Modern Political Economics: Chapter 3

I am currently reading “Modern Political Economy: Making sense of the post-2008 world” by Yanis Varoufakis, Joseph Halevi and Nicholas Theocarakis, published in 2011 by Routledge. In this and next posts I will collect my comments, chapter by chapter. Here I discuss Chapter 3.

Condorcet’s Secret refers to the fact that the complicated economic organisation of society obscures or veils the distribution of power. In feudal society there is the least veiling of power, since land owners take their share post-production rather than pre-production. In an industrial society this is different due to the complication of reward before and during completion of trading process; supply chains need to be supported by an advanced social financial organisation based on debt instruments.

French Physiocrats introduced the idea of surplus related to exploitation of a single productive sector, namely the agricultural sector. This neglects the role of cities as essential hubs in the networks founded on advanced social division of labour.

This reasoning was extended through the work of Adam Smith and David Ricardo. The latter resorted to a single sector “corn model” to solve this inherent error problem. Both classical thinkers based their theory of value on labour inputs, due to their contemporary situation in which all economic value was clearly underpinned to the subsistence compensation of labour in terms of foodstuffs. Hence, all economic commodities and activities were directly linked to corn as a means to replicate labour. This links again directly to Ricardo’s corn model as a metaphor for economic thought. Even today our thinking is very much tainted by thinking about the economy as a single commodity or sector. Extension to multiple sectors turns out to be impossible, as is the case with the corn model. This again refers to the Inherent Error in economics, which still remains clouded and unexplained, even though the authors spend quite a bit of space on debating it again in this chapter.

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