Re: Keynes and competition

[Paul Davidson <pdavidson@xxxxxxx>]

At 04:46 PM 5/25/01 +1000, you wrote:

> Copy and paste here my preceding remarks on
> the distinction between 
> degree of competition and perfect competition, and the argument that
> degrees of competition refers to the degree to which it involves 
> pure competition.  It doesn't make much sense to talk about perfect
> competition in the technical sense with reference to the GT, because
> the GT rules out the possibility of perfect information on all 
> matters of importance to a market decision.


yes but pure competition where P =MC is not ruled out by GT -- and in
fact that is what Keynes says in his response to Dunlop and Tarshis in
the 1939 EJ.  Also in chapter 19 he indicates that flexible market
prices cannot  per se AUTOMATICALLY PRODUCE FULL EMPLOYMENT

> I would say that impure
> competition indicates all market institutions 
> outside a certain narrowly defined group.  If the narrowly defined
> group of (very nearly) purely competitive market structures imply that
> the markets must clear, then the opposite SUFFICES to identify the 
> institutions as "non-pure
> competition"

Clearing of the product market, given profit making expectations leading
to Marshallian supply prices will occur in either pure competition or
impure competition (your terminology, not mine).




>  you cannot infer further
> that being "non-pure competition" implies non market
> clearing.

Nonsense! MUST have product market clearing to have point of effective
demand-- therefore if effective demand means anything in "any degree
of competition , it is just as relevant (and therefore product market
clearing) for any degree of competition.

> Under impure competition, BOTH
> non-market clearing and the role of 
> money can lead to unemployment.


No 1 Only the need for money and liquidity demands can result in
unemployment equilibrium as even Frank Hahn recognized and demonstrated
in his 1977  article that I cited earlier.

>   This is why Keynes had to
> insist 
> that his theory applied to whatever degree of competition, to make 
> clear that pursuing a higher and higher degree of competition is no
> cure-all to "the unemployment problem".

More importantly any degree of competition is neither a necessary or
sufficient condition for involuntary unemployment.  

> So rather than,
> "either/or", its non-market clearing IN ADDITION TO
> the role of money.


No!

> (Of course, if a government was
> fighting a WAR on unemployment, it 
> could offer a job to anyone willing to work at prevailing wages
> but unable to find work, "and declare victory in time for
> tea.")

Government does not have to hire all the unemployed -- because the
multiplier will assure some additional workers will be hired by private
sector.

Paul

Paul Davidson

Editor, JOURNAL OF POST KEYNESIAN ECONOMICS

Holly Chair of Excellence in Political Economy

Economics Department - University of Tennessee

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