Zombie Marx and Modern Economics, or How I Learned to Stop Worrying and Forget the Transformation Problem

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In 2009, UC Berkeley Economics Professor and former Clinton adviser Brad DeLong took a pot shot at David Harvey on his blog. Headlined 'Department of "Huh"?', and beginning 'Why neoclassical economics is an absolutely wonderful thing', the post quotes eleven straight paragraphs from a Harvey essay, which DeLong proceeds to ridicule.

For DeLong, the essay is contentless waffle. It strings together economic concepts without making an economic argument. He would call it 'intellectual masturbation', he writes, except that it 'does not feel good at all'. Only in the eleventh paragraph does he find 'the suggestion of a shadow of an argument'. Here Harvey argues that the US stimulus package is bound to fail because the deficit needs to be financed by foreign powers, and the amount of Treasury bonds it will be able to sell to the likes of the Chinese central bank will not fund a big enough stimulus. DeLong responds that this is a question that requires a theory of the bond market and interest rates, which Harvey does not provide: 'The question is thus not can government deficit spending be financed ... the question is at what interest rate will financial markets finance that deficit spending' (DeLong, 2009).

Harvey responded with some anger at the arrogance of neoclassical economists:

I would have thought that in a profession dominated by neoclassical and increasingly neoliberal theory these last thirty years, that there might have appeared at least some sliver of humility. They have collectively provided us with no guidance on how to avoid the current mess and now, when faced with a crisis, they can only say, as Marx long ago presciently noted, that things would not be so if the economy only performed according to their textbooks. Maybe it is time to revise if not change the textbooks (Harvey, 2009).

He goes on to bring up Sraffa and the 'Cambridge capital controversies' of the 1960s, which, he argues, showed that 'all of neoclassical theory is based on a tautology'. DeLong's argument was 'a bit of casual empiricism about the current low and seemingly stable rate of return on long-term treasuries'. 'Why bother' with neoclassical economics at all, he asks.

DeLong's attack was unfair and indeed arrogant, and deserved a forthright response. Unfortunately, Harvey missed the opportunity. DeLong would have welcomed his dismissive response, because it reinforced his image of the otherworldly nature of Marxian economics. It would have convinced no-one not already well-disposed to Harvey's way of thinking. Criticism of the incoherence or unrealistic assumptions of neoclassical economics rolls off like water from a duck's back--most economists will freely admit they are simply heuristics and would be quite happy to be considered pragmatic 'casual empiricists'.

Here I argue that there is much for Marxists to learn from modern economics, even neoclassical economics. Further, I argue that there are aspects of Marx's Capital widely seen to be at its theoretical core that should not survive this engagement. Yet, I think, the project Marx undertook in his own time is still as relevant today--in fact it is only by jettisoning much of the content of 'Marxian economics' that the form will survive.

I take for granted here that economic theory is a worthwhile pursuit for Marxists and socialists more broadly, and that the more scientifically valid the theory the better. There are those who argue that by subtitling Capital 'a critique of political economy' Marx had only negative criticism in mind--that economic theory of any kind is misguided because it reifies historically-bound social relationships. But it is hard to read Capital and not find it full of positive economic theory alongside the ruthless criticism of everything existing. By 'critique' Marx meant essentially what Kant did vis-a-vis pure, practical and aesthetic reason not to dismiss political economy, but to enquire as to what makes it possible, and what these conditions of its existence mean for how it should proceed. …