Macroeconomists must grasp the difference between economic value and exchange value.
the exchange solution is a dynamic equilibrium resting on the equilibria of markets. … every product of the exchange economy must mate through exchange with some other product, and the ratio in which the two mate is the exchange value. The generality of this equilibrium makes it indifferent to endless complexity and endless change; for it stands on a level above all particular products and all particular modes of production. (CWL 21, 34-35)
… Adam Smith and all the proponents of the “labor” theory of value were never able to clarify the relationship between exchange value and “toil and trouble” as the measure of value. Lonergan shifted the issue entirely by explaining that an “economic value relates an object to human effort, but an exchange value relates objects among themselves.”31 (CWL 21, 31) [Fred Lawrence; “Money, Institutions, and The Human Good,” in Liddy, 2010, 183-84]
… , like Smith, Locke, Ricardo, and Marx later on, Aristotle did not seem to understand money in terms of exchange value, and therefore as relating objects among themselves in relation to the concomitance or lack of concomitance between “the real flow of property, goods, and services and the dummy flow being given and taken in exchange for the real flow.”39 CWL 21, 40 Still less did they grasp that in an advanced industrial society, the real flow and the money flow are channeled within two separate circuits of production and circulation functionally distinguished into producer goods and consumer goods, and operating in real time in accord with distinct phases of expansion. Besides misunderstanding money of account, they misunderstood the relationship of money to time. [Fred Lawrence; “Money, Institutions, and The Human Good,” in Liddy, 2010, 186] Continue reading →