Re: M-C-M' fallacy

["Schulte-baeuminghaus" <schulte.baeuminghaus@xxxxxxxxx>]

I thought what it was trying to say is that the earning - the producing -
the growing economically - depend on spending by the entrepreneur, the
investor, the producer.
He earns what he spends.
The worker, the consumer is an essential part of the equation - he has to be
there to buy, to consume what is produced; but his spending does not
directly bring about, as distinct from being a stimulus to, production.
I think this is in the current context that high consumer spending may not
cause the growth, high employment, etc, that we want. What is necessary is
that spending by the entrepreneur, the producer, the investor should stand
up. If it does not, then we are in trouble.
Does that - in the practical context of the present - make sense or is it a
nonsense?



James Cumes



----- Original Message -----
From: "William B. Ryan" <william_b_ryan@xxxxxxxxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Cc: <pdavidson@xxxxxxx>; <martinh@xxxxxxxxxxxxxxxxxxxxxx>;
<kwilde@xxxxxxxxxxxx>; <geoffrey.gardiner@xxxxxxxxxxxxxxx>;
<ChrisOfDulwich@xxxxxxx>; <schulte.baeuminghaus@xxxxxxxxx>
Sent: Wednesday, April 24, 2002 7:52 PM
Subject: Re: M-C-M' fallacy


>
> ----- Original Message -----
> From: "Schulte-baeuminghaus" <schulte.baeuminghaus@xxxxxxxxx>
> Date: Wed, 24 Apr 2002 12:10:08 +0200
> To: "William B. Ryan" <william_b_ryan@xxxxxxxxxxxxxxx>
> Subject: Re: M-C-M' fallacy
>
>
> > The consumer spends what he earns, the entrepreneur earns what he
spends.
> > Is that true?
> >
> >
> > James Cumes
> >
>
> Strictly speaking, no.
>
> This is Michal Kalecki's dictum which he expressed as "Capitalists get
what they spend; Workers spend what they get."
>
> Kalecki's version is more straightforward, for yours very much depends on
the definition of "earns."
>
> The dictum, which does have some heuristic value, is empirically false.
It abstracts time from the discussion.  It says nothing about the rate of
"getting" as compared to the rate of "spending."  They are by no means equal
in the real world.  It is as meaningful as saying that a falling object will
at some point strike the surface of the earth.
>
> The conventional approach to economics includes a great many
pre-industrial or pre-scientific concepts.  These are superstitions that
seem reasonable to our common sense, such as the belief in ghosts.
>
> It is difficult if not impossible to see the acceleration of a falling
object with the naked eye.  It seems that a falling object is falling at a
constant rate.  But we know almost intuitively that while you might safely
jump from a chair, you risk serious injury if you jump off a roof.  So
something is happening to a falling object as it falls.  More sophisticated
pre-scientific theories concluded that the speed of a falling object is
proportional to the distance it has fallen.  Most people today who didn't
pay attention in physics class still believe that.  It was through
experimentation that Galileo proved that its speed is proportional to the
TIME it has fallen.
>
> The entrepreneur and consumer spend from their lines of credit which can
take many forms, tangible and intangible.  Their lines of credit are,
ideally, proportional to their future incomes.
>
> In respect of the individual entrepreneur or consumer, he spends from his
line of credit which is based upon his future projected income, which is
prospectively greater than his income today.  It is from tomorrow's income
that he will repay the debt incurred today.