When Things Go Wrong: the Political Economy of Market Breakdown

Freeman, Alan (2003): When Things Go Wrong: the Political Economy of Market Breakdown. Published in: Westra; R and Alan Zuege (Eds) (2003) Value and the World Economy Today: Production; Finance and Globalization (2003): pp. 81-118.

Abstract

Prepublication version of ‘When things go wrong: the Political Economy of Market Breakdown’ in Westra; R and Alan Zuege (Eds) (2003) Value and the World Economy Today: Production; Finance and Globalization; pp91-118. London:MacMillan; ISBN: 1 40390 002 7

This paper constructs a theoretical framework for understanding what happens when markets break down. It argues that when this happens; the ‘invisible hand becomes visible’ and conscious agencies (classes; states; governments; etc) intervene in the economy. ‘External Intervention’ into the market is thus not an imposition on the market but a product of the market.

The paper grapples with what is arguably the most basic question in economics: are breakdown and recovery endogenous or exogenous? Do markets fall or are they pushed? Conversely; do they mend themselves; or does someone have to stick them back together? The primary ‘finding’ of all dominant economic theories is that the market works: that breakdown is exogenous and recovery is endogenous.

I show that this finding arises from the shared starting point of these theories; the equilibrium or comparative static paradigm. This is equivalent to assuming that; the market works so perfectly that nothing needs to change.

It then becomes impossible to deduce endogenous market failure. This why is one of the primary shortcomings of mainstream economic theory is its inability to two-way causal links between political institutions and the market.

• Item Type: MPRA Paper
• Language: English
• Keywords: Keywords: Divergence; stagnation; World Economy; Kondratieff; Development; Europe; US; value; price; TSSI; temporalism; profit rate; polarisation; inequality; globalisation; deregulation; imperialism; World Systems Theory; unequal exchange; dependency; North-South
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches > B50 - General; B - History of Economic Thought, Methodology, and Heterodox Approaches > B0 - General > B00 - General; O - Economic Development, Innovation, Technological Change, and Growth > O1 - Economic Development > O10 - General

References

All cited IWGVT papers can be accessed on www.gre.ac.uk/~fa03/iwgvt

Amin; S. (1976a) Unequal Development. New York: Monthly Review Press Amin; S. (1976b) Imperialism and Unequal Development. New York: Monthly Review Press Böhm-Bawerk; E. von (1984); ‘Karl Marx and the Close of his System’ in Sweezy (1984). Brenner; R. (1999) ‘The economics of Global Turbulence’ in New Left Review 229; May/June 1998 Bridel; Pascal (1997) ‘Money and General Equilibrium Theory: from Walras to Pareto (1870-1923)’; Edward Elgar Dobb; M. (1973) Theories of value and distribution since Adam Smith. Cambridge: CUP Dos Santos; T (0000) Emmanuel; A. (1972) Unequal Exchange. New York and London Evans; T (2003) ‘Marxian and post-Keynesian theories of Finance and the Business Cycle’ Capital and Class; forthcoming Farjoun; E. and Machover; M. (1983); Laws of Chaos. London: Verso. Freeman; A. (1997) Time; the Value of Money and the Quantification of Value. Paper presented to the 1997 mini-conference of the IWGVT at the Eastern Economic Association. Freeman; A. and Carchedi; G.(1995) (eds) Marx and non-Equilibrium Economics. Aldershot: Elgar Freeman; A. (1995a) ‘Marx Without Equilibrium’. Capital and Class #56; Summer 1995. Freeman; A. (1995b) ‘0000’ in Freeman; A. and Carchedi; G.(1995) Foley (2000:282) ‘Response to Kliman and Freeman’ in Zarembka (2000) Gunder-Frank; A.(1969) ‘The Development of Underdevelopment’; in Latin America: Underdevelopment or Revolution; New York and London Harcourt; G C; 1972. Some Cambridge Controversies in the Theory of Capital. Cambridge: Cambridge University Press. Hahn; F.H. (1982) Money and Inflation; Oxford: Blackwell Kant; E. (1933) The Critique of Pure Reason. London: 0000 Kliman; A. and McGlone; T. (1988); ‘The Transformation non﷓Problem and the non﷓Transformation Problem’; Capital and Class; 35; Summer; pp56﷓83. Kliman; A. (1988); ‘The Profit Rate Under Continuous Technological Change’; Review of Radical Political Economics; 20:2 & 3. Kuhn; T. S. (1962) The Structure of Scientific Revolutions. Chicago and London: University of Chicago Press Maldonado-Filho; E. (1994); ‘Release and Tying up of Productive Capital and the “Transformation Problem”’; URPE conference at the ASSA; fall 1994. Mandel; E. and Freeman; A. (1984) Marx; Ricardo and Sraffa. London: Verso Mandel; E. (1972) Late capitalism. London:Verso Marx; K. (1935); The Poverty of Philosophy; Co-operative Publishing Society of Foreign Workers in the USSR: Moscow. ________ (1972); Theories of Surplus Value; Part III. London: Lawrence and Wishart. ________ (1973); Grundrisse: Foundations of the critique of political economy. London: Penguin. ________ (1976); Capital: A critique of political economy. Volume I (Capital Volume I). London: Penguin ________ (1978); Capital: A critique of political economy. Volume II (Capital Volume II). London: Penguin and New York: Vintage. ________ (1981); Capital: A critique of political economy. Volume III (Capital Volume III). London: Penguin and New York: Vintage. Palloix; C.; 1975. ‘The Self-Expansion of Capital on a World Scale’; translated from L’internationalisation du capital; Paris; Maspero. Perez; C (2003) xxxx Aldershot: Elgar Popper; K (1968) The Logic of Scientific Discovery. Harper: New York Ramos; A. (1995). ‘The Monetary Expression of Labor: Marx’s twofold measure of value’. Paper presented to the 1995 mini-conference of the IWGVT at the Eastern Economic Association. Townshend; H. (1937) ‘Liquidity Premium and the Theory of Value’ The Economic Journal; March 1937 Van Parijs; P (1980) ‘The Falling-Rate-of-Profit Theory of Crisis: a Rational Reconstruction by Way of Obituary’; Review of Radical Political Economics; 12 (1); Spring; pp1-16 Wells; J.P. (2001). ‘What is the distribution of the rate of profit?’. Paper presented to the 2001 mini-conference of the IWGVT at the Eastern Economic Association. Zarembka; P. (2000) (ed) Value; Capitalist Dynamics and Money; Research in Political Economy 18; 2000: New York: JAI