units has been
adopted, its precise definition is an impossible task. The problem of comparing one real output
with another and of then calculating net output by setting off new items of e"uipment against the
wastage of old items presents conundrums which permit, one can confidently say, of no solution.
Not only is there =the pro"lem of comparing one real output with another>? "ut, more
important, there is the far greater pro"lem =of then calculating net output "y setting off
new ite#s of e+uipment against the wastage of old ite#s>& %he =pro"lem> is =to "ridge>
and homogeni1e the political command of capital over living la"our not just =across
sectors> of capitalist industry, "ut also =across periods> of investment, ="etween the
present and the future>& #nd, as Keynes says, only =money> can do that, and only =the
money wage> can =ground> institutionally the political command of capital 3ere is
Keynes again*
In dealing "ith the theory of employment I propose, therefore, to make use of only t"o
fundamental units of 'uantity, namely, 'uantities of money-(alue and 'uantities of
employment) The first of these is strictly homogeneous, and the second can *e made so)
,or# in so far as different grades and kinds of labour and salaried assistance en:oy a more or less
fixed relative remuneration# the $uantity of employment can be sufficiently defined for our
purpose by taking an hour9s employment of ordinary labour as our unit and weighting an hour9s
employment of special labour in proportion to its remuneration1 i.e. an hour of special labour
remunerated at double ordinary rates will count as two units. 5e shall call the unit in which the
$uantity of employment is measured the labour4unit1 and the money4wage of a labour4unit we
shall call the wage4unit.[1]
/e will look at KeynesAs underlying assumptions on real wages ne:t
'n the chapter on =%he 6ostulates of .lassical ,conomics>, Keynes sets out +uite
successfully to demonstrate the flaw in SayAs 9aw @ that supply creates its own demand
and that therefore there cannot "e any involuntary unemployment @ on the ground of the
discrepancy that e:ists "etween the postulate that aggregate supply e+uals aggregate
demand in terms of money prices, whereas the employment of la"our is e:pressed in real
terms* the utility of the real wage at e+uili"rium e+uals the marginal disutility of la"our
/e noted a"ove how Keynes simply fails to tackle the pro"lem of how =real> +uantities
can "e =aggregated> or =homologated> in terms of =marginal units> constituting the
=marginal product of la"our> and how indeed this =marginal product> can then "e
homologated or e+uiparated with the notion of =marginal disutility of la"our>
%ry as one may, it will never "e possi"le to achieve such a monstrous feat e:cept "y
means of the most fantastic leap of the imagination closer to certain forms of insanity
than to any process of ratiocination Keynes never +uestions for a single instant what is
the most "asic tenet or =postulate> of marginalism and neoclassical theory
%o make matters worse, Keynes never does even so much as +uestion the neoclassical
postulate of =la"our> as a homogeneous su"stance that can "e =+uantified> at least in
terms of its =marginal product> and then of its =marginal disutility> 8or if "y =la"our>
we intend the =living activity> of human "eings, it is evident that no amount of
=measuring> will ever turn such living la"our into a =su"stance> that can "e measured in
terms of its potential =marginal product>& 9iving activity is a pure human =reality> that
cannot "e e+uiparated with its =product> e:cept through the most a"surd reduction -or
transmutation2& 'ndeed, the very fact that such a =reduction> is politically possi"le is
indicative not of the =measura"ility> of living la"our "ut of its repressive a"use and
alienation "y the powers interested in enforcing @ more or less violently @ such perverse
reduction %he =measurement> of human living activity can occur only "y =a"stracting>
fictitiously, and that means violently, through the coercion of human activity, from its
su"jective form of e:pression and also from its mode of o"jectification, that is to say,
through the =alienation> or =separation> of living la"our from the =o"ject> of its e:ertion
without which it is a pure and sterile concept, a mere figment of the imagination, a pure
fantasy
#nd this =o"jectA from which living la"our is =separated> forci"ly "y capital is not solely
the individual tools and raw materials to "e used in production, in the =o"jectification> of
living la"our 8irst and foremost is the =separation> of living la"our from its "eing
intrinsic part of =social la"our>, that is, of "eing a"solutely insepara"le from the process
of =social la"our> without which it would "e utterly meaningless %hat is what =the
wage> achieves? that is its real purpose* to slice and divide the living la"our of workers
into =separate individual la"ours> @ separate from "oth the means of its o"jectification
and from their =sociality> so as to "e a"surdly =measured> and =compensated> as
=individual separate la"ours>&
Keynes a"jectly ac+uiesces in this a"surd e:ercise, culpa"ly lending credence to what
must surely "e the most repugnant theoretical myth in the horrific history of "ourgeois
supremacy )ut this is not the end of the unseemly mystification in which Keynes
engages with argua"le degrees of complicity with the marginalist counter$revolution of
the neoclassical school Keynes also fails to +uestion the very notion that =the utility of
the real wage> can "e commensurate with the =marginal disutility of la"our> Given that
there is no such entity as =a"stract +uantifia"le la"our> e:cept as a criminally violent
imposition of the "ourgeoisie of its command over living la"our, it follows that living
la"our as the living activity of human "eings simply cannot have a =disutility> 3uman
living activity can "e either =free> in the sense that it constitutes the o"jectification of
autonomously determined human a"ilities or else it can "e the o"ject of more or less
violent imposition 't is totally insensate to speak of the =disutility of la"our> @ "ecause
once we define =la"our> properly for the only manifestation it can assume @ that of living
activity @ then it "ecomes apparent how =disutility>, whatever that e:pression may mean,
cannot even remotely "e applied to such living activity&
%o compound KeynesAs a"surd ignorance of even the most "asic theoretical appreciation
of human reality and social meaning, Keynes thoughtlessly accepts the =e+uation> of
living la"our -and its a"surdly attri"uted =disutility>2 with the =utility> of a =real wage>
made up o"viously of the products of human living la"our #gain, it is impossi"le to
attri"ute to the pro$ducts of living la"our @ the o"jectification of living la"our, what we
call =dead la"our> @ any =utility> however =marginally> measured %he very act of
e+uating dead la"our with living la"our is an act of violence so vile and violent that any
and every decent human "eing ought to detect it the instant that this gross
misapprehension is e:posed&
't is a"solutely o"vious from the foregoing analysis that no conclusions of any sort can "e
drawn form KeynesAs analysis and internal criti+ue of =the postulates of classical
economics> #s we have argued, Keynes evades the insupera"le scientific and analytical
difficulties posed "y this phantasmagoric neoclassical theoretical framework "y
concentrating his analysis on monetary =aggregates> of supply and demand that transpose
his entire analysis to the level of overall political command through the monetary
medium 9et us see how GMoney wageH