Exploring Heterodox Economics: The Impact and Legacy of Frederick S. Lee

Embark with John Michael Colon and I on a journey through the intricate world of heterodox economics as we unravel the legacy of Frederick S. Lee, a titan in the field whose ideas stand in stark opposition to the mainstream. Prepare to have your understanding of economic dynamics challenged and expanded as we dissect the limitations of neoclassical economics and its inability to foresee crises like the 2008 financial meltdown. Together with our distinguished guest, we'll navigate the turbulent waters of economic theory, scrutinizing neoclassical and Austrian schools while advocating for a cooperative, inclusive approach to integrating microeconomic theory within heterodox frameworks.

This episode serves as a beacon for those seeking to understand the complexities of price theory, the historical evolution of economic thought, and the human stories intertwined within. We pay homage to the intellectual bravery of Lee, who sought to foster a diverse economic dialogue, embracing Marxist, post-Keynesian, and even Austrian insights. Through our conversation, witness the unfolding of a comprehensive economic model that seeks to harmonize the various micro and macroeconomic puzzles pieces—a testament to Lee's undying quest for an economic theory that truly reflects the multifaceted nature of our global economy.

Our discourse culminates in a contemplation of the practical application of Lee-inspired theories, the dangers of dogmatism in economic models, and the need for a robust, multi-disciplinary approach to industry and sector analysis. As we close this chapter, we also open the doors to a broader socialist dialogue, with a nod to the importance of diverse historiography in understanding the wealth of nations. Don't miss our engaging exchange that promises a fresh take on the role of alternative economic paths and the vitality of heterodox perspectives in today's fiscal landscape.

Transcript

Speaker 1: 1:35

Hello and welcome to VarmVlog and Strange Matters code production on my show, VarmVlog. How much branding can I get in there For this magazine when we are talking about the legacy of Frederick S Lee, a heterodox economist, interesting guy, and you are writing an extremely long, multi-part general introduction to his life and work, which begins its first section in this volume of Strange Matters magazine? Now I've done my selling for the day, I can cut that out, yeah.

Speaker 2: 2:25

Well, thank you for having me. As always, varm, it's always good to talk on this show in particular, because usually we're able to have these incredibly long, prolonged discussions where you can get into all the nuances. This time we're a little short for time, so we have to be a little more.

Speaker 1: 2:40

By short for time you mean an hour and 45 minutes Exactly.

Speaker 2: 2:44

Yeah, yeah, yeah. You got to be. You got to rigidly discipline me. I'm the Lucy Goosey petty bourgeois anarchist who doesn't know party discipline. So you got to crack the windmill.

Speaker 1: 2:53

All that is correct. You have accurately assessed yourself. At least I'm honest.

Speaker 2: 3:00

The jokes aside, I know that the essay is in some ways making onerous demands on a reader's time. The reason for that is because the subject matter is the sort of thing where, if you get into it briefly, you risk either watering it down to the point where people don't even understand why it's important, or writing a specialist piece that only economists understand. If you really want to understand why this guy, that 99.99% of people, even people who are into Marxian and post-Kinsey and institutionalists and all the other heterodox, you're dissident schools of economics. Even people who are into that have usually never heard of Fred Lee.

Speaker 2: 3:35

The only way that you can really understand why he's important is actually kind of reconstructing, bit by bit from the bottom up, a little bit of a picture of what economics has been, especially since the rise to dominance of the Neal Classical schools since the early mid-20th century. The underlying kind of model of the world that it puts together and why it's so fundamentally misleading that it doesn't let you predict anything in the world. It's the kind of picture of the world that leads people to believe, not only in 2007, that the 2008 financial crash isn't going to happen. Not only believe that, but to believe that it's actually impossible To believe that the thing that literally then defines the next 10, arguably 20 years of economic life is actually like it was never going to happen, because it was literally impossible. It's the kind of world oh sorry, yeah, go ahead.

Speaker 1: 4:32

To mess up your speech. I actually remember being one of the dissidents who predicted that. I'm not an economist, obviously I'm a fucking poet. I do remember arguing with economists and I remember hearing just that that it was impossible for that debt bubble to explode and it was impossible for housing values to crash. Now, never mind that that had happened in history, but it hadn't happened since the Great Depression. So I suppose that was the argument, just like I was hearing, I don't know five years ago, that it was impossible for inflation to come back. That's exactly right.

Speaker 1: 5:13

We will get into this today, but I do remember around 2006, 2007, there were two people, plus your Marxist, who predict the crash every 35 seconds.

Speaker 1: 5:25

But there were two people I remember coming up, and this is when I heard of Frederick Lee, and I also remember Nero Rabini, who doesn't predict a class as much as Marxist the every 35-second mark, but it's more like every two and a half minutes with him. So that was how I discovered him and then I kind of filed him away and never thought about him again, even when I got back into Marxist, post-marxist, post-keynesian for those of you who were not watching I just retched Modern monetary theorists, chartilists, neo-chartilists, dare we say, post-neo-chartilists I think that's on the way very soon heterodox economic spears. And you actually one of the people who pointed back to me about I guess it's about a year and a half ago, or maybe even you mentioned him in one of our very old systematic redness zero book supplement interviews that I needed to go back and let the work of Fred Lee, that you found him and Michael Hudson, and even more than Michael Hudson, you found Fred Lee useful and so with that enterway you can pick back up your speech plus Brian.

Speaker 2: 6:47

No, I actually I'm really glad that you said all that, because that's all true and it's yeah, I think I picked up we I can't remember the exact year now, but it would have been either 2018 or 2019 was when I started picking it up, because I started talking to.

Speaker 2: 7:04

I was living in Brooklyn at the time and the I was talking to a number of different sort of heterodox economics groups, like loose conglomerations of economists and fellow travelers who were interested in these alternative theories, and it's a whole milieu, it's a whole scene, it's not just in New York, it's in a whole bunch of other places and the you know I was talking to a number of different sorts of people because I was really into like the Hadrin Chang sort of like kicking the ladder, developed heterodox developmental economics stuff, the stuff about how you industrialize a country and how the story that they tell about how you make a country rich is completely different from what even the country's advocating for today. Like you know, the US via, you know, institutions under its imperialistic control like the IMF and stuff like that will recommend things to countries that itself, in building up its wealth, absolutely never would have done. So I was really into that stuff and then through that I kind of warmed my way through some of like the like macro PK literature, you know the Keynes stuff. Basically, of course, I was working my way through Marxism and historical materialism as well at the same time and talking to a whole bunch of different people, and it was eventually when I fell in with a couple of the PKs, the post Keynesians that I like fell in and I'll just say it like with Nathan Tankus, who is, you know, at the time was not a famous person and it's now semi famous within these kinds of circles because his business newsletter got picked up by Bloomberg and now he's, like you know, talking about the various economic crises that you know that have been ongoing since 2020, you know, in this sort of authoritative manner based on some of the heterodox stuff that he was at the time teaching us, kind of like little group of anarchist types who were interested in the, or Murray Bookchin types, I think is more precise way of putting it who were interested in this, these, these, these heterodox debates.

Speaker 2: 9:05

And it was really through Tankus that I even learned that this guy existed because, again, he's obscure even in the relatively obscure circles of people who are interested in these topics. And, you know, it makes sense that it would have been through Tankus, because Tankus is kind of, like, you know, affiliated with the MMT people and, although Fred Lee is not himself an MMT or per se, like his theory was developed independently of MMT and it adds MMT as a module onto it after. He's kind of convinced of it, you know, but it's not like dependent on it theoretically or logically the in the in the like, like. Nevertheless, the place that hosted Lee, the place where Lee ended up settling after a very sort of tortured career of being run out of various economics departments by neoclassicals and we'll get into what that means in a second was UMKC, the University of Missouri, kansas City, which is the same place where MMT was basically invented by Randall Ray and Stephanie Kelton and people in that milieu. So so that's the kind of like institutional history.

Speaker 2: 10:11

For people who are real econ nerds, they'll be like oh wow, interesting. For people who are not, they'll be like why are you talking about all this? The basic answer is that the the thing to understand about economics is that it's broken. Like you can't. You can't even begin to talk about the current lay of the land unless you understand that, like even the people in the field, particularly once you've got a couple beers that you put into them.

Speaker 2: 10:38

They themselves admit that the this discipline that purports to be a science. You know a dismal science that explains. You know the, the tough bitter pills that we have to swallow about what's really possible because of you know economic realities that they can't actually describe economic reality. They don't actually know, to put it in that wonderful Trumpian phrase, what the hell is going on. And this has been apparent even to the economists themselves since the 2008 crash when, as you know, derek was saying, and as I was saying, like they not only failed to predict it, but they actively had said that it was impossible. Then it happened and it becomes the definitive event of an entire lost generation and it's like okay, what do we do about it? And almost everything that's happened since then has been a mad scramble by the economists to figure out what they can replace their failed framework with, which is why the heterodox schools are such an exciting place to be, because there have there is one dominant school called neoclassical economics, which has basically controlled the discipline since, certainly since 1945, and it was even becoming hegemonic, like since the 1910s or so but it's, you know, the the the heterodox schools have figured out places that they can kind of hide out in particular departments, which is why these like lineages like UMKC or other heterodox departments, you know, at places like the new school or University of Massachusetts, Amherst, university of Utah and a couple of other places, and then the UK places like Cambridge, for example. You know these, these, the lineages of like this professor who begat this grad student, who begat this grad student, are really important precisely because basically anywhere else, anywhere where they weren't able to establish a foothold, they were run out and you know, kind of like with, with, with pitchforks and torches, you know it's, it's actually the, the quite brutal counterinsurgency by the neoclassicals against the dissident schools is something that Lee himself did a lot of work on and I'm not going to talk about it too much because I want to kind of like stick to his theories mostly. But you know I have a long section about it in the, in the essay, and he he did a lot of historical work, actually kind of like uncovering the way in which dissident economic schools were suppressed within the discipline, not because there was like a debate and then they lost the debate and they were proven wrong and so like the grad students gravitated towards like the more correct theory. But precisely because any attempts to institute such debates or do something like that, the, the, the. They would basically like, like, get, they would get kicked out. I mean it's, it's the, the. Their funding streams were attacked. They were. They were for, despite having perfectly fine publications, were consistently denied tenure. They were, they were actively, like, blacklisted and censored across different economics departments.

Speaker 2: 13:40

Like you know, all of this stuff is very kind of carefully cataloged by Lee in his famous history of heterodox economics. And well, it's not famous, it's his most famous book. But again, for a figure who is obscure even among people who are into obscure subjects, that's not saying much, but it's the book of his that. If somebody has heard of a Fred Lee book, it's that one, because other heterodox economists have found it very useful in kind of justifying their existence and engaging in academic faction fights to allow themselves to socially reproduce their own kind of practices and models and theories.

Speaker 1: 14:14

Um, which, of course, I will destroy if I have a chance.

Speaker 2: 14:18

Yeah, we're all about abolishing economics and abolishing the value for him, right. Or is it or is it more that you want to just poke holes in them?

Speaker 1: 14:28

Uh, all of the above actually. I mean I also want to destroy the university as a whole. So people like you have to get a real job.

Speaker 2: 14:35

But um, I've never. I've never been a grad student in my life. That's one mistake. I've made many mistakes in this life, but that's one mistake that I've assiduously avoided. I got a little taste of that and undergrad and I was like nope, no I.

Speaker 1: 14:50

The only thing I want to push back on your narrative of that story is is, while the neoclassicals are dominant, they aren't the only dominant non-heterodox school, and I kind of don't love the whole scrappy little heterodox versus the neoclassicals, because there's also why we have to call the post-Kinzians post-Kinzians and not proper Keynesians. All right, there are no true Keynesians really left. I mean, there might be some of them somewhere hanging out in the apartment somewhere. But basically in the 1970s the Keynesians gave up on on the tax model of Keynes. Now, I think it was for political reasons. Um, I also think Keynesians tax model was wrong, but that's that's a separate problem. I don't think that's why they gave it up and they adopted neoclassical monetarism as understood by the Chicago school um into their modeling of how Keynesian economy should work. So the primary difference between Keynesians and neoclassicals Keynesians, proper neoclassicals eroded. So someone like Larry Summers is technically a Keynesian Like if you look at his, uh, his publication history et cetera, but he feels far more like a neoclassical.

Speaker 1: 16:07

And the other thing that we have to mention are the big baddies in the room that even the neoclassicals don't like, cause they're too extreme in the other direction, which is the Orthodox Austrians either of the Von Hayek or the neoliberal? Are the Von Mises? I don't even know what you call them. I used to call them order liberals, but it's confusing, cause there's other things called order liberals and um variety, and they still like they are a dissonant faction, but they don't get chased out of the. They don't get chased out of departments in the same way um that a lot of the uh heterodox do. Um I also. People should know that, like all things that are marginal in society, uh heterodox economists fight each other. Um.

Speaker 1: 16:53

There are schools that will pretend they don't, such as modern monetary theorists. All of them deny that they disagree with each other until you read them and realize that they don't agree with each other. Um and even what they think the basis of the like, whether or not the basis of currency is debt or credit, or whether or not it's the state or whether or not it's law, um which those all sound like they're the same thing, but they're not. Um these, these are debates within modern monetary theory. Um, I think Fred Lee's interesting because he's uh.

Speaker 1: 17:30

I mean, we associate him with uh. I associate him with two books um a monetary theory of employment, uh, by Gardner Means, which which is kind of his take on that book and his history of heterodox economics. But I also associate him and there's he does have a book on this on price theory, particularly his survey on post-Kansey and uh theories of price, which I think is really important for understanding his contribution to uh what we do here. And um, it's interesting you tell me he's on board with MMT because there's elements of of Lee that I don't think are actually copacetic with it. So I'll let you get to that later.

Speaker 2: 18:22

Yes, no, I think you're absolutely right, and this is also kind of like. It kind of raises the question of like, okay, so having, if you accept Lee's basic premises, then what path do you take from Lee? And it's it, there are very different paths that you can take in terms of your research program. Uh, if you accept the kind of PKPT framework, and some of them go into what I think is Lucy Gussie nonsense land, and then others of them are the ones that I think are more fruitful, and it's interesting to see which ones have been kind of institutionally rewarded, to the extent any of them have, uh, you know, by by, for example, mmt or so who've taken up Lee, uh, who I think have gone down the Lucy Gussie path. But that's a, that's a kind of you have to explain Lee first before we get there.

Speaker 1: 19:03

Yeah, so let's get into Lee. I mean Lee, uh, lee's an interesting guy. I guess he's a lost generation head those of you who get lost uh, uh, you will find Leo he was. He was born in New York, uh, upstate New York, I believe in 1949, which means he is five years younger than my dead grandfather. Um, so he died in 2014 too, unfortunately. Um well, I was about to say he's also dead. Um, but he had a. He had a good run of it. Um well, not really.

Speaker 2: 19:41

Well, I'd, I'd, I'd say from the outside, as somebody who has now done, I think, an extensive amount of journalism about him, he, his life, looks pretty amazing. He had some, some interesting encounters, to say the least. Um, I think that Lee, towards the end, though, and you can tell in like the YouTube videos that exist of his, like last lectures from you know the poor guys like in a wheelchair on an oxygen tank and you know coughing up fits. You know through the lectures as he's talking with, through his at his input output tables, but you know that was.

Speaker 1: 20:17

I would just indicate in that he died that he died relatively young, at 64.

Speaker 2: 20:22

Yes, yes, and and not only did he die young, but I think that he was wrestling with a feeling that his life had been in some ways a failure or that it could have been.

Speaker 2: 20:31

And I think the reason the very or at least he was very pissed off, like, like, and you can tell in these, in these last videos, because he had only just finished the work that for him he had been like doing a whole bunch of busy work basically.

Speaker 2: 20:46

So all the history stuff, all the history of the discipline, all the stuff about how the neoclassicals had suppressed the heterodox schools, all the stuff about like okay, what distinguishes an orthodox from a heterodox theory, like, what are these like Now? All of that was just groundwork and PKPT was like micro. But he really wanted to write a book that was like what is the entire economy as a whole? By the way, pkpt is my shorthand for post-Kinsey and Price Theory 1998, which is where he lays out his heterodox microeconomics. But he really wanted to lay out, like a picture of the economy as a whole. How does the whole thing fit together? And into his very last days he was still working on that book, you know, as far as like, and it wasn't completed until after his death by his graduate student who's now a professor, Tiki Jo.

Speaker 1: 21:31

That's a microeconomic theory or heterodox approach, and that's something that we actually should talk about, because usually heterodox economics Almost to a man going all the way back to Marx does not fuck with Microeconomics. That has traditionally been left To either Austrians or near-class schools, even by heterodox schools, because we just like well, you know, really Like individual price theory and all this stuff and it makes sense, right? You think about the concerns of MMT. It's about laws and states. That doesn't really affect the individual purchasing.

Speaker 1: 22:08

You know matrix, all that much Marxism, you know we. You know we want to overthrow the capitalist anyway and make all these people, you know, get real jobs. So it doesn't really affect us very much either. Why would we care what people do? I mean, it's not that Marx doesn't write on it, but he doesn't write on it in any sort of I Mean he actually doesn't really write on it on any sort of like empirical basis in the same way that he tries to do on macroeconomics, and he only messes with microeconomics In so much that it's mentioned and texts that he is critiquing.

Speaker 2: 22:49

Yeah and and and even then. I mean this is I. I hesitate about which doors to open in this because because you can easily go down Rabbit holes that will eat up the time that we need to kind of explain Lee.

Speaker 1: 23:04

Well, I was gonna tell you we're. I'm just gonna tell you we're gonna this. This is a part one. Since you have a part two coming up, you're gonna have to come back.

Speaker 2: 23:14

I gotta get through at least the the part one of the essay, though. Okay, I do think I have to open this door, though, so I'm gonna try to make it very brief.

Speaker 2: 23:22

All right because otherwise people won't understand certain things. I actually think that Microeconomics versus macroeconomics is a category that we take for granted nowadays, but I think it actually doesn't make any sense unless you historicize it. What Lee's actual relationship to those terms is. So, once upon a time it was classical political economy, and that's, roughly speaking, your Smith's and your Ricardo's, arguably your marks, you can say marks was this kind of critique of classical political economy. Who, you know, overcame it dialectically. Him, you know, created a totally new science, a critical theory, or you can say that he was the last and greatest of the classical political economists. It kind of depends on what lens you want to look at it through and however you want to be towards the model in dust copy, tall, but like. Either way, he's very much building, you know, antagonistically, upon that body of knowledge.

Speaker 2: 24:17

Classical political economy is a Story about a whole entire society and it's capital accumulation process. It's a story about how, like you know, we collectively Apply our brains and muscles to the world to transform it, to meet our needs and desires. That produces a surplus of tangible products. So they don't include services. They don't include, you know, like, like, like anything immaterial they're really thinking about, like, like agriculture, manufacturing and the end products of those things. There's a pile of them called the surplus. However, year-to-year, in producing that surplus, some of that surplus gets consumed, right, because, for example, if you're talking about, like, you know, people who are growing wheat, they have to eat some wheat in order to continue to grow the wheat. So some of the wheat that's totally produced gets absorbed while it's being produced. Right, and this becomes even more so if you think in the supply chain way which Not all the classicals did, but Quenet in France and Marx in Germany do think this way where you know, one One person's production process feeds into another person's production process. So you know the people who mine iron, you know some of like like send it off to Factories to be turned into steel, which send it off to, I don't know, railroads to become railroads, so Like there's some leftover afterwards, but a lot of things that are produced are just consumed as inputs into other productive processes, right?

Speaker 2: 25:54

So the surplus in is basically what's left over after you've subtracted the bits of stuff that got used by for social reproduction, for the, for the mix, for the Continuance of current output. You do get it left over, though, and then it's distributed. And how is it distributed to the social classes? Right, so, like Landlords, get rent that they use to buy products that are in the surplus, capitalists have profits which they use to either reinvest in businesses or themselves, as households consume surplus. And, of course, workers have wages. But, unlike Capitalists and landlords, workers do not set their wages because they are Not in a position to do so in the class system.

Speaker 2: 26:40

So the class and, by the way, like up to now I have described, like Adam Smith, thomas, mouthless, you know, like you know Quenet in France I forget his first name and and a David Riccardo, you know I'm not talking about Karl Marx, no, and frankly, these people like seeing the system like this justify the class system. They don't like landlords because they think that they're parasitic on production, but they love Industrial Capitalists. They think that they're the bees knees and what they really want to do is keep labor cheap, because they see labor as the kind of common input into all productive processes and, since goods are tend to be produced at their Cost of production, want to keep labor cheap, so the goods are cheap, and that's how you get economic growth. I mean it's, it's a wrap. I'm like extremely simplifying, like you can check out my footnotes upon footnotes for more details on this. But you know that's the classical worldview.

Speaker 2: 27:36

Now You'll notice what's missing here. Like what's missing here is everything that you learn in econ 101. Because although today's economists Say that classical political economy was basically just like the prototype version of the modern scientific economics, in fact they basically don't have anything in common the classicals in fact it more in common with Marx than they do with neoclassicals. Because in neoclassical world, you know, we're all a bunch of atomized agents. You know, like varns over there and I'm over here, and there's a, there's a, there's a, a collection of scarce goods out there in the world already. How did they get out there in the world? Well, you deal with that in a production function, but other than that you don't think about it very much. There's just scarce goods out there in the world and they're in people's pockets in some configuration, but that, but they're scarce. There's only so much of them go around and that means that you know all other things being equal when we start out.

Speaker 2: 28:30

You've got some stuff that I want or need, and I've got some stuff that you want or need. So what do we do? We trade, you know, and we're trying basically to get the best deal where we buy cheap and sell dear, and that's what the economy is. And yes, there's money, but money is basically just one commodity that we've picked to kind of like mask what is ultimately barter exchange, and therefore you can kind of eventually from those principles deduce your way to a system where Allocations are happening based on supply and demand, like, and particularly as, mediated by changing prices. I mean, they basically create this extremely rigid system whereby, like, like, how much we choose to produce or how much we choose to consume depends entirely upon the price at any given instant, and and if the price changes, then so do our production or consumption Decisions, basically, and that that way of allocating resources in like a supposedly, supposedly, this is how resources are optimally or semi optimally allocated in our economy, the that, that that relationship, which is seemed to be a quantitative, fixed, functional relationship at least ideally, before you introduce distortions is called the price mechanism between supply, demand and price.

Speaker 2: 29:52

I've again kind of done the hop skip and jump through it in my essay again into it more in depth.

Speaker 2: 29:59

But that is the basic framework of today's mainstream economics, which is More properly called neoclassical economics. Now the neoclassicals argued that they were just taking the most rational parts of the classical school and dispensing with irrational stuff like the labor theory of value and Creating this system instead, which is more scientific because more mathematical. But really it's quite clear that what they were shooting to do was to create a system where you snipped off anything that was acknowledging the existence of the class system or the wages, acknowledging the existence of some who command the means of production, some who don't, and and turning everything into a story about agents who were just exchanging to mutual benefit in a kind of win-win situation. You know, if you want to consume one day and produce another day, you just have the choice to do that like, yes, things are produced, but that you know you can mathematically deal with that as a, as a function that sets the lower bar of the supply, of the, of the supply curve, and then that's kind of that's kind of it, you know like the, the.

Speaker 2: 31:10

So the logic here is to kind of like. I mean it's and I'm not the first person to say this, it's, it's practically cliche. It's basically to create a story. We're no longer thinking in terms of like social classes, you're no longer thinking in terms of antagonism, you're thinking in terms of this kind of like, you know, sort of everybody's on the same level and everything is, you know, contractual, and blah, blah, blah, blah, blah. So we're all, we're all singing kumbaya around a campfire, and that's the economy.

Speaker 2: 31:37

And that's free trade, economic life right. So You'll notice that there's nothing here about Effective demand. There's the famous Keynesian term, for, you know, in order for all the goods that are produced to be consumed, somebody's got to have money in their pocket and buying them, which is why it tends to be good for consumer economies to have at least decent wages and savings. The, the you don't hear anything here about central banks, and you don't hear anything here about exchange rates or about.

Speaker 1: 32:14

You know or?

Speaker 2: 32:15

about like, like the, the, the activity of the state, you know, in the economy, or any of these other kinds of different things, right, and you don't hear any of the Marxist stuff either, which we'll talk about structural, you know, determinants, whether it's like abstract things like the tendency of the rate of profit to decline, or whether it's more kind of like institutional things, like, you know, the wages system or the role of the state and primitive accumulation, and blah, blah, blah, blah, blah. All of this is just atomized agents individually, you know, trading with each other, and you can create a story that encompasses the economy as a whole from that, because they turn it into the general equilibrium story when, ideally, what these exchanges are doing, when they're truly frictionless and when they've, you know, is that we all kind of like reach this collective orgasm where Varnana and all the other people have traded until we basically each have, we have each supplied one another's demand perfectly, and now there's nothing left to do and you can information symmetry, which I mean.

Speaker 1: 33:17

We can talk about this, but I just, I just want to point out that I've even gotten neoclassicals to admit that this would require the abolition of time.

Speaker 2: 33:26

Yeah, yeah, absolutely. And also economic growth. Interesting, right, that's. Which is, which is the Austrian counter argument to it. They're like we don't believe in generally clue room, because then how do you get growth?

Speaker 2: 33:37

like it's the so, so, the Basically, you end up with this story where, like we live in the best of all possible worlds you know, bar some Interference from these you know, if it weren't for these meddling kids like the trade unions or the state or whoever who introduced these distortions, or sometimes monopolies, in more like left-wing neoclassical theories. You know they introduce these distortions that ruin the perfect kind of, like you know, system there. So this is a problem because that doesn't exist in the world. However, it's the oldest and truest oh sorry, the oldest and like like falsest part of neoclassicalism. Now, the neoclassicals didn't keep it there. They that that that was just economics for them. There was no macro level until Keynes wrote his book, the general theory, which basically had no real neoclassical like basis, like it doesn't really talk about general equilibrium. It's not terribly interested in supply and demand curves at all. It tells a story where whereby, basically, like the economy, if it crashes, right, why? Why is a crash in the financial sector so bad? Because everybody gets their finance from it.

Speaker 2: 34:55

You know, like like which, which causes firms that require finance to collapse, which means that they lay everybody off. But then, if all those people got laid off, they don't have wages anymore, so they can't buy stuff, so the firms that they would have bought stuff from get you know closed down to and so on and so forth, until you Suddenly have a bunch of empty factories and a bunch of unemployed people and you can't put the two back together again, just with the free market.

Speaker 2: 35:17

So what you have to do is put people to work, even if it's just digging ditches or at least that's kind of his most exaggerated version of the story, you know. So you put money in their pockets so that it stimulates firms to get started producing stuff, which then creates a virtuous cycle of economic growth and employment and all the other stuff.

Speaker 2: 35:33

So that's like the basic Keynesian story and there's a great deal of truth to it. Now, this was a huge attack on the neoclassicals, even though that's weird to us because Keynes, we just kind of learn him as a mainstream economist, but actually he was a huge challenge to the neoclassical establishment. Arguably, he, and certainly his grad students, got a lot of this stuff from Marx, you know, and his and his certain Accounts of overproduction that exists in capital, though, you know. He then would then say, but that's not why crises happen and all this other stuff. He had a more kind of complicated Baroque theory of that. So that, but the. But the main thing is that, like you know, that this had to be dealt with.

Speaker 2: 36:19

So the way that, that, that the, that the neoclassicals Absorbed Keynesianism and this is something that I'm actually gonna talk about more in part two is that they pretended that Keynesianism did not contradict their main theses at all and they took the bits and pieces of the effective demand story right, like, like the ones that were compatible, and integrated it as like a module into their story. But they basically said, on the micro level, it's all still supply and demand curves. So they created an artificial distinction between the way that the economy as a whole works which they basically said is how Keynes's story and the way that the economy, on the level of it's actually unclear where it starts and where it stops the firm, the individual industry it's kind of like shrug. But, like you know, on the micro level it works the way that we originally said it did. So they preserved their obsolete theory by grafting the Contradictory theory, at least the compatible elements of it, onto it and saying, well, these are two separate magisteria. On the macro level it works like this. On the micro level works like this. That's how we got the terms macro and micro economics. That was not a distinction that the classicals would ever have acknowledged. The reason why this is important is because you can see Lee's project as the attempt to create a micro economics compatible with Keynesian macro, rooted in the description of real-world phenomena, which would, if you could do this and if you understand this history that I'm telling you mean that there would no longer be a macro micro distinction in the same way that things were back in classical days.

Speaker 2: 38:02

The way that things work on the economy as a whole are not in some sort of, like you know, irremediable way, totally different from the way that they work on some smaller scale.

Speaker 2: 38:15

Instead, you can just move up and down between the scales Depending on the kind of situation that you want to analyze and the agents who are involved in it, which sounds crazy to a mainstream economist, because they're like well, of course there's a. There's a micro foundations problem, like right now there's all these controversies about how we can take these macro things like the interest rate and and boil them down to Micro phenomena, because we can't do it and you have to create all these complex mathematical models to try to make it work, where there's more exceptions and rules, and blah, blah, blah. It's a huge controversy. Well, the controversy goes away if you abandon the old dumb theory, because what we call micro is Basically a totally different theory from what we call macro, and it's no coincidence that all the smartest young, ambitious grad students in economics despise microeconomics and Gravitate towards macro, particularly macro that has, like the most og Keynesian influences, which is the p-case, because I Disagree a bit with your story, varn.

Speaker 2: 39:10

I think that the, the, the difference between the kind of Paul Krugman or or Lee Summers Keynesians versus the like post Keynesians actually begins in 1945, because in 45 is when they do that, that, that that's so, that that that's suturing job, where they, where they, try to graft.

Speaker 2: 39:30

You know the bits and pieces of Keynes that they can, that they can, you know, that they can tolerate Onto their bullshit micro theory. That happens in 1945 as a result of Paul Samuelson's famous textbook, and that's kind of the new Keynesians or the neo Keynesians, which, to Keynes's grad students, which is where the post Keynesians are descended from you know, they're descended from Joan Robinson and Piero Sraffa and Maurice Dobb and all these, like you know, people who were like actually at Cambridge with Keynes. They despised that stuff because they saw, rightfully, that it was an attempt to take like a Dumbed down, bastardized version of some of the most irrefutable parts of Keynes but then discard all the parts of Keynes that really question the supply and demand stuff you know and then act as if everything was fixed you know, so they I understand I'm gonna push back on your thing that Keynes has a goddamn thing he would.

Speaker 1: 40:22

Mark says there's been a theory of ever production, which I know where he got, because he got it from the, from the German historical school, which kind of got it from Marx. But yeah, can you just find mark? And he, yeah, he was a bourgeois, he celebrated bourgeois virtues. If I'm ever in England and have a chance to spit on Keynes's grave, I will do so. He's, he's in my in, in my economic calculations and and it's not because I'm a orthodox Marxist, because I am not Keynes did advance the profession absolutely, but he's a villain in history.

Speaker 2: 41:05

So it's, yeah, I mean, I Think he's highly ambiguous in history. I think that that you can make a very solid case like I'm not a Keynes defender, sort of like unwarrantedly because like you can absolutely make a case that he he laid the groundwork for and very intentionally so, this kind of like technocratic mixed economy, you know where. You just leave the experts in charge and they twist the dials of policy and and and that solves the social question.

Speaker 1: 41:44

His social assumptions about what his work would lead to were fundamentally wrong, because one of the things, even though he despises the working class and was open about it and if you want to go read his biography, I'm not making it up, yeah, jmc is nodding his head because he knows that he can't.

Speaker 2: 42:05

I don't want to either. I don't like that. Keynes either. Right, but the thing is that there's another Keynes. That's the trouble. That's the trouble. It's kind of like he kind of wobbled back and forth depending on the time period because he's also the guy who wanted to create the, the bank or system internationally to make sure that, like all, the developing countries Would no longer have to deal either with like their gold reserves or with like an imperial Currency, like what the Germans tried to implement or what the Americans succeeded in implementing, but instead there would be this kind of like.

Speaker 1: 42:38

I'm not really what the British implemented and we stole, but well.

Speaker 2: 42:42

That's correct as well. Yes, that's what the Pound sterling was in at the height of the Empire. Absolutely, you know, he really wanted there to be a non circulating international currency, that that that countries could use to deal with their trade balances, allowing for, basically, like the development of poor countries and their ability to kind of, like you know, do imports of the Capital goods that they needed to raise their living standards without them becoming the debt pions of the rich world, because this currency would have been Under the control of a one vote, one country, one vote system. Now, this is utopian. I'm not.

Speaker 2: 43:17

There's very clear reasons why the geopolitics worked out in such a way that this was completely off the table. But the intention there is quite humanistic and humane and it's quite in caught and specifically humanistic, humane towards the very people who Keynes himself, some 40 years before, would have called basically like inferior savages. So it's, it's there's, there's always like like. The trouble is like. Keynes's legacy, in a way, doesn't even matter, depend on what he did, it depends on kind of like what, what people do, like using his ideas.

Speaker 1: 43:49

Absolutely, but that's still why I think he's a villain in history, because he gives us, he gives us the American imperial system, ultimately, exactly like there's no way around that. Like the foundations of America, of the American imperial system are based, are set up in the 1950s and they are based more off Keynes than on neoclassical economics, until the neoliberal period and and and I think people clear metize actually pretty good on this, where she talks about the fascist answers to the first crisis of Well, not the first crisis is really like the fifth crisis of capitals and whatever, which, by the way, you know, not because we haven't gotten friendly yet about 45 minutes in, but I Think this is one of the legitimate critiques of Marx that I'm gonna go ahead and grant the post. Keynesians is is even if the tendency of the rate of profits to fall is true, and I Increasingly can't figure out how we calculate it, because, depending on how I calculate it and what aggregate number I use, if I'm using GDP, it actually looks kind of correct. If I'm using, if I'm using like raw profit data, it it goes all over the place. It doesn't seem to be like it's not stochastic, but it's. It's the trends don't follow any clear trend line and so there was an over dependence on that theory throughout Marxism and that is absolutely Undeniable. And people who try to deny that it's in Marx, I think are frankly Torturing the text to ignore the plain reading of the text.

Speaker 1: 45:40

Now, and I think this is why there is a weird relationship, when we talk about heterodox economics and this is where people like Fredley are gonna be interesting, because Fredley does pull from Marx but where there's a tension, there is like a weird tension In all the heterodox economics schools about their relationship to Marxism, particularly after you could be honest about it after 1992. And what, what? Why do I say that the most precipitous attacks on Marx, both on the left and in general, come out of the heterodox school and Some people in the same fields. And this is one of the things where I'm like, when people are like, well, mmters agree, I'm like, well, yeah, but half of them hate Marx and half of them love him, so I don't know how they agree. And yet there's also, in most of these Groupings, people who defend Marx, even though they might be critiquing one element of it.

Speaker 1: 46:44

Like that, like this, you can see the Ray, the Prophet, the fall or over dependence on bar theory of money or the idea of labor theory, value or value at all if you get into, like the capitalist power people who are, you know, who can sometimes be made adjacent to MMT. So this is, this is why I figure like Fred Lee so interesting, because he is trying to bridge the gap, but he's not. I Don't see him as a as a as a buffiferous marks defender, but I also don't see him as, like Losing sleep at night because there are still marks in the world, like some people we know, in modern monetary theory. So so to kind of get us there and I agree with you, I did mischaracterize that the post-Kanzean is because I do forget about Samuel sends big split.

Speaker 1: 47:45

And it's interesting you mentioned Shaffer, because Shaffer is a split within Marxism. Like, basically I don't believe in orthodox Marxism. I want to say that. But if there is an orthodox, if there's an orthodoxy on value theory, shaffer's flirtation with Marx in Z it in, in Dividing the Marxist economic world between people who think value theory is really important and people just think, well, it might have been true in the eight, in the 19th century, but it's not true now, if it was ever true at all.

Speaker 2: 48:15

That's exactly right. Yes, and, and Sharaf is also a very so. Sharaf is a huge influence on Lee To an extent that I.

Speaker 2: 48:26

Wasn't able to get into in part one. I may or may not be able to get into it in part two, but it's Rafa is also a human type who's interesting in this conversation, because he was a lifelong communist. He was best friends with Gramsci, who was a post-Kanzean in his economics Although there wasn't a term for that yet At the start of it because he was basically like in Keynes's milieu since the 20s but then by like the 60s. You know, the pks are distinct from the American Keynesians or neo Keynesians or new Keynesians who basically are the people who suck, who integrated the neoclassical stuff or tried to. So the Sharafa and Jerome Robinson and Maurice Dobb are all Keynes's grad students and, unlike the old man, they love Marx, they try to synthesize. You could you could kind of Over simplistically describe post-Kanzeanism as the attempt to synthesize Keynes's insights with Marx's. Arguably that's over an oversimplification there's many actions.

Speaker 1: 49:26

Some of them are more friendly to Marx than others. Or the Minsky School of post-Kanzeanism, which is trying to reconcile Keynesianism with with German historical school charlism.

Speaker 2: 49:35

Right, right, the. Although Minsky was a Metschewik, he was from a Metschewik family. So, so there's also a Marx connection there. But yes, I agree, that's, that's.

Speaker 1: 49:44

that's Well, I mean yeah, and there are Marxists in the in the German historical school who Like Sombart, etc.

Speaker 2: 49:52

But we don't talk about them anymore because some of them became nazis yep, verner, verner uh ended up Making some alliances, although you know who among Marxist economists has not occasionally written for Crypto-Nazi publications funded by billionaires.

Speaker 1: 50:13

I have it, that's. That's not a yeah, yeah.

Speaker 2: 50:16

Yeah, sorry, this is my, this is my pet thing Never write for American affairs or Palladium, fuck the teal machine. Death to billionaires, anyway, um. So, um, to get back to Lee, lee is very much operating within that kind of lineage, right? So he's somebody who, yes, he calls his book post-Kinsey and price theory. The reason he's a post-Kinsey nazism is because his mentor, alfred Eichner, who's the first person to kind of dream of abolishing the difference between macro and micro economics by basically fixing Micro economics by replacing it with a totally different model entirely, that that is more concrete and actually studies firm behavior. That was kind of like his idea, um, you know, and he was kind of a post-Kinsey and like after John Robinson. So Lee becomes a post-Kinsey. But Lee is reading everybody.

Speaker 2: 51:10

Lee is a kind of patriot for the heterodox schools in general. He, you know, and this is also taking after Eichner. Both Eichner and Lee were huge Institution builders within this milieu. They founded journals and associations. They joined sort of dying associations and revitalized them, um, like a union for radical political economists and a whole bunch of other, the heterodox economics review, a newsletter, whatever like. They started like a whole bunch of these things, basically kind of like dual unionism but for, like academic institutions, to create a home for um Heterodox economists in a very hostile academic environment where people were trying to purge them, um, and they did this for all the heterodox schools.

Speaker 2: 51:52

So not just like their own tribe, the pks, but people with whom they agreed or even disagreed vociferously with Um, you know so, marxians, institutionalists, georgists, ecological economists, feminist economists, like they tried to kind of like, create pluralistic homes for all of them. So Lee's political project within academia was to try to create a pluralistic economics discipline. He even included austrians, who I would not include because, in terms of you know, austrians are treated by neoclassicals as a dissident school. But actually austrians before before, the american neoclassicals tried to integrate kinsian ideas and so invented so-called macroeconomics. The austrians and the neoclassicals there was no difference between them, they were just two different wings of neoclassicalism.

Speaker 1: 52:37

There were a few austrians who flirted with the german historical school, most famously schupenter.

Speaker 2: 52:43

But and and shumpeter is in fact the least bullshit of all the austrians. He is the one who actually has some, some useful stuff for uh, for us, um no erositillian proxology for you, yeah. Yeah, you know it's funny. I don't think that you learn about the world by asserting things in an armchair and then logically deducing from them. I just, you know, it's just this weird thing. I don't know, I just like it's not my style.

Speaker 1: 53:08

Yeah, those people who were like well, get rid of car accidents and put a spike in the middle of the. This is a real thing that austrians have suggested, I'm not even making this up. Um, if we put a spike in the middle of the of the car so that you have to drive carefully because you'll die if you don't, by increasing the risk profile, uh, that's Because of you know, proxialogical. They don't calculate because calculations would involve math, and they also Not all austrians, but most austrians are mathophobic.

Speaker 2: 53:42

So I have. I have, I have an intense footnote about why you should probably just count austrians as one subset of neoclassicalism rather than as a true dissident school. But it's, it's a sign of how open-minded Lee was, that he thought that they could have a home under the big tent, even the neoclassicals, if, and only if, they wanted to play nice with others. So that was kind of Lee's political project with an academia. Now I personally think that the results speak for themselves.

Speaker 2: 54:11

You know, several decades later and Lee worked harder than anybody I think ever has on trying to make that a thing there are no pluralistic economics departments, more or less. You know, the heterodox ones tend to cluster around one of the pet schools that that that has taken over. And then the orthodox ones. You know they don't even acknowledge the history of their own discipline or the existence of any other perspective and violently try to suppress any attempt to do it. So you know it's, it's kind of um, I don't think that it can work with an academia, for a number of different reasons.

Speaker 2: 54:43

Uh, that I won't get into. Uh, but it was very good for Lee's theory that he thought this way is the way that I would put it, because what it meant is that he took the bits and bobs that work in all the heterodox schools and figured out how to stitch them together, and not just how to stitch them together in that sloppy way that self educated you know, internet weirdos often do, where it doesn't actually fit together as a coherent system, because they're trying to fit together stuff that has radically different assumptions, and so it just ends up being like a hodgepodge.

Speaker 1: 55:16

But Lee, like Bernie Sanders tries to do anyway.

Speaker 2: 55:19

Yeah, it's true, or something like that, but but rather lee actually tried to study the history of the development of these schools and the path that they took.

Speaker 2: 55:30

So if you see classical political economy as kind of like a thing that has a beginning, middle and end let's say it ends with marks, and then the neoclassicals come along that was one path out of classical political economy.

Speaker 2: 55:41

But there was another path that, as far as the disciplines you know, um, academic codification was concerned, was the road not taken.

Speaker 2: 55:50

But the dissidents all basically took the same road, which is to try to come up With a story of the economy that basically uses the general perspective of classical political economy but fixes it in various ways, such as, for example, seeing the human economy as embedded within ecology, which is the path that georgian rogan took out of classical political economy there by funding the ecological economics schools right. Or by seeing how, um, you know, uh, how the, the, the different kinds of, like, uh, parts of the economy fit together into a supply chain, which is what was nay and marks within classical political economy did, but then later think it was like leon, tf, um and uh and and serafa took even further into the development of what later came to be known as input output modeling, which is basically the tools that we would use, more than anything else, to do economic planning or to build on marx's model. You know, in one way or the other, by, for example, trying to clarify the historical materialist origins of the modes of production before capitalism, or by trying to figure out um.

Speaker 2: 57:00

You know, how capitalism has evolved since marx was writing, which led initially to the rise of sort of theories of like state capitalism being uh dominant, which is kind of what the, uh, the, the monthly review school was trying to do, and they were also integrating sort of kinsian ideas about planning and so on, or, after the death of social democracy, how the inevitable trajectory of capitalism was instead towards the kind of like, uh, global, globalized free market of the 1990s. You know, uh and how, and that was like kind of like what, uh, what people like arigi were doing. Um, you know so I'm over simplifying, but you can see how there's like a common dna, though, oh, uh and another thing, uh, this is an important one, the the way that. Okay, so if you have a classical political economy, of these classes and you have these institutions like companies and so on, but how are they legally organized?

Speaker 2: 57:48

So we talk about rents or profits, but, like, how exactly are they extracting these? What are the social systems and institutions through which they're doing all that stuff? Um, that was what Thorstein Veblen tried to do. He actually was interested in studying the firm and studying um uh uh legal systems and things like that.

Speaker 2: 58:05

And out of that he kind of develops a whole group of theories which are very Marxist in uh in structure, but specifically focus on these kind of like socially constructed elements of the system which then feed back into the material elements of the system. Yeah, that's called an institutionalism, the institutional school in german historical school accidentally created sociology.

Speaker 1: 58:27

I mean, would you add dirkheim and the sociological positives in there, like you have the the like, and throw some Marxism in there when people want to claim that you have kind of the fine prongs of the school that makes up sociology? And I think that's interesting, because that faux distinction leads you to miss one. Why? Why sociologists and an economist often hate each other is they're actually probably the same discipline and different guys is Uh, you know, and if, if you're our friend Colin drum, you would just say they're both equally full of shit. Um yeah, so just sort of less full of shit than the economists.

Speaker 2: 59:05

The way that would put it Um, but that's not, although that's not saying much, because you know. Economics is possibly the most fraudulent and the most disgusting and the most valueless sort of. Field, in academia, maybe. Maybe it's tied with analytic philosophy. Sorry, okay, now I'm just being uh, oh no, you are really trying to start a new chapter.

Speaker 1: 59:27

I know you are really trying to start a fight. I know I really am.

Speaker 2: 59:33

Hey, some analytics. Some analytics are good, but they tend to be the ones who don't don't realize that they're actually Continentals, like philosophers of science. Uh, but anyway, um Okay, let's. Let's get focused, though.

Speaker 1: 59:46

Um so, 35 minutes in the clock exactly.

Speaker 2: 59:52

So lee is basically trying to take the bits, because he had this kind of pluralistic conception of the heterodox schools. He's trying to take the bits and pieces of each of them that work. So From the institutionalists he gets the idea that the firm is really, really important and that you have to look at its specific operations and its legal constitution as like a basis for looking at things. From um, and then from the post-cainsians, which is his kind of like native tradition, before he kind of like merges all of these. Uh he, he gets a general understanding of the massive importance of effective demand and he also, I think, gets the supply chain view from sarafa, although he could have just usually gotten it from marx, but I think that in his case he actually got it from sarafa, um, but marx had it too.

Speaker 2: 1:00:37

I mean, marx had it before anybody else, actually just one of his great achievements in volume two, um, and then from the marxists that and this isn't his later work, more so than in post-kinsian price theory, he gets what he calls lee does the surplus approach, which is roughly what I was describing as classical political economies framework, with a surplus that is produced that requires some of its own production for inputs into its production, and then whatever's left over is distributed to the different social classes through different means, and that you can map that system In principle, and that map is a map of the economy as a whole. It's a kind of general orientation towards the economy or an approach, which is why he calls it the surplus approach. Another way that you could see what lee was up to is like this lee was trying to update the surplus approach in order to integrate khanesian insights about effective demand and institutionalist insights into the nature of the firm, um kind of like, synthesized into a totally new Microeconomics. That wasn't just a microeconomics, it's just that it kicks out neoclassical micro and slots so elegantly into khanesian macro that there's no longer a distinction between the micro and the macroeconomy, so that all that you're left with is a picture of the economy as a whole and how it fits together.

Speaker 2: 1:02:01

Uh, I think that he succeeded at that and that, although he basically completed that and then unfortunately died, that picture of the economy as a whole is basically the germ of a non-bullshit Alternative to economics, and not just like. Not just like an alternative to economics in the risk. In a certain respect, like you know, with respect to, for example, um, government, you know, funding and finance, or with respect to exchange rates, or with respect to some specific element that's wrong in the theory. I mean a total replacement that encompasses just as much phenomena as economics purports to explain.

Speaker 2: 1:02:40

It can explain all those different things, but the difference is that he can actually explain those things and actually predict events in the world before they happen and actually give you an understanding that allows you to act purposefully and meaningfully in the world. Now, whether that's still economics or not is a kind of like uh, semantic, terminological question that we can debate, but it would be the thing that we need in order to, for example, do economic planning on a scale that would allow us to do the green transition or which, for example, would allow you, as a sort of I don't know radical labor union or as a uh, uh, a confederation of cooperatives, or as a revolutionary autonomous zone or something, to figure out how to plug into or plug out of the global economy in ways that allow you to achieve your goals but also, um, socially reproduce yourself, and so on and so forth, like so. We need this and basically what I argue in the piece is that this guy that nobody's ever heard of more or less invented it.

Speaker 2: 1:03:39

Uh, now, In the face of a lot of the same promises of, well, not quite as radical as cybernetics and um Hmm, Least theory is a cybernetics theory Inspired by systems theory stuff, but through roi bascar's critical realism, which is why he doesn't use that word. But basically, that's the.

Speaker 1: 1:04:02

Well, that's a pretty big difference because, for example, cybernetics has a lot of assumptions about both organism nature and and uh, human cognition. That is based purely off of behaviorist assumptions on a servo mechanic effect, which is why you don't hear about cybernetics very much outside of Uh Programming now. Because, well, when you're talking about the machines and the server mechanic effect actually works and when you're talking at a high level of extraction, it's hard to tell if it's working or not because you can make the abstractions fit um, whereas when you start talking about human cognition, it it really does start to break down. Um. I the reason why I bring it up. And I bring it up to push back on you a little bit, because A lot of Marxists recently rediscovered early cybernetics but then kind of seemingly deliberately, or at least interestingly, do not cover the problems it developed in cybernetics.

Speaker 1: 1:05:11

After cognitivism, after the attempt to come up with cybernetics, sociology really failed. It was neither, I mean it was so abstract. It was like almost like Durkheimian systems theory where, like you, fit the system to whatever happens, so it's not disconfirmable in any way, and bring it up to basically say like how do I know that your hope about Freddie Lee doesn't give me back to that, because I've been sold this stuff before.

Speaker 2: 1:05:51

Yeah, that's a great question. I think what I really wanna do is defend the honor of cybernetics a little bit, because I understand what you're saying but it depends on what is most important about cybernetics. Because if what's most important is the original kind of Norbert Wiener highly mechanical account of like human nature and stuff, then yeah, that stuff didn't really last. But if what matters most about it is the mathematical formalisms to describe things like positive and negative feedback loops and emergence and stuff like that, that stuff is everywhere, in all the most advanced parts of the natural sciences right now and social sciences. It's like chaos theory, it's the mathematics of complexity and nonlinear dynamic systems, it's like systems biology, it's ecology, it's like all these different kinds of things. And if you look at the people who like originated the complexity turn in those disciplines, it often was like personnel from the old Macy conferences and stuff.

Speaker 1: 1:06:44

So again, it's it's post cybernetic. What that's that? What complexity theory comes from, is ecologist. Cybernetics is to got burnt by the 70s, by the 70s, 80s, fall out around cognitivism in particular, meet each other again to try to come up with something and you get complexity theory, emergent theory, what we used to call chaos theory, but I think we just call complexity theory now. Yeah, general systems theories, plural. That said, they don't make the same promises of cybernetics, like cybernetics is supposed to deliver a system of doing positive science that is predictive on the level of the individual in the system, from the eye of an organ all the way up to a planetary ecology. That's the promise and they can't do that.

Speaker 2: 1:07:53

Yeah, I think that this is. You're right to make the analogy, because and this actually kind of goes back to what I was saying about how, like okay, if you accept Lee, which way do you go? And one way leads to nonsense land, and the other way leads to science Like the we're getting If you accept staffer beer.

Speaker 1: 1:08:10

Which way do you go? One way leads to nonsense land and the other way leads to science.

Speaker 2: 1:08:14

No, I completely agree, because, okay, I think I'll make that point last. I'll very quickly describe the model first, and I'll say, by the way, that I'm gonna be very cursory and perfunctory here. And if you want the full version, read the essay and especially the footnotes. It goes into an excruciating detail, hopefully in an entertaining and fun way, but that's for you to decide. I liked it, but I'm a nerd. Right, exactly. But the basic story is this Lee begins in micro, he begins with the firm.

Speaker 2: 1:08:47

It's a very similar story to Marx, right? You've got people who own the means of production, you've got people who don't, the people who don't have to sell their labor power, and blah, blah, blah, blah. They produce surplus value. But Lee doesn't like using any of the value theoretical terms, and he also likes keeping it to agents. And there's reasons that I won't get into in this time, but probably in part two I will about why he does that. So instead he says okay, you have an economy that have made up of firms. The firms have owners. Owners aren't necessarily the ones doing the managing. They now hire managers to basically run it, and oftentimes they're totally absentee owners who just like wait for their capital gains or their dividends, and then you've got employees who are working as wage laborers, either on an hourly or yearly sort of pay rate, usually corresponding to their rank within the institution. Workers need their wages in order to, you know, buy the goods and services that they need in order to reproduce themselves. Firms produce, you know, commodities for sale. They produce goods and services for sale in order to achieve revenue streams that allow them to socially reproduce themselves. Social reproduction, by the way, is just a fancy Marxian type term, for, like they perpetuate themselves. They continue to exist day to day, week to week, month to month, year to year, as long as possible, in fact, because a firm is a going concern, an aspirationally immortal entity that is trying to maintain and perpetuate itself for as long as possible. It's a term that Veblen gets from 19th century economics.

Speaker 2: 1:10:20

Now, the lifeblood of the firm is its revenue streams. It gets its revenue streams from selling at the goods and services that it produces. However, to produce those goods and services, the firm needs ingredients, right? So, just like when you cook on an omelette, you need your eggs, you need your tomatoes, you need your butter, you need your cheese, whatever. In the same way, in order to produce this ceramic cup, you need the particular kind of coffee and you need sorry, not coffee. What am I talking about? You need the particular kind of like ceramic, you need an injection mold and you need this, and you need that.

Speaker 2: 1:10:55

You know and, mind you, the ingredients are a combination of very different kinds of things.

Speaker 2: 1:10:59

You need the workers, right, which manifests themselves monetarily as wages, which are a cost for the business, but then you also need the machines, which manifest themselves as the cost of acquisition and the cost of depreciation for the machine, and then you need the inputs which you're buying on a continual basis, sorry, the other inputs that might be paying your rent, that might be the raw materials that you're forming, that might be things that the machines need. I don't know. It's all sorts of different things, right, like, but the point is that, in order to continuously do production, you need to create this kind of flow between the money that's coming into the firm and the money that's going out of the firm to, kind of like, pay all those costs and ultimately, what that looks like is a metabolism. Lee doesn't use this analogy, but I think that it's a very useful analogy for understanding this kind of thing, and any Marxist already has intuited something similar, because they call this the MCPM prime cycle, you know or the process of accumulation, you know.

Speaker 1: 1:12:00

Which we base explicitly on metabolism.

Speaker 2: 1:12:02

Exactly right, yeah, like. So metabolism is, like you know, a cell, right in a human body. It has its own input output system, you know. It has a membrane that separates it from the rest of the world, but it's semi-permeable because it needs to take stuff in in order to, like, get the bits and bobs that it uses to keep itself going, and then it expels things outwards that are its kind of waste products, which are often the input into some other cell or entity, which is you know. Which is foreshadowing how these things all fit together. But for now we're on the level of the individual firm. So what are prices doing?

Speaker 2: 1:12:37

Neoclassicals basically want prices to act in a certain way, because they have this superstitious and insane story about how changes in prices are what are ultimately allocating resources. So I'm just gonna read directly from my essay for the sake of brevity. There are four key assumptions that must be true about our world for neoclassical economics to hold up. If neoclassicals were true, you would expect the following One due to the price mechanism shifts in demand leading to changes in prices which reallocate supplies to the demand you would expect that when sales go up, prices would go up. When sales go down, prices would go down. Two due to the nature of price signals, you would expect that everyone is just a price taker and a quantity adjuster. That is, prices aren't really like set by people, they're set by the market and their production decisions correspond directly to what the current price is. So they see the price and that means that they buy a certain amount, or they see a price and then they produce a certain amount.

Speaker 1: 1:13:44

Three oh yeah, sorry.

Speaker 2: 1:13:46

So this means that you'd be buying and selling decisions, that you'd expect buying and selling decisions by agents to be highly sensitive to changes in price.

Speaker 2: 1:13:54

Three, it also means that you would expect prices to be arrived at some point during any given transaction itself and so potentially adjust from transaction to transaction in a process of price discovery. In other words, prices are all over the place all the time. And four, due to marginal cost, you would expect that the more of something that a firm produces, the higher costs of production will be. Now, this is kind of more than I can explain, because I would have to explain the way that the supply curve is composed. I don't have time for that, but basically it's actually the opposite the more stuff that you produce, the cheaper things get. Generally, or although that's more a survivorship bias of, like the firms that have been able to produce lots of stuff and discovered economies of scale that make it cheaper to produce, which basically just totally refutes the idea of marginal cost. So those three assumptions, those four assumptions, particularly the first three, are like they're the way that you would know that neoclassicalism is true, that the world behaved that way. Then it's behaving according to the assumptions of the supply and demand theory. The supply and demand theory wants prices to be the thing that is allocating resources. Change in price means that people produce and consume differently.

Speaker 2: 1:15:11

What Lee discovered and he didn't really discover this there's a whole literature from the last like 100 years of people who have from very different ideological backgrounds in fact who have basically discovered and rediscovered and rediscovered all this, and Lee basically just put it all together into a single picture. But basically what they discovered is that prices are not behaving that way and they're not serving that function. They're just a completely different thing. First of all, they have no real relationship to changes in sales, which is our best proxy for demand. Sales go up, the price stays the same. Sales go down, the price stays the same in like 99% of cases, and in fact there's situations where the price changes seemingly in response to a change in sales and it changes the opposite way. Either the sales go down and prices go up or something like that, in which case that they're behaving as a gardener means put it perversely from the point of view of the theory.

Speaker 2: 1:16:05

I personally like the idea of perverse prices kind of tickles me. It's a very amusing moralistic way of framing it. But so that's point number one. They're not behaving in that kind of way, the overwhelmingly they're not changing at all.

Speaker 2: 1:16:21

The other thing that's interesting is that prices aren't being set in a particular transaction through the process of groping or price discovery that the neoclassicals are always thinking is going on, where, like, the price is being discovered because people are producing and consuming, sort of in relationship to the price, the price will always be discovering the price. That adjusts supply to demand automatically. Instead, prices are the same for very long periods of time. They won't change for six months, for a year, for five years, like we're talking about very long periods. And furthermore, they're not administered to market in individual transactions. Right, because the mechanism through which they would change in the classical Teton Mont theories is like some kind of auction. But there's not an auction. That's not what's happening when you go to the supermarket.

Speaker 2: 1:17:15

The prices are administered to market by firms over a period of transactions that is up to the discretion of the firm, usually due to its planning horizon, you know of, like you know looking forward the next month, the next quarter, the next year, whatever, according to what strategic needs.

Speaker 2: 1:17:31

So, like, prices are administered to market, they're not being set by the market, which means that, as my co-editor, steve Mann, puts it, it's not the market that sets prices or anything else abstract like that, it's people who set prices. Which immediately then suggests that you have to then ask, okay, who is setting which prices and why? Which gets us to the kind of like final nail in the coffin for the neoclassical predictions about the world, which is that prices are basically serving a totally different function. When sales go down, the company will just like shut, you know like diminish or shut down production of the thing, while keeping the price the same. You know they might lay off the entire department even, you know you know to cut costs, but they're not going to like, but they're not gonna like change the price, you know maybe they'll do it to get rid of inventory at the end.

Speaker 2: 1:18:23

But even then they you know that's a decision that's up to them. It's not like some kind of like automatic thing. The. So basically, like they, the prices have nothing to do with the productive production decisions. They're kind of like two separate magisteria. Instead, what prices are is the attempt to set a markup over and above the firm's total cost, because, remember, the first thing that a firm is trying to do is not to be some kind of optimizer for anything. It is simply to survive, to keep the lights on, which, at the very least, means continually being able to pay for the inputs that you need in order to maintain current output. How do you pay for that? From revenues. How do you get revenues? From selling the products. So you make an estimate of how much, how many products, you think you can sell, and then you basically say, okay, at this price we would be able to recoup our costs you know, so it's costs of production that are basically determining the markup.

Speaker 2: 1:19:22

Once you have that as your basic framework and, by the way, this is very similar to the labor theory of value, except that it's not tied, strictly speaking, to labor hours it's basically agnostic about where costs of production come from. Perhaps they come from the organic composition of capital, perhaps they don't. But mainly, all that you need to know is that you know the prices that are administered to market are gonna be, in the first instance of markup over total costs. That allows the firm to reproduce itself over time. Now this becomes more complicated because firms are doing other stuff. Once they have kind of like gotten the production cycle going and they've got a customer base and they're able to recoup their costs and break even, maybe even have a surplus, then they've got decisions to make and not just the classical Marxian decision about what to do with the surplus. You know whether to use it to pay the owners or reinvest in the firm, to expand production or give the workers a raise, because you know they always they love to do that right? Yeah, they don't.

Speaker 2: 1:20:18

But, you know, like, instead of that there's or in addition to that there's other strategic things the firm can choose. For example, first of all, firms don't just make one thing right, they make many different things. So they can choose, for example, to they want to enter some kind of market. You know so, like, let's say that we do a magazine, but maybe we want to start a publishing house because we have a lot of inputs in common with that. It's basically the same process. So we could just, you know, market, market books under our label and call ourselves a publishing house. That's entering a different market, right? Perhaps in order to do that, we need to run that at a loss for several years because it's more expensive for some reason.

Speaker 2: 1:21:04

So we but we calculate that we can get it cheaper eventually, so we'll run that at a loss subsidized by the more profitable side of the business, which would be like the subscription magazine business, until we've gotten enough market share that we can either raise our prices or get economies of scale that make us more efficient and maintain that price. That's a strategy I just described, a strategy that is used all the time. There's a million different strategies that you can do in price. There's different kinds of pricing that pursue totally different goals, and not all of them have to do with optimizing short to medium term profit. In fact, that whole idea that firms are profit maximizers is not true in any useful sense. Like, yes, they're trying to at least Lee argues this. Like, yes, they're trying to reproduce themselves socially Absolutely, which requires being profitable. In that sense, yes, they you know they arguably want as much profit as possible, but that they may decide that doing that requires giving up profit in the short to medium term. And also, even if they aspire to maximum profitability in the long term, they don't know what optimal profitability is. They might copy, for example, the strategy that works for one firm but not know that that can no longer work. They might try to do a totally new and different thing and find that it just doesn't work, but another firm might try the same thing and it does work. Nobody really knows enough to know what optimal would be, and the only measure of success that you ever have is basically have you been able to socially reproduce yourself and have you been able to achieve your targets, which is a different thing from this idea that you can have some kind of optimal allocation, either in the neoclassical sense or in the sense of that.

Speaker 2: 1:22:48

You sometimes hear from Marxists about the efficiency of price competition being such that if you don't do something you go out of business, which structurally means that only certain firms exist. So that's kind of like the general gist of his microeconomics. There's a great deal more, but I won't get into it Now. The way that this plugs into a total picture of economics is let's say you've got one firm and let's say you've got another firm, and this one makes the iron ore and this one makes the steel. So how do the people who do the iron ore know how much iron ore to make? Now Friedrich Hayek says that it's because of the price of their inputs that determines to them, and changes in the price determine how much they're going to produce to the market. Now that sounds really cool when he says it in his really an essayistic prose. But if you actually know any industry, when has the fluctuation in the price of something been the main thing that determines how much quantity to put out there? That's not really how it works. His specific mechanism is kind of fluffy and weird when you actually try to use it to describe the world. But if you believe, as I do, that Lee blew up the price mechanism in PKPT, the question then is okay, there is clearly some kind of decentralized planning that happens in market economies and indeed in other economies as well, such that no one person can see the whole system, but nevertheless the system keeps functioning. So what is that thing? And for Lee it's effective demand traveling up supply chains in the form of orders.

Speaker 2: 1:24:25

So if Varn makes the iron ore and I make the steel, how does Varn know how much iron ore I to make? Because I, the steel company that is, his customer put in an order for so and so amount of iron ore, and when Varn sees me and all the other customers that he's got, that determines how much. I don't know how many miners to hire how much. You know how many machines to buy boring machines or whatever, I don't know how mining works and that in turn determines for those industries you know, varn and all their customers how much to produce on their end and so on and so forth. Now you'll notice that if Varn and I were in the same vertically integrated company and there was no money changing hands, if it was just like I don't know, we're in a vertically integrated, I don't know, even like military or something. And you know I'm the logistics, I'm the logistics guy in Varn is the, the, the, the part of the Air Force that is for the jets.

Speaker 2: 1:25:32

You know, like the amount of production that I do is determined by the orders that Varn puts in for my stuff, which, and then the amount that I do and the orders that I put in is how much the previous guy puts in, and there could be no money changing hands here. Or I could be a contractor like Boeing and then there's money changing hands. But the thing that's doing it is not changes in prices or even prices at all. It's the order flow up the chain, which is basically a Keynesian concept. But Keynes doesn't really look at it in supply chain form. Lee does, because Lee is looking at the microstructure and that's what he sees as supply chains.

Speaker 2: 1:26:09

Now, lee basically argues that the supply chains in an economy form a circuit that loops in on itself, that, that, that and this is not just Lee, I mean he's getting this from Dos Copytel, volume two, and from Sraffa and from Leontia, from the great kind of theorists of input output economics, where basically, like, like you know, everybody produces something that somebody else uses to produce something else, which somebody else uses to produce something else, which in the end gets consumed by firm, by, by households or the state, or it's reinvested into the next round of production.

Speaker 2: 1:26:44

Like you know, based on the time period that you're looking at, like a year, the entire economy is like that.

Speaker 2: 1:26:50

Now you can look at it as a closed system. Now, really, it's an open system because if you look at it on the national level, that's, there is a circuit, but then there's loops, there's stuff coming out of the loop and it connects to the loops of other regions of the world, right, you know that are socially reproducing themselves, because, in fact, when you're talking about, like, people who make stuff that other people used to make stuff, which other people used to make stuff, those supply chains are now international and interdependent, right, so you know like, but you can still map it using the same principles. In fact, it helps you define what an economy is in the first place. By the way, there's this is the supply chain of production going down. There's also a kind of chain of finance or credit, of payments, a chain of payments going the other way, where money in a monetary production economy or capitalist system like you know it has its origins in the institutions that print money, which tends to be either states, through their spending, or banks, through their loans.

Speaker 2: 1:27:54

And then it kind of like moves up the economy because the payments that people are making, at least in the kind of capitalistic parts of the supply chain although like that, how you define that is itself kind of like you know, a tenuous kind of thing. But like you know, like, like those every every bit of production where an input is being sent to somebody that they use to make some output, that is an input and somebody else's thing. Up the chain there's payments being made and so those two, those are kind of two parallel loops and in the same way that you can map the loop that is, the supply chains intertwined, you can map using the kind of stuff that the MMPers have invented, like stock flow, consistent modeling and stuff like that, and balance, interlink, balance sheets. You can kind of follow the money as it goes and those two loops kind of circling back on itself and linking together all the productive activity of the world.

Speaker 2: 1:28:47

That's the economy and you can describe it, including in real time with good data, and people have done this using tools like input, output, you know, models and stock flow, consistent models. There's even models that connect it to the surrounding ecology and, for example, map the flow of a resource like copper, like out of the earth into our economy and then out of our economy when we discard it and where it goes on a planetary and sort of ecosystem basis. And it's basically just the same technique, but now kind of like modeling, not just the input output of our system but of the surrounding system. So, basically, once you've got this picture, this gives you the general framework by which to understand economic activity in total. What does that get you?

Speaker 2: 1:29:34

Well, it lets you then do research programs to, for example, map out the input output system of the you know, the Venezuelan economy from this year to that year, or in real time, having an updated model right now. If you have good data right, you can do that in principle and you can show how different institutional agents sorry, different agents embedded within different institutions have more or less leverage in the system, depending on the balance of forces, which also lets you do a kind of like Marxist in the in the 18th Brumair sense, right, like the sociological, political, geopolitical Marx. You know who are the different factions and the balances of forces and what institutions are they working through and who's more powerful and who's not. Like you can do that political analysis but then also be able to supplement it with like okay, why are they more powerful or less powerful? Better positions or less position?

Speaker 2: 1:30:25

Well, that's because of who controls the forex, which has to do with the exchange rate, or has to do with who has control over the strategic export industries, or whatever right like you know, and you can kind of like use this general framework as a way of directing your inquiry about the world in a way that lets you see what's going to happen before it happens. So in another interview that I did that aired this week at it's going no, not, sorry, not, it's going down, it could happen. Here, the Robert Evans podcast, you know, I was talking to Mia Wong with my co-editor, Steve Mann, about the fact that the we at Strange Managers were able to predict not just that the inflation was going to happen you know, in 2020, but why it happened, you know, and its specific causes, you know, and there's proof of this because we posted about it before the magazine went live and on Twitter, and you know, like, like, the reason we were able to do that was because we had Steve's supply chain theory of inflation, which was rooted in Lee's framework. So that's the kind of thing that you can get out of this stuff. But there's a downside and it's that like, okay, you have this general framework, what do you do with it?

Speaker 2: 1:31:38

There is definitely a version of the research program that comes out of Lee where all you do is pick pedantic battles with Neil Classical Economist, showing how, in this or that discrete case, the Neil Classical said this happened, but actually our framework says that this happened and this is why our framework is better, where you just kind of like end up pedantically defending this in a dogmatic way, the idea of this kind of general approach to the, to the economy, because you know you're staking your academic credibility on its, you know on its, on the prestige of it. That prestige doesn't exist right now but, like in a theoretical world, release ends became like a more of a thing.

Speaker 1: 1:32:22

Or you have another, or you have another theory. We mentioned MMT's use of this, where you start using these supply chains to be like well, you know why the economy hasn't crashed? It's actually because of the supply chain response of people being paid out from the high interest rates, which which leads to automatic employment and low employment, which which I think I'm not going to. I have heard this from Warren Mosler right and Warren Mosler himself, and I think a that's ridiculous not that they're wrong that there's a back end payout on on interest rates. There is the idea that that's just an output into the economy enough to to explain relatively high levels of employment. That doesn't make sense. Like you can't do a one to one like that and and and they'll do that off of some supply chain logic, but they won't even try to empirically prove it. It's all deductive and like like speculative on supply like, yeah, that's absolutely true.

Speaker 2: 1:33:34

And there's there's even worse examples, like you know. I'm going to get into this in part two but as a slight preview, I've got my little notebook here with my notes. There's a bunch of unpublished Lee lectures that one of his graduate students recorded, the 10 lectures of his last graduate seminar, which basically is, you know, a summary of his book that he was writing. That was completed posthumously and there are tapes circulating, you know, in Google Drive form of this, but it's not been published or transcribed. So if you, if you want them to be, you know you can you can take a cue from the from, from the Trumpies, and just demand release the tapes, release the tapes.

Speaker 2: 1:34:13

You know bug, bug, nathan Tank is about it, because I really think that they should. But you know, nathan Tank, I can't in general, I mean, but, but the, the, the. In those lectures you get stuff that Lee never wrote down, like his theory of inflation. And frankly his theory of inflation is very disappointing because he gave us this input output framework by which to understand how the firms are linked together. From there you can come up with a supply chain theory of inflation, like Steves, which I think is fantastic because it helped us make that prediction. But Lee didn't take it in that direction, because there's another aspect of Lee which is the social constructivist direction, and I think that that was an impulse that he indulged too much in his final years. And again, the more detailed critique of this is going to come in part two.

Speaker 2: 1:35:02

But to give you a sense, you know, when his students were asking him about inflation, lee basically said in these lectures in response to them that you know, as long as wages trail inflation, it doesn't really matter, and the only reason why they wouldn't is basically he adopts a very typical post-Kinseyan sort of story about a distributional struggle between capital and labor over the resource, over the allocation of the surplus, or of rising markups, which supposedly you know, whenever wages don't trail the markups, it's because the people in charge, the people administering the price, have just raised it out of a desire to have more for themselves. And so you know that's where you fight. Then you know, as a labor union, like to raise wages because the wages clearly aren't driving the inflation. So for Lee, inflation is kind of like a non-issue, like which, because it's always a matter of class war and that's kind of the end of the story.

Speaker 1: 1:36:11

I really think that's like the Keynesian Marxist hybrid stuff from Sweden basically, that's exactly right.

Speaker 2: 1:36:17

Yes, and Levoix in Canada has a version of this as well, and the problem with this is that, like it's not that there isn't a distributional conflict during inflation. There is, but it usually happens after the fact, like an inflationary crisis hits and then the distributional conflict is over. Who's going to get fucked over in their purchasing power, capital or labor? But, like you know, the reason the crisis hits is almost always at least strange matters is current theory, which is Steve Mann's supply chain theory, you know, is there's always an exogenous shock of some sort, whether it's a natural disaster or whether it's some kind of biophysical bottleneck that's happened, or whether it's a, like, a balance of payments crisis, where imports suddenly become much more expensive due to fluctuating exchange rates, which can happen for any number of reasons.

Speaker 2: 1:37:07

But whatever it is creates an external shock that causes some initial person who's well networked within the supply chain to raise their prices, and that progenitor price increase travels down the supply chain, because somebody's price is always somebody else's cost and it travels down particular specific supply chains, not across the economy as a whole, but if somebody's. These chains are networks right, we were talking about them as lines, but everybody's interconnected like this. So if somebody's a particularly well connected node down and they raise their price, downstream of them, a bunch of people are going to raise their price and it basically manifests itself as a generalized rise in prices, which is what we call inflation. Now, that's Steve's theory. It allowed us to predict inflation and its specific causes before it happened, which to me is based off of off of Freddie Freddie Lee's model.

Speaker 1: 1:37:53

I remember talking to you about it when I talked about it. But it's not Freddie Lee theory of inflation at all. So himself.

Speaker 2: 1:38:00

Yeah, lee himself was not going in the direction of inventing that theory, because I think that he was becoming. He was becoming too attached to the social constructivist elements of his theory. As a result, I think, of the negative, well of the of the negative influence of the MMT that he was imbibing at UMKC. This is my personal opinion and I don't have the time to substantiate that, so I always Roy Boschkar too.

Speaker 1: 1:38:28

I mean Roy Boschkar, as you mentioned, his, his critical realism, which early on I think is good, but like other aforementioned there, but for the grace of Wu, go we um. Roy Boschkar gets weird in his later life on exactly the social constructivist elements.

Speaker 2: 1:38:47

Yeah, exactly so. So to answer your question from like 20 minutes ago, Varn, how do you like? How do you know that Lee is not selling snake oil? I think because we've gotten results, which means that there's something there. However, there is a risk that it could become snake oil If either it becomes a dogma that's static that people feel like they can't question because they're trying to justify it, or if it indulges too much on the social constructivist side of things and becomes an excuse for why anything is possible.

Speaker 2: 1:39:20

Because as long as you can print infinite money a la MMT, that means that like eventually you can like, and because resources aren't scarce, the way that you know, classical economists say you can just retool any productive process to be whatever you need, eventually Like that's. I haven't gotten to that part, but that's. That's a very common interpretation of the social construction of resources argument that Lee gets from Diggory, and I actually think that Lee's version is more sophisticated. But even Lee still needs too much in that direction for me, because I think that it's ultimately a denial of biophysical limits. So like if you use Lee to deny the reality of biophysical limits or to prevent inquiry into specific industries and specific sectors and how they do, things like how they actually make their products. Because you sit back, you have the master theory, and because you have the master theory you don't need to know anything about the specific economy. If that's the attitude that you take, then Lee's not going to give you shit. However, if you take the general model of how the thing, how the how the going economy fits together, or how the social provisioning process fits together these are Lee's preferred terms for that sort of total model of the economy that I was describing before If you take that as a general approach to research and then, informed by that approach, you do case studies of particular industries with particular institutional frameworks and configurations and particular biophysical limitations and particular places in particular times, and then use that to like describe the world, then you've got something really good.

Speaker 2: 1:40:56

It's not that Lee provides all the answers. It's that Lee gave us this kind of like general framework that we can then use to analyze particular case studies, and we're still going to have to fix the framework. You know Lee's framework was not complete. It was not integrated into ecological stuff. It didn't really have much to say about the, about the service economy. It didn't really have much to say about, you know, different kinds of you know different kinds of specific problems pertaining to things like the green transition and things like that.

Speaker 2: 1:41:22

So we need to. It also needed to be more integrated into the developmental economics literature the stuff that I was originally into the Hadrian Chang stuff, right, and the Alice Amston stuff about how you industrialize countries that it was not integrated into that literature at all yet either. And Lee, by the way, acknowledged all this in his last days. He was so pissed off that he was dying because he knew that none of that work had been done and that somebody was going to have to do it, and unfortunately he didn't really feel like anyone was going to take it up. So he was very one thing. I've been.

Speaker 2: 1:41:53

I've been kind of criticizing Lee in the last couple of minutes, but I want to emphasize that Lee is a very virtuous writer because he says out loud and in print what 99% of economists, including the heterodox ones, will only ever whisper to each other in back rooms and group chats and so on. He says out loud and in print what his commitments are, what the implications are and why he thinks that they're true, like you know, and also who the people are who disagree with him and why they disagree with him, and what the commitments are. So I want to emphasize that Lee is, like you know, a very, very virtuous figure here who we have a lot to learn from. But you know like if we're really going to do justice to his legacy, we have to use his framework to get into specific inquiries, into specific supply chains and use it to transform the world, not sit back and act as if his master theory gives us this kind of galaxy brain overview of everything, such that we don't actually need to learn anything else.

Speaker 1: 1:42:54

Well, yeah, this is a critique I have of the way MMTS sometimes used, which is basically print the money and they will come, and that's not actually what MMT says before people come on me, but that is often how it's used, particularly when you start getting into.

Speaker 1: 1:43:11

Well, we can get around all the problems of planning and all those political problems, even though for our theory to work we have to not just print money but micro-injected in specific industries and areas and then suck it up in specific industries and areas, and it actually requires quite a bit of planning. But we don't want to talk about that because that makes it all. Makes it a lot less cool as a as like it's a one neat trick scenario. And I think this will be a good pivot to our to when I'm going to have you back and I'm already committing you coming back relatively soon, because I want to talk about this criticism of Lee as part of the problem of the sociology of heterodox economics, as a sociology of any besieged school of thought, because I also think it applies to Marxist and you might go Marxist or heterodox economicist, yeah, but we also make bigger claims in that. Honestly, we're like a theory of most things, kind of people, not everything, but we're Marxism.

Speaker 2: 1:44:08

Marxism has an economic aspect. That's why I was laughing when you were like kind of like bashing cybernetics before. I'm like well, I mean Marxism is that, but more so where it's like no, we don't try to explain all fucking organisms.

Speaker 1: 1:44:22

No, we do not.

Speaker 2: 1:44:23

Well, oh, I mean Big Bang guy, though that's rock. Who's like the Big Bang is anti. Dialectical materialism is kind of that's, that's proxy.

Speaker 1: 1:44:36

All right. That's because. That's because they're not abandoning 19th century physics, because that's what's assumed in Hegel, but that's not because of the claims we're making on on biology.

Speaker 2: 1:44:47

I'm just I'm just picking, I'm just picking on it.

Speaker 1: 1:44:50

It would be like if I decided that you got that like that. Are there chartleists who really are going to die on the hill of of of Gordish Frederick NAPS? Like insistence on barter, because he also insists on it? I don't know. I mean, one of the things that I've been researching separately from you guys and maybe I'll write something about it for you one day after I finished the two other books I promised is trying to figure out how the fuck chartleism was actually used by the German Historical School, because it seems like they didn't really pick it up and also Cane's picked it up and then immediately buried it and only, like Michelle Innes is the only one who did anything with it and like even he didn't really get rediscovered and reutilized until, I don't know, 20 years ago. So it's, you know it's, it's, it's a. It's an interesting thing because there is a clear relationship between the German Historical School, the institutional school, and Cane's Ianism. But but Cain's actually part of the reason why we don't actually know that relationship, because he suppressed it.

Speaker 2: 1:46:01

Well, cain's did this a lot. Cain's was a very shrewd operator. This is part of the bad, the dark Cain's that we were talking about before, dark Cain's, which are most of.

Speaker 1: 1:46:10

Cain's.

Speaker 2: 1:46:10

No, he was, he was, he was a shrewd operator in terms of. I mean, I've mentioned the blacklists and the and the purges within economics. He did it too Well, he did it too, and he avoided that partly by doing it too and getting his own hands dirty with the blood of socialists, but also by by having basically a um, the, the, he basically would like lie.

Speaker 2: 1:46:42

I mean, I hate to put it in such in such shrill terms, but he was as much of a liar and a dissimulator as all the other economists who were more orthodox than him in terms of like his influences and the origins of some of his ideas and like the implications of some of his ideas for the mainstream theory. He would like massage all of that and like reverse course, say something in a more candid environment, but then in a more public space, for some people who didn't want to see it would see it say the exact opposite thing, you know, in order to like protect his position within the discipline. And this is something that post-Kinzians really don't like to talk about, because they like to talk about the authentic Keynesianism that they defend versus the bastard Keynesianism that Neo Keynesians and that is true Like Keynes's theory taken as a whole, is basically anti-Neoclassical. But part of the reason that we don't know that is not just because of Samuelson, it's because of Keynes himself.

Speaker 2: 1:47:35

Yeah, and that you know, that's something that the PKs do not like to talk about.

Speaker 1: 1:47:41

And every Keynesian. There are two Keynes the bad Keynes and the worst Keynes. No, no, so one day we're going to get a panel of opinion around your people, around your people, about strange matters, versus, basically me, was Keynes bad, was Keynes good? Was Keynes the worst? And I don't think it was the worst. I actually do think Keynes advanced economics in a way that socialists can use, but I think on the whole, I actually put them on the bad side of the ledger, so like Well, there was a great essay. It was actually a.

Speaker 2: 1:48:36

Fabian pamphlet, but that's kind of mischaracterizing its politics because the guy who did it was GDH Cole, who was like significantly the left of the Fabians, because he was like a syndicalist or post-syndicalist guild socialist, whatever, like worker control guy. Basically, gdh Cole wrote this great pamphlet about the reception of Keynes by Marxists in the 40s. It's a very interesting pamphlet because when you read it and when you read other sources from the time that are like Marxist reviewing Keynes, there's a range and some of them are like this is vile stuff and then others are like actually this does advance economic science but the motives behind it are deeply politically suspect because he wants like a kind of mixed system economy under a democracy that preserves capitalism in as much as it preserves the wage relation.

Speaker 1: 1:49:34

But Perceive capitalism indefinitely, I mean yeah.

Speaker 2: 1:49:38

Yeah, but that's so indefinitely by stopping crises, by basically making a consumer economy that can sustain effective demand and therefore production in perpetuity, through planning. And this is like deeply insidious because, to the extent that it can work, it basically halts progress towards socialism. However, it's also the most dialectical view, in my view was and this is Cole's point is the insights that it has into how to do planning in a way that doesn't cause catastrophic famines, and stuff is stuff that socials can use to build socialism. So it's a deeply politically ambiguous theory with very bad motives in terms of like it's you know, it's the attitude of its author towards the class system. So I actually really agree with his characterization of it in that essay and I think that it's like it's a very interesting artifact of like the initial reception of Keynes, because that initial reception was very, was very complicated and messy, because the 30s and 40s were very complicated and messy.

Speaker 1: 1:50:35

You have both Stalinist and Paul Maddock, who normally agree on nothing attacking Keynes, and then you have a spectrum of reception early on. Actually, it's interesting where that goes. I would love for someone not me to write a book on the socialist reception of Keynes and post-Keynesianism down to and including the debates between the MMTers.

Speaker 1: 1:51:08

And also, does Marx and the MMT play along? Yes, no, is it as bad as say? I don't know. I think Tancas really hates Marxist and Bill Mitchell thinks he is one, and there's like people, I think Tancas is a crypto, a crypto esoteric Marxist.

Speaker 2: 1:51:28

That's the way that I read him. He has read all three volumes of DK, in and out, thinks that some of it is total nonsense but wants to preserve what he sees as the rational kernel of it At least this is, as of a couple of years ago, for all.

Speaker 1: 1:51:41

I know I think parts of Das Kapital of total nonsense too, but I also think parts of his because of what Marx is actually pulling from, and I am a bigger Marx fan than you, but it's.

Speaker 2: 1:51:57

I want to correct something for the record, incidentally, I have a huge Marx fan, in the sense that everything about who I am would not even be possible if I hadn't just deeply immersed myself for 10 years or 15, actually, if you can't read the manifesto at 15, in his work. Basically it's in my DNA every other socialist type. The reason I bash him so hard on here is as a corrective to the hero worship. Basically, he is one of the most important political economists ever to live, but that puts him in a pantheon that contains other people, frankly, not just political economists, but socialist political economists. The trouble is we need Evena.

Speaker 1: 1:52:50

Super orthodox Marxist like Henrik Grossman actually at points critiques Marx. Henrik Grossman actually critiques Marx on the Marxist assumption that money doesn't have a cost.

Speaker 2: 1:53:03

For example.

Speaker 1: 1:53:06

People are now like how dare you call Marx an economist?

Speaker 2: 1:53:10

He was an economist and a historian and a sociologist and a journalist and a poet.

Speaker 1: 1:53:15

He was a million things, but that was one of the hats that he wore, for sure yeah he wrote some really golf poetry. I was not actually familiar with Marx's poetry until very recently.

Speaker 2: 1:53:29

I have an old PDF of it from ARG. Somebody made an edition of it in like 2014 or something.

Speaker 1: 1:53:35

I would like to read it in German because I'm hoping it reads better.

Speaker 2: 1:53:44

Yeah, it doesn't. I've heard from people who do that. It doesn't. The thing is. One of the reasons why I'm always pushing back against Marx on here is because you let me which most Marxists would not what we really need is.

Speaker 1: 1:54:05

I had a whole two hours on why Marx was probably wrong about a key value theory category.

Speaker 2: 1:54:14

And we need a pan socialist historiography. This is a whole other tech, but I just want to leave people with it as an idea. We need a history of our own social movements and traditions which, yes, includes Marxism, including as a key pillar, but which also includes anarchist and in-between movements, cooperativism, all the other kinds of socialism and all the people who theorized socialism and political economy and philosophy and history and ecology, all these other different things. There was a lot of people besides Marx. We can't even reconstruct our own political tradition unless we see him as one star in the sky rather than as the sun. You know what I mean.

Speaker 1: 1:54:54

My response to that is we also can't appreciate him until we do that. Because one of the things that I have a big issue is people ignoring the plain reading of certain Marx passages because they don't like its implications are because quote Orphodox Marxism whatever the fuck that is is and people it's funny because I've been called an Orphodox Marxist because I'm kind of a very rigorous when we make Marx claims. Here's what we say and we dig down and we figure it out. But it's not because I believe everything Marx says. It's because I'm tired of not even knowing the terrain in which we are arguing, because people are using his name as a way to hide their argument or not make one.

Speaker 2: 1:55:35

You can make DK say whatever you want it to say, because nobody reads it. So you have to read it to be able to defend yourself against people.

Speaker 1: 1:55:43

Particularly when you start getting into, like the political and economic manuscripts that are not Das Kapital, the Grandresa. Oh my god, what people have tried to do. I used to bemoan that no one ever reads theories of surplus value, aka Capital Volume 4, and then people started to read it and I'm like never mind, don't read theories of surplus value, because you're using it for stupid shit.

Speaker 2: 1:56:07

Yeah, I actually. You know, my joke is that it's actually Volume 1.5, because people should read Volume 1 and then read it before going to. Volumes 2 and 3 because it's kind of like the homework that he did on the history of political economy that let him kind of then build on and critique those theories yeah.

Speaker 1: 1:56:24

And on that note, I have to plug your magazine because I am contractually obligated and also I really do like it because I don't get these for free people. I actually bought them. This is Volume 1 and this is Volume 2. This contains one of the most interesting historical critiques of enmity from anybody who's ever been in sympathetic to. It begins in this book. You haven't finished it yet.

Speaker 1: 1:56:56

I'm going to shame you about that as a person who's been promising a book on Christopher Lash for literally five years and I've written now a chapter and I have 500 pages of notes.

Speaker 2: 1:57:14

So yeah, we have a manuscript that's a mess of the MMT book, but it'll come out. The 4x thing is on its way and then there's this, which is the currently existing volume.

Speaker 1: 1:57:27

It has a I don't know if you heard me say this before the show it actually has a better paperscover. I don't know if you knew that. It is also quite good. I like your fixing economics. I actually really like your wobbly economics piece. We didn't really talk about why it was called wobbly economics.

Speaker 2: 1:57:50

Yeah, he was a lifelong member of the IWW. I should have mentioned that, sorry.

Speaker 1: 1:57:54

Yeah, he's one of the few wobbly economists after the 20s.

Speaker 2: 1:58:00

Yeah after the Abellin, and Abellin was more of a fellow traveler.

Speaker 1: 1:58:05

Yeah, a fellow traveler. I mean, the problem that you have is a lot of the wobbly. Economists all became Marxist-Leninist in the 30s Because William Z Foster leaves the wobblies, goes into TUL and really becomes important in the CPUSA. So anyway, check this book out. Well magazine, it's good, it is enjoyable. There's art, see art.

Speaker 2: 1:58:34

So there we go, and yeah, so you can follow the magazine at Strange Matters Strange underscore matters on Twitter. You can follow me at reddillaton and please consider subscribing. You know all the money that we make we're not paying ourselves as editors. We're either paying our capitalist overlords for the services that we use to keep things running our inputs right All that friendly stuff or the rest of it goes to paying our writers above market rate for magazines of our size.

Speaker 1: 1:59:03

You know how rare it is for socialist magazines to pay at all. So yeah, just knowing you're paying the authors here, you're not helping a capitalist business, it's a run like a co-op. You can assuage your conscience accordingly, although we have to sell it to you because we live in a market society and, if I have my way, we'll stop.

Speaker 2: 1:59:24

So here's to that one day.

Speaker 1: 1:59:30

So on that note, thank you, jmc. You're going to be coming back actually relatively soon. I know you don't know that, but I've just commended you so and then we will have, once I've done Grillin' JSC enough off of the first section. In about six months, when volume three comes out and I'm hoping the rest of this for at Leapy's comes out, we'll have him back to Grillin' even more. But look forward. We tend to have a guest from Strange Matters about once a month. Sometimes it's every six weeks depending. But we should be back on our once a month schedule. And, by the way, these are the only shows I promise to do live. Everything else liveness is at my discretion and I rarely want to talk to you. Sorry, audience.

Speaker 2: 2:00:19

So Unless it's to attack them.

Speaker 1: 2:00:23

You do like doing that. No, actually that's why I don't do as many live shows is because like telling your audience that maybe it should like reconsider being a socialist because they're too stupid is not really a good idea.

Speaker 2: 2:00:39

This is why I like your show so much. It defies the market logic of pandering to your parasocial audience.

Speaker 1: 2:00:49

Yeah, but then they develop Stockholm syndrome and you have Stockholm parasociality. It just doesn't really work.

Speaker 2: 2:00:59

Please belittle me.

Speaker 1: 2:01:01

Please belittle me, Derek.

Speaker 2: 2:01:02

Tell me how much I've misunderstood value theory.

Speaker 1: 2:01:05

May I have some more red gruel. Anyway, on that note, I have to go. If you're on this channel, you can click us in about 30 seconds and I will be on TIR talking about the satanic panic. So, and James, he will be back. Check out his stuff. Check out Red Deletante. Check out the magazine. His article, which I believe you can read for free, is down in the show notes. I'm pointing downward. Check it out in the show notes. It's there. I put it there and that will also. Yes, I do love my audience and I will talk to you and the patron and know you don't have to be not excuse me in the Discord and you don't have to be a patron to get access to the Discord. You just have to figure out how to ask me, derek is actually very, very nice, very approachable.

Speaker 1: 2:01:58

Yeah Well, I've been told I'm approachable, but I've also been told that I have a temper of a volcano in real life too.

Speaker 2: 2:02:09

That is also true. It's like teddy bear, grizzly bear, kind of depends on the day.

Speaker 1: 2:02:15

Yeah, it depends on my mood. I'm like one of those bears in that New York video from 1994 that'll each year that looks like a teddy bear.

Speaker 2: 2:02:23

Yes, oh, my God, such a deep cut. I love that video.

Speaker 1: 2:02:27

All right, that video is human behavior. I'm going to endorse that too. Go find Bjork's human behavior from like 1994 to somewhere in there. I was a kid, anyway. On that note, good day, we're hitting you with the space music.