Re: [OPE] estimating the severity and duration of a capitalist economic crisis

[Dave Zachariah <davez@xxxxxx>]

glevy@xxxxxxxxx wrote:
> Well,
> that relates to - as you say - "long-run movements".  The
> questions at hand
> in an economic crisis are generally short-run: i.e.
> how long will a particular crisis
> last and how bad (for different
> classes and groups) will it get?  I think you
> need to look at
> other variables to explain the short- to medium-run changes.
>   

Jerry, there is a difference between variables used as indicators and 
variables used in explanations of those indicators. The fraction of 
capital making a loss is a direct indicator of the state of the economic 
system.

A predictor of how long an economic crisis will last could be the time 
derivative of the size of this fraction, once the fraction is shrinking 
average conditions for profitability are restored. Predictors of how the 
crisis will affect the working class are union density and the 
proportion of employees in firms within the low profit rate bracket.


In general --- by analogy from control theory --- a system is in a 
"crisis" when its regulatory mechanisms fail to correct the trajectory 
of its states to a stable path. I take the approach that historical 
processes have causes that are either proximate or ultimate. The 
proximate causes for a crisis may be short-term fluctuations in e.g. 
effective demand which are inherent to the system. They may be small 
perturbations which cause the system to diverge from a stable path.

In that case the search for an explanation must look toward more 
ultimate factors: why could the system not cope with such common 
fluctuations anymore? What were the underlying causes? They are often 
changes that have occurred over a longer period of time than the 
proximate causes.

//Dave Z
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