,*APT] #a 
,B\RGEOIS ,ECONOMICS 

,PEOPLE 3 

,AU?OR 3 ,PAUL ,MATTICK 

,TEXT 3 

,! PROGRESSIVE DEVELOPM5T ( ! CAPITALI/ ECONOMY WAS FROM 
! />T A PROCESS PUNCTUAT$ BY SETBACKS4 ,!RE W]E GOOD & BAD TIMES & 
= ?IS AN EXPLANATION WAS S\<T4 ,?AT SOCIAL PRODUCTION WAS AT FIR/ /ILL 
DOM9AT$ BY AGRICULTURE MADE IT POSSIBLE TO F9D ! CAUSE ( ECONOMIC 
DI/RESS 9 ! 9CON/ANCY ( NATURE4 ,BAD H>VE/S C\LD BE BLAM$ = ! 
G5]AL SC>CITY ( GOODS4 ,9 ADDITION1 ! L[ PRODUCTIVITY ( AGRICULTURAL 
LABOR1 9 ! CONTEXT ( A GR[+ POPULATION1 AWAK5$ ! FE> ?AT ! 
DEVELOPM5T ( CAPITALI/ PRODUCTION W\LD RUN UP AGA9/ NATURAL LIMITS1 
9DICAT+ ! 9EVITABILITY ( A /ATION>Y /ATE4 ,B\RGEOIS POLITICAL ECONOMY 
WAS COLOR$ BY A DEEP PESSIMISM1 :I* WAS OV]COME ONLY ) ! ACCEL]AT+ 
GR[? ( CAPITAL4 

,AL?\< 9 CLASSICAL ECONOMICS SOCIAL RELATIONS W]E REG>D$ AS 
0NATURAL40 ?IS DID NOT /OP ! CLASSICAL !ORI/S FROM 
EXPLA9+ ! DI/RIBUTION ( 9COME SPECIFICALLY 9 T]MS ( !SE RELATIONS4 
,&1 :ILE 9 CLASSICAL !ORY ! EQUILIBRIUM ( DIFF]5T 9T]E/S WAS 
GU>ANTE$ BY ! EX*ANGE PROCESS1 BECAUSE ! LATT] WAS REGULAT$ BY ! 
QUANTITIES ( LABOR CONTA9$ 9 ! COMMODITIES EX*ANG$1 ?IS *>ACT] ( 
EX*ANGE WAS CALL$ 9TO QUE/ION BY ! !ORY ( DI/RIBUTION1 & ) IT 
! EQUILIBRIUM BAS$ ON IT4 ,A PURELY =MAL CONSID]ATION ( EX*ANGE 
RELATION%IPS1 ?AT IS1 TOGE!R ) ! ASSUMPTION ( FREE COMPETITION1 MAKES 
9DIVIDUAL 9T]E/S APPE> TO CO9CIDE ) ?AT ( SOCIETY AS A :OLE1 & 
! ECONOMIC LAW ( ! EX*ANGE ( EQUIVAL5TS APPE>S TO 5SURE ! 
SY/EM'S JU/ICE4 ,BUT RECOGNITION ( ! CLASS-DEF9$ DI/RIBUTION ( 
! SOCIAL PRODUCT BETWE5 R5T1 WAGES1 & PR(IT IMPLI$ ?AT ! =MAL 
MODEL ( ! EX*ANGE PROCESS WAS NOT A LEGITIMATE AB/RACTION FROM 
REALITY4 

,! LABOR !ORY ( VALUE PROP\ND$ BY ! CLASSICAL ECONOMI/S EXAM9$ 
! CONDITIONS ( ! TIME & !IR FUTURE DEVELOPM5T FROM ! /&PO9T ( 
CAPITAL &1 !RE=E1 FROM ! /&PO9T ( CAPITAL ACCUMULATION4 ,) FEW 
EXCEPTIONS1 AL?\< ) DIFF]5T >GUM5TS1 ! CLASSICAL !ORI/S 
HYPO!SIZ$ ?AT CAPITALI/ ACCUMULATION W\LD HAVE DEF9ITE LIMITS ?AT W\LD 
MANIFE/ !MSELVES 9 A DECL9E ( PR(ITS4 ,ACCORD+ TO ,DAVID ,RIC>DO1 
ACCUMULATION W\LD 9EVITABLY BE LIMIT$ BY ! DECREAS+ PRODUCTIVITY ) 
:I* ! SOIL C\LD BE CULTIVAT$4 ,AN 9CREAS+ DIFF]5CE BETWE5 ! 
RETURNS FROM 9DU/RY & AGRICULTURE W\LD RAISE WAGE CO/S & L[] PR(IT 
RATES TO ! B5EFIT ( R5TS4 

,?IS !ORY OBVI\SLY REFLECT$ ! RELATION%IP BETWE5 ! L&[N]S & 
CAPITALI/S ( ,RIC>DO'S TIME & HAD NO?+ TO DO ) DEVELOPM5TAL 
T5D5CIES 9H]5T 9 VALUE PRODUCTION4 ,AS ,M>X PUT IT1 IT WAS ,RIC>DO'S 
9ABILITY TO EXPLA9 ! DEVELOPM5TAL LAWS ( CAPITAL ON ! BASIS ( ! 
NATURE ( CAPITALISM ITSELF ?AT CAUS$ HIM TO FLEE 'FROM ECONOMICS 9TO 
ORGANIC *EMI/RY40 ,NEV]!LESS1 ,M>X SAW 9 ! ,5GLI% 
ECONOMI/S' CONC]N OV] ! DECL9E ( ! RATE ( PR(IT A PR(\ND 
UND]/&+ ( ! CONDITIONS ( CAPITALI/ PRODUCTION40 ,:AT WORRI$ 
,RIC>DO1 = EXAMPLE1 WAS 

?AT ! RATE ( PR(IT1 ! /IMULAT+ PR9CIPLE ( 
CAPITALI/ PRODUCTION1 ! FUNDAM5TAL PREMISE & DRIV+ =CE ( 
ACCUMULATION1 %\LD BE 5DANG]$ BY ! DEVELOPM5T ( PRODUCTION ITSELF 444 
,IT COMES TO ! SURFACE H]E 9 A PURELY ECONOMIC WAY I4E41 FROM ! B\RGEOIS 
PO9T ( VIEW1 )9 ! LIMITATIONS ( CAPITALI/ UND]/&+1 FROM ! 
/&PO9T ( CAPITALI/ PRODUCTION ITSELF ?AT IT HAS ITS B>RI]1 ?AT IT IS 
RELATIVE1 ?AT IT IS NOT AN ABSOLUTE1 BUT ONLY AN HI/ORICAL MODE ( PRODUCTION 
CORRESPOND+ TO A DEF9ITE LIMIT$ EPO* 9 ! DEVELOPM5T ( ! MAT]IAL 
REQUIREM5TS ( PRODUCTION4 

,IF ! T5D5CY ( PR(ITS TO FALL WAS FIR/ EXPLA9$ BY 9CREAS+ 
COMPETITION & BY 9CREAS+ R5TS 79 CONNECTION ) POPULATION GR[?71 IT 
WAS NOT LONG BE=E WAGES W]E ALSO SE5 AS CONFLICT+ ) ! PR(IT 
REQUIREM5TS ( ACCUMULATION4 ,ON ! O!R H&1 ! EXT5SION ( WAGE LABOR AS 
A SOCIAL 9/ITUTION SUGGE/$1 TO ?OSE :O ANALYZ$ VALUE 9 T]MS ( LABOR 
TIME1 QUE/IONS AB\T ! ORIG9 ( PR(IT QUE/IONS ANSW]$ BY ! 
PRODUC]S' DEM& = ! FULL PROCE$S ( !IR LABOR4 ,LIKE PR(IT 
ITSELF ACCUMULAT$ CAPITAL CAME TO BE UND]/OOD TO BE ACCUMULAT$ UNPAID 
LABOR4 ,TO REFUTE ! ACCUSATION ( CAPITALI/ EXPLOITATION ?US DEM&$ 
AB&ONM5T ( ! LABOR !ORY ( VALUE4 ,MOREOV]1 ! PROBLEM ( 
ACCUMULATION C\LD SIMPLY BE =GOTT51 AS E>LI] APPREH5SIONS APPE>$ TO BE 
FALSE4 ,ACCUMULATION DID NOT DECL9E BUT 9CREAS$1 & CAPITAL UNMI/AKABLY 
DOM9AT$ ! :OLE SOCIETY4 ,WAGE LABOR & CAPITAL N[ REPRES5T$ ! 
FUNDAM5TAL ANTAGONI/IC CLASSES ?AT DET]M9$ ! FUR!R METAMORPHOSES ( 
B\RGEOIS ECONOMICS4 

,! 9CREAS+LY APOLOGETIC NATURE ( ECONOMIES DID NOT1 TO BE SURE1 REQUIRE 
A CONSCI\S EF=T ON ! P>T ( ! B\RGEOIS ECONOMI/S4 ,= !M1 CONV9C$ 
AS !Y W]E ?AT ! CAPITALI/ ECONOMY WAS ! ONLY POSSIBLE ONE1 EV]Y 
CRITICISM ( IT WAS AN UNJU/IFI$ & SUBJECTIVE DI/ORTION ( ! REAL FACTS 
( ! MATT]4 ,APOLOGETICS APPE>$ AS OBJECTIVE1 SCI5TIFIC KN[L$GE1 :I* 
NO DEMON/RABLE %ORTCOM+ ( ! SY/EM C\LD %AKE4 ,( C\RSE1 ! 
G5]ALIZATION ( ! CAPITALI/ ECONOMY AS A MODEL = ALL SOCIAL SY/EMS 
REQUIR$ AN AHI/ORICAL APPROA* & ! CONV]SION ( ! CATEGORIES ( 
POLITICAL ECONOMY 9TO G5]AL LAWS ( HUMAN BEHAVIOR4 

,AS ! PA/ CAN ONLY BE CONCEPTUALIZ$ 9 T]MS D]IV$ FROM ! PRES5T1 
= ,M>X ALSO ! B\RGEOIS ECONOMY PROVID$ A KEY TO ! UND]/&+ ( 
E>LI] =MS ( SOCIETY1 0BUT NOT AT ALL 9 ! MANN] ( ! 
ECONOMI/S1 :O SMUDGE OV] ALL HI/ORICAL DIFF]5CES & SEE B\RGEOIS 
RELATIONS 9 ALL =MS ( SOCIETY40 ,!RE >E G5]AL1 AB/RACT 
CATEGORIES APPLICABLE MORE OR LESS TO ALL =MS ( SOCIETY1 BUT = ! 
ANALYSIS ( ANY P>TICUL> SY/EM !Y MU/ BE GIV5 A CONT5T CORRESPOND+ TO 
?AT SY/EM ALONE4 ,MONEY AS A MEANS ( EX*ANGE & MONEY AS CAPITAL EXPRESS 
DIFF]5T SOCIAL RELATION%IPS1 & ! MEANS ( PRODUCTION UTILIZ$ 9 ! 
PA/ >E NOT TO BE EQUAT$ ) CAPITAL OR SELF-EXP&+ VALUE4 ,! CAPITALI/ 
ECONOMY CANNOT BE EXPLA9$ ON ! BASIS ( AB/RACT G5]AL CATEGORIES ( 
HUMAN BEHAVIOR2 ! ATTEMPT TO DO SO >ISES EI!R FROM IGNORANCE ( REAL 
SOCIAL 9T]RELATIONS OR FROM ! WI% TO ESCAPE ! PROBLEMS !Y 9VOLVE4 

,ACCORD+ TO ,M>X1 ! CLASSICAL !ORY ( VALUE RE/$ ON A CONFUSION 
BETWE5 ! NATURAL & ! ECONOMIC S5SES ( PRODUCTION4 ,TAK+ LABOR AS A 
/>T+ PO9T1 IT ?\<T ( CAPITAL AS A ?+1 NOT A SOCIAL RELATION%IP4 
,H[EV]1 TO DEVELOP ! CONCEPT ( CAPITAL IT IS NECESS>Y TO BEG9 NOT ) 
LABOR BUT ) VALUE &1 PRECISELY1 ) EX*ANGE VALUE ALREADY DEVELOP$ 9 
! MOVEM5T ( CIRCULATION40 ,IT IS ON ! DIFF]5CE BETWE5 ! 
EX*ANGE VALUE & ! USE VALUE ( LABOR P[] ?AT ! EXI/5CE' & 
! DEVELOPM5T ( CAPITALI/ SOCIETY DEP5D1 A DI/9CTION ?AT PRESUPPOSES 
! SEP>ATION ( WORK] FROM ! MEANS ( PRODUCTION4 ,LABOR ITSELF HAS NO 
VALUE1 BUT ! COMMODITY LABOR P[] G5]ATES1 :5 CONSUM$1 A SURPLUS VALUE 
9 ADDITION TO ITS [N VALUE4 ,?IS SURPLUS VALUE DIVIDES 9TO ! V>I\S 
ECONOMIC CATEGORIES ( ! M>KET ECONOMY1 LIKE PRICE1 PR(IT1 9T]E/1 & 
R5T CATEGORIES ?AT AT ! SAME TIME CONCEAL !IR ORIG9 AS %>ES ( SURPLUS 
VALUE4 

,! ,M>XIAN CRITIQUE ( B\RGEOIS ECONOMICS WAS !RE=E A D\BLE ONE4 ,ON 
! ONE H&1 IT CONSI/$ II7 ! RIGOR\S APPLICATION ( ! LABOR !ORY ( 
VALUE TO ! /UDY ( CAPITALI/ DEVELOPM5T1 :I* IT ANALYZ$ 9 T]MS ( ! 
SY/EM'S [N FETI%I/IC ECONOMIC CATEGORIES4 ,ON ! O!R H&1 IT 
EXPOS$ !SE CATEGORIES AS EXPRESSIONS ( ! CLASS & EXPLOITATION RELATIONS 
SPECIFIC TO CAPITALI/ COMMODITY PRODUCTION4 ,M>X A*IEV$ :AT ! CLASSICAL 
ECONOMI/S C\LD NOT NAMELY1 AN EXPLANATION ( CAPITAL'S GR[+ 
DIFFICULTIES BY ! CONTRADICTION1 SPECIFIC TO CAPITALISM1 BETWE5 
EX*ANGE-VALUE & USE-VALUE PRODUCTION4 ,9 ?IS WAY HE SUCCE$$ %[+ ?AT 
! LIMITS ( CAPITAL >E SET BY CAPITAL ITSELF4 ,& S9CE ! ECONOMIC 
CATEGORIES MASK REAL CLASS RELATIONS1 ! ECONOMIC CONTRADICTIONS 
*>ACT]I/IC ( CAPITALISM >E AT ! SAME TIME REAL ANTAGONISMS ( 9T]E/1 
:I* CAN !RE=E BE ABOLI%$ BY REVOLUTION4 

,BECAUSE IT REFUS$ TO OBS]VE ! CLASS CONFLICT BETWE5 LABOR & CAPITAL 
TO :I* CAPITALISM GAVE BIR?1 CLASSICAL ECONOMICS SAW ITSELF AS AN UNBIAS$ 
SCI5CE4 ,IT DID NOT1 H[EV]1 FALL 9TO PURE POSITIVISM1 S9CE AT ! SAME 
TIME1 FROM ITS NORMATIVE SIDE IT 9DULG$ ITSELF 9 PROPOSALS = ! R$RESS 
( P]SI/+ OR NEWLY EM]G+ GRIEVANCES4 ,! H>MONY ( 9T]E/S EXPECT$ 
TO *>ACT]IZE M>KET SOCIETY WAS HELD TO BE DELAY$ BY ! RETROGRADE EF=TS 
( M]CANTILI/ MONOPOLY & MONET>Y POLICY4 ,AT ! SAME TIME1 H[EV]1 D\BTS 
>OSE ?AT UNIV]SAL COMPETITION W\LD BE A CURE-ALL = ECONOMIC 9JU/ICE4 
,! OBVI\S PAUP]IZATION ( ! WORK]S L$ ,JOHN ,/U>T ,MILL1 = 9/ANCE1 TO 
SUGGE/ A MODIFICATION ( ! ECONOMIC CONSEQU5CES ( CAPITALI/ PRODUCTION BY 
A MORE JU/ DI/RIBUTION ( 9COME1 TO BE A*IEV$ BY POLITICAL MEANS4 

,= ,M>X ! RELATION ( PRODUCTION TO DI/RIBUTION WAS DET]M9$ BY ! 
CLASS RELATIONS ( PRODUCTION4 ,FROM ?IS PO9T ( VIEW ,MILL ONLY %[S HIS 
0FATUITY0 :5 HE 0CONSID]S ! B\RGEOIS RELATIONS ( 
PRODUCTION AS ET]NAL1 BUT !IR =MS ( DI/RIBUTION AS HI/ORICAL1 .<& 
!REBY.> %[S ?AT HE UND]/&S NEI!R ! ONE NOR ! O!R4 0,! 
NORMATIVE ELEM5TS ( CLASSICAL ECONOMICS EXPRESS$ ONLY AN 9SUFFICI5T 
UND]/&+ ( ! CAPITALI/ ECONOMY4 

,9 G5]AL ! POLITICAL ECONOMY ?AT >OSE ALONG ) CAPITALISM WAS /ILL 
! IDEALIZ$ REPRES5TATION1 FROM ! B\RGEOIS PO9T ( VIEW1 ( COMMODITY 
PRODUCTION 9 :I* EX*ANGE 5ABL$ ! POSSESSORS ( ! MEANS ( PRODUCTION 
TO REALIZE PR(ITS4 ,! PRACTICAL CRITIQUE ( POLITICAL ECONOMY REPRES5T$ BY 
! WORK]S' /RUGGLE = BETT] LIV+ CONDITIONS REMA9$ )9 ! 
SAME CONCEPTUAL FRAMEWORK1 SE5 FROM ! WORK]S SIDE4 ,! CONT5T ( POLITICAL 
ECONOMY WAS ?US ! /RUGGLE BETWE5 LABOR & CAPITAL DISGUIS$ 9 ECONOMIC 
CATEGORIES ,SO LONG AS ! B\RGEOISIE ADH]$ TO ! LABOR !ORY ( VALUE 9 
ITS [N WAY IT RECOGNIZ$ OBJECTIVE REALITIES1 EV5 IF IT PASS$ OV] 9 
SIL5CE ! FACT ( EXPLOITATION4 ,BY AB&ON+ ?IS !ORY IT DEPRIV$ ITSELF 
( ! POSSIBILITY ( OBJECTIVE KN[L$GE ( ECONOMIC RELATIONS & 
REL9QUI%$ TO ITS ,M>XIAN CRITIQUE ! SCI5TIFIC 9VE/IGATION ( B\RGEOIS 
SOCIETY4 

,IT W\LD BE 9CORRECT1 H[EV]1 TO EXPLA9 ! B\RGEOISIE'S 
AB&ONM5T ( ! LABOR !ORY ( VALUE SOLELY BY ! DESIRE TO D5Y ! FACT 
( EXPLOITATION4 ,TO BEG9 )1 ! REAL SIGNIFICANCE ( ?IS !ORY - 
! DUAL *>ACT] ( LABOR P[]1 AT ONCE AN EX*ANGE VALUE & A USE VALUE 
- WAS NOT CORRECTLY UND]/OOD4 ,9 ADDITION1 ! LABOR !ORY HAD NO 
PRACTICAL IMPORTANCE = ! B\RGEOISIE4 ,9 ! BUS9ESS WORLD WE 5C\NT] 
NOT LABOR-TIME-VALUES BUT ! PRICES D]IV$ FROM !M & E/ABLI%$ ?R\< 
COMPETITION4 ,?IS NE$ NOT HAVE PREV5T$ ! CLASSICAL !ORI/S FROM 
E/ABLI%+ ! VALIDITY ( ! VALUE !ORY1 S9CE !IR />T+ PO9T WAS 
! SOCIETY AS A :OLE1 & 9DE$ !Y PUT A GREAT DEAL ( EF=T 9TO ! 
MATT]4 ,BUT ! SOLUTION ( ! !ORETICAL DIFFICULTIES CONNECT$ ) ! 
LABOR !ORY ( VALUE WAS LEFT TO ,M>X4 ,!IR 9ABILITY TO OV]COME !M ?US 
SURELY HAD A ROLE 9 ! ECONOMI/S' AB&ONM5T ( ! LAW ( VALUE4 

,BE ?AT AS IT MAY1 TO ACC\NT = PR(IT1 9T]E/1 & R5T ON ! BASIS ( 
! LAW ( VALUE C\LD ONLY MAKE IT CLE> ?AT ! WORK]S PRODUCE A SURPLUS 
VALUE1 9 ADDITION TO ! VALUE ( !IR LABOR P[]1 :I* ! NON-PRODUC+ 
LAY]S ( SOCIETY APPROPRIATE4 ,! IDEA ?AT LABOR ALONE CREATES VALUE HAD TO 
BE DROPP$ IF 9COME 9 ! =M ( PR(IT1 9T]E/ & R5T WAS TO BE 
JU/IFI$4 ,?IS MOVE WAS NOT ONLY NECESS>Y BUT ALSO PLAUSIBLE1 = UND] 
CAPITALI/ CONDITIONS ! WORK]S CAN NO MORE PRODUCE )\T CAPITAL ?AN 
CAPITAL )\T WORK]S4 ,AS ! WORK]S' LACK ( PROP]TY IS ! 
PRESUPPOSITION ( CAPITALI/ PRODUCTION1 SO CAPITALI/ POSSESSION ( PROP]TY 
IS ! PRESUPPOSITION ( ! EXI/5CE ( A PROLET>IAT4 ,S9CE LABOR IS AS 
NECESS>Y AS CAPITAL1 & PEOPLE DO LIVE ON ! E>?1 WE CAN SPEAK ( ?REE 
FACTORS ( PRODUCTION L&1 LABOR1 & CAPITAL ?AT PLAY EQUAL P>TS 9 
PRODUCTION4 ,?US ! LABOR !ORY ( VALUE GAVE WAY1 TO BEG9 )1 TO A !ORY 
( ! DET]M9ATION ( PRODUCTION CO/S BY !SE ?REE FACTORS4 

,AL?\< 9COMPATIBLE ) ! LAW ( VALUE1 ! CO/-(-PRODUCTION !ORY 
REMA9$ AN 0OBJECTIVE0 CONCEPTION ( VALUE 79 CONTRA/ ) ! 
LAT] D]IVATION ( VALUE FROM ! SUBJECTIVE EVALUATIONS ( CONSUM]S7 9 ?AT 
IT ACKN[L$G$ ! ROLE ( V>I\S PUTATIVE CONTRIBUTIONS TO SOCIAL PRODUCTION 
& REPRES5T$ !IR VALUE4 ,9 ?IS !ORY ! VALUE ( COMMODITIES WAS 
DET]M9$ NOT ONLY BY ! LABOR DIRECTLY EXP5D$ 9 !IR PRODUCTION BUT ALSO 
BY ! CONDITIONS ( PRODUCTION )\T :I* ?IS LABOR W\LD BE IMPOSSIBLE4 
,9T]E/1 (T5 NOT DI/+UI%$ FROM PR(IT1 WAS EXPLA9$ AS >IS+ FROM 
! 0PRODUCTIVITY ( CAPITAL40 0,PURE0 PR(IT 
7DI/+UI%$ FROM 9T]E/7 WAS EXPLA9$ AS ! PAYM5T TO ! 5TREPR5EUR 
ON :OSE ACTIVITY ANO!R PORTION ( ! TOTAL SOCIAL VALUE WAS SUPPOS$ TO 
DEP5D4 ,! CO/-(-PRODUCTION APPROA*1 H[EV]1 WAS UNSATISFACTORY BO? FROM 
! !ORETICAL & FROM ! PRACTICAL PO9T ( VIEW4 ,MOREOV]1 ! IDEA ( 
PROP]TY [N]%IP AS P] SO CREATIVE ( VALUE ALSO WAS RA!R QUE/IONABLE4 
,BUT ! ID5TIFICATION ( ! M>KET PRICE ( LABOR P[] ) ITS VALUE 7SO 
?AT ! WORK] SEEM$ TO BE PAID ! FULL VALUE ( HIS LABOR7 P]MITT$ ! 
ILLUSION ?AT ! GA9S OBTA9$ ON ! M>KET W]E NOT BAS$ ON EXPLOITATION4 
,! PROBLEMS ( B\RGEOIS ECONOMICS SEEM$ TO DISAPPE> AS SOON AS ONE IGNOR$ 
PRODUCTION & ATT5D$ ONLY TO ! M>KET4 ,?IS EXCLUSIVE CONC5TRATION ON ! 
M>KET L$ TO ! TRANS=MATION ( ! OBJECTIVE CONCEPT ( VALUE 9TO A 
SUBJECTIVE ONE4 

,! PLAUSIBLE IDEA ?AT ! VALUE ( A COMMODITY D]IVES FROM ITS UTILITY 
= ! PUR*AS] HAD ALSO NOT BE5 =EIGN TO ! CLASSICAL ECONOMI/S4 ,?US 
,JEAN-,BAPTI/E ,SAY HAD ALREADY TRI$ TO EXPLA9 VALUE ON ! BASIS ( UTILITY 
ONLY TO COME TO ! CONCLUSION ?AT ! LATT] C\LD NOT BE MEASUR$4 ,IT WAS 
MEASURABLE ONLY BY ! QUANTITY ( LABOR :I* A P]SON W\LD BE WILL+ TO 
P]=M 9 ORD] TO PUR*ASE A COMMODITY4 ,= ,M>X1 TOO1 ! EX*ANGE VALUE ( 
COMMODITIES PRESUPPOS$ !IR HAV+ A USE VALUE4 ,BUT CAPITALISM IS BAS$ NOT 
ON ! EX*ANGE ( PRODUCTS ( LABOR = ! SATISFACTION ( 9DIVIDUAL NE$S 
BUT ON ! EX*ANGE ( SOME USE VALUE1 PLAY+ A ROLE AS EX*ANGE VALUE1 = A 
GREAT] QUANTITY ( EX*ANGE VALUE 9 ITS GOLD OR COMMODITY =M4 ,= SU* AN 
EX*ANGE TO BE POSSIBLE AS AN EX*ANGE ( LABOR-TIME EQUIVAL5TS1 !RE MU/ BE 
A COMMODITY :OSE USE VALUE IS GREAT] ?AN ITS EX*ANGE VALUE 9 AN 
OBJECTIVELY MEASURABLE S5SE I4E41 9 VALUE T]MS4 ,! COMMODITY LABOR 
P[]-:OSE USE VALUE IS LABOR ITSELF - FULFILLS ?IS CONDITION4 ,BUT IF1 
LIKE ! ECONOMI/S1 WE DISREG>D ?IS REAL BASIS ( CAPITALISM1 EX*ANGE 
9DE$ APPE>S TO S]VE ! SATISFACTION ( 9DIVIDUAL NE$S1 & ! VALUATION 
( COMMODITIES SEEMS TO BE DET]M9$ BY ! MULTIPLICITY ( SUBJECTIVE HUMAN 
PREF]5CES4 

,VIEW$ AP>T FROM PRODUCTION1 ! PRICE PROBLEM CAN BE DEALT ) PURELY 9 
T]MS ( ! M>KET4 ,IF ! SUPPLY ( COMMODITIES EXCE$S ! DEM& = !M1 
!IR PRICE FALLS2 9 ! OPPOSITE CASE IT RISES4 ,! MOVEM5T ( PRICES1 
H[EV]1 CANNOT EXPLA9 ! PH5OM5ON ( PRICE ITSELF1 AS A PROP]TY ( 
PRODUCTS4 ,EV5 IF ! OBJECTIVE CONCEPT ( VALUE IS GIV5 UP1 SOME O!R 
CONCEPT ( VALUE MU/ BE MA9TA9$ TO SAY MORE ?AN ?AT PRICES DET]M9E 
PRICES4 ,! 0SOLUTION0 TO ?IS PROBLEM WAS F\ND 9 A MOVE FROM 
ECONOMICS TO PSY*OLOGY4 ,PRICES1 ECONOMI/S BEGAN TO CLAIM1 >E BAS$ ON 
CONSUM]S' 9DIVIDUAL EVALUATIONS AS REPRES5T$ BY !IR DEM& = 
GOODS4 ,PRICES >E !N EXPLA9$ BY ! SC>CITY ( ! GOODS 9 QUE/ION 
RELATIVE TO ! DEM& = !M4 ,IT DID NOT TAKE LONG = ?IS SUBJECTIVE 
TREATM5T ( VALUE1 9 ! =M ( 0M>G9AL UTILITY !ORY10 TO 
BECOME ALMO/ UNIV]SALLY ACCEPT$ )9 B\RGEOIS ECONOMICS4 

,) ! M>G9AL UTILITY !ORY ! IDEA ( POLITICAL ECONOMY LO/ ITS 
S5SE & WAS AB&ON$ = ?AT ( 0PURE0 ECONOMICS4 ,M>G9ALISM 
WAS NOT DIFF]5T 9 ME?OD FROM CLASSICAL ECONOMICS1 BUT IT APPLI$ ?IS 
ME?OD NO LONG] TO SOCIAL PROBLEMS BUT TO ! BEHAVIOR ( 9DIVIDUALS ) 
RESPECT TO ! GOODS AVAILABLE TO !M & TO ! CONSEQU5CES ( ?IS BEHAVIOR 
= ! EX*ANGE PROCESS4 ,NATURALLY1 CLASSICAL ECONOMICS ALSO CONC]N$ ITSELF 
) ! 9DIVIDUAL :O1 AS HOMO ECONOMICUS1 COMPET$ ) O!R 
9DIVIDUALS = ! GREATE/ POSSIBLE GA94 ,BUT ?IS COMPETITION WAS ?\<T TO 
BE A PROCESS ( EQUILIBRATION & ORD]+ ?AT ADJU/$ PRODUCTION & 
DI/RIBUTION TO SOCIAL REQUIREM5TS4 ,:ILE ?IS PROCESS TOOK PLACE AS IF 
DIRECT$ BY AN 9VISIBLE H& BEH9D ! BACKS ( ! PRODUC]S1 IT 
NEV]!LESS TOOK PLACE1 EFFECT+ ! NECESS>Y UNITY ( PRIVATE & G5]AL 
9T]E/4 ,CONV]SELY1 IT C\LD OBVI\SLY NOT OCCUR TO ! M>G9ALI/S TO D5Y 
! EXI/5CE ( SOCIETY4 ,BUT = !M SOCIAL CONDITIONS W]E ONLY A MEANS TO 
! 5D ( E/ABLI%+ ! 0ECONOMIC RELATION0 ( ! 9DIVIDUAL 
TO ! ?+S HE F9DS ( USE4 ,!Y SAW ?IS RELATION AS HOLD+ = 
9DIVIDUALS \TSIDE SOCIETY AS WELL AS = EA* P]SON 9 ANY & EV]Y 
SOCIETY1 SO ?AT ! NATURE ( ANY P>TICUL> SOCIETY WAS IRRELEVANT4 

,M>G9ALISM RE/$ ON ! APPLICATION TO ! ECONOMY ( ! NOT OV]LY 
PR(\ND DISCOV]Y ?AT !RE CAN BE TOO MANY GOOD ?+S AS WELL AS TOO MANY 
BAD ONES4 ,9 ,G]MANY IT WAS ,H]MANN ,HE9RI* ,GOSS5 :O FIR/ >GU$ = ?IS 
PR9CIPLE4 ,AT FIR/ UNAPPRECIAT$1 IT LAT] WON RECOGNITION ?R\< ! 
POPUL>ITY ( ! ,5GLI%MAN ,WILLIAM ,/ANLEY ,JEVONS'S 9DEP5D5TLY 
DEVELOP$ CONCEPT ( M>G9AL UTILITY4 ,AT ! SAME TIME1 ,K>L ,M5G] F\ND$ 
! 0,AU/RIAN ,S*OOL0 ( !ORETICAL ECONOMICS1 BAS$ ON ! 
SUBJECTIVE VALUE CONCEPT1 TO :I*1 AMONG O!RS1 ,FRI$RI* VON ,WIES] & 
,EUG5 VON ,BOHM-,BAW]K BELONG$4 ,AL?\< !SE ECONOMI/S DIFF] AMONG 
!MSELVES ON DETAILS1 !Y CAN BE LUMP$ TOGE!R AS JO9T F\ND]S ( 
M>G9AL UTILITY !ORY4 

,M>G9ALISM TAKES ITS DEP>TURE FROM ! NE$S ( 9DIVIDUALS4 ,! 
EVALUATION ( !SE NE$S IS AN AFFAIR ( HUMAN CONSCI\SNESS & ?US IS 
SUBJECTIVE4 ,EX*ANGE VALUE & USE VALUE1 :I* TAKE ACC\NT ( ! SC>CITY OR 
SUP]FLUITY ( CONSUM] GOODS1 >E ONLY DIFF]5T =MS ( ! G5]AL 
PH5OM5ON ( SUBJECTIVE EVALUATION4 ,! DESIRE = ANY P>TICUL> GOOD IS 
LIMIT$4 ,! PO9T1 ON AN 9DIVIDUAL'S SCALE ( SATISFACTION1 AT :I* 
! DESIRE = A GOOD IS SATISFI$ DET]M9ES ?AT GOOD'S M>G9AL 
UTILITY & !REBY ITS VALUE4 ,S9CE AN 9DIVIDUAL'S NE$S >E MULTIPLE1 
HE *OOSES BETWE5 ! V>I\S GOODS AVAILABLE 9 SU* A WAY AS TO REALIZE ! 
MAXIMUM ( M>G9AL UTILITY4 ,S9CE SOME PLEASURES ( ! MOM5T HAVE PA9FUL 
CONSEQU5CES1 HE MEASURES PRES5T SATISFACTIONS AGA9/ FUTURE PRIVATIONS 9 
ORD] TO M9IMIZE DISSATISFACTION4 ,9 ! M>KET EV]YONE MEASURES ! VALUE ( 
A COMMODITY BY ITS M>G9AL UTILITY1 TOTAL UTILITY REA*+ ITS MAXIMUM :5 
! M>G9AL UTILITIES ( ALL ! COMMODITIES PUR*AS$ >E EQUAL4 

,:O DOES NOT KN[ ?AT HUMAN LIFE IS ATT5D$ BY PLEASURE & PA9 & ?AT 
EV]YONE SEEKS TO DIM9I% ! LATT] & 9CREASE ! =M]8 ,JU/ LIKE ! 
UTILIT>IAN PHILOSOPH] & SOCIAL RE=M] ,J]EMY ,B5?AM1 ,JEVONS HELD 
PLEASURE & ITS OPPOSITE TO BE QUANTIFIABLE & CALCULABLE1 ?ANKS TO :I* 
ECONOMICS CAN BE MA!MATICALLY CONCEIV$ & ALGEBRAICALLY REPRES5T$4 ,BUT 
:AT ,SAY HAD ALREADY FAIL$ TO DO ,JEVONS & ! O!R M>G9ALI/S DID NOT 
A*IEVE1 & ! ATTEMPT TO MEASURE SUBJECTIVE UTILITIES WAS SOON AB&ON$4 ,IT 
WAS AGRE$ ?AT UTILITIES C\LD BE COMP>$ BUT NOT MEASUR$ EXACTLY4 

,B\RGEOIS APOLOGETICS HAD TAK5 ON TWO TASKS4 ,ON ! ONE H&1 IT WAS 
?\<T ESS5TIAL TO REPRES5T ! W9N+ ( PR(IT1 9T]E/1 & R5T 
P>TICIPATION 9 ! CREATION ( WEAL?4 ,ON ! O!R1 IT WAS ?\<T DESIRABLE 
TO F\ND ! AU?ORITY ( ECONOMICS ON ! PROC$URES ( NATURAL SCI5CE4 ,?IS 
SECOND DESIRE PROMPT$ A SE>* = G5]AL ECONOMIC LAWS 9DEP5D5T ( TIME 
& CIRCUM/ANCES4 ,IF SU* LAWS C\LD BE PROV5 ! EXI/+ SOCIETY W\LD 
!REBY BE LEGITIMAT$ & EV]Y IDEA ( *ANG+ IT REFUT$4 ,SUBJECTIVE VALUE 
!ORY PROMIS$ TO ACCOMPLI% BO? TASKS AT ONCE4 ,DISREG>D+ ! EX*ANGE 
RELATION PECULI> TO CAPITALISM-?AT BETWE5 ! SELL]S & BUY]S ( LABOR 
P[] IT C\LD EXPLA9 ! DIVISION ( ! SOCIAL PRODUCT1 UND] :ATEV] 
=MS1 AS RESULT+ FROM ! NE$S ( ! EX*ANG]S !MSELVES4 

,?IS ATTEMPT HAD ALREADY BE5 ANTICIPAT$ 9 ,NASSAU ,W4 ,S5IOR'S VIEW 
?AT 9T]E/ & PR(IT %\LD BE CONSID]$ AS RECOMP5SE = ! SACRIFICE 
UND]GONE BY ! CAPITALI/ 9 HIS AB/5TION FROM CONSUMPTION 9 FAVOR ( 
CAPITAL =MATION4 ,?US ! CO/ ( CAPITAL1 LIKE ! CO/ ( LABOR 9 ! 
S5SE ( ! PA9 ( WORK C\LD BE SE5 AS AN AB/5TION FROM PLEASURE1 & 
PR(IT C\LD BE PUT ON A P> ) WAGES4 ,AP>T FROM !SE AB/5TIONS ! GOAL 
( EX*ANGE WAS ! SATISFACTION ( ! NE$S ( ! EX*ANG]S1 SO ?AT 
EV]YONE C\LD ONLY GA9 9 EX*ANGE1 S9CE EV]YONE OBVI\SLY VALU$ ! GOODS 
OR S]VICES ?AT HE RECEIV$ MORE HI<LY ?AN ?OSE HE GAVE 9 RETURN4 ,! 
CAPITALI/ BUYS LABOR P[] BECAUSE IT MEANS MORE TO HIM ?AN ! SUM ( WAGES 
PAID = IT1 & ! WORK] SELLS HIS LABOR P[] BECAUSE IT MEANS LESS TO HIM 
?AN ! WAGE RECEIV$ 9 EX*ANGE4 ,?US ! EX*ANGE B5EFITS BO?1 & !RE 
CAN BE NO TALK ( EXPLOITATION4 

,S9CE SUBJECTIVE VALUE CANNOT BE MEASUR$1 ! PSY*OLOGICAL F\NDATION ( 
M>G9AL UTILITY WAS SOON GIV5 UP1 ( C\RSE )\T AB&ON+ ! !ORY 
ITSELF4 0,UTILITY0 N[ REF]R$ NOT TO ! SUBJECTIVE EVALUATIONS 
!MSELVES BUT TO !IR MANIFE/ATIONS 9 M>KET DEM&4 ,UTILITY1 IT WAS N[ 
HELD1 CONC]N$ NOT SO MU* A P>TICUL> COMMODITY AS ! NUMB] ( COMMODITIES 
AMONG :I* ! BUY] W\LD BE PLEAS$ TO *OOSE4 ,?IS ORD]+ OR PREF]5CE 
SCALE ( ! CONSUM]'S WAS REPRES5T$ GRAPHICALLY BY SO-CALL$ 
9DIFF]5CE CURVES4 ,?US ECONOMI/S N[ DI/+UI%$ BETWE5 ! ABSOLUTE 
7C>D9AL7 MAGNITUDE ( UTILITY & ! RELATIVE 7ORD9AL7 UTILITY1 :I* WAS 
REPRES5T$ 9 ! PREF]5CE SCALE4 ,! CONCEPT ( M>G9AL UTILITY 
METAMORPHOS$ 9TO ?AT ( ! M>G9AL RATE ( SUB/ITUTION1 ! RATE AT :I* 
! QUANTITY ( ONE GOOD MU/ 9CREASE TO COMP5SATE = ! DIM9I%+ 
QUANTITY ( ANO!R4 ,MAXIMAL WANT SATISFACTION C\LD !N BE DEF9$ 9 T]MS 
( ! M>G9AL RATES ( SUB/ITUTION BETWE5 ALL PAIRS ( GOODS4 ,9 O!R 
WORDS1 ! BUY] W\LD SO DI/RIBUTE HIS MONEY ?AT ALL ! GOODS HE PUR*AS$ 
W]E EQUALLY VALUABLE TO HIM1 AT :I* PO9T HIS *OICE BEHAVIOR W\LD COME TO 
A SATISFACTORY CONCLUSION4 

,NOT ALL M>G9ALI/S W]E READY TO GIVE UP ! CONCEPT ( C>D9AL UTILITY1 
& = O!RS ! CONCEPT ( ORD9AL UTILITY DID NOT GO F> 5\<1 AS IT 
/ILL REF]R$ TO SUBJECTIVE VALUE4 ,S9CE ! M>G9AL UTILITY C\LD BE 
OBS]V$ ONLY 9 ! PRICE1 ?IS GR\P PREF]R$ A PURE PRICE !ORY :I* KEPT 
ITS DI/ANCE FROM ALL VALUE PROBLEMS4 ,M>G9ALISM RAN 9TO ANO!R DIFFICULTY1 
?AT IT WAS IMPOSSIBLE TO REG>D PRICE AS DET]M9$ BY ! DEM& SIDE ALONE4 
,)\T A D\BT !RE MU/ BE PRODUCTION AS WELL AS CONSUMPTION & SUPPLY 
PRICES AS WELL AS DEM& PRICES4 ,9 MEET+ ?IS PROBLEM !Y MOV$ TO UNITE 
! SUBJECTIVE VALUE !ORY ) ITS PRECURSOR1 ! CO/-(-PRODUCTION !ORY4 
,?IS GAVE RISE TO ! SO-CALL$ NEO-CLASSICAL !ORY1 :I* F\ND ITS MO/ 
IMPORTANT REPRES5TATIVE 9 ,ALFR$ ,M>%ALL4 

,( C\RSE1 9 ?IS APPROA* PRODUCTION CO/S W]E DEF9$ 9 SUBJECTIVE 
T]MS1 AS CAPITALI/ AB/5TION & WORK]S' DIS9CL9ATION TO WORK4 ,JU/ 
AS M>G9AL UTILITY WAS SUPPOS$ TO DET]M9E DEM&1 SO BEH9D SUPPLY WAS 
DISCOV]$ ! M>G9AL PROP5SITY TO WORK MORE OR TO DEF] CONSUMPTION 9 
FAVOR ( CAPITAL =MATION4 ,AT ! SAME TIME1 IT WAS CLE> TO ,M>%ALL ?AT 
!SE FACTORS DET]M9+ SUPPLY & DEM& W]E NOT OBS]VABLE AS SU*1 & 
?AT ! ONLY CLUE TO !SE 0REAL0 FACTORS W\LD BE F\ND 9 ! 
ACTUAL PRICE RELATIONS4 ,! MONET>Y SY/EM CONV]T$ SUBJECTIVE VALUATIONS 
9TO PRICES ?AT ?US REFLECT$ 0REAL0 NE$S & AB/5TIONS4 ,9 
! =M ( PRICE ! NON-QUANTIFIABLE SUBJECTIVE VALUE W\LD BECOME A 
MEASURABLE VALUE4 ,S9CE PRICES W]E REGULAT$ BY ! T5D5CY ( SUPPLY & 
DEM& T[>D EQUILIBRIUM1 ! RELATION ( SUPPLY & DEM& W\LD DET]M9E 
COMMODITY VALUES 9 ! LONG RUN1 IF NOT AT EV]Y MOM5T4 

,= ANO!R V>IANT ( ! M>G9AL UTILITY !ORY1 PRODUCTION1 AS AN 
OBVI\S PR]EQUISITE ( EX*ANGE1 REQUIR$ NO P>TICUL> 9VE/IGATION4 ,= 
,LEON ,WALRAS1 ! F\ND] ( ! 0,LAUSANNE ,S*OOL10 ECONOMICS AS A 
:OLE WAS NO?+ BUT A !ORY ( COMMODITY EX*ANGE & PRICE DET]M9ATION4 
,= HIM1 TOO1 VALUE >OSE FROM ! SC>CITY ( GOODS 9 RELATION TO WANTS1 ) 
M>G9AL UTILITY EXPLA9+ ! V>IATIONS 9 ! 9T5SITY ( FELT NE$S4 ,BUT 
EXACTLY AS ! 9DIVIDUAL ?R\< HIS *OICES ON ! M>KET W\LD BR+ HIS 
V>I\S NE$S 9TO AN EQUILIBRIUM ( WANT SATISFACTION1 SO EX*ANGE ON ! 
LEVEL ( SOCIETY AS A :OLE W\LD T5D TO A 0G5]AL EQUILIBRIUM0 
9 :I* ! TOTAL VALUE ( DEM&$ GOODS & S]VICES W\LD CORRESPOND TO ! 
TOTAL VALUE SUPPLI$4 

,TO BE SURE1 ! ASSUMPTION ( A T5D5CY TO EQUILIBRIUM ( SUPPLY & DEM& 
EFFECT$ BY EX*ANGE LAY AT ! BASIS ( ALL M>KET !ORIES4 ,WALRAS1 H[EV]1 
ATTEMPT$ TO PROVE ! VALIDITY ( ?IS ASSUMPTION 9 ! MANN] ( ! EXACT 
SCI5CES4 ,ACCORD+ TO HIM M>G9AL UTILITY WAS NOT ONLY SELF-EVID5T BUT ALSO 
MEASURABLE BY ! APPLICATION ( ! PR9CIPLE ( SUB/ITUTION TO ! COMMODITY 
M>KET AS A :OLE1 :]E ALL PRICES 9EXTRICABLY 9T]TW9$4 ,PRICES SEEM$ TO 
HIM TO BE 9V]SELY PROPORTIONAL TO ! QUANTITIES ( COMMODITIES EX*ANG$4 
,PRODUCTION CO/S W]E =M$1 9 HIS EYES1 BY ! WAGES1 9T]E/1 & R5TS 
5T]+ 9TO !M1 :I* HE CONSID]$ ALIKE AS PAYM5TS = PRODUCTIVE 
S]VICES4 ,ALL P]SONS EX*ANG$ !IR PRODUCTIVE S]VICES = CONSUM] GOODS ( 
EQUAL VALUE4 ,! 0REALITY0 ( ! SUBJECTIVE VALUES MANIFE/$ 9 
EQUILIBRIUM PRICES WAS H]E VISIBLE 9 ! EQUILIBRIUM ( ! ECONOMY1 & 
?IS EQUILIBRIUM 9 TURN DEMON/RAT$ ! VALIDITY ( ! SUBJECTIVE VALUE 
CONCEPT4 ,AS VALUE & EQUILIBRIUM DEF9$ EA* O!R1 ! !ORY ( VALUE WAS 
EQUAT$ TO ?AT ( G5]AL EQUILIBRIUM1 & IT SUFFIC$ TO PROVE ! 
!ORETICAL POSSIBILITY ( ! LATT] TO PROVE ! VALIDITY ( ! SUBJECTIVE 
!ORY ( VALUE4 

,DESPITE ITS DEP5D5CE ON CIRCUL> REASON+1 ! IDEA ( EQUILIBRIUM 
APPLI$ TO ! ECONOMY AS A :OLE1 TO P>TS ( IT1 OR TO P>TICUL> CASES1 
REMA9S ONE ( ! ME?ODOLOGICAL PR9CIPLES ( B\RGEOIS ECONOMICS1 IF ONLY 
BECAUSE FROM ?IS DISCIPL9E'S PO9T ( VIEW1 ALL MOVEM5T 9 ! WORLD 
- NOT ONLY ?AT ( ! ECONOMY - T5DS T[>D EQUILIBRIUM /ATES4 
,( C\RSE1 ! ,WALRASIAN SY/EM ( G5]AL EQUILIBRIUM-REPRES5T$ BY A SY/EM 
( SIMULTANE\S EQUATIONS-WAS ONLY A MODEL & NOT A PICTURE ( CONCRETE 
CONDITIONS4 ,IT CLAIM$1 H[EV]1 ! /ATUS ( SCI5TIFIC KN[L$GE ON ! 
GR\ND ?AT ?\< ! ECONOMY MI<T DEP>T FROM EQUILIBRIUM1 IT W\LD ALWAYS 
T5D TO RETURN TO ?IS CONDITION4 ,ON ACC\NT ( ! 9VOLUTION & COMPLEXITY 
( ! MANIFOLD 9T]TW9$ ECONOMIC PROCESSES1 !ORETICAL PRO( ( ! 
POSSIBILITY ( EQUILIBRIUM C\LD BE FURNI%$ ONLY BY MEANS ( MA!MATICS ON A 
LEVEL ( AB/RACTION :I*1 :ILE CORRESPOND+ TO ! !ORY1 HAD LO/ ALL 
CONNECTION ) REALITY4 

,! HYPO!SIS ?AT 9 ! LA/ ANALYSIS ! CONSUM]S DET]M9E ! VALUE 
( COMMODITIES TOOK NO ACC\NT ( ! SOCIAL DI/RIBUTION ( 9COME4 ,JOHN ,BATES 
,CL>K ATTEMPT$ TO REM$Y ?IS SITUATION ?R\< ! APPLICATION ( M>G9AL 
ANALYSIS TO ! FACTORS1 ( PRODUCTION4 ,JU/ AS 9 CONSUMPTION ! DEGREE ( 
SATURATION DET]M9$ M>G9AL UTILITY1 SO A /EADY 9CREASE 9 ! SUPPLY ( 
LABOR IMPLI$ ITS DECREAS+ M>G9AL PRODUCTIVITY4 ,?IS M>G9AL PRODUCTIVITY 
WAS REPRES5T$ BY ! WAGE PAID AT ! TIME4 ,! ID5TITY1 OR EQUILIBRIUM1 
BETWE5 WAGE & M>G9AL PRODUCTIVITY C\LD ( C\RSE BE DI/URB$1 BUT ONLY 
TO REE/ABLI% ITSELF ,= EXAMPLE1 IF ! M>G9AL PRODUCTIVITY EXCE$$ ! 
WAGE1 ! DEM& = LABOR W\LD 9CREASE UNTIL M>G9AL PRODUCTIVITY & WAGE 
AGA9 BALANC$4 ,IF ! WAGE EXCE$$ ! M>G9AL PRODUCTIVITY1 ! DEM& = 
LABOR W\LD GO D[N UNTIL ! ID5TITY ( M>G9AL PRODUCTIVITY & WAGE WAS 
REE/ABLI%$4 ,:AT HELD = WAGE LABOR W\LD HOLD = ALL ! O!R FACTORS 
( PRODUCTION1 SO ?AT 9 EQUILIBRIUM ALL FACTORS W\LD %>E 9 ! TOTAL III 
COME 9 PROPORTION TO !IR M>G9AL PRODUCTIVITY4 ,9 ?IS WAY NOT ONLY SUPPLY 
& DEM& BUT ALSO ! DI/RIBUTION ( ! SOCIAL PRODUCT W]E EXPLA9$ 9 
T]MS ( M>G9AL UTILITY 7OR DISUTILITY74 ,& S9CE EV]Y FACTOR ( PRODUCTION 
RECEIV$ ! %>E ( ! SOCIAL PRODUCT CORRESPOND+ TO ITS CONTRIBUTION TO 
SOCIAL PRODUCTION1 ! EXI/+ DI/RIBUTION ( 9COME WAS NOT ONLY 
ECONOMICALLY DET]M9$ BUT ALSO JU/4 

,TO SOME ADEPTS ( M>G9ALISM ! 9CLUSION ( SOCIAL PRODUCTION 9 ! 
SUBJECTIVE VALUE !ORY SEEM$ UNCALL$ =4 ,TO ,BOHM-,BAW]K1 = :OM ALL 
PRODUCTION 9 ! LA/ ANALYSIS WAS ONLY = ! SAKE ( CONSUMPTION1 IT MADE 
NO S5SE TO MAKE A SPECIAL /UDY ( PRODUCTION OR TO SPEAK ( A DEP5D5CE ( 
9COME DI/RIBUTION ON ! M>G9AL PRODUCTIVITY ( ! FACTORS ( PRODUCTION4 
,! PRODUCTION ( CAPITAL WAS = HIM 09DIRECT0 PRODUCTION1 BY 
CONTRA/ ) 0DIRECT0 PRODUCTION1 OR PRODUCTION C>RI$ ON 
ESS5TIALLY )\T ! USE ( MEANS ( PRODUCTION4 ,FROM ?IS PO9T ( VIEW1 
EV]Y PRODUCTION PROCESS ?AT 9VOLV$ MEANS ( PRODUCTION W\LD BE A 
CAPITALI/ PRODUCTION PROCESS1 EV5 9 A SOCIALI/ ECONOMY4 ,= ,BOHM-,BAW]K 
!RE W]E ONLY TWO FACTORS ( PRODUCTION1 LABOR & L&2 HE CONSID]$ 
CAPITAL AS A PURELY !ORETICAL CONCEPT1 NOT A HI/ORICAL ONE4 ,ALL PRES5T 
GOODS REPRES5T$ MEANS ( CONSUMPTION1 & FUTURE GOODS 9CLUD+ MEANS ( 
CONSUMPTION APPE>$ 9 ! 9T]V5+ TIME AS CAPITAL GOODS & PRODUCTS ( 
LABOR4 ,PR(IT1 ( :I* HE TOOK ACC\NT ONLY AS 9T]E/1 >OSE NOT FROM 
PRODUCTION BUT FROM ! EX*ANGE ( PRES5T GOODS = FUTURE GOODS4 ,M>G9AL 
UTILITY DECID$ ! RELATIVE VALUATION ( PRES5T & FUTURE GOODS4 

,ACCORD+ TO ,BOHM-,BAW]K 9T]E/ WAS ?US NOT ONLY 9EVITABLE BUT ALSO 
JU/IFI$1 AS ALL PRODUCTION DEP5D$ DIRECTLY ON ! CAPITALI/S' 
PROP5SITY TO SAVE1 & WORK]S1 LIKE L&$ PROPRIETORS DEP5D$ ON CAPITALI/ 
CR$IT4 ,NEI!R C\LD LIVE DIRECTLY FROM !IR PRODUCTION1 AS ?IS W\LD 
REQUIRE V>I\S P]IODS ( MANUFACTURE4 ,:ILE !Y W]E PRODUC+ !Y HAD TO 
LIVE ON PRODUCTS MADE AT AN E>LI] TIME4 ,ANYONE NOT WILL+ OR ABLE TO 
RE/RA9 HIS CONSUMPTION & TO SAVE W\LD HAVE NO CLAIM TO ! 9T]E/ DUE TO 
! TIME FACTOR4 ,AL?\< 9T]E/ WAS ! =M 9 :I* ! REV5UE IS D]IV$ 
BY A PRO-FROM CAPITAL GOODS WAS PAID OR COLLECT$1 IT WAS A PRODUCT NEI!R ( 
LABOR NOR ( CAPITAL BUT A GA9 DUE SIMPLY TO ! PASSAGE ( TIME-SO TO SPEAK1 
A GIFT FROM HEAV54 ,9T]E/ WAS ALL ! MORE A HEAV5LY GIFT AS IT WAS EQUALLY 
! 9/RUM5T ( ECONOMIC EQUILIBRIUM & PROGRESS4 ,IT E/ABLI%$ ! 
NECESS>Y EQUILIBRIUM BETWE5 CURR5T & FUTURE PRODUCTION BY REGULAT+ ! 
EXT5SION OR CONTRACTION ( CAPITAL 9VE/M5TS 9 REF]5CE TO ! CONSUMPTION 
REQUIREM5TS AT ANY GIV5 TIME4 ,AS 9DIRECT PRODUCTION 9CREAS$1 MOREOV]1 ! 
MASS ( CONSUMPTION GOODS W\LD GR[1 !REBY DECREAS+ ! NE$ = NEW 
SAV+ = ADDITIONAL MEANS ( PRODUCTION4 ,9 ?IS WAY SOCIAL PROGRESS W\LD 
MANIFE/ ITSELF 9 A DECL9+ RATE ( 9T]E/4 

,IT W\LD NOT BE WOR?:ILE1 H[EV]1 TO SP5D TIME ON O!R EXPON5TS ( ! 
SUBJECTIVE VALUE !ORY1 JU/ AS IT WAS H>DLY WRONG TO IGNORE IT COMPLETELY 9 
ITS HEYDAY4 ,M>X HAD NO?+ TO SAY AB\T IT1 & = ,FRI$RI* ,5GELS IT WAS 
ONLY A BAD JOKE1 AL?\< HE ?\<T IT QUITE POSSIBLE 0?AT IT IS JU/ 
AS EASY TO BUILD UP 444 .<A.>PLAUSIBLE VULG> SOCIALISM 444 ON ! F\NDATION ( 
,JEVONS'S & ,M5G]'S !ORY ( USE VALUE & M>G9AL 
UTILITY40 

,9 FACT1 A SECTION ( ! RE=MI/ ,SOCIAL ,DEMOCRACY DID TURN TO W>D ! 
M>G9AL UTILITY !ORY \T ( ! CONVICTION ?AT ,M>X'S ALLEG$ NEGLECT 
( DEM& & ITS ROLE 9 PRICE =MATION HAD KEPT HIM FROM GRASP+ ! REAL 
9T]CONNECTIONS ( ! ECONOMY4 ,BUT EV5 :ILE ! SUBJECTIVE VALUE !ORY WAS 
GA9+ GR\ND 9 ! ,SOCIAL ,DEMOCRATIC CAMP1 IT HAD ALREADY LO/ ITS 
P]SUASIVE P[] 9 ! B\RGEOIS CAMP & W\LD SOON BE COMPLETELY AB&ON$4 
,9DE$1 IT IS ! REJECTION ( ! PSY*OLOGICAL CONCEPTION ( VALUE BY ! 
B\RGEOISIE ITSELF :I* R5D]S SUP]FLU\S A DETAIL$ CRITIQUE ( ?IS 
!ORY4 

,! SUBJECTIVE VALUE !ORY WAS DISCR$IT$1 FIR/1 BY A !ORETICAL 
REF9EM5T SO EXCESSIVE ?AT IT LO/ ANY VISIBLE CONNECTION ) REALITY1 & 
SECOND1 BY ! FRANK R5UNCIATION ( ! ATTEMPT TO EXPLA9 PRICE BY VALUE4 
,JOSEPH ,A4 ,S*UMPET] MAY BE M5TION$ 9 CONNECTION ) ! FIR/ ( !SE 
5DEAVORS4 ,FROM ! /&PO9T ( ! ,AU/RIAN ,S*OOL1 FROM :I* HE CAME1 ! 
VALUE ( F9AL PRODUCTS1 OR CONSUM] GOODS1 DEP5DS ON !IR M>G9AL UTILITY 
= ! CONSUM]1 :ILE ! M>G9AL UTILITY ( 9T]M$IATE PRODUCTS1 SU* RAW 
MAT]IALS & MA*9]Y IS D]IV$ BY A PROCESS ( IMPUTATION FROM ! M>G9AL 
UTILITIES ( ! F9AL GOODS4 ,= ! CONSUM] ! V>I\S RAW MAT]IALS1 MEANS 
( PRODUCTION1 & SEMIF9I%$ GOODS HAVE NO DIRECT BUT ONLY AN 9DIRECT USE 
VALUE1 BUT ?IS IS REPRES5T$1 ?R\< ! PROCESS ( IMPUTATION 9 ! PRICES 
( ! CONSUM] GOODS4 ,! SAME ANALYSIS WAS (F]$ = COMMODITY CIRCULATION4 
,A DI/9CTION WAS MADE BETWE5 FIR/ - ORD] & SECOND-ORD] GOODS1 ! 
LATT] BE+ ?OSE :I* HAVE NOT YET 5T]$ 9TO CONSUMPTION & :OSE 
UTILITY MU/ BE IMPUT$ TO ! M>G9AL UTILITY ( ! CONSUM] GOODS4 
,S*UMPET] CONCLUD$ FROM ?IS ?AT1 SE5 !ORETICALLY1 SUPPLY & DEM& >E 
ONE & ! SAME1 SO ?AT ! DEM& SIDE IS SUFFICI5T TO /ATE ! CONDITIONS 
( EQUILIBRIUM4 

,9 ,S*UMPET]'S CONCEPTION ( EQUILIBRIUM NOT ONLY W]E SUPPLY PRICES 
SUP]FLU\S1 S9CE !Y C\LD BE UND]/OOD 9 ! =M ( DEM& PRICES1 BUT 
PR(IT & 9T]E/ CAN BE OMITT$ AS SEP>ATE CATEGORIES BY 9CLUD+ !M 
UND] ! RUBRIC ( WAGES4 ,EQUAT+ PRODUCTION ) EX*ANGE1 ,S*UMPET] SAW NO 
NE$ TO DEAL ) UTILITY OR ITS OPPOSITE4 ,HE REPLAC$ ! PSY*OLOGICAL 
CONCEPT ( VALUE ) A LOGIC ( *OICES1 S9CE EV5 ! SUBJECTIVE CONCEPT 
ALL[$ ONE TO SAY NO MORE ?AN ?AT A P]SON1 ) GIV5 TA/ES & 9COME1 IS 
GUID$ 9 HIS PUR*ASES BY ! GIV5 PRICES4 ,S*UMPET] HAD NO 9T]E/ 9 
9VE/IGAT+ ! FUNDAM5TAL FACTORS :I* DET]M9E CONSUM] *OICES BUT TOOK 
!M AS ! GIV5 />T+ PO9T = ECONOMIC ANALYSIS4 ,! LOGIC ( *OICE WAS 
SUFFICI5T = ! MA!MATICS ( EQUILIBRIUM1 :I* ON ?IS AB/RACT LEVEL 
ADMITT$LY HAD NO REAL SIGNIFICANCE4 ,NEV]!LESS'1 ! 0PURE 
!ORY0 WAS SUPPOS$ TO BE A MEANS TO ! UND]/&+ ( REALITY & TO 
/& 9 ! SAME RELATION TO IT AS !ORETICAL ME*ANICS TO PRACTICAL 
5G9E]+4 ,9 ANY CASE1 0PURE !ORY0 WAS A VALUABLE PURSUIT 9 
ITSELF BECAUSE IT WAS 9T]E/+ 9 ITS [N RI<T & SATISFI$ HUMAN 
CURIOSITY4 

,AMONG O!RS IT WAS NOTABLY ,GU/AV ,CASSEL :O /ROVE = ! ABOLITION ( 
! M>G9AL UTILITY !ORY BECAUSE ( ITS VICI\S CIRCUL>ITY4 ,AL?\< ! 
!ORY WAS SUPPOS$ TO EXPLA9 PRICES1 PRICES W]E MADE USE ( 9 ! 
EXPLANATION ( M>G9AL UTILITIES4 ,AS BUS9ESS IS TRANSACT$ 9 T]MS ( 
MEASURABLE QUANTITIES1 MONEY & PRICES1 9 ,CASSEL'S VIEW ! ANALYSIS ( 
?OSE TRANSACTIONS REQUIR$ NO?+ BUT PRICE CONCEPTS1 SO ?AT ECONOMICS HAD 
NO NE$ ( ANY !ORY ( VALUE4 ,ON ! ASSUMPTION ?AT ECONOMIC RELATION%IPS 
>E DET]M9$ BY A G5]AL 0SC>CITY10 ,CASSEL SAW ! TASK ( 
ECONOMICS AS ! OPTIMAL ADAPTATION ( PEOPLE'S V>I\S WANTS TO ! 
9SUFFICI5T MEANS AVAILABLE = !IR SATISFACTION4 

,! D]IVATION ( PRICES FROM ! SC>CITY ( GOODS CAN ( C\RSE ONLY 
EXPLA9 ONE PRICE BY ANO!R & LEAVES ! QUE/ION ( :AT LIES BEH9D PRICES 
UNANSW]$4 ,B\RGEOIS ECONOMICS1 H[EV]1 SEES NO NE$ TO POSE ?IS QUE/ION4 
,IT HAS !RE=E AB&ON$ ! ORIG9AL DOCTR9E ( M>G9AL UTILITY1 AS IT CAN 
MAKE DO )\T IT & IS ABLE TO RETURN TO IT1 :5 NECESS>Y1 ) ! 
ASS]TION ?AT 9 ! F9AL ANALYSIS PRICES EXPRESS CONSUM]S' SUBJECTIVE 
EVALUATIONS4 ,9DE$1 IT CAME TO BE SAID ?AT MOD]N ECONOMIC !ORY BECAME AN 
OBJECTIVE SCI5CE JU/ BECAUSE IT IS BAS$ ON ! SUBJECTIVE4 ,ACCORD+ TO 
,LUDWIG VON ,MISES1 PEOPLE'S NE$S >E OBS]VABLE 9 !IR BEHAVIOR1 :I* 
REQUIRES NO DEEP] 9VE/IGATION2 !Y >E TO BE TAK5 AS !Y >E GIV54 ,S9CE 
! M>G9AL UTILITY !ORY WAS F9ALLY BOIL$ D[N TO AN ID5TIFICATION ( ! 
ECONOMIC REALM ) ! DOMA9 ( ! PRICE ME*ANISM1 ! V>I\S ATTEMPTS TO 
SUB/ITUTE PSY*OLOGICALLY GR\ND$ M>G9AL UTILITIES = ! OBJECTIVE VALUE 
!ORY MU/ BE CONSID]$ TO HAVE FAIL$4 ,!Y L$ ONLY1 TO ! ELIM9ATION ( 
! VALUE PROBLEM FROM B\RGEOIS ECONOMICS4 

,AL?\< ! CONCEPT ( M>G9AL UTILITY WAS AB&ON$1 M>G9AL ANALYSIS 
REMA9$ G5]ALLY ACCEPT$ BY B\RGEOIS ECONOMI/S4 ,ACCORD+ TO ,JOAN 
,ROB9SON1 ?IS %[$ ?AT EV5 METAPHYSICAL CONCEPTS1 :I* >E /RICTLY 
SPEAK+ NONS5SE1 HAVE MADE A CONTRIBUTION TO SCI5CE4 0 ,AS AN 
9/RUM5T ( ANALYSIS ! PR9CIPLE ( ! 0M>G90 IS NO MORE 
?AN A G5]ALIZATION ( ,RIC>DO'S IDEA ( DIFF]5TIAL R5T4 ,RIC>DO BELIEV$ 
! PRICE ( AGRICULTURAL PRODUCTS TO DEP5D ON ! YIELD ( ! LEA/ F]TILE 
SOIL2 MUTATIS MUT&IS1 ! ,RIC>DIAN LAW ( DIM9I%+ RETURNS IS 
SUPPOS$ TO HOLD = 9DU/RY JU/ AS = EV]Y O!R SORT ( ECONOMIC ACTIVITY 
& TO DET]M9E PRICES & !IR FLUCTUATIONS4 ,! 9DIVIDUAL AM RANGES HIS 
PUR*ASES1 ON ! BASIS ( ! GIV5 PRICES1 9 SU* A WAY AS TO OBTA9 ! 
MAXIMUM SATISFACTION AVAILABLE ) HIS 9COME2 9 ! SAME WAY1 S9CE ALL 
9DIVIDUALS FOLL[ ?IS 0RATIONAL0 OR 0ECONOMIC0 
PR9CIPLE1 ! 9T]DEP5D5CE ( PRICES PRODUCES A G5]AL PRICE CONFIGURATION 
9 :I* SUPPLY & DEM& >E BALANC$4 ,:5 ! TOTAL DEM& IS EQUAL TO ! 
TOTAL SUPPLY1 ALL PRICES >E EQUILIBRIUM PRICES2 CONV]SELY1 APPLICATION ( ! 
ECONOMIC PR9CIPLE 7OR M>G9AL PR9CIPLE7 LEADS TO PRICES :I* REPRES5T A 
G5]AL EQUILIBRIUM4 ,?US 0PURE !ORY0 WAS AN*OR$ BY ! 
ALL-EMBRAC+ M>G9AL PR9CIPLE1 ON :I* ! PRICE !ORY 9 ALL ITS DETAIL 
WAS BUILT4 

,IT IS NOT WOR? ! CONSUM]'S EF=T 9 DAILY LIFE TO 
0OPTIMIZE0 ! DI/RIBUTION ( HIS EXP5DITURES BY ! APPLICATION 
( M>G9AL CALCULATION AP>T FROM ! QUE/ION ( :E!R HE IS 9 A POSITION 
TO DO SO4 ,9 ! BEHAVIOR ( ! CAPITALI/ 5TREPR5EUR AS WELL1 M>G9AL 
CALCULATION DOES NOT PLAY ! ROLE ASSIGN$ TO IT BY ! ECONOMI/S4 ,TO BE 
SURE1 ! LATT] ADMIT ?AT !IR !ORETICAL REFLECTIONS DO NOT PICTURE ! 
WORLD AS IT REALLY IS4 ,BUT !Y >E SUPPOS$ TO BE CLOSE 5\< TO REALITY TO 
HAVE PRACTICAL VALIDITY OV] & ABOVE !IR VALUE AS SCI5TIFIC KN[L$GE4 ,! 
FACT ?AT 5TREPR5EURS TRANSACT !IR AFFAIRS )\T TR\BL+ !MSELVES 
AB\T ! CALCULATION PROC$URES ( !ORETICAL ECONOMICS DOES NOT PREV5T ! 
!ORI/S FROM F9D+ CONFIRMATION ( !IR !ORIES 9 PRACTICAL ECONOMIC 
LIFE4 

,( C\RSE1 ?IS REQUIRES TRANSLATION ( 0IDEAS FROM ! 
BUS9ESSMAN'S LANGUAGE 9TO ?AT ( ! ECONOMI/S1 & VICE 
V]SA40 ,?IS W\LD REVEAL ?AT ! !ORETICAL 0EXPLANATION ( AN 
ACTION MU/ (T5 9CLUDE /EPS ( REASON+ :I* ! ACT+ 9DIVIDUAL 
HIMSELF DOES NOT CONSCI\SLY P]=M444 4 .<,T.>HE CON/RUCTION ( A 
PATT]N = ! ANALYTICAL DESCRIPTION ( A PROCESS IS NOT ! SAME ?+ AS 
! ACTUAL PROCESS 9 DAILY LIFE2 & WE %\LD NOT EXPECT TO F9D 9 DAILY 
LIFE ! DEF9ITE NUM]ICAL E/IMATES ?AT >E P>T ( ! SCI5TIFIC 
PATT]N40 ,:ILE IT IS CONC$$ ?AT ! BEHAVIOR ( CONSUM]S & 
BUS9ESSM5 ALSO DISPLAYS 0UNECONOMIC0 ELEM5TS1 BO? MU/ ON ! 
:OLE OP]ATE RATIONALLY1 ?AT IS1 /RIVE = MAXIMUM GA9 AT M9IMUM CO/4 
,5TREPR5EURS MU/ CONSID] ! PROPORTIONAL RELATIONS BETWE5 !IR PRODUCTION 
& ! EXI/+ DEM&1 & BETWE5 !IR PRODUCTION & ! CAPITAL 9VE/$ 
& ! WAGES PAID \T1 AS WELL AS MAKE *OICES ) RESPECT TO MEANS ( 
PRODUCTION & RAW MAT]IALS4 ,9 BRIEF1 !Y MU/ PROCE$ 9 ACCORDANCE ) 
! PR9CIPLE ( ! M>G9AL RATE ( SUB/ITUTION4 ,ACCORD+ TO ?IS PR9CIPLE 
! ECONOMIC OPTIMUM IS REA*$ AT ! PO9T :]E FUR!R ALT]ATIONS 9 ! 
COMB9ATIONS ( ! MULTIPLE FACTORS ( PRODUCTION W\LD YIELD NO ADDITIONAL 
PR(IT1 ! M>G9AL RATE ( CO/S !N CO9CID+ ) ?AT ( B5EFITS4 

,:AT WE HAVE H]E IS ?US NOT SO MU* A MATT] ( ECONOMICS AS A MORE 
PRECISE ?AN NORMAL CALCULATION ( EXP5SES & RECEIPTS4 ,BUT AT ! SAME TIME1 
?IS ME?OD ( CALCULATION IS VIEW$ AS ! BASIC PR9CIPLE ( ALL ECONOMIC 
PH5OM5A1 S9CE IT E/ABLI%ES A COMMON D5OM9ATOR = ALL EX*ANGE RELATIONS 
BY MEANS ( ! SIMPLE ID5TIFICATION ( VALUE & PRICE4 ,9 ?IS WAY IT 
ELIM9ATES A MAJOR DEFECT ( ! CLASSICAL !ORY ( VALUE4 ,AL?\< !Y 
F\ND$ !IR !ORY ON AN EXPLANATION ( ! PH5OM5ON ( VALUE 9 T]MS ( 
SOCIAL LABOR TIME1 ! CLASSICAL ECONOMI/S HAD NONE!LESS SPOK5 9 ! SAME 
BREA? ( 9DIVIDUAL M>KET PRICES4 ,S9CE !Y SAW ! TRUE CONT5T ( 
POLITICAL ECONOMY AS LY+ 9 ! QUE/ION ( ! CLASS DI/RIBUTION ( ! 
SOCIAL PRODUCT1 !Y /RUGGL$ TO %[ H[ 9DIVIDUAL PRICES >E DET]M9$ BY 
SOCIAL VALUE RELATIONS4 ,) ! APPE>ANCE ( SUBJECTIVE VALUE & 0PURE 
PRICE !ORY10 ! REALM ( ECONOMIC QUE/IONS WAS R$UC$ TO ?AT ( 
EX*ANGE1 & ! PROBLEMS POS$ BY ! CLASSICAL !ORY1 LIKE ?OSE ( ! 
RELATION BETWE5 VALUE & PRICE & ( DI/RIBUTION1 C\LD !REBY BE IGNOR$4 
,N[ ! M>G9ALI/S SAW DI/RIBUTION1 JU/ AS ! CLASSICAL ECONOMI/S HAD 
SE5 PRODUCTION1 AS REGULAT$ - :ATEV] ! \TCOME ( ! PROCESS BY 
! PRICE SY/EM4 ,! PROBLEM ( DI/RIBUTION CEAS$ TO EXI/ AS A TOPIC = 
!ORETICAL ECONOMICS4 ,IT WAS 9TEGRAT$ 9TO ! G5]AL PROBLEM ( PRICE 
=MATION1 S9CE ! DIFF]5T =MS ( REV5UE W]E TREAT$ AS PRICES ( 
FACTORS ( PRODUCTION4 ,S9CE ALL PRICES >E FUNCTIONALLY RELAT$ TO EA* O!R1 
! SOLUTION ( ! G5]AL PRICE PROBLEM ALREADY 9CLUDES ! SOLUTION ( ! 
PROBLEM ( DI/RIBUTION4 

,9 ?IS WAY ALL QUE/IONS AB\T ! ECONOMY W]E TO BE DEALT ) 9 T]MS 
( ONE PR9CIPLE4 ,?IS PR9CIPLE HAD ! =M ( A CALCULUS ?AT C\LD PASS = 
NEUTRAL ) RESPECT TO ANY P>TICUL> ECONOMIC VIEWPO9T4 ,9 ! EYES ( ITS 
ADVOCATES1 M>G9AL ANALYSIS & ! CONCEPT ( EQUILIBRIUM D]IV$ FROM IT 
GAVE ECONOMICS1 = ! FIR/ TIME1 A POSITIVE1 SCI5TIFIC *>ACT]4 ,! 
M>G9ALI/ CALCULUS1 H[EV]1 RE/$ ON NO MORE ?AN ! OLD ILLUSION1 
9H]IT$ FROM ! CLASSICAL !ORI/S1 ( ! POSSIBILITY ( AN EQUILIBRIUM ( 
SUPPLY & DEM& & ! POSSIBILITY ( PRICE =MATION AS GOV]N$ BY ?IS 
EQUILIBRIUM4 ,! V]Y NATURE ( ! MA!MATIZATION ( ECONOMICS ON ! BASIS 
( M>G9AL ANALYSIS L$ TO ! CONCEPTION ( EQUILIBRIUM 9 T]MS ( A /ATIC 
MODEL4 ,S9CE ! CAPITALI/ ECONOMY 9 FACT KN[S NO /EADY /ATE1 /ATIC 
EQUILIBRIUM MODELS C\LD NOT BE CONFIRM$ BY REALITY2 & ! MA!MATICAL 
EXPRESSIONS1 :ILE UND5IABLY EXACT1 0RELAT$ NOT TO ! CONT5T ( 
ECONOMIC KN[L$GE BUT TO ! TE*NIQUE ( MA!MATICAL OP]ATIONS40 

,9 CONTRA/ TO ,M>X1 = :OM ! ASSUMPTION ( A /ATIC CONDITION 79 HIS 
T]M9OLOGY1 SIMPLE REPRODUCTION7 WAS ONLY A ME?ODOLOGICAL DEVICE TO EXHIBIT 
! NECESS>Y DYNAMIC ( ! CAPITALI/ SY/EM1 B\RGEOIS ECONOMICS SAW ITS 
/ATIC MODEL ( ! ECONOMY AS FURNI%+ 0SCI5TIFIC0 SUPPORT = 
! HYPO!SIS ( A T5D5CY T[>D EQUILIBRIUM4 ,! 5DLESS PLAY+ >\ND 
) SU* EQUILIBRIUM MODELS GAVE RISE TO ! CONVICTION AMONG !ORETICAL 
ECONOMI/S ?AT ?IS M5TAL EXP$I5T IS A PR]EQUISITE = ECONOMIC ANALYSIS1 
EV5 ?\< !Y ADMIT ?AT ! ACTUAL ECONOMY IS NEV] 9 P]FECT EQUILIBRIUM4 
,JU/ AS EV]Y MA*9E CAN BE 9 NE$ ( REPAIR1 ! EQUILIBRIUM ( ! ECONOMIC 
SY/EM CAN BE DI/URB$ BY 9T]NAL OR EXT]NAL %OCKS4 ,9 EI!R CASE ONLY 
EQUILIBRIUM ANALYSIS P]MITS ID5TIFICATION ( ! REASONS = ! DI/URBANCES 
& ALL[S = ! DISCOV]Y ( ! FACTORS NE$$ TO REE/ABLI% 
EQUILIBRIUM4 

,! IDEA ( ! EQUILIBRIUM ( SUPPLY & DEM&1 IMPOS$ ON ! M>KET 
?R\< COMPETITION1 HAS ?US REMA9$ A COMMON !ME ( B\RGEOIS ECONOMICS 
FROM ! TIME ( ,ADAM ,SMI? & ,JEAN-,BAPTI/E ,SAY TO ! PRES5T1 H[EV] ! 
F\NDATIONS ( ?IS HYPO!SIS HAVE BE5 TRANS=M$ & H[EV] UNREALI/IC 
!Y HAVE MEAN:ILE BECOME4 ,! QUE/ION ?AT NEO-CLASSICAL !ORY SET ITSELF 
WAS NOT H[ ! PRICE SY/EM REALLY FUNCTIONS1 BUT H[ IT W\LD FUNCTION IF ! 
WORLD W]E AS ! ECONOMI/S HAVE IMAG9$ IT4 ,?IS !ORY REQUIR$ ! 
EQUILIBRIUM PR9CIPLE 9 ORD] TO SEE ! PRICE SY/EM AS ! REGULATOR ( ! 
ECONOMY1 & IT REQUIR$ ! AMALGAM ( ! PURE PRICE SY/EM 9 ORD] TO BE 
ABLE TO PASS (F ! ACTUAL /ATE ( AFFAIRS AS RATIONAL & !RE=E IMMUNE 
TO ATTACK4 ,BUT ?IS ALL ADD$ UP TO NO MORE ?AN A NEW V]SION ( ,ADAM 
,SMI?'S 09VISIBLE H&0 9 MA!MATICAL =MULAS1 TOGE!R 
) ,SAY'S CONVICTION ?AT EV]Y SUPPLY BR+S ) IT AN EQUIVAL5T 
DEM&4 

,NEO-CLASSICAL !ORY NOT ONLY REMA9$ AT ! LEVEL ( B\RGEOIS ECONOMIC 
SCI5CE'S FIR/ RESULTS BUT FELL F> %ORT ( IT1 S9CE ! EQUILIBRIUM 
APPROA* MAKES IT IMPOSSIBLE TO 9VE/IGATE ! REAL DYNAMIC ( CAPITAL1 ! 
ACCUMULATION PROCESS4 ',! FREEZE-FRAME IMAGE ( /ATIC EQUILIBRIUM DID 
NOT ALL[ PR$ICTIONS AB\T ! PROCESS ( DEVELOPM5T4 ,:ILE ! FACT ( 
ECONOMIC *ANGE ( C\RSE C\LD NOT BE OV]LOOK$1 IT WAS TREAT$ AS SELF 
EXPLANATORY1 ,S9CE !Y C\LD NOT AB&ON ! /ATIC EQUILIBRIUM CONCEPTION 
)\T DECL>+ !IR [N !ORETICAL BANKRUPTCY1 ! M>KET !ORI/S 
LIMIT$ !MSELVES1 9 DEAL+ ) DEVELOPM5T1 TO 0COMP>ATIVE 
/ATICS30 ! FEATURES ( ONE NON-EXI/5T EQUILIBRIUM W]E COMP>$ ) 
?OSE ( A LAT] NON-EXI/5T EQUILIBRIUM1 9 ! HOPE !REBY ( REGI/]+ 
ECONOMIC *ANGES 9 ! ACTUAL WORLD4 ,BUT S9CE !RE IS NO PR(IT OR ANY O!R 
SORT ( SURPLUS 9 ! NEO-CLASSICAL EQUILIBRIUM1 !RE CAN BE NO EXP&$ 
REPRODUCTION ( ! SY/EM4 ,TO ! EXT5T ?AT IT NONE!LESS OCCURS1 IT FALLS 
\TSIDE ! FRAMEWORK ( !ORETICAL ECONOMICS4 

,9 CONTRA/1 ! CLASSICAL ECONOMI/S HAD DIRECT$ !IR ATT5TION TO ! 
ACCUMULATION ( CAPITAL1 ! GR[? ( NATIONAL WEAL?4 ,!IR !ORIES ( 
DI/RIBUTION />T$ FROM ! NECESSITY ( ACCUMULATION & 9QUIR$ :AT 
FACTORS W\LD FAVOR OR H9D] ACCUMULATION4 ,! PR(IT ECONOMY WAS = !M ! 
CONDITION S9E QUA NON ( ACCUMULATION4 ,! PURSUIT ( PR(IT !REBY S]V$ 
! COMMUNITY BECAUSE ON IT DEP5D$ ! IMPROVEM5T ( LIV+ CONDITIONS 
?R\< 9CREAS+ PRODUCTION & PRODUCTIVITY4 ,M>KET PROBLEMS W]E 
SUBORD9AT$ TO ?OSE ( ACCUMULATION & GOV]N$ BY ! LAW ( SUPPLY & 
DEM&4 ,UND] ! CONDITIONS ( G5]AL COMPETITION1 EX*ANGE WAS CONSID]$ TO 
BE A PROCESS REGULAT+ ! ECONOMY 9 ! FRAMEWORK ( CONT9U\S SOCIAL 
DEVELOPM5T4 

,?IS SELF-REGULAT+ & !RE=E CRISIS-FREE ECONOMY ( CLASSICAL !ORY 
CONFRONT$ A REFRACTORY REALITY4 ,! ACCUMULATION ( CAPITAL TOOK PLACE NOT AS 
A SMOO?LY CONT9U+ PROCESS BUT AS ONE 9T]RUPT$ P]IODICALLY1 S9CE ! 
BEG9N+ ( ! N9ETE5? C5TURY1 BY PR(\ND CRISES4 ,H[ W]E !SE CRISES1 
CLE>LY CONTRADICT+ ! DOM9ANT ECONOMIC !ORY1 TO BE EXPLA9$8 ,AL?\< 
! CLASSICAL ECONOMI/S1 ESPECIALLY ,RIC>DO1 CONC5TRAT$ ON ! ACCUMULATION 
( CAPITAL1 AT ! SAME TIME1 !Y %>$ ,SAY'S CONVICTION ?AT ! 
M>KET ECONOMY IS A SELF EQUILIBRAT+ SY/EM 9 :I* EV]Y SUPPLY WILL F9D 
AN EQUIVAL5T DEM&4 ,ACCORD+ TO ,SAY EV]Y P]SON PRODUCES ) ! 9T5TION 
EI!R TO CONSUME HIS PRODUCT OR TO SELL IT 9 ORD] TO ACQUIRE O!R 
COMMODITIES = HIS [N CONSUMPTION4 ,AS ?IS HOLDS = ALL PRODUC]S1 
PRODUCTION MU/ NATURALLY BE BALANC$ BY CONSUMPTION4 ,IF ALL 9DIVIDUAL 
SUPPLIES & DEM&S MAT*1 SOCIAL EQUILIBRIUM RESULTS4 ,?IS /ATE CAN ( 
C\RSE BE DI/URB$ FROM TIME TO TIME BY AN OV]SUPPLY ( A P>TICUL> 
COMMODITY OR AN 9SUFFICI5T DEM& = ANO!R4 ,BUT ! PRICE *ANGES PRODUC$ 
BY SU* P>TIAL DISEQUILIBRATION LEAD TO ! RE/ORATION ( EQUILIBRIUM4 ,AP>T 
FROM SU* DI/URBANCES 9 P>TICUL> M>KETS !RE CAN BE NO G5]AL 
OV]PRODUCTION1 ANY MORE ?AN ACCUMULATION CAN OV]/EP SOCIETY'S 
PROP5SITY TO CONSUME4 

,?US ! CLASSICAL ECONOMI/S' !ORIES ( ACCUMULATION W]E COMB9$ 
) A /ATIC CONCEPTION ( EQUILIBRIUM ?AT OBLIG$ !M TO EXPLA9 
DI/URBANCES ( ! SY/EM'S EQUILIBRIUM BY REF]5CE TO FACTORS \TSIDE 
! SY/EM4 ,! FACT ( CRISES ( G5]AL OV]PRODUCTION L$ ,J4 ,C4 ,L4 ,SISMONDE 
DE ,SISMONDI TO R5\NCE CLASSICAL !ORY & SOON TO REJECT ! LAISSEZ-FAIRE 
SY/EM AS A :OLE4 ,9 HIS OP9ION IT WAS EXACTLY ! G5]AL COMPETITION1 BAS$ 
ON NO?+ BUT PRICES1 :I*1 9/EAD ( RESULT+ 9 EQUILIBRIUM & G5]AL 
WELF>E1 OP5$ ! WAY TO ! MIS]Y ( OV]PRODUCTION4 ,! AN>*Y ( 
CAPITALI/ PRODUCTION1 ! PASSION = EX*ANGE VALUE )\T CONSID]ATION ( 
SOCIAL NE$S1 GAVE RISE TO PRODUCTION 9 EXCESS ( EFFECTIVE DEM& & 
!RE=E TO P]IODIC CRISES4 ,! UND]CONSUMPTION RESULT+ FROM ! UNEQUAL 
DI/RIBUTION ( 9COME WAS ! CAUSE ( OV]PRODUCTION & ! ACCOMPANY+ 
DRIVE T[>D =EIGN M>KETS4 ,SISMONDI WAS ?US ! F\ND] ( ! !ORY1 
/ILL WIDESPREAD TODAY1 ( UND]CONSUMPTION AS ! CAUSE ( CAPITALI/ 
CRISIS4 

,AMONG MANY O!RS IT WAS NOTABLY ,JOHN ,A4 ,HOBSON :O APPLI$ 
,SISMONDI'S !ORY TO DEVELOP$ CAPITALISM & RELAT$ IT TO IMP]IALISM4 
,9 ,HOBSON'S VIEW1 ANTICIPAT+ ?AT LAT] ELABORAT$ BY ,KEYNES1 ! 
DEM& = CONSUM] GOODS1 & ) IT ! RATE ( CAPITAL EXPANSION1 FALLS AS 
A RESULT ( UNEQUAL DI/RIBUTION & ! 9CREAS+ ACCUMULATION ( CAPITAL4 
,S9CE CONSUMPTION CANNOT KEEP /EP ) PRODUCTION1 !RE >E P]IODIC CRISES1 
S9CE P>T ( ! ACCUMULAT+ PR(ITS CAN NO LONG] BE PR(ITABLY 9VE/$ & 
=E LIES FALL[4 ,ONLY ! R$UCTION ( OV]PRODUCTION 9 DEPRESSION MAKES 
POSSIBLE A NEW BEG9N+ ( ! EXPANSION PROCESS1 :I* WILL LEAD AGA9 9 
TIME TO OV]PRODUCTION & IDLE CAPITAL4 ,OV]PRODUCTION RESULT+ FROM 
9SUFFICI5T CONSUMPTION ALSO EXPLA9S ! NE$ = =EIGN M>KETS ?AT 
*>ACT]IZES IMP]IALISM & IMP]IALI/IC COMPETITION4 ,HOBSON1 H[EV]1 WAS 
( ! OP9ION ?AT ?IS /ATE ( AFFAIRS C\LD BE REM$I$ BY RE=MI/ 
GOV]NM5T 9T]V5TIONS 9 ! ECONOMIC ME*ANISMS TO /R5G!N CONSUM] 
DEM&2 9 ?IS RESPECT HE REMA9$ AN IDEOLOGICAL PRISON] ( ! CAPITALI/ 
ECONOMY4 

,:AT %\LD BE CLE> H]E IS ?AT IT WAS NECESS>Y TO AB&ON ! CLASSICAL 
& !N ! NEO-CLASSICAL !ORIES 9 ORD] TO COME TO GRIPS ) ! REALITY 
( ! ECONOMY4 ,VIEW$ FROM A P]SPECTIVE DEF9$ BY ! ALLEG$LY 
SELF-REGULAT+ M>KET ME*ANISM1 ! ACTUAL ECONOMIC PROCESSES W]E 
9COMPREH5SIBLE2 ?IS PU%$ ,SISMONDI & ,HOBSON TO R5\NCE ! 
M>KET-ORI5T$ !ORY4 ,TO DEAL ) ! CAPITALI/ CRISIS1 AS ) SOCIAL 
CONDITIONS G5]ALLY1 WAS ALSO TO REJECT TRADITIONAL ECONOMIC CONCEPTIONS1 TO 
DEVELOP !ORIES CLOS] TO REALITY1 ?\< )\T QUE/ION+ CAPITALI/ 
PROP]TY RELATIONS ?IS IS POSSIBLE ONLY TO A LIMIT$ DEGREE4 ,ATTEMPTS 9 ?IS 
DIRECTION W]E CONDITION$ NOT ONLY BY ! DOM9ANT !ORY'S FLAGRANT 
CONFLICT ) REALITY BUT ALSO BY ! IMPACT ( CAPITALI/ COMPETITION ON ! 
DEVELOPM5T OPPORTUNITIES ( BACKW>D C\NTRIES4 ,?IS ACC\NTS1 ON ! ONE 
H&1 = ! EMPIRICISM ( ! HI/ORICAL S*OOL &1 ON ! O!R1 = ! 
EVOLUTION>Y P]SPECTIVE ( 9/ITUTIONALISM1 BO? ( :I* OPPOS$ ! 
!ORIES DEVELOP$ BY ! CLASSICAL ECONOMI/S4 ,9 ! PROCESS ( CAPITALI/ 
ACCUMULATION1 ! ADVANTAGE ( ?OSE :O COME FIR/ REPRES5TS ! DISADVANTAGE 
( ?OSE !Y HAVE LEFT BEH9D4 ,?US FREE TRADE APPE>$ AS AN ,5GLI% 
PRIVILEGE & MONOPOLY ?AT MADE ! 9DU/RIALIZATION ( LESS DEVELOP$ L&S 
MORE DIFFICULT & ! MIS]Y ( !IR 0TAKE-(F0 APPE> 
UNBE>ABLE4 ,9 ! /RUGGLE AGA9/ MONOPOLI/IC COMPETITION1 ! PR9CIPLE ( 
LAISSEZ-FAIRE HAD TO BE AB&ON$ & ) IT ! !ORIES ( CLASSICAL 
ECONOMICS4 ,?IS WAS NOT1 AS ,ROSA ,LUXEMBURG SUPPOS$1 A 0PROTE/ ( 
B\RGEOIS SOCIETY AGA9/ ! KN[L$GE ( ITS [N LAWS0 BUT AN ATTEMPT 
TO USE POLITICAL MEANS TO REA* A /AGE ( DEVELOPM5T TO :I* ! IDEOLOGY ( 
FREE TRADE W\LD BE APPROPRIATE4 ,IT WAS ONLY AFT] !Y EXP]I5C$ ! EFFECTS 
( ! 9T]NATIONAL COMPETITIVE /RUGGLE ?AT ! ECONOMICALLY WEAK] 
C\NTRIES ESCAP$ ! 9FLU5CE ( ,5GLI% POLITICAL ECONOMY & DEVELOP$ AN 
IDEOLOGY SUIT$ TO /ATE 9T]V5TION & PROTECTIVE T>IFFS4 ,?AT ! 
HI/ORICAL S*OOL :I* FL[]$ BRIEFLY 9 ,G]MANY ONLY EXPRESS$ ! 
P>TICUL> NE$S ( COMPETITIVELY WEAK C\NTRIES WAS ALREADY VISIBLE 9 ! 
CONTRADICTION IMPLICIT 9 ITS DOCTR9E3 ?AT IT RECOMM5D$ 9 ! NATIONAL 
CONTEXT :AT IT CONDEMN$ 9 ! 9T]NATIONAL4 

,TO BE SURE1 ! ADH]5TS ( ! HI/ORICAL S*OOL ( POLITICAL ECONOMY 
5DEAVOR$ TO DEMON/RATE ?AT A DI/RIBUTION ( 9COME REGULAT$ EXCLUSIVELY 
BY ! M>KET W\LD LEAD TO ! PAUP]IZATION ( ! WORK]S & W\LD !REBY 
CALL ! EXI/5CE ( B\RGEOIS SOCIETY ITSELF 9TO QUE/ION AN APPREH5SION 
SEEM+LY CORROBORAT$ BY ! RISE ( AN 9DEP5D5T LABOR MOVEM5T4 ,! REM$Y 
= PAUP]IZATION WAS SIMPLY A MORE RAPID & MORE ORD]LY DEVELOPM5T ( 
CAPITALISM4 ,9 ?IS WAY ! HI/ORICAL S*OOL COMB9$ A NATIONALLY ORI5T$ 
ECONOMIC POLICY ) ! SOCIAL POLICY KN[N AS ,KA!D]SOZIALISMUS 
7ACADEMIC SOCIALISM71 AN IDEOLOGY :I* REJECT$ ! AB/RACTIONS ( CLASSICAL 
!ORY ) ! AIM NOT ( TRANSC5D+ !M COMPLETELY BUT ( ADAPT+ !M 
?R\< HI/ORICAL CRITICISM TO P>TICUL> NATIONAL 9T]E/S4 

,9 ! EYES ( ! HI/ORICAL S*OOL1 ECONOMIC KN[L$GE WAS MU* MORE ?AN 
A D$UCTIVELY E/ABLI%$ UND]/&+ ( ! M>KET ME*ANISM4 ,IT 9CLUD$ 
ALSO ! 9DUCTIVE DISCOV]Y ( ! HI/ORICALLY DET]M9$1 NATIONALLY 
SPECIFIC1 & EXTRAECONOMIC ASPECTS ( ! SOCIAL TOTALITY & ITS DEVELOPM5T1 
SO ?AT ASS]TIONS AB\T ! CONT5T ( POLITICAL ECONOMY W]E HELD TO 
PRESUPPOSE EXT5SIVE HI/ORICAL RESE>*4 ,?+S DID NOT PROGRESS BEYOND ! 
LEVEL ( RESE>*1 H[EV]1 S9CE ! CONT9U+ HOMOG5IZATION ( ! 
ECONOMIES ( ! ,WE/1 :I* ACCOMPANI$ ! CAPITALIZATION ( ?IS P>T ( ! 
WORLD1 ALSO D$IFF]5TIAT$ ECONOMIC !ORY1 & ! HI/ORICAL S*OOL LO/ 
ITS 9FLU5CE4 ,IT LEFT BEH9D ! NE$ IT HAD AWAK5$ = AN UNPREJUDIC$ 
9VE/IGATION ( ! EMPIRICALLY GIV5 PH5OM5A ( ! ECONOMY1 :I* F9ALLY 
PRECIPITAT$ 9 BUS9ESS-CYCLE RESE>*4 

,AL?\< ! ECONOMY REMA9$ AFFLICT$ BY CRISIS & CYCLICAL FLUCTUATIONS1 
B\RGEOIS ECONOMICS /ILL HAD NO !ORY ( CRISIS AS AN 9H]5T ASPECT ( ! 
CAPITALI/ SY/EM BUT EXPLA9$ ECONOMIC FLUCTUATIONS 9 T]MS ( EV5TS 
EXT]NAL TO ! ECONOMY4 ,JEVONS W5T SO F> AS TO CONNECT CRISIS ) 
EXTRAT]RE/RIAL NATURAL PH5OM5A4 ,HE DISCOV]$ ?AT ! P]IODIC APPE>ANCE 
( SUNSPOTS CO9CID$ ) ! \TBREAK ( ECONOMIC CRISIS4 ,SUPPOS$LY ! 
SUNSPOTS ADV]SELY AFFECT$ ! WEA!R & ) IT AGRICULTURAL PRODUCTION1 
:OSE DECL9E L$ TO A G5]AL CRISIS4 ,( C\RSE1 ?IS !ORY DID NOT W9 MANY 
SUPPORT]S4 ,AL?\< ! WEA!R C]TA9LY HAS SOME 9FLU5CE ON ! ECONOMY1 
CRISES HAVE BEGUN 9 P]IODS ( GOOD WEA!R1 & A SIGNIFICANT CORRELATION 
BETWE5 ! WEA!R & SUNSPOTS CANNOT BE E/ABLI%$4 

,S*UMPET]1 9 CONTRA/1 ATTEMPT$ TO EXPLA9 ! ECONOMIC DEVELOPM5T 
RESULT+ FROM ! TRADE CYCLE & ! CYCLE ITSELF BY REF]5CE TO ! NATURE 
( ! CAPITALI/ SY/EM4 ,FAMILI> ) ,M>X'S !ORY1 HE WAS AW>E ?AT 
ALL FUNDAM5TAL PROGRESS DEP5DS ON ! DEVELOPM5T ( ! SOCIAL =CES ( 
PRODUCTION4 ,BUT = ,S*UMPET] ! AG5TS ( NEW PRODUCTIVE =CES W]E ! 
P>TICUL>LY 5]GETIC 5TREPR5EURS :O BY !IR G5IUS BROKE ?R\< 
CU/OM-B\ND1 MONOTON\SLY REPEAT$ ECONOMIC PROCESSES4 ,HE DEVELOP$ A K9D ( 
H]OIC !ORY ( BUS9ESS FLUCTUATIONS1 SEE+ 9 !M ! DYNAMIC ( ! 
CAPITALI/ SY/EM4 

,TO ?IS 5D1 H[EV]1 HE MADE USE ( TWO DIFF]5T !ORIES CORRESPOND+ TO 
TWO PSY*OLOGICALLY DIFF]5TIAT$ TYPES ( PEOPLE4 ,9 ! G5]AL EQUILIBRIUM 
( 0PURE !ORY0 !RE WAS NO DEVELOPM5T4 ,?IS CORRESPOND$ TO ! 
FACT ?AT 9 ! REAL WORLD ! MAJORITY ( MANK9D WAS TOO SLUGGI% & LAZY 
9 SPIRIT TO OPPOSE ! MONOTONY ( ! /ATIC /ATE4 ,AS WE HAVE ALREADY SE51 
9 EQUILIBRIUM !RE IS NO PR(IT1 ! APPE>ANCE ( :I* 9DICATES 
P]TURBATION ( ! SY/EM1 :I* WILL AGA9 BE OV]COME BY ! 
C\NT]-MOVEM5TS IT PROVOKES4 ,SO ! PROBLEM IS POS$3 H[ CAN SITUATION ?AT 
KN[S NO DEVELOPM5T GIVE RISE TO DEVELOPM5T8 

,H]E ,S*UMPET] HAD ! ADVANTAGE ?AT HE1 AS E>LI] AN ADEPT ( ! 
HI/ORICAL S*OOL1 HAD NOT =GOTT5 ?AT ECONOMICS DID NOT NE$ TO BE CONF9$ 
TO ! AB/RACTIONS ( SUPPLY-DEM& EQUILIBRIUM4 ,TO ACC\NT = ITS DYNAMIC 
! CAPITALI/ SY/EM MU/ ALSO BE CONSID]$ FROM ! HI/ORICAL & 
SOCIOLOGICAL PO9TS ( VIEW4 ,BUT 9 ! FRAMEWORK ( ECONOMIC !ORY HE W\LD 
CONSID] ONLY ! SPECIAL ME*ANISM ?AT W\LD TRANS=M ! /ATIC TO A 
DYNAMIC MODEL4 ,?IS ME*ANISM HE EMBODI$ 9 A TYPE ( P]SON :O1 TORM5T$ OR 
BLESS$ BY CREATIVE UNRE/1 BREAKS BY SELF-WILL$ ACTIVITY ?R\< ! CYCLE ( 
/ATIC EQUILIBRIUM4 ,?IS TYPE1 ! 9NOVATIVE 5TREPR5EUR1 ALWAYS ON ! 
LOOK\T = NEW 9DU/RIAL1 SCI5TIFIC1 BUS9ESS1 & ORGANIZATIONAL PROJECTS 
?AT W\LD QUANTITATIVELY & QUALITATIVELY ALT] EXI/+ PRODUCTIVITY & 
PRODUCTION1 DE/ROYS ! CONSUM]-GOV]N$ ECONOMIC EQUILIBRIUM 9 SU* A WAY 
?AT IT CAN BE REE/ABLI%$ ONLY ON A NEW1 HI<] LEVEL4 ,?IS SPONTANE\S1 
ACCID5TAL1 BUT EV] RECURR+ PROCESS PRODUCES ! BUS9ESS CYCLE1 AT ONCE 
CREATIVE & DE/RUCTIVE1 9 :I* ! DYNAMIC ( ! CAPITALI/ SY/EM IS 
PLAY$ \T4 ,:ILE C]TA9LY REGRETTABLE1 IT IS UNAVOIDABLE ?AT ADAPTATION TO 
*ANG+ CIRCUM/ANCES 9VOLVES CO/S & MIS]Y4 ,!SE DISADVANTAGES1 H[EV]1 
,S*UMPET] ?\<T C\LD BE MITIGAT$ ) BETT] ECONOMIC =ECA/S & 
GOV]NM5T 9T]V5TIONS4 ,9 ANY CASE1 9 HIS VIEW ! 9H]5T DYNAMIC ( ! 
CAPITALI/ SY/EM WAS ( GREAT] IMPORTANCE ?AN ! PROBLEM ( ECONOMIC 
EQUILIBRIUM ) :I* B\RGEOIS ECONOMICS HAD ALMO/ EXCLUSIVELY OCCUPI$ 
ITSELF4 

,EV5 IF IT WAS ONLY 9 HIS IMAG9ATION ?AT ,S*UMPET]'S !ORY WAS 
RELEVANT TO ! LAWS ( CAPITALI/ DEVELOPM5T1 ?IS !ORY WAS NONE!LESS 
SYMPTOMATIC ( ! PR(\ND UNEAS9ESS ( B\RGEOIS !ORETICIANS AB\T 
CYCLICAL FLUCTUATIONS & CRISIS P]IODS1 :I* W]E BECOM+ MORE S]I\S AS 
ACCUMULATION PROGRESS$4 ,! !ORY ( A SELF-REGULAT+ PRICE ME*ANISM MADE 
! CRISIS PH5OM5ON AN UNSOLVABLE RIDDLE4 ,S*UMPET]'S ATTEMPT TO F9D 
A SOLUTION 9 ! REPEAT$ VIOLATION ( EQUILIBRIUM CONDITIONS BY A SPECIAL 
K9D ( P]SON WAS NO EXPLANATION BUT ONLY A CONFESSION ?AT ! EQUILIBRIUM 
T5D5CY ATTRIBUT$ TO ! M>KET WAS NOT TO BE F\ND 9 ! REAL WORLD4 ,AS WE 
HAVE SE51 ?IS HAD ALREADY BE5 RECOGNIZ$ BY ! E>LIE/ ECONOMIC CRITICS ( 
CAPITALISM1 LIKE ,SISMONDI & ,HOBSON4 ,BUT ! SIMPLE /ATEM5T ?AT ! 
!ORETICAL H>MONY ( SUPPLY & DEM&1 PRODUCTION & CONSUMPTION1 WAS 
REFUT$ BY REALITY WAS 9 ! 5D R$UC$ TO A M]E DESCRIPTION ( OBVI\S 
/ATES ( AFFAIRS1 :I* 9 ITSELF PROVIDES NO EXPLANATION ( ! LAWS ( 
MOTION PECULI> TO CAPITAL4 

,UNSOLVABLE BY ! DOM9ANT ECONOMIC !ORY1 ! PROBLEM ( ! NATURE ( 
CAPITALI/ CRISIS C\LD NEV]!LESS NOT BE IGNOR$4 ,ATTEMPTS W]E MADE TO DEAL 
) IT BY EMPIRICAL ME?ODS4 ,?IS APPROA* HAD BE5 ANTICIPAT$ BY ! 
E/ABLI%M5T ( PRIVATE 9/ITUTIONS = ! /UDY ( ! BUS9ESS CYCLE ) 
! AIM ( TURN+ CYCLICAL FLUCTUATIONS TO COMM]CIAL ACC\NT4 ,FROM ?IS >OSE 
A SPECIAL BRAN* ( ECONOMIC SCI5CE1 CONC]N$ EXCLUSIVELY ) BUS9ESS-CYCLE 
RESE>*1 :I* GREW ) ! SY/EMATIC MULTIPLICATION ( PRIVATE & PUBLIC 
DATA COLLECTION4 ,WI%+ TO DESCRIBE ! C\RSE ( ECONOMIC EV5TS AS IT 
UNFOLDS 9 REALITY1 CYCLE RESE>* 0MADE USE ( 'PURE !ORY' 
ONLY AS AN ELEM5T>Y !ORY40 

,?IS RA!R M9OR CONCESSION TO NEO-CLASSICAL ECONOMICS WAS ALREADY AN 
EXAGG]ATION1 AS BUS9ESS-CYCLE RESE>* C\LD DEVELOP ONLY 9 DIRECT 
OPPOSITION TO 0ELEM5T>Y0 ECONOMIC !ORY4 ,?IS !ORY DEALT1 AS 
WE HAVE SE51 ONLY ) ! /ATIC EQUILIBRIUM /ATE1 9 :I* ! C\RSE ( 
ECONOMIC EV5TS BR+S NO *ANGE 9 ! DATA4 ,SU* A /ATION>Y EQUILIBRIUM WAS 
PRECISELY EXCLUD$ FROM ! DOMA9 ( CYCLE !ORY1 AS ! LATT] DEALT ) 
! CONT9U\S TRANS=MATION ( ! ECONOMY4 ,:ILE 9 ! 0ELEM5T>Y 
!ORY0 DEVIATIONS FROM EQUILIBRIUM ONLY L$ TO ! REE/ABLI%M5T ( 
EQUILIBRIUM1 BUS9ESS-CYCLE !ORY DID NOT DEAL ) TRANSI5T IRREGUL>ITIES 
BUT ATTEMPT$ TO LAY B>E ! LAWS ( MOTION ( CAPITAL & TO EXPLA9 ! 
PH5OM5A ( CRISIS4 ,SUCCESS 9 ?IS ATTEMPT W\LD MEAN ! CON/RUCTION ( A 
DYNAMIC !ORY ( CAPITALI/ DEVELOPM5T TRANSC5D+ ! /ATIC 
CONCEPTION4 

,IT GOES )\T SAY+ ?AT ! !ORY ( CAPITALI/ DEVELOPM5T & ITS 
LAWS ( MOTION LONG S9CE =MULAT$ BY ,M>X WAS 9T5TIONALLY NEGLECT$4 ,! 
0UNBIAS$0 ME?ODS ( ! HI/ORICAL S*OOL W]E SUPPOS$ TO CONF] 
ON BUS9ESS-CYCLE RESE>* ! 0OBJECTIVITY0 9DISP5SABLE = 
KN[L$GE ( ! ACTUAL PROCESS ( ECONOMIC EV5TS4 ,9 HI/ORICAL SURVEYS ( 
! *ANG+ M>KET CONDITIONS & !IR OSCILLATIONS1 RESE>*]S ATTEMPT$1 
ON ! BASIS ( RELEVANT /ATI/ICS & ) ! AID ( MA!MATICAL ME?ODS 
SU* AS CORRELATION COEFFICI5TS1 TO TRACE ! RHY?M ( ECONOMIC LIFE 9 ORD] 
TO DET]M9E ITS DRIV+ =CES & 9T]NAL RELATIONS4 ,( C\RSE1 PURELY 
EMPIRICAL RESE>* CAN YIELD NO MORE ?AN DATA2 ! FACTS1 ONCE DET]M9$1 
/ILL REQUIRE AN EXPLANATION4 ,= ?IS A !ORY IS REQUIR$ ?AT W\LD NOT ONLY 
DESCRIBE ! BUS9ESS CYCLE BUT W\LD ALSO MAKE IT 9TELLIGIBLE4 ,BUT NONE ( 
:AT SEEM TO BE DYNAMIC !ORIES ( ! BUS9ESS CYCLE 9VE/IGATES ! CAUSES 
( CYCLICAL *ANGES2 9/EAD1 !SE *ANGES =M !IR PO9T ( DEP>TURE & 
>E TAK5 AS GIV54 ,9 !SE CIRCUM/ANCES ! BUS9ESS-CYCLE !ORIES REMA9 
M]E DESCRIPTIONS ( ! ECONOMIC DYNAMIC )\T EXPOS+ ! NATURE ( ! 
DYNAMIC ITSELF4 

,! DIV]SITY ( ECONOMIC PH5OM5A SEEM+LY 9DICAT$ A PLURALITY ( 
CAUSES = ! CYCLICAL FLUCTUATIONS & PROMPT$ ! CON/RUCTION ( V>I\S 
!ORIES :I*1 ?\< CONFRONT+ ! SAME FACTS1 DI/+UI%$ !MSELVES 
FROM EA* O!R BY ! EMPHASIS LAID P>TICUL>LY ON ONE OR ANO!R ASPECT ( 
! :OLE PROCESS4 ,DI/9CTIONS W]E MADE BETWE5 ECONOMIC & NON ECONOMIC1 
5DOG5\S & EXOG5\S FACTORS RESPONSIBLE = ! BUS9ESS CYCLE1 :ILE SOME 
OPT$ = A COMB9ATION ( BO? TO ELUCIDATE ! RHY?M ( ! ECONOMY4 
,SOMETIMES MONEY & CR$IT QUE/IONS1 AT O!R TIMES TE*NICAL MATT]S1 M>KET 
DISCREPANCIES1 9VE/M5T PROBLEMS1 OR PSY*OLOGICAL FACTORS W]E PU%$ 9TO 
! =EGR\ND & DECL>$ ! DECISIVE ELEM5T ( ! :OLE MOVEM5T4 
,/>T+ FROM !SE V>I\S VIEWPO9TS1 PEOPLE S\<T ! CAUSES ( CRISIS & 
DEPRESSION 9 ! EV5TS ( ! PREC$+ P]IOD ( PROSP]ITY & ITS DECL9E 
OR LOOK$ = MEANS & WAYS TO MOVE FROM CRISIS TO A NEW UPSW+4 

,! AIM ( BUS9ESS-CYCLE RESE>* WAS NOT A ME?ODICAL & MORE EXACT 
DESCRIPTION ( ! CYCLICAL FLUCTUATIONS OBS]VABLE 9 ANY CASE BUT ! 
DISCOV]Y ( SOME WAY TO 9T]V5E = ! ALLEVIATION ( CRISIS SITUATIONS & 
= ! 0NORMALIZATION0 ( ! ,C *ANG+ ECONOMIC PROCESSES ) 
! AIM ( EV5+ \T ! H>% ALT]NATION ( BOOM & CRISIS4 ,CYCLE 
DIAGNOSIS WAS TO LEAD1 ON ! ONE H&1 TO ! =MULATION ( A PROGNOSIS 
FACILITAT+ ! ADAPTATION ( ECONOMIC ACTIVITY TO A GIV5 TR5D ( ECONOMIC 
DEVELOPM5T &1 ON ! O!R1 TO ! ATTEMPT TO /ABILIZE ! ECONOMY OV] ! 
LONG] T]M ?R\< A CYCLICAL POLICY C\NT]ACT+ ! AUTOMATIC C\RSE ( ! 
CYCLE4 ,BUS9ESS-CYCLE !ORY ?US SAW ITSELF AS AN APPLI$ SCI5CE :OSE 
=ECA/S1 EV5 IF !Y REMA9$ AB/RACT1 /ILL P]MITT$ ! DRAW+ ( 
ANALOGICAL CONCLUSIONS ( POSSIBLY PRACTICAL SIGNIFICANCE4 

,( C\RSE1 CYCLE !ORY DID NOT CALL ! SOCIAL ORD] 9TO QUE/ION & 
!RE=E REMA9$ FROM ! />T LIMIT$ TO ! 9VE/IGATION ( M>KET 
PH5OM5A4 ,NOT ! ESS5CE ( CAPITALISM BUT ITS APPE>ANCE =M$ ! DOMA9 
( BUS9ESS-CYCLE RESE>* & S]V$ AS ! BASIS = ! V>I\S !ORIES 9 
:I* IT CLO!D ITSELF4 ,ACCORD+ TO ! CYCLE !ORI/S IT IS ! OBSCURITY 
( ! DEVELOP$ M>KET ECONOMY & ! IGNORANCE OR MISUND]/&+ ( 
ECONOMIC CONDITIONS ?AT >E ! CAUSES ( ! DISPROPORTIONAL ECONOMIC 
DEVELOPM5T 9 :I* ! BUS9ESS CYCLE MANIFE/S ITSELF4 ,CONSUMPTION LAGS 
BEH9D PRODUCTION1 CR$IT EXPANSION LEADS TO OV] 9VE/M5T1 PR(ITS DECL9E 
DUE TO AN UNJU/IFI$ EXPANSION ( PRODUCTION1 SO ?AT AT A C]TA9 PO9T1 ! 
PO9T ( CRISIS1 ! ECONOMY SW+S 9 ! O!R DIRECTION4 ,!N 9VE/M5TS 
LAG BEH9D SAV+S1 ! SATURAT$ M>KET F9DS NO EFFECTIVE DEM&1 CAPITAL 
VALUES >E DE/ROY$1 PRODUCTION DECREASES RAPIDLY1 & UNEMPLOYM5T GA9S 
GR\ND4 ,! CRISIS & ! P]IOD ( DEPRESSION ?AT DEVELOPS \T ( IT MAKE A 
CLEAN SWEEP ( ! EXCESSES ( ! P]IOD ( EXPANSION UNTIL ! REQUISITE 
ECONOMIC PROPORTIONS >E RE/OR$1 MAK+ POSSIBLE A NEW UPSW+1 :I* ( 
C\RSE WILL 9 ITS TURN MEET ITS HI< PO9T & COLLAPSE 9TO A NEW CRISIS4 

,?IS REPRES5T$ AN ACCURATE PICTURE ( ! ECONOMIC EV5TS PRODUC$ BY 
CAPITALISM'S T5D5CY TO CRISIS1 BUT IT DID NOT EXPLA9 ?IS T5D5CY 
ITSELF ,! CYCLICAL MOVEM5TS APPE>$ 9 ?IS VIEW TO BE DEP>TURES FROM A 
NORMAL C\RSE ( AFFAIRS :I* )\T !M W\LD RUN SMOO?LY4 ,WE SEE H]E ! 
PRES5CE1 9 ! M9DS ( ! BUS9ESS-CYCLE !ORI/S1 ( ! EQUILIBRIUM 
ME*ANISM ( 0PURE !ORY10 A ME*ANISM :I* TO BE SURE CAN WORK 
ONLY BY WAY ( IRREGUL>ITIES1 SO ?AT ! PROPORTIONALITIES NECESS>Y = ! 
0NORMAL0 C\RSE ( ! ECONOMY MU/ BE E/ABLI%$ ?R\< ! UPS 
& D[NS ( ! CYCLE4 ,! BUS9ESS CYCLE WAS SE5 AS ! ACTUAL =M ( ! 
EQUILIBRIUM T5D5CY ( ! M>KET ME*ANISM4 ,IT EVID5TLY FOLL[$ ?AT AN 
EXACT KN[L$GE ( ! FACTORS RESPONSIBLE = ! DEVIATIONS FROM ! NORM 
C\LD OP5 ! WAY TO ! CONSCI\S USE ( ECONOMIC 9/RUM5TS TO ALLEVIATE OR 
ELIM9ATE ! H>MFUL SIDES ( ! CYCLE4 

,ACCORD+ TO ?IS VIEW ! CAPITALI/ ECONOMY IS *>ACT]IZ$ BY BO? 
/ATIC & DYNAMIC T5D5CIES1 ( :I* ! LATT] CONDITION ! =M]4 ,IT 
FOLL[S FROM ?IS ?AT 0PURE !ORY10 ! /ATIC EQUILIBRIUM 
APPROA*1 \<T TO BE SUBORD9AT$ TO ! BUS-MESS-CYCLE !ORIES1 S9CE IT 
APPLIES TO A SITUATION ?AT >ISES ONLY MOM5T>ILY1 AS A PO9T ( TRANSITION 
T[>D ! P]PETUALLY *ANG+ CONDITIONS1 & ?AT C\LD !RE=E YIELD NO 
9=MATION AB\T ! REAL POSITION ( ! ECONOMY & ! DIRECTION 9 :I* 
IT WAS MOV+4 ,AL?\< ! P>TIZANS ( ! !ORY ( G5]AL EQUILIBRIUM 
CLAIM$ ONLY ?AT IT WAS AN AB/RACT REPRES5TATION ( ! PRICE SY/EM )\T 
DIRECT CORRESPOND5CE TO REAL ECONOMIC PROCESSES1 !Y NEV]!LESS 9SI/$ ON 
ITS HEURI/IC VALUE = ! /UDY ( ECONOMIC RELATION%IPS4 ,FROM !IR PO9T 
( VIEW EV5 BUS9ESS-CYCLE MOVEM5TS C\LD BE CONSID]$ AS PRO( ( ! 
FACTUAL EXI/5CE ( EQUILIBRIUM T5D5CIES1 S9CE ! DEP>TURE FROM AN 
EQUILIBRIUM /ATE TAK5 AS A NORM IS F9ALLY FOLL[$ BY A RE/ORATION ( 
EQUILIBRIUM4 ,:ATEV] BR+S !M AB\T1 !SE DEVIATIONS WILL 9 TURN BE 
ANNULL$ ?R\< ! SY/EM'S [N EQUILIBRIUM ME*ANISM1 SO ?AT 
EQUILIBRIUM !ORY CANNOT BE D5I$ ! FRONT RANK AMONG ECONOMIC !ORIES4 

,SOME B\RGEOIS ECONOMI/S W5T SO F> AS TO D5Y ! V]Y EXI/5CE ( ! 
BUS9ESS CYCLE4 ,= EXAMPLE1 ,IRV+ ,FI%] F\ND NO JU/IFICATION = SPEAK+ 
( A BUS9ESS CYCLE1 AS ! T]M REF]R$ TO NO?+ BUT ! RECORD ( ECONOMIC 
ACTIVITY AT A LEVEL ABOVE OR BEL[ ! AV]AGE4 ,! SUPPOSITION ?AT !SE 
PH5OM5A W]E *>ACT]IZ$ BY A DEF9ITE P]IODICITY & ?AT ?IS OP5$ A 
WAY TO ! MAK+ ( ECONOMIC PR$ICTIONS WAS UNT5ABLE SO LONG AS ! ECONOMY 
WAS GOV]N$ BY *ANG+ PRICE RELATIONS4 ,9 ,FI%]'S VIEW IT WAS MORE 
IMPORTANT TO %[ H[ ! ECONOMY W\LD FUNCTION IF !RE W]E NO CYCLICAL 
DEVIATIONS SO AS TO UND]/& ! *>ACT] ( !SE DI/URBANCES & TO 
C\NT]ACT !M :]E POSSIBLE4 ,9 ! 5D A DIVISION ( LABOR DEVELOP$ )9 
ECONOMIC SCI5CE ?AT PRES]V$ ! EQUILIBRIUM APPROA* = ! 
0PURE0 !ORI/S & LEFT ! FIELD ( BUS9ESS-CYCLE ANALYSIS TO 
! MORE EMPIRICALLY ORI5T$ ECONOMI/S4 

,ASIDE FROM ! FACT ?AT !RE EXI/S NO UNBIAS$ EMPIRICAL RESE>*1 IT IS 
ALSO WOR? NOT+1 AS ,W4 ,C4 ,MIT*ELL WAS L$ TO SEE BY HIS [N EXP]I5CE1 
?AT TWO OBS]V]S CAN 9T]PRET & UTILIZE ! SAME EMPIRICAL MAT]IAL QUITE 
DIFF]5TLY4 ,ACCORD+LY1 ALL /ATI/ICAL 9VE/IGATIONS MU/ BE LOOK$ AT ) 
A SKEPTICAL EYE1 A REQUIREM5T ?AT ( C\RSE IS (T5 =GOTT51 S9CE SIMPLY 
AS A RESULT ( BE+ PUBLI%$1 NUMB]S & TABLES ACQUIRE AN AU?ORITY ?AT 9 
REALITY !Y DO NOT DES]VE ,OSC> ,MORG5/]N HAS PO9T$ \T ?AT ! 
/ATI/ICS RELEVANT TO ! AMPLITUDE1 ! 9T]ACTIONS1 & ! HI/ORICAL 
CORRESPOND5CES ( CYCLICAL WAVES >E COMPLETELY UNC]TA91 AL?\< ?IS FLAW 
IS = ! MO/ P>T IGNOR$4 ,! ACCEPT$ DATA >E NOT FREE FROM ]ROR & ! 
JUDGM5TS MADE ON !IR BASIS >E OP5 TO D\BT4 

,DESPITE ! ACKN[L$G$ DEFICI5CIES ( /ATI/ICAL TE*NIQUES & ! 
CONFLICT+ 9T]PRETATIONS ( ! DATA1 ! RESULTS OBTA9$ BY ?IS K9D ( 
RESE>* DO REVEAL ! CYCLICAL MOVEM5T ( CAPITALI/ DEVELOPM5T4 ,BUT ?IS 
ONLY CONFIRM$ :AT WAS ALREADY OBVI\S FROM ! QUALITATIVE SIDE4 ,! S]IES 
( CRISIS YE>S - #a#h#a#e1 #a#h#b#e1 #a#h#c#f1 #a#h#d#g1 #a#h#e#g1 #ahff - SUGGE/$ 
! EXI/5CE ( A T5-YE> CYCLE1 AL?\< IT C\LD NOT BE E/ABLI%$ :Y ! 
9DU/RIAL CYCLE HAD ?IS P>TICUL> RHY?M4 ,LAT] CRISES & ! DATA WORK$ 
UP FROM PA/ CRISES PO9T$ TO A LESS PRON\NC$ REGUL>ITY 9 ! ONSET ( 
CRISIS P]IODS1 :I* 9 ANY CASE HAD DIFF]5T EFFECTS 9 DIFF]5T C\NTRIES4 
,( C\RSE1 IT C\LD ALSO BE %[N ?AT ) ! PASSAGE ( TIME ! PH5OM5A 
( CRISIS TOOK ON AN EV]MORE 9T]NATIONAL & UNI=M *>ACT]4 ,! MORE 
EXACT ANALYSIS ( /ATI/ICAL TIME S]IES YIELD$ BO? SMALL] CYCLICAL 
MOVEM5TS )9 ! TWO PHASES ( ! BUS9ESS CYCLE & SO-CALL$ LONG WAVES 
5COMPASS+ %ORT] WAVE MOVEM5TS4 ,! SECOND ( !SE PUT BUS9ESS-CYCLE 
FLUCTUATIONS 9TO ! CONTEXT ( AN UND]LY+ TR5D ! 0LONG 
WAVE0 OR 0SECUL> TR5D10 ) A WAVEL5G? E/IMAT$1 
DEP5D+ ON ! CALCULATION1 AT EI!R TW5TY-FIVE OR FIFTY YE>S4 

,ALL !SE CASES REPRES5T$ DIFF]5T USES & 9T]PRETATIONS ( 
/ATI/ICAL TIME S]IES1 :I* BY !MSELVES C\LD LEAD ONLY TO PROVISIONAL 
/ATEM5TS ( PROBABILITY4 ,! 0LONG WAVE0 !ORY HAS NEV]!LESS 
MA9TA9$ ITS P[] TO FASC9ATE UNTIL TODAY1 S9CE ON ! ONE H& IT ALL[S 
! B\RGEOISIE TO S9K ! IRREFUTABLE ,M>XIAN LAW ( CRISIS 9 A MY/]I\S1 
EPO*AL WAVE MOTION ( ECONOMIC LIFE1 & ON ! O!R H& IT GIVES ! 
CRITICS ( B\RGEOIS SOCIETY AN OPPORTUNITY TO ADH]E TO ! 9EVITABILITY ( 
CRISES DESPITE !IR *ANG+ P]IODICITY4 ,BUT ! /ATI/ICAL DATA !MSELVES 
(F] NO EXPLANATION = ! 0LONG WAVES10 S9CE ! HYPO!SES >E 
LACK+ ?AT ALONE C\LD LEAD TO !IR 9T]PRETATION4 

,FROM !SE BEWILD]+ DESCRIPTIONS ( V>I\S TYPES ( CYCLES NEI!R CAN 
%ORT-RUN PR$ICTIONS BE MADE NOR LONG-RANGE POLICY BE DEF9$1 AS EV]Y CYCLE 
HAS ITS P>TICUL> *>ACT] & ACCORD+LY CALLS = MEASURES TAILOR$ TO IT1 
& H5CE NOT DECIDABLE 9 ADVANCE1 ) EQUALLY 9CALCULABLE CONSEQU5CES4 
,AL?\< A CYCLE POLICY 9 ! BROAD S5SE IS A PRACTICAL IMPOSSIBILITY SIMPLY 
BECAUSE ( ! PRIVATE 9T]E/S ?AT GOV]N SOCIETY1 IT WAS NONE!LESS 
ATTEMPT$ TO MAKE ! OV]ALL TR5D ( BUS9ESS P]CEPTIBLE TO ! G5]AL 
PUBLIC BY MEANS ( SO-CALL$ BUS9ESS B>OMET]S1 9 ! HOPE !REBY ( 
9FLU5C+ ! ECONOMY 9 A B5EFICIAL WAY4 ,! DISAPPO9T+ RESULTS ( ?IS 
ATTEMPT PUT AN 5D TO IT1 & BUS9ESS-CYCLE RESE>* REMA9$ A FIELD )9 
ECONOMIC HI/ORY4 

,V>I\S !ORIES ( CAPITALI/ CRISIS1 AIM+ 9 !IR RESULTS AT ! 
CONFIRMATION ( PRECONCEIV$ IDEAS1 HAD ALREADY BE5 SUGGE/$ )\T 
REF]5CE TO CYCLE RESE>*4 ,SOME TOOK ! HYPO!TICAL EQUILIBRIUM AS !IR 
PO9T ( DEP>TURE1 ONLY TO %[ H[ IT WAS VIOLAT$ 9 REALITY4 ,! ECONOMY 
C\LD EXP& FREE ( CRISIS ONLY IF ALL ITS ELEM5TS DEVELOP AT ! SAME TIME1 
SOME?+ :I*1 UN=TUNATELY1 IS NEV] ! 5 ,SE4 ,! BALANC+ ME*ANISM 
DOES NOT OP]ATE DIRECTLY BUT MANIFE/S ITSELF ONLY :5 ! V>I\S DEVIATIONS 
FROM ! NECESS>Y PROPORTIONALITY REA* !IR LIMITS4 ,! DEM& = 
COMMODITIES CANNOT BE DISCOV]$ 9 ADVANCE1 = EXAMPLE1 & PRODUCTION & 
ITS VOLUME !RE=E CANNOT BE ADJU/$ TO IT4 ,SO PRODUCTION EXCE$S DEM&1 
:I* LEADS TO DECL9+ PR(ITS1 BR++ ! EXPANSION PROCESS TO A HALT & 
RELEAS+ ! CRISIS4 ,?IS PROCESS IS ACC5TUAT$ BY ! CR$IT SY/EM1 S9CE 
L[ DISC\NT RATES /IMULATE NEW 9VE/M5TS1 :I* !N AFFECT ! :OLE 
ECONOMY TO A PO9T AT :I* ! EXT5SION ( CR$IT COMES UP AGA9/ ! LIMITS 
( BANK RES]VES & ) ?IS COMES TO AN 5D4 ,! RESULT+ RISE 9 9T]E/ 
RATES LEADS TO DEFLATION1 :I* ALSO GRIPS ! :OLE ECONOMY & 9TRODUCES A 
P]IOD ( DEPRESSION4 ,! R$UCTION ( DEM& RELATIVE TO PRODUCTION & 
CAPITAL ACCUMULATION >ISES EI!R SUBJECTIVELY1 FROM ! DECREAS+ M>G9AL 
UTILITY ( ! 9CREAS+ QUANTITY ( CONSUM] GOODS1 OR OBJECTIVELY1 FROM ! 
%R9K+ CONSUMPTION ( ! WORK+ POPULATION AS DET]M9$ BY ! WAGE 
SY/EM4 

,9 OPPOSITION TO SU* VIEWS ! ADH]5TS ( 0PURE !ORY10 :O 
NOT ONLY />T$ 9 !IR REASON+ FROM EQUILIBRIUM BUT REMA9$ !RE1 
9SI/$ ?AT ! CRISIS SITUATION %\LD BE BLAM$ NOT ON ! SY/EM BUT ON 
>BITR>Y DISREG>D = OR 9T]F]5CE ,I ) ITS REGULATORY FUNCTIONS4 ,!Y 
TOOK !IR /& ON ! ABSOLUTE VALIDITY ( ,SAY'S LAW ( ! M>KET & 
CONSEQU5TLY F\ND IT SELF-EVID5T ?AT :5 MORE IS CONSUM$1 LESS WILL BE 
9VE/$1 & :5 MORE IS 9VE/$1 LESS CAN BE CONSUM$4 ,9 EI!R CASE ! 
EQUILIBRIUM ( PRODUCTION & CONSUMPTION REMA9S 9TACT4 ,( C\RSE1 TO ]R IS 
HUMAN & CAN LEAD TO BAD 9VE/M5TS2 ! CONSEQU5CES ( SU* ]RORS1 
H[EV]1 DISAPPE> ( !MSELVES AS 5TREPR5EURS ADAPT TO ! *ANG$ M>KET 
CONDITIONS4 ,!RE IS NO PO9T 9 RACK+ ONE'S BRA9 OV] ! CRISIS 
S9CE ! PRICE ME*ANISM ALSO MAKES IT POSSIBLE TO OV]COME :ATEV] 
DI/ORTIONS ( ! ECONOMY MAY APPE>4 ,?AT !SE DI/ORTIONS CAN 5D UP HAV+ 
V]Y F>-REA*+ EFFECTS 9 ONE OR ANO!R PHASE ( ! CYCLE IS A REFLECTION 
LESS ( ! NATURE OR ! SY/EM ?AN ( ! PSY*OLOGICAL PROP]TIES ( HUMAN 
BE+S4 ,AL?\< OBJECTIVE *ANGES 5G5D] CYCLICAL MOVEM5T 9 ! ECONOMY1 
SAY+ ?IS LEAVES UNANSW]$ ! QUE/ION3 

:Y IS ?IS MOVEM5T FIR/ PU%$ SO F> 9 ONE DIRECTION1 
ONLY TO BE LAT] REV]S$8 ,:Y DOES IT LEAD TO AN 9CORRECT RELATION%IP 
BETWE5 CONSUMPTION & PRODUCTION OV] TIME1 9/EAD ( A P]MAN5T1 ONE-TIME 
*ANGE 9 ?IS RELATION%IP8 ,?IS QUE/ION CAN ONLY BE ANSW]$ 9 A NON 
>TIFICIAL WAY BY A 0PSY*OLOGICAL0 !ORY4 

,! C\RSE ( ECONOMIC AFFAIRS CAN ONLY BE SAID TO BE DYNAMIC 0:5 WE 
F9D1 ON ! HI<E/ LEVEL ( !ORETICAL AB/RACTION AS WELL AS 9 REALITY NO 
T5D5CY T[>D ! E/ABLI%M5T ( A /ATIC EQUILIBRIUM40 ,! 
ASSUMPTION ?AT !RE IS SU* A T5D5CY 9 ! CON/RUCTION ( !ORIES1 
:E!R !Y D5I$ OR RECOGNIZ$ ! T5D5CY TO CRISIS AS WELL1 RUL$ \T 
FROM ! />T ANY REAL 9SI<T 9TO ! DYNAMIC ( ! CAPITALI/ SY/EM4 ,SU* 
!ORIES MU/ ALWAYS BE 9 CONTRADICTION ) REALITY1 DESPITE ! GREATE/ 
EF=TS TO ESCAPE ?IS4 ,! FUTILITY ( TRY+ TO COMPREH5D CAPITALI/ 
DEVELOPM5T ) ! ME?ODS ( CLASSICAL & NEO-CLASSICAL !ORY L$ 9 ! 
B\RGEOIS CAMP ITSELF TO A %>P CRITIQUE ( !SE !ORIES & TO NEW ATTEMPTS 
TO APPROA* ! LAWS ( DEVELOPM5T BY O!R PA?S4 

,ACCORD+ TO ,SMI? & ,RIC>DO1 ! ULTIMATE BASIS ( ECONOMICS WAS HUMAN 
NATURE1 P>TICUL>LY ! PROP5SITY TO EX*ANGE1 BY :I* MAN IS DIFF]5TIAT$ 
FROM ANIMALS4 ,! DIVISION ( LABOR1 CLASSES1 ! M>KET1 & ! ACCUMULATION 
( CAPITAL W]E SE5 AS NATURAL PH5OM5A ?AT NEI!R C\LD BE NOR %\LD BE 
*ANG$4 ,MOREOV]1 ! POLITICAL ECONOMY DEVELOP$ 9 ,5GL& TOOK UP ! IDEAS 
( ! ,FR5* PHYSIOCRATS1 NOTABLY ! ASSUMPTION ?AT A SMOO?-RUNN+ ECONOMY 
IS 9 ! NATURE ( ?+S1 & ?AT EV]Y?+ WILL TURN \T = ! BE/ IF 
?IS NATURAL ORD] ( ?+S IS UNDI/URB$4 ,! PHYSIOCRATS' !ME SONG1 
LAISSEZ FAIRE1 BECAME A MORAL ELEM5T 9 ! CLASSICAL !ORY4 ,:ILE ?IS MORAL 
PR9CIPLE WAS EX*ANG$ -TO SOME EXT5T ALREADY BY ,RIC>DO & AFT] HIM 
EV5 MORE WIDELY - = CONCEPTIONS BORR[$ FROM ,MAL?US & ,D>W91 ! 
CAPITALI/ MODE ( PRODUCTION NEV]!LESS CONT9U$ TO PASS = A NATURE-GIV5 
ORD]4 

,) ,SOCIAL ,D>W9ISM WE SEE ! B\RGEOISIE AT ! HI< PO9T ( ITS 
SELF-UND]/&+4 ,IT HAD NO MORE NE$ ( ILLUSIONS AB\T ! *>ACT] ( 
SOCIETY4 ,! CLASS /RUGGLE WAS CONFUS$ ) ! G5]AL /RUGGLE = 
EXI/5CE1 ) :I* ALL PROGRESS IS PAT5TLY CONNECT$4 ,= ! ,SOCIAL 
,D>W9I/S EV]Y 9DIVIDUAL P]SON IS 9 COMPETITION ) EV]Y O!R P]SON1 
& ?IS COMPETITIVE /RUGGLE HAS NO?+ TO DO ) ! P>TICUL> SOCIAL 
RELATIONS ( CAPITALIZ+ BUT EXPRESSES ! OP]ATION )9 ! ECONOMIC REALM 
( A LAW ( NATURE4 ,IF ONE P]SON IS MORE SUCCESSFUL ?AN ANO!R1 ?IS IS 
BECAUSE !Y HAVE HAD DIFF]5T SOCIAL OPPORTUNITIES BUT BECAUSE ( !IR 
DIFF]+ 9DIVIDUAL APTITUDES4 ,IF ONE CAN AB/RACT FROM CLASS DIVISIONS1 ONE 
MI<T AS WELL AB/RACT FROM ! RELATIONS ( PRODUCTION 9 :I* !Y MANIFE/ 
!MSELVES4 

,AS A !ORY ( EVOLUTION ,D>W9ISM IMPLI$ A SL[ BUT CONT9U\S 
TRANS=MATION ( NATURE1 SOCIETY1 & MANK9D4 ,ACCORD+LY1 ! PRES5T /ATE 
( SOCIETY MU/ ALSO BE REG>D$ AS TRANSITORY & H5CE AS A PROCESS ?AT 
C\LD NOT BE COMPREH5D$ BY MEANS ( ! /ATICS ( 0PURE0 OR 
OR?ODOX !ORY4 ,ACCORD+ TO ,?OR/E9 ,VEBL51 ! F\ND] ( ! ,AM]ICAN 
09/ITUTIONALI/0 S*OOL1 OR?ODOX !ORY'S NEGLECT ( 
DEVELOPM5T & ITS TREATM5T ( SOCIAL RELATION%IPS 9 ISOLATION FROM ANY BUT 
AB/RACT ECONOMIC ASPECTS PROHIBIT$ ANY REAL 9SI<T 9TO SOCIO-ECONOMIC 
REALITY4 ,! TRANS=MATIONS ( SOCIETY >E TO BE SE51 ACCORD+ TO ,VEBL51 9 
! *ANGES ( ITS 9/ITUTIONS1 BY :I* HE MEANT ! CULTURALLY DEVELOP$ 
CU/OMS OR HABITS ( ?\<T & FEEL+ ?AT HE ?\<T DET]M9E ! WAY & 
MANN] 9 :I* PEOPLE SATISFY !IR VITAL NE$S4 ,CULTURAL DEVELOPM5T IS A 
SL[ BUT UN9T]RUPT$ PROCESS ( SMALL BUT CUMULATIVE *ANGES ?AT RESULTS 9 
NEW CU/OMS & NEW SOCIAL RELATIONS4 

,! CURR5T RESULT ( ?IS G5]AL PROCESS ( DEVELOPM5T & ! 
ACCUMULATION ( EXP]I5CE IS1 ACCORD+ TO ,VEBL51 A SET ( CU/OMS OR 
9/ITUTIONS :OSE EXPRESSION WE SEE 9 ! MA*9E PROCESS ( PRODUCTION & 
9 CAPITALI/ 5TREPR5EUR%IP4 ,AL?\< !Y DEVELOP$ SIMULTANE\SLY1 !SE 
9/ITUTIONS >E 9 CONFLICT3 ! AIM ( ! FIR/ IS GOODS PRODUCTION1 ?AT ( 
! SECOND1 MONEY MAK+4 ,:ILE 9DU/RY REPRES5TS ! MAT]IAL BASIS ( 
MOD]N CIVILIZATION1 ?IS CIVILIZATION IS CONTROLL$ NOT BY 9DU/RY BUT BY 
BUS9ESSM54 ,FROM ?IS >ISES ALL ! ABSURDITIES ( ! ECONOMY & ITS 
CRISES4 

,! PR(IT MOTIVE ?AT DOM9ATES ! ECONOMY CONDITIONS BO? ITS RISE & 
ITS DECL9E4 ,PR(ITS >ISE FROM ! DIFF]5CE BETWE5 ! CO/ PRICES & ! 
M>KET PRICES REALIZ$4 ,! VALUE ( AN 5T]PRISE1 H[EV]1 IS E/IMAT$ BY 
REF]5CE NOT TO ! PR(ITS IT ACTUALLY E>NS BUT TO EXPECT$ FUTURE PR(ITS4 
,! NOM9AL CAPITAL VALUE DIFF]S FROM ! ACTUAL CAPITAL VALUE1 BUT IT IS ! 
=M] ?AT DET]M9ES ! CR$IT WOR?9ESS ( ! 5T]PRISE4 ,COMPETITION 
COMPELS ! 9CREASE ( PRODUCTIVITY1 ! EXPANSION ( ! 5T]PRISES1 & 
!RE=E ( !IR BORR[+S1 :I* AFFECT FUTURE PR(ITABILITY4 ,SO LONG AS 
!RE IS 5\< MONEY TO BE BORR[$ & ! PROSP]ITY 5G5D]$ BY EXPANSION 
HOLDS1 ! GR[+ SUM ( CAPITAL VALUE REPRES5TS NO PROBLEM4 ,O!RWISE1 
H[EV]1 A DIV]G5CE >ISES BETWE5 ! 9FLAT$ CAPITAL VALUES & !IR 
ACTUAL PR(ITS ?AT LEADS TO A PROCESS ( LIQUIDATION & ! DEPRESSION TO 
:I* ?IS GIVES RISE4 

,?US PROSP]ITY BE>S ! SE$S ( ITS [N DEMISE4 ,PRODUCTIVITY & 
PRODUCTION 9CREASE AS PR(ITS GR[ 9 T&EM ALONG ) CR$IT & ! 
ACCOMPANY+ PRICE 9CREASES1 UNTIL ! EXT5SION ( CR$IT COMES UP AGA9/ 
ITS [N LIMITS & ?OSE IMPOS$ BY ! CONTRACTION ( PR(ITS4 ,AS LOAN CAPITAL 
BECOMES SC>CE & 9T]E/ RATES RISE1 ! E>LI] RELATION%IP BETWE5 ! 
PR(ITS EXPECT$ & ! CAPITAL 9VE/$ ON ?IS BASIS *ANGES1 COMPELL+ A 
DEFLATION>Y REVISION ( CAPITAL VALUES4 ,TO ?IS >E ADD$ ! CAUSES ( 
S9K+ PR(ITABILITY RESULT+ FROM PRODUCTION ITSELF1 SU* AS RIS+ WAGES1 A 
DECREAS+ 9T5SITY ( LABOR1 & ! SPREAD+ DISORGANIZATION ( ! 
5T]PRISES1 :I* >ISES FROM ! HECTIC *>ACT] ( ! BOOM4 

,?\< ,VEBL5'S DESCRIPTION ( ! C\RSE ( ! BUS9ESS CYCLE DOES 
NOT DIFF] FROM ?OSE GIV5 BY O!RS1 HE DOES H[EV] RELATE IT TO ! 
CONFLICT BETWE5 PRODUCTION & CAPITALI/ PRODUCTION4 ,HE SEES ?AT IT IS ONLY 
BECAUSE ! AIM ( PRODUCTION IS ! 9 CREASE ( CAPITAL RA!R ?AN ! 
SATISFACTION ( HUMAN NE$S ?AT ! LAM5TABLE CONDITIONS ( CAPITALI/ 
SOCIETY1 & ! CRISES *>ACT]IZ$ BY OV]PRODUCTION & UND]CONSUMPTION1 
>ISE4 ,UNLIKE O!R OBS]V]S1 ,VEBL5 SAW CRISES NOT AS PH5OM5A DET]M9$ BY 
EQUILIBRIUM RELATIONS & REPRES5T+ NO?+ BUT TEMPOR>Y DEVIATIONS FROM 
! NORM1 BUT AS ! NORMAL CONDITION ( CAPITALI/ SOCIETY AS SOON AS IT HAS 
ATTA9$ A C]TA9 MATURITY4 ,FROM ! CRISIS CYCLE ( AN E>LI] P]IOD >OSE 
! *RONIC CRISIS ( DEVELOP$ CAPITALISM1 :I* C\LD BE ELIM9AT$ ONLY BY A 
TRANS=MATION ( ! SOCIAL SY/EM4 

,S9CE !RE EXI/ NO /ATIC /ATE & NO ECONOMIC EQUILIBRIUM1 IT CANNOT BE 
EXPECT$1 ACCORD+ TO ,VEBL51 ?AT ! CAPITALI/ SY/EM WILL DEVELOP 
CONT9U\SLY DESPITE OR BY MEANS ( ITS CYCLICAL FLUCTUATIONS4 ,! SY/EM AS 
SU* CONTA9S NO EQUILIBRATION ME*ANISM4 ,DUR+ ! MONEY-&-CR$IT 
SOCIETY'S P]IOD ( ASC5DANCE1 ! P]IODICITY ( CRISIS HAD NO?+ TO 
DO ) ! SY/EM ITSELF BUT WAS MO/ LIKELY DUE TO EXT]NAL CIRCUM/ANCES4 
,! DIV]G5CE BETWE5 CAPITALISM & PR(ITABILITY C\LD /ILL = A :ILE BE 
CONTROLL$ BY EXTRA SY/EMIC MEANS1 SU* AS MONET>Y 9FLATION OR AN 5L>G$ 
& *EAP5$ GOLD PRODUCTION & ! PRICE 9CREASES B\ND UP ) ?IS4 ,! 
CRISES ?AT P]IODICALLY >OSE W]E = ! MO/ P>T COMM]CIAL CRISES1 QUITE 
DIFF]5T FROM ! CRISES ( 9DU/RIAL SOCIETY4 ,) ! DEVELOPM5T ( ! 
LATT]1 ! CONTRADICTION BETWE5 ! EXIG5CIES ( CAPITAL & ! PR(ITS 
ATTA9ABLE CANNOT BE EV5 MOM5T>ILY OV]COME4 ,FROM ?IS >ISES ! *RONIC 
CRISIS CONDITION4 

,ACCORD+ TO ,VEBL5 IT IS ( ! ESS5CE ( MA*9E PRODUCTION1 & ! 
CONT9UALLY 9CREAS+ PRODUCTIVITY ?AT GOES ) IT1 ?AT UND] COMPETITIVE 
CONDITIONS PRICES FALL & ! PR(IT ( A GIV5 CAPITAL DECL9ES4 ,! 
MA9T5ANCE ( PR(ITS REQUIRES ! 5L>GEM5T ( ! 9DIVIDUAL CAPITALS4 
,?US A SORT ( RACE BEG9S BETWE5 CAPITAL EXPANSION & ! T5D5CY ( 
PR(ITS TO FALL1 :I* ( C\RSE ONLY ! LATT] CAN W94 ,AS CAPITAL VALUES & 
! ATTA9ABLE PR(ITS 9CREAS+LY DIV]GE1 AN ATTEMPT TO COMBAT ?IS IS FIR/ 
MADE ?R\< TRU/IFICATION & MONOPOLIZATION4 ,MONOPOLIZATION1 H[EV]1 GIVES 
RISE TO MONOPOLI/IC COMPETITION & A NEW />T TO ! RACE4 ,! NE$ = 
PR(ITABLE PRICES IS !N MET BY AN EXTRAORD9>Y GR[? ( UNPR(ITABLE 
CONSUMPTION A PRODUCTION ( WA/E2 BUT ?IS 5C\NT]S IMPASSABLE B>RI]S4 .<HE 
5D RESULT IS A SITUATION ?AT CAN ONLY BE DESCRIB$ AS ONE ( *RONIC CRISIS4 
,VEBL5 BELIEV$ ?AT ?IS NO LONG] SURM\NTABLE CRISIS ALREADY EXI/$ & 
ACCORD+LY1 ?AT A G5]AL BREAKD[N ( SOCIETY C\LD BE AVOID$ ONLY BY ! 
REPLACEM5T ( ! ECONOMIC SY/EM 7AS A MONEY-&-CR$IT SY/EM7 BY ANO!R 
SY/EM ( PRODUCTION4 

,?IS NEW SY/EM W\LD BE ! EXI/+ SY/EM ( PRODUCTION )\T ITS 
CAPITALI/ P]V]SIONS4 ,IT WAS = ,VEBL5 ALREADY ANTICIPAT$ III ! WID5+ 
SPLIT BETWE5 [N]%IP & MANAGEM5T & 9 A GR[+ CONSCI\SNESS ?AT 
9DU/RIAL PRODUCTION CAN PROGRESS )\T ! CAPITALI/ 9/ITUTIONS 
P>ASITIC ON IT4 ,! 9CREAS+ SABOTAGE ( 9DU/RIAL DEVELOPM5T BY ! DECAY 
( PR(IT PRODUCTION 7TOGE!R ) ! GR[+ SIGNIFICANCE ( TE*NOLOGY & 
MA*9E PRODUCTION7 W\LD DE/ROY ANTIQUAT$ CU/OMS & ALL[ NEW ONES TO 
>ISE ?AT W]E BETT] SUIT$ TO 9DU/RIAL PRODUCTION & TO FUR!R SOCIAL 
DEVELOPM5T4 

,AS IT BECAME A BRAN* ( B\RGEOIS ECONOMICS1 9/ITUTIONALISM1 DESPITE ITS 
CRITICAL MOM5TS1 LO/ MU* ( ! CONSI/5CY TO BE F\ND 9 ,VEBL5'S 
WORK4 ,IF ,VEBL5 7LIKE ,ADAM ,SMI?7 C\LD 9 ! LA/ ANALYSIS ONLY TRACE ! 
RU9 ( CAPITAL BACK TO ! EFFECTS ( 9CREAS+ COMPETITION1 HIS AV]SION TO 
CAPITALI/ CIVILIZATION EXT5D$ TO ALL ITS ASPECTS4 ,! CRITIQUE MADE BY HIS 
FOLL[]S1 9 CONTRA/1 >OSE MORE FROM ANXIETY AB\T ! ?REAT5+ 5D ( 
CAPITALI/ SOCIETY ?AN FROM A DESIRE = NEW SOCIAL RELATIONS4 ,= !M ! 
IRRESPONSIBLE BEHAVIOR ( ! P[]FUL 0PR(IT HY5AS0 DROVE ! 
SY/EM TO COLLAPSE2 ?US 0,9/ITUTIONALISM IS A CALL TO ACTION1 AN ,S,O,S TO 
SAVE A S9K+ WORLD40 ,CONSCI\S 9T]V5TION 9 ECONOMIC PROCESSES WAS 
NECESS>Y IF A WAY \T ( ! SPREAD+ MIS]Y WAS TO BE F\ND4 ,OR?ODOX !ORY 
(F]$ NO H&LE ON A SOLUTION TO ! M\NT+ SOCIAL PROBLEMS & CONFLICTS4 
,H]E 9/ITUTIONALISM WI%$ TO BE ( HELP BY SUGGE/+ A SET ( RE=M 
MEASURES1 PO9T+ 9 ! DIRECTION ( A PLANN$ ECONOMY1 ?AT W\LD OV]COME 
! DEFECTS ( COMPETITIVE CAPITALISM4 

,) ?IS TO (F]1 9/ITUTIONALISM C\LD W9 NO EXT5SIVE OR LA/+ 
9FLU5CE & WAS SE5 AS A CURIOSITY1 CAPABLE ONLY ( S]V+1 9 A MODIFI$ 
=M AS AN IDEOLOGICAL F\NDATION = TEMPOR>Y GOV]NM5T 9T]V5TIONS 9 
CRISIS SITUATIONS4 ,IT PLAY$ ALL ! GREAT] ROLE 9 V>I\S RE=M MOVEM5TS1 
P>TICUL>LY 9 ! ,5GLI% ,FABIAN ,SOCIETY4 ,OR?ODOX !ORY SUBDIVID$ 9TO 
NUM]\S SPECIALTIES SUBORD9AT$ TO 'PURE !ORY0-CONTROLL$ ! FIELD 
( !ORETICAL ECONOMICS1 (F]+ A RAPIDLY GR[+ NUMB] ( ACADEMICS ! 
OPPORTUNITY TO MAKE A RELATIVELY GOOD LIV+4 ,! PURELY IDEOLOGICAL FUNCTION 
( !ORETICAL ECONOMICS WAS ALSO EVID5C$ BY ! GR[? ( BUS9ESS S*OOLS1 
D$ICAT$ TO ! PRACTICAL LIFE ( BUS9ESS1 :I* REMA9$ UNDI/URB$ BY 
!ORETICAL ECONOMICS4 

,AS AN IDEOLOGICAL APOLOGIA = ! CAPITALI/ SY/EM1 !ORETICAL ECONOMICS 
F\ND ITSELF MORE & MORE EMB>RASS$ ?ANKS TO ITS 9CREAS+LY OBVI\S 
IRRELEVANCE TO REAL ECONOMIC AFFAIRS ,S9CE IT C\LD NOT APPROA* ?IS REALITY 
)\T R5\NC+ ITSELF IT TOOK ! OPPOSITE ROAD TO GREAT] AB/RACTION 9 
ORD] TO BE ABLE TO ESCAPE EV]Y CONFRONTATION ) REALITY ,IT N[ NO LONG] 
9VE/IGAT$ M]ELY ! ECONOMY BUT A PR9CIPLE ( RATIONALITY1 PURPORT$LY 
RELEVANT TO ALL HUMAN ACTION1 :I* ADAPTS SC>CE MEANS TO ALT]NATIVE 5DS 9 
ORD] TO A*IEVE ! BE/ POSSIBLE RESULT4 ,ECONOMICS CONC5TRAT$1 9 ?IS 
CONCEPTION1 

ON A P>TICUL> ASPECT ( BEHAVIOR1 ! =M IMPOS$ BY ! 
9FLU5CE ( SC>CITY4 ,IT FOLL[S FROM ?IS1 !RE=E1 ?AT 9S(> AS IT 
PRES5TS ?IS ASPECT1 ANY K9D ( HUMAN BEHAVIOR FALLS )9 ! SCOPE ( 
ECONOMIC G5]ALIZATIONS4 ,WE DO NOT SAY ?AT ! PRODUCTION ( POTATOES IS 
ECONOMIC ACTIVITY & ! PRODUCTION ( PHILOSOPHY IS NOT4 ,WE SAY RA!R ?AT1 
9S(> AS EI!R K9D ( ACTIVITY 9VOLVES ! REL9QUI%M5T ( O!R DESIR$ 
ALT]NATIVES1 IT HAS ITS ECONOMIC ASPECT4 ,!RE >E NO LIMITATIONS ON ! 
SUBJECT-MATT] ( ,ECONOMIC ,SCI5CE SAVE ?IS4 

,?IS EXT5SION ( ECONOMICS TO EV]Y SUBJECT MATT] AS A PR9CIPLE ( 
RATIONALITY WAS AT ! SAME TIME ITS R$UCTION TO A PURELY ANALYTICAL 
PROC$URE1 :I* PROHIBIT$ IT FROM SAY+ ANY?+ AT ALL AB\T ! ECONOMIC 
SY/EM ITSELF4 ,?US ECONOMIC CRISIS1 TOO1 LAY \TSIDE ! SPH]E ( 9T]E/ ( 
ECONOMICS1 & IT REQUIR$ A WORLDWIDE CRISIS1 %AK+ ! GLOBE = YE>S1 TO 
OV]COME ?IS LACK ( 9T]E/4 

,FROM 3 ,M>XI/S4ORG4 

,*RONOLOGY 3 
,M>* #c1 #bba 3 ,*APT] #a -- ,ADD$4 

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