Re: Surplus Value or Profit

[Gunnar Tómasson <gunnar.tomasson@xxxxxxxxxxx>]

Re. the following:

> Yes, I agree that Samuelson's protrayal of Keynes'
> circular flow model is more or less closed as an
> abstract system (I am not really qualifying here ...
> just fudging due to lack of time)
>
> But it was Samuelson who provided the closure, not
> Keynes.

Comment:

The thrust of my argument is that Keynes, while sketching a Closed System in
Ch. 4 ('The Choice of Units') and in his summary statement thereof in Ch. 6
('The Definition of Income, Saving, and Investment') - "In short - Income =
value of output = consumption + investment." - incongruously reasoned AS IF
"Surplus Value or Profit" could in principle be an attribute of a Closed
System.

In the context of Newtonian Mechanics, a strictly analogous methodological
no-no would be replacement of the Action = Reaction Axiom by an Action <
Reaction Axiom.

As indicated by my comments below on selected passages from Ch. 4, there is
no question that Keynes set out to predicate his analysis on a Closed System
view of entrepreneurial market economies:

First.

"Obviously our quantitative analysis must be expressed without using any
quantitatively vague expressions. [...]  Our precision will be a mock
precision if we try to use ... partly vague and non-quantitative concepts as
the basis of a quantitative analysis."

It is "quantitatively vague" to define "income" as the sum of (i) Factor
Supply Cost/Earnings and (ii) Final Demand Inflation.

Second.

"When, for purposes of description or rough comparison, we wish to speak of
an increase of output, we must rely on the general presumption that the
amount of employment associated with a given capital equipment will be a
satisfactory index of the amount of resultant output; - the two being
presumed to increase and decrease together, though not in a definite
numerical proportion.

"In dealing with the theory of employment I propose, therefore, to make use
of only two fundamental units of quantity, namely, quantities of money-value
and quantities of employment.  The first of these is strictly homogeneous,
and the second can be made so.  For, in so far as different grades and kinds
of labour and salaried assistance enjoy a more or less fixed relative
remuneration, the quantity of employment can be sufficiently defined for our
purposes by taking an hour's employment of ordinary labour as our unit and
weighting an hour's employment of special labour in proportion to its
remuneration; i.e. an hour of special labour remunerated at double ordinary
rates will count as two units.  We shall call the unit in which the quantity
of employment is measured the labour-unit; and the money-wage of a
labour-unit we shall call the wage unit.  Thus, if E is the wages (and
salaries) bill, W the wage-unit, and N the quantity of employment, E = N.W."

Here, Keynes specifies "income" in terms of the "quantities of money-value"
equivalent of "quantities of employment" - or, in terms of (i) above, in
terms of Factor Supply Cost/Earnings = E = N.W.

Third.

"It is my belief that much unnecessary perplexity can be avoided if we limit
ourselves strictly to the two units, money and labour, when we are dealing
with the behaviour of the economic system as a whole..."

In Ch. 6, Keynes disregarded his own advice and generated much "unnecessary
perplexity" by reasoning as if 'Surplus Value of Profit' could in principle
be part of "income".

Gunnar


----- Original Message -----
From: "Bruce McFarling" <ecbm@xxxxxxxxxxxxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Sent: Tuesday, November 13, 2001 9:33 PM
Subject: Re: Surplus Value or Profit


> Yes, I agree that Samuelson's protrayal of Keynes'
> circular flow model is more or less closed as an
> abstract system (I am not really qualifying here ...
> just fudging due to lack of time)
>
> But it was Samuelson who provided the closure, not
> Keynes.
>
> Primary Demand Plus Secondary Demand generates
> Income by the principle of effective demand, and
> it is income that generates secondary demand by
> the definition of secondary demand.  However, the
> level of primary demand is analytically open, both
> by definition (it is the aggregate of the creation
> of purchasing power through financial arrangments
> other than expenditure of income) and as Keynes
> preforms his own analysis of it.  And it is the
> open facet of primary demand that Post Keynesian
> theory insists upon in its focus on true uncertainty:
> the net present value of an investment is specifically
> influenced but not determined by economic conditions,
> because it could only be determined if we were able to
> receive information from future states of the economy.
>
>
> Virtually,
>
> Bruce McFarling, Shortland, NSW
> ecbm@xxxxxxxxxxxxxxxxxxx
>
>