Thread: Critique of Mathematically Perfected Economy

I identify and evaluate the four premises underlying Mike Montagne’s Mathematically Perfected Economy™:

1) People trade things that are of equal value. If they trade things that are not equal in value, then one of them is being cheated.

2) Borrowers are trading more money in the future for less money now. It follows from premise #1 that they are being cheated.

3) Any monetary system subject to interest ultimately terminates itself under insoluble debt. It follows from premise #2 that, because the charging of interest is not currently prohibited, the world economy is destined to collapse.

4) There is class conflict between laborers and usurers as they battle over the unearned gain (surplus value) that is the proletariats’ due. By an argument similar to dialectical materialism, as the world economy collapses (see premise #3), the implementation of Mathematically Perfected Economy™ is inevitable.

Mr. Montagne denies that he is a socialist though I view his theory as being akin to Marxism and find fault with all four of his premises.

Read the complete paper at Critique of Montagne's Mathematically Perfected Economy.

Originally Posted by Khayembii Communique

I've grown tired of responding to people that think that "society is no longer partitioned into workers and capitalists but has many prosperous self-employed tradesmen and many salarymen who own stocks."

I am a prosperous self-employed tradesman and I know many people who work 9 to 5 jobs and have substantial investments in stocks.

I'd like to know what you find wrong with this quotation of mine.

Incidentally, "people" is plural. When I wrote this I was not aware that anybody else had advanced a similar argument or that you had responded to them. References, please?

Originally Posted by Onion Eater

I know many people who work 9 to 5 jobs

wait what??

I'm not going to touch on Montagne's work or your replies relevant to that, as I really don't care, but I'll at least illustrate where you are incorrect in your discussions regarding Marx.

Originally Posted by Muravchik

What is science but the practice of experimentation, of hypothesis and test? Owen and Fourier and their [utopian] followers were the real “scientific socialists.” They hit upon the idea of socialism, and they tested it by attempting to form socialist communities. In all, there were scores of these tests in America and England – and all of them failed, utterly and disastrously.

Then Marx came along and said never mind these experiments at bringing about socialism by human devices, it will be brought about by the impersonal force of history. In other words, under the banner of “science,” Marx shifted the basis for socialism from human ingenuity to sheer prophesy.

Experiment doesn't equal science and science doesn't equal experiment. Science is merely the attempt to understand our world, and every study into how our world or part of our world works doesn't necessitate experimentation. What is required is scientific study which examines the various processes involved in the composition and various mechanisms of what one is studying. For example, if I am studying insects I can simply put it under a microscope - no experiment required. So the idea that you must conduct experiments to be scientific is a very poorly thought out and utterly incorrect assertion.

In this sense Marxism certainly is scientific in nature; Marx studied the development of history and the various mechanisms that condition this development, and based on his studies of past and present society he was able to draw general conclusions about how future society will develop. Whether or not you agree that Marx was correct is really irrelevant to whether or not Marx applied a scientific basis to his studies. Similarly, this is why the utopian socialists were utopian and not scientific; they based their conclusions on philosophical and moral conclusions and failed to put it into a historical basis.

The other mistake made is that Marx's theory was "impersonal" and will be brought about by the "force of history". Historical materialism takes into account both the "impersonal" developments such as mode of production and relations of production and "human" developments such as class struggle. In fact, the "force of history" to Marx is the history of class struggle, as evidenced in the famous first sentence of the Manifesto that states that "The history of all hitherto existing society is the history of class struggles."(S). Marx's entire body of work is based on the relation between man and his environment, and how the two interact.

The Economists in Russia were guilty of this as well, which Lenin summarily refuted. It's just that not many people do it in such a blatant and extreme manner as Muravchik has done here. Whereas the Economists believed that the class struggle was conditioned primarily by the mode of production, Muravchik here claims that the class struggle is unimportant in Marx's theories! This is laughably ridiculous to anyone that has read any Marx.

Muravchik here is taking a horribly vulgar one-sided analysis of Marx's method attacking it; this is an incredibly poor attempt at a straw man. Perhaps he should actually read some Marx.

Since you are quoting him I am guessing that you agree with him. If you want to actually understand Marx's materialism and his conception of history I suggest that you read G.V. Plekhanov's The Development of the Monist View of History which traces the history of Marx's theory from the French Materialists of the 18th century through Utopian socialism and German idealism to Marx himself, and explains his theory in a way even an Austrian could understand.

At first, when a Castro or a Chávez is seizing houses from the bourgeois and distributing them to the proletariat for a nominal $83 per month, socialism seems like a fine plan – maybe even a mathematically perfected plan. It is only later, when the people are crowding into old houses with leaky roofs that were built before the Revolution, do they start to wonder if it was such a fine plan after all. Of course, by then it is too late to revolt – they are too tired to fight and they have long since hocked their rifles to buy bread. If only they had known more about economic theory, they might have seen through Great Leader’s siren song of mathematical perfection!

The basic flaw in the logic of modern socialists (Montagne, Cook, Zarlenga, etc.) is confusion between motivation and capability. “He’s privately controlled!” the socialist sneers at the Federal Reserve chairman, the unspoken assumption being that, were the socialist put in charge, he would immediately open the floodgates of wealth and prosperity for us all. It would be a veritable socialistic paradise, if only the Benevolent One were given the authority to print money! But, the fact is, the Fed is in a box. If a socialist were put in charge, he would be in the same box. Basically, if a central bank prints too much money, they debase the currency. Small countries like Zimbabwe are in a much tighter box than big countries like the United States, but a box it is.

This is all of course true, and we agree on this but from completely opposite perspectives. Every time a "socialist" gets in one of these positions they immediately take a turn to the right, for the very reason that you state; they want to expand that box, but they are unable to do so. They are bound by the box as long as it exists; of course, Marxists are for doing away with the box entirely. It's an important distinction to make.

On this same note, Marxists say that the Chilean revolution didn't go far enough in doing away with bourgeois property relations and due to this fact counterrevolution destroyed the entire movement. This is also bound to happen in Venezuela eventually as well, although the "revolution" there is much more consolidated.

The easy answer is that, just as society is no longer partitioned into workers and capitalists but has many prosperous self-employed tradesmen and many salarymen who own stocks, neither is it partitioned into debtors and creditors. We no longer have company towns where the residents have made serfs of themselves by borrowing more from the company store than they can ever repay. Today, most people are simultaneously both creditors and debtors.

This of course is patently absurd. A proletarian is not defined by how poor they are (although of course it is quite obvious that proletarians in your "vulgar" sense still exist today - they just exist in "underdeveloped" countries).

Perhaps you could qualify this statement; maybe I'm just misunderstanding you, but it certainly sounds like you're applying an incredibly mechanistic and absolutist conception of Marxism.

Originally Posted by Khayembii Communique

Since you are quoting [Muravchik] I am guessing that you agree with him.

Yes, I agree with him, though my mention of Muravchik was actually an aside, introduced by the statement, "But before we consider Montagne’s premises, I want to point out that drawing a timeline to world-wide economic collapse and calling oneself 'mathematically perfected' is very similar to Marx predicting the inevitable collapse of capitalism and calling himself 'scientific.'"

This was included primarily as a response to Montagne's insistence that I blithely accept his premises and restict my inquiry solely to whether the graph he has drawn crosses the x-axis, which would indicate economic collapse.

The principle thesis of my paper is given at Critique of Montagne's Mathematically Perfected Economy:

"Of course, all mathematics is axiomatic, so our task is to determine whether Montagne's premises are sound, not to just blithely accept his premises and then confine our investigation into whether his graph does indeed go to zero, which would indicate an economic collapse.

"Theone, of the Market Ticker Forum, who is not known for mincing his words, also believes that we must look at the assumptions that people make.

"With [Montagne’s] assumptions you can make the numbers do whatever the hell you want them to do and monkeys 'might' fly outta my ass. As far as I can tell there is absolutely nothingin those equations that prognosticate 'systemic failure.' [Montagne] is simply pulling his comment about systemic failure right out of his ass at the point at which the maximum amount of money has been 'created' from a finite reserve amount.

"Montagne has sent me an e-mail claiming that I do not know what a proof or a disproof is and demanding that I accept his assumptions and confirm or deny that they prognosticate systemic failure. But, since Theone has already demonstrated that Montagne’s assumptions are insufficient, what remains to be shown is whether they are sound and thus can be redeemed by additional assumptions or unsound and thus irredeemable. My task, therefore, is to determine whether Montagne’s premises are acceptable, not to inquire what they prove alone or what they might prove if additional and more restrictive assumptions were made."

So, my question to you, Khayembii Communique, is whether or not you agree that this is my task. If so, have I accurately identified the four assumptions of Marx/Montagne?

Originally Posted by Onion Eater

I identify and evaluate the four premises underlying Mike Montagne’s Mathematically Perfected Economy™:

1) People trade things that are of equal value. If they trade things that are not equal in value, then one of them is being cheated.

2) Borrowers are trading more money in the future for less money now. It follows from premise #1 that they are being cheated.

3) Any monetary system subject to interest ultimately terminates itself under insoluble debt. It follows from premise #2 that, because the charging of interest is not currently prohibited, the world economy is destined to collapse.

4) There is class conflict between laborers and usurers as they battle over the unearned gain (surplus value) that is the proletariats’ due. By an argument similar to dialectical materialism, as the world economy collapses (see premise #3), the implementation of Mathematically Perfected Economy™ is inevitable.

Incidentally, I cannot help but point out the absurdity of this remark:

Originally Posted by Khayembii Communique

Every time a "socialist" gets in one of these positions they immediately take a turn to the right, for the very reason that you state; they want to expand that box, but they are unable to do so. They are bound by the box as long as it exists; of course, Marxists are for doing away with the box entirely.

Marxists are for doing away with the box entirely???

At Critique of Montagne's Mathematically Perfected Economy I write:

"Montagne’s claim (sometimes called the Debt Virus Theory), that spending paper money directly into the economy, rather than buying Treasury Bills as the Fed does, is not inflationary can only be sustained with a gross re-definition of the word 'inflation.' But re-defining words like 'inflation' does not revoke the laws of economics. If you are taking a curve too fast in your car, you cannot avert a crash simply by re-defining 'road' to include what used to be known as 'median.'”

Yes, I agree with him, though my mention of Muravchik was actually an aside, introduced by the statement, "But before we consider Montagne’s premises, I want to point out that drawing a timeline to world-wide economic collapse and calling oneself 'mathematically perfected' is very similar to Marx predicting the inevitable collapse of capitalism and calling himself 'scientific.'"

It is not an aside when it is used to support what you are saying. By showing how Muravchik was wrong I was showing how your statement (the one you quoted above) was wrong as well.

This was included primarily as a response to Montagne's insistence that I blithely accept his premises and restict my inquiry solely to whether the graph he has drawn crosses the x-axis, which would indicate economic collapse.

The principle thesis of my paper is given at Critique of Montagne's Mathematically Perfected Economy:

"Of course, all mathematics is axiomatic, so our task is to determine whether Montagne's premises are sound, not to just blithely accept his premises and then confine our investigation into whether his graph does indeed go to zero, which would indicate an economic collapse.

"Theone, of the Market Ticker Forum, who is not known for mincing his words, also believes that we must look at the assumptions that people make.

"With [Montagne’s] assumptions you can make the numbers do whatever the hell you want them to do and monkeys 'might' fly outta my ass. As far as I can tell there is absolutely nothingin those equations that prognosticate 'systemic failure.' [Montagne] is simply pulling his comment about systemic failure right out of his ass at the point at which the maximum amount of money has been 'created' from a finite reserve amount.

"Montagne has sent me an e-mail claiming that I do not know what a proof or a disproof is and demanding that I accept his assumptions and confirm or deny that they prognosticate systemic failure. But, since Theone has already demonstrated that Montagne’s assumptions are insufficient, what remains to be shown is whether they are sound and thus can be redeemed by additional assumptions or unsound and thus irredeemable. My task, therefore, is to determine whether Montagne’s premises are acceptable, not to inquire what they prove alone or what they might prove if additional and more restrictive assumptions were made."

So, my question to you, Khayembii Communique, is whether or not you agree that this is my task. If so, have I accurately identified the four assumptions of Marx/Montagne?

I have already told you that I am not interested in addressing this. I have no desire to have yet another debate on this matter; if you want to know how I feel then go read Hilferding's responses to Böhm-Bawerk or something.

Marxists are for doing away with the box entirely???

At Critique of Montagne's Mathematically Perfected Economy I write:

"Montagne’s claim (sometimes called the Debt Virus Theory), that spending paper money directly into the economy, rather than buying Treasury Bills as the Fed does, is not inflationary can only be sustained with a gross re-definition of the word 'inflation.' But re-defining words like 'inflation' does not revoke the laws of economics. If you are taking a curve too fast in your car, you cannot avert a crash simply by re-defining 'road' to include what used to be known as 'median.'”

Explain to me how what you wrote is a response to what I wrote and then I will respond. From how I'm reading this you are making the claim that Marxists desire to "spend" their way out of capitalism, which is ridiculous, so I will give you the benefit of the doubt and explain that that is not what you meant.

Originally Posted by Khayembii Communique

I

Explain to me how what you wrote is a response to what I wrote and then I will respond. From how I'm reading this you are making the claim that Marxists desire to "spend" their way out of capitalism, which is ridiculous, so I will give you the benefit of the doubt and explain that that is not what you meant.

No, Marxists are naive to believe the laws of economics will bend as a society implements such a system.

No, Marxists are naive to believe the laws of economics will bend as a society implements such a system.

The laws of economics don't "bend". Property relations change, thereby making the laws of ecomonics (i.e. bourgeois economics) obsolete, as they were in the past and as they will be in the future.

Originally Posted by Khayembii Communique

The laws of economics don't "bend". Property relations change, thereby making the laws of ecomonics (i.e. bourgeois economics) obsolete, as they were in the past and as they will be in the future.

I would agree, only if the instances of black markets were not such a pesky problem...

I would agree, only if the instances of black markets were not such a pesky problem...

If you want to discuss Marxian economics then start another thread on it. This thread is about Onion Eater's comments regarding Marxism in general and not about Marxian economics.