This post refers to pages pg. 413-420 (4) exchangeability and (5) Double meaning of credit
Subsection 4 is fairly brief and is mostly Commons defining again that Macleod made economics about exchange and that value was derived by the two parties mutually in the exchange process. He also re-emphasizes the point that exchange is the derivation of value as opposed to production with the orientation of classical economics like Smith and Ricardo.
Subsection 5 is in a way a fairly complicated section but is intended by Commons to show the errors that MacLeod made. These errors meant that economists did not take him seriously and to their discredit did not follow the important advances that Macleod did in fact make. Macleod used the term for one thing when it should have been separated into two things. Credit can be future sales of product or output and credit can be payment of a debt. The first one is intangible property and the second one is incorporeal property. MacLead confused these as the same thing and his insights were then ignored.
His mistake centered on calling a debt and the ability sell a debt and calling both a credit. Macleod did not distinguish between the specific transaction between a buyer and seller where as the buyer has a debt to pay the seller for performance and the debt that is owed by the res tof te world of to someone who has money or credit for money to buy products and services.
Macleod also used the word “command” in two different ways in conflict. The economic way in which he though the command of goods and services and the legal way in which a command is a legal power to enforce a duty.
There was also confusion around the word duty. Duty can refer to an act to perform based on transaction. Duty is converted to a liberty where there is omission or the ability to act without a duty. The problem is there is not only a duty to perform between a specific buyer and seller once an agreement is reached but there is also a duty to avoidance the rest of the world to not interfere with the transaction.
This is a complicated section and hard to understand if you haven't read the original Macleod to give context. The bottom line is this - Macleod got certain things right. Economics was the exchange of property rights and not things with an eye to future use. The value of future use is negotiated and is a social rather than private value. For Commons, this is what can transform economics into a social science.
Common own words, “MacLeod starts with the proposition that political economy is a science of the “laws of property,” and not the laws of physical things or psychological feelings. Next, he narrows the subject to the Exchange-Value of these Rights of property, for otherwise it cannot be a “science” which always must deal with quantities and units of measurement.” (Commons, 1934, pg. 420). Then later he writes that, “He substituted Future Time for Past Time throughout the entire subject-matter of the science “ (Commons, 1934, pg. 420. So again, we find that economics deals with not things but the transaction of property rights between people with an eye to future use and value. Commons also mentions the importance of Hohfeld here.
One point that Commons makes and can be very useful is that access to buyers and markets is a crucial property right for sellers. This is an important insight but almost an offhand comment by Commons.
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