Re: Savings fallacy redux (was Re: Method)

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

Thanks, Esteban.

At the time, I took Patinkin's feigned ignorance of the "banana plantation"
parable to imply that he was not prepared to engage in debate on the subject
matter.

And why might that be so?

A possible explanation occurred to me when I read Patinkin's book on the
evolution of Keynes' monetary thought, where he explicitly acknowledged
that, as I recall it, he could not make sense of a key aspect of Keynes'
definition of the Aggregate Supply Function and made some comments to the
effect that he would like to ignore the point at issue.

If Patinkin had been open to debate on the "banana plantation" parable, I
would have started out by asking the following question:

What, if any, is the essential difference between Production in Keynes'
"banana plantation" and modern Entrepreneurial Market Economies insofar as
the technically appropriate definition of Money is concerned?

And, to follow up:

What, if any, is the essential role of the Money Rate of Interest in the
context of Keynes' "banana plantation"?

Which would bring to light the fact that modern Keynesians have no answer -
other than silence - to Schumpeter's long-standing and much-derided
contention that Interest on Production Credit is a socio-economic phenomenon
and NOT a technically essential attribute of Money insofar as Production in
Entrepreneurial Market Economies is concerned.

Gunnar


----- Original Message -----
From: "Esteban Perez" <eperez@xxxxxxxxxxxx>
To: <ecbm@xxxxxxxxxxxxxxxxxxx>; <gunnar.tomasson@xxxxxxxxxxx>
Cc: <pkt@xxxxxxxxxxxxxxxx>; <gang8@xxxxxxxxxxxxxxx>
Sent: Saturday, August 31, 2002 12:56 AM
Subject: Re: Savings fallacy redux (was Re: Method)


Strange. Read Don Patinkin´s Anticipations of the General Theory, p. 15 for
example. Patinkin writes:¨Contrast this with Keynes´parable in the Treatise
of a simple ¨banana plantation¨. BTW
Patinkin´s book was published in 1982.
---------------------------------------------


<<< "Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>  8/30  4:02p >>>
> > 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?"
>
>
> What makes this curious?  In the early 1980's, American "Keynesians"
> who ignored the Treatise would have easily outnumbered those who
> took it into account.

When we had our exchange, Don Patinkin had spent a sabbatical year
researching the evolution of Keynes' monetary thought and published the
result in a book, whose title escapes me at the moment.

Gunnar





----- Original Message -----
From: "Dr. Bruce McFarling" <ecbm@xxxxxxxxxxxxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Sent: Friday, August 30, 2002 4:12 PM
Subject: Savings fallacy redux (was Re: Method)


> Gunnar Tomasson <gunnar.tomasson@xxxxxxxxxxx> wrote,
> on Thu, 29 Aug 2002 10:39:30 -0400
>
>
>
> >> 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.
>
>
> But nobody can spend IOU's issued by Entrepeneurs to Suppliers of Factor
> Services.  If that is what you are calling "creditary money", that could
> not conceivably be an example of the "correct" position that anyone
> ever "missed" to account for any supposed "flaws" of theirs.
>
> Because if you can't spend it, you are just playing semantic games
> calling it money.
>
>
> There is nothing in that which is in any conflict with Keynes'
> description of saving.  When that payment is made, prior to
> that income being used to pay for anything, it is saving, and
> it remains saving until it is spent.  When it is spent, the
> net saving is unchanged, by the location of the saving in the
> system changes.
>
> > For, insofar as the Output "growth" is concerned,
>
>  >  "savings" = Factor of the Economy's Work in Process.
>
> Surely a model can be constructed in which total savings
> at any point in time is equal to the dollar (value?/exended on?)
> Work in Progress.  But if it is not at the time compatible with
> Keynes' theory of saving, it is not compatible with our monetary
> production economy, since the theory of saving is not based
> on a simplified model of the economy, it is based on the
> implications of the institutional rules governing the
> economy.
>
>
> > Curiously, the "banana economy" fable of his 'Treatise'
>
>  > reflected Keynes' grasp of this analytical point.
>
> As many Post Keynesians have pointed out, the GT extended
> some apects of the Treatise on Money reasoning, and supplants
> some other aspects.
>
>
> > 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,