Question 1 What did Marx mean with his formu - University of Utah

U of Utah Econ 5080 2007fa 99
Most economist regardless of their school of thought can acknowledge our economy functions
in a circular fashion. My spending becomes your earnings and in turn your earnings
become my spending. The system spins round and round like a toy top. For reasons we do
not always understand the top occasionally loses momentum slows to stop and falls on the
floor. Usually the top does not just crash to the floor, we can feel it losing speed. To carry
the metaphor as the top loses speed one is earning less and less and rational individuals as
they earn less and less hoard more and more to carry themselves through the lean times.
Sadly this is a Chinese-finger trap. The more one saves, the less one spends, the less
everyone else earns the more they save and they cycle continues like water washing down a
drain until there is nothing left and the system stagnates. Saving, which all respects appears
to be a rational choice is not in mine or societies best interest. Liquidity is the grease that
keeps the system moving. Even though saving is rational my rational choice helps breaks
the system which is not in my best interest.
Keynes also carries this idea over into his theory of “price stickiness”. We have to remember
that Keynes lived through the Great Depression. The concepts of inflation and deflation
were ever present. Keynes sensibly reasoned that it is easier for prices to go up, to inflate
than in it is to go down or deflate. None of us complains when our wages increases, each of
us wants to see a higher bottom line. However none or very few us want to see our paychecks
shrink. We will resist deflation even it means a return to market equilibrium and the same or
a higher purchasing power. It is rational to want a higher number on our paychecks, it is not
always in our best interest.
A society cannot function in a hyper inflation economy it is too volatile. There is a chain
of producers and suppliers in our country. There are people who produce cotton to sell to
the fabric factory which sells shirts to the retail clothing outlet ( a gross over simplification
I understand but one gets the idea). Said retail clothing outlet has competitors. When prices
start to run-away and escalate out of control, no one wants to be the first to cut prices. Every
part of the chain has another part of the chain to pay, if one cuts prices profit diminishes or
disappears.
We live in a profit seeking society, no one wants to realize diminishing profits or disappearing
it is not rational. Even given that price cutting would lead to others cutting their
prices and an eventual downward price adjustment which is in my best interest no one wants
to be the first. Losing money is not rational. It is another scenario where behaving rationally
is not in my best interest.
Keynes is splitting hairs in a sense but he is saying that even though we behave rationally
or rationality is not always in our best interests. Basically our behaving rationally is
not rational. He is opening the door for challenging a basic tenant of classical economics.
Admitting that the system can break and allowing that classical assumptions do not always
hold true is a large step. And it is one step closer to Marx.
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100 2007fa Econ 5080 U of Utah
Exam Question 241 Why does Marx explore the mysterious character of the commodity,
which is bland and abstract, instead of picking up one of the many striking outwardly mysterious
phenomena of capitalism?
[120] JoshS: Bland and Abstract. From my short time reading Karl Marx, homework
submissions, and Hans’s annotations to Das Kapital, I’ve come to the conclusion that Marx
is not only concerned with the mysterious phenomena of capitalism, but seeks to explain
all aspects of capitalism. If Marx were to only discuss and expound on the exciting and
titillating aspects of capital, his book would be half as long and I don’t think it would be the
work that it is. We have this class and discussion based on Marx and his thorough discussion
of all aspets of capital.
When a child wants to become a musician and play wonderfull music, that child must
first learn all the basics of tempo, rythm, note reading, etc. So it is with Marx. He seeks to
explain everything about the nature of capitalism to have a full, precise knowledge of it.
Hans: Such a general answer is always true. In the given situation Marx has more specific reasons to go back to
the basics.
Next Message by JoshS is [122].
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Question 242 Whether the commodity is “mysterious” or not is a value judgment which
can neither be proved nor disproved. Do you agree? What would Marx say about this?
[110] Dyoung: graded B– The mystery of commodities: why are they mysterious? I
agree, but mostly because I am an antagonist. In many aspects commodities could be considered
to have a mysterious component that adds to their value. I don’t think this goes for
all commodities. There are also many commodities that seem to be free of mystery, it simply
takes x amount of labor and other costs to create the commodity, so therefore the commodity
costs y. There are things that in some way change commodities so they have more or
less value, besides supply and demand, things that are created socially, for example brand
name items cost more simply because of the brand name. . . this is what I feel creates the
mystery. I don’t agree that all commodities have this “mystery” component and that’s why
I feel that it would be a value judgement, which if it is then a value judgement each person
is deciding based on their own view of each commodity, and it becomes impossible to say
which commodities have this “mystery” component and which do not.
Marx would disagree with this statement. To him, it was very important to understand
why they are mysterious. And I think his interpretation of the mystery factor is that each
commodity contains the development of capital and money, yet each commodity is also
influenced externally by the characters of capital and money. Each is in the commodity
intrinsically, yet each also can act on the commodity to further determine the commodity’s
value.
Hans: Even if the value of a commodity is not propped up in your mind by a marketing campaign, alone the fact
that commodities can be exchanged for each other, or bought and sold, is mysterious. The commodities are active
in these transactions because the prices are not set by the commodity owners, but seem to reside in the commodities
themselves. This is basically things telling people what to do, not the other way around.