Skip to main content

Futurity: negotiability of debt (pg. 390-400) first thoughts

Commons spends a lot of time thinking about the double meaning of many words and how we use them.  One of those words he is concerned with is "commodity" (page 393, IE).  He talks about the meaning of a commodity as a physical object and secondly as the ownership of a physical thing.  Commons claim that the classical economists had an inherent contradiction in their work because they used both of these definitions.

Commons spends some time in the first part of the chapter "Futurity" thinking about the various ways we can classify a commodity. He uses the example of water (pg. 399-400). He states that the Austrian economist Bohm-Bawerk classified water in four ways: 1. as a physical object, 2. as having some chemical or physical qualities 3. as having some value to humans (use-value) and 4. as having attached to it legal rights and duties.  Commons goes on to state that engineering and engineering economics is focused on number 2, hedonistic or psychological economics is focused on number 3 (like Bohm-Bawerk) and proprietary or institutional economics is focused on number 4.

Commons is of course on the side of number 4. He introduces Henry Dunning Macleod as the original institutional economist and the importance of his work as an economist even though he is mostly forgotten by mainstream thinking.

Macleod used the term debt to refer to the ownership of a commodity rather than the physical thing as commodity.  In this case debt meant a legal duty. Macleod introduced the common idea that there was corporeal property whose ownership was bought and sold and incorporeal property that was bought and sold. The final step was by Macleod to state that economics was a science of the exchange of commodities, both corporal and incorporeal.  Commons asserts that this is very different from classical, psychological or even the early original economists.  They focused on the physical aspects of property as opposed to the legal rights and duties.  This will take us further as we will explore how we define a commodity and the large difference it makes in how economic analysis proceeds.


------------------------------------------------------
As an aside, Commons makes a note on page 401, "it is the expectation of receiving something valuable from others.and this mere expectation can be bought and sold." This is hugely important as Commons understood early on, before most economists, that the expectations of money to be received can be bought and sold as practitioners understood in the early incarnations of the Chicago futures market.

  

Comments

Popular posts from this blog

Commons Futurity pg.526-528

Commons Futurity VII. The Margin for Profit pg 526-528  In this section, Commons turns to thinking about a specific aspect of modern banker capitalism addressing the question of profit's role in the economy. He starts with some terminology regarding profit share - the share of national income that goes to profit earners and the profit margin - the dynamic aspect that drives a going concern forward. We then move into another set of terms that are rate of profit and profit yield.  The rate of profit is related to the par value of stock and yield is related to market value of stock or outstanding equity. The social question to Commons is what the role of profit in keeping the overall economy and does society or community pay too much or too little for this service. Economists have long thought about the role of profits in driving the economy up or down.  Commons believes there are profit share theories and profit margin theories as two diction categories in economic thinking...

Commons Futurity pg. 510-526 VI. The Transactional System of Money and Value

VI. The Transactional System of Money and Value  The overall objective of this section is to understand money and its role and relationship to economic value in the institutional economics of John R. Commons. Commons writes that, "It is because Value is a two-dimensional concept (omitting futurity)—with two different causations, the one being the scarcity-value, or price, determined by supply and demand, the other being the greater or smaller output of use-value which will be created in the labor process that follows the transaction. " (Commons, pg. 517, 1934). The point here is again Commons is fighting against what he observes are the limits of other definitions of economic value such as simply individual utility or the classical case of exchange value only.   In this section, Commons make an important move on pages 520 and 521. He states that for a thing to be objective it needs to be independent of any objective will as opposed to other competing definitions. He will ...

Commons commenting on Marx and Proudhoun

Commons provides a short discussion to contrast Karl Marx (communism) and Pierre Joseph Proudhon (anarchism) in Institutional Economics.  His point in writing about these two authors is to continue to flesh out the idea of theory of efficiency versus an economic theory of value. This is section eight in the chapter of efficiency and scarcity pages 366 to 378.  Commons wants us to understand that Ricardo and later Marx led us to a theory of efficiency and not a theory of value.  This is not in itself a negative as a theory of efficiency is important to Commons. However, Commons wants us to understand that a theory of efficiency as espoused by Ricardo and Marx is only half the story of a theory of value.  Marx is the real part of the story in this section with some attention paid to Proudhon. As usual, Commons points out both the advanced and faults in the various thinkers he is addressing. Marx, Commons writes, did improve on Ricardo and others by replacing a subjec...