Probabilistic political strongeconomystrong and endogenous money.pdfVIP

Probabilistic political economy and endogenous money P. Cockshott, A. Cottrell∗ July 17, 2008 Since the foundational work of Farjoun and Machover [2], important contributions to the field of probabilistic economy have been made in [1] and in [6]. Both of the latter works assume an economy with exogenous money. In this context one naturally has conservation of money as a postulate. However it is questionable whether a capitalist economy could ever work with entirely exogenous money, and it is interesting to see to what extent probabilistic arguments can illuminate the evolution of the type of endogenous money system that characterizes contemporary capitalism. We first argue, on probabilistic grounds, that a system with a strict conservation law on money was historically unsustainable. We then make the case that phenomena such as the formation of a rate of interest, periodic commercial crises, and the formation of a rentier class can be understood using the sort of reasoning pioneered by Farjoun and Machover. 1 The impossibility of monetary conservation The most obvious characteristic of capital—one might call it the signature of capital—is its ability to ′ undergo exponential growth. Marx characterized this signature using the notation M − C −M , where ∆M = M ′ −M 0, and attempted to explain how such expansion is possible. It could not, he argued, come about in the field of commodity exchange, since this was governed by a law of conservation of values. Echoing Newton’s concept that to each action there is an equal and opposite reaction, Marx argued that to the extent that one set of people sold goods above value another set must sell below value. Thus,