Re: The unfinished 20th century

[Jim Devine <jdevine@xxxxxxxxxxxxxxx>]

Tom "Temps" Walker wrote:
> Chapman's analysis was the culmination of a tortuous process, begun by
> William Thornton, of dismantling the prejudices of the wages-fund doctrine
> as they continued to persist in marginalist thought.

1) The "wages fund doctrine" lives. Pick up almost any macroeconomics
textbook and you'll find that it assumes the existence of a discredited
aggregate production function for the economy. Many or most of them assume
that this production function is Cobb-Douglas, which means that at any
given time, the share of wages and salaries in national income is fixed by
technology. For a given national income and employment, that means that any
increase in the wage or salary of one group of workers in society leads to
a decline in the wages or salaries of all of the other workers in society.
Or it leads to a fall in the number of them employed. In this view, the
income share of workers can change, but only due to technology (or perhaps
cyclical changes in aggregate demand, but this shows up rarely). If this
isn't the "wage fund doctrine," I don't know what it is.

Of course, many of the more sophisticated economists at the self-defined
"best" schools (except the University of Chicago, I suppose) reject the
aggregate Cobb-Douglas production function and even the aggregate
production function, in favor of general equilibrium, game theory, and
other microeconomic models that shed little or no light on these questions.
But students are still given this nonsense, when they're beginning, so that
they can suffer the ideological impact of the concept even after they move
up the food-chain and learn more sophisticated economics (if they ever do).
The distribution of income is determined technologically.

Brad, you're a mainstream economist: what is the current view about the
"functional" distribution of income among neoclassicals? Or has this whole
question been dropped?

2) Tom, what is the content of Chapman's analysis? That is, as a
neoclassical, what did he see as wrong about the wages fund doctrine?

Jim Devine jdevine@xxxxxxx &  http://bellarmine.lmu.edu/~jdevine