Re: Method

["Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>]

Mat:

Re. the following:

By showing that savings are the result,
> and not the source, of growth, Keynes's theory overthrew one of the
> justifications of economic inequality.  Since lower and middle income
> earners have a higher propensity to consume, redistribution could even
> mean stronger growth.

Alas, Keynes never got his basic monetary ideas right, the idea that
"savings are the result, and not the source, of growth" being a case in
point.

Had he done so - that is, started from the Creditary View of Money as IOUs
issued by Debtors/Entrepreneurs to Creditor/Suppliers of Factor Services -
it is fair surmise that Keynes would have recognized his mistake at once.

For, insofar as the Output "growth" is concerned, "savings" = Factor Content
of the Economy's Work in Process.

Curiously, the "banana economy" fable of his 'Treatise' reflected Keynes'
grasp of this analytical point.

Curiouser still, when I raised this point with Don Patinkin during a Q and A
period following a lecture on the 'core' Keynesian GT model at the IMF in
the early 1980s, Patinkin claimed not to recall the fable itself - "It was
in the Treatise, you say?"

Gunnar





----- Original Message -----
From: "Forstater, Mathew" <forstaterm@xxxxxxxx>
To: "Harry L. Cook" <hlc710@xxxxxxxxxxx>; "Henry C.K. Liu"
<hliu@xxxxxxxxxxxxxx>; <pkt@xxxxxxxxxxxxxxxx>
Sent: Wednesday, August 28, 2002 11:37 PM
Subject: Re: Method


>
> Harry -
>
> If you are interested in some recent serious work on income and wealth
> inequality, you might want to check out Top Heavy by Ed Wolff. Also, for
> a grim look at racial wealth disparity, Black Wealth/White Wealth by
> Melvin Oliver and Thomas Shapiro is a real eye-opener.  (African
> American net wealth is 0.)
>
> For a more 'popular' presentation, Economic Apartheid in America by
> Chuck Collins and Felice Yeskel (with United for a Fair Economy), is
> very good.
>
> Keynes of course believed that "arbitrary and inequitable distribution
> of wealth and incomes" was, along with the "failure to provide for full
> employment," one of the two "outstanding faults of the economic society
> in which we live" (GT, p. 372).  By showing that savings are the result,
> and not the source, of growth, Keynes's theory overthrew one of the
> justifications of economic inequality.  Since lower and middle income
> earners have a higher propensity to consume, redistribution could even
> mean stronger growth.  Keynes also believed that this removed one of the
> arguments against lowering interest rates.  If investment responded to
> lower interest rates, lower rates could lead to higher savings--contrary
> to the received view.
>
> Kalecki is another important economist for Post Keynesians who
> contributed to the analysis of income distribution.  The distinction
> between wages and profits in terms of both their source and their use is
> an important cornerstone of his system.
>
> This list includes some important contributors to analyzing problems of
> income distribution.  Your patience will be rewarded.
>
> Mat
>