Re: elasticity of production

[dequech@xxxxxxxxxxxxxx]

Dear Basil,

The only part I disagree with is the one on the determinants of money
supply, where I would give more weight to the liquidity preference of banks
than you did. This is another discussion, though.

Cheers,
David

At 03:50 09/03/2001 -0500, you wrote:
>David
>
>Money is not a commodity like other commodities. It is a social convention,
>like a language. It is not produced using labor and capital by some
>technologically determined physical production function. There is no
>production function relationship for money.
>
>Having said that, it is of course true that banks employ labor and capital
>in the process of money creation. But the amount of money "produced" or
>better "supplied" is not a function of the quantity of labor and capital
>(means of production) employed.  The quantity of credit money supplied
>depends on the quantity of bank credit demanded, by borrowers who are
>judged by banks to be "credit-worthy", so long as banks are price-setters
>and quantity-takers in lending markets.
>
>I don't believe we have a disagreement?
>
>Basil
>
>
>
>At 09:10 AM 3/8/01 -0300, you wrote:
>>In response to Kazuhiro:
>>
>>
>>It is true that the argument of the elasticity of production appears in The
>>General Theory in the middle of Keynes's discussion of the own-rates of
>>interest. For the own-rate discussion, a variation in the quantity of an
>>asset is important, especially since Keynes related the returns on an asset
>>to its scarcity. However, I argued in my previous post that the elasticity
>>of production is defined by Keynes (in chapter 17 of the GT)  in terms of a
>>variation in the quantity of labour employed. Given this definition, the
>>distinction between endogenous and exogenous
>>money is not important for the discussion of the elasticity of production.
>>
>>In my view, if we want to think about how endogenous money relates to the
>>elasticity of production, two questions must be distinguished:
>>(1) can (a lot more of) labour be employed to produce (a larger quantity of)
>>money?
>>(2) can the supply of money increase?
>>
>>
>>Cheers,
>>David Dequech
>
>