Re: Samuelson vs. Keynes on "theory"

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

Bill:

 

Re. the following:

This is from Louis-Philippe Rochon's dissertation:

"...This is the familiar debate over the existence of profits, or in Marx's terminology, how can M become M'.  As Saccareccia...asks, 'How can firms collect more money revenues than the amount that economic agents are willing to borrow collectively from the banking system?'  Similarly, Nell and Deleplace...also ask, 'How firms who borrow a given sum can reimburse it and pay the interest, if all money comes from bank credit?'  Even Schumpeter...asked this question.  Consider the following reference:  'Within the circular flow...it is impossible with a given money sum to obtain a greater money sum.'"

Comment:

 

Louis-Philippe Rochon's proposition that Schumpeter's concerns were analogous to those of Marx is highly revealing - for there is precisely no connection between the two.

 

"Throughout this work," Karl Marx stated at the outset of Chapter III of Das Kapital, "I assume, for the sake of simplicity, gold as the money-commodity."

 

Schumpeter's analysis was anchored in credit-money - specifically, as noted by his Harvard colleague Arthur Smithies in a memorial article, Entrepreneurial Credit was the only kind which Schumpeter judged to be relevant for analysis of Interest and Profit in Entrepreneurial Market Economies.

 

*(For a normal economy that is expanding.  The stationary relationship is:  Costs = Sales = Expense, where profit is zero.)

Comment:

 

This has nothing to do with analytical economics, whose propositions - like those of analytic geometry - are independent of scale.

 

Gunnar

 

 

----- Original Message -----

From: William B. Ryan

To: gunnar.tomasson@xxxxxxxxxxx ; pkt@xxxxxxxxxxxxxxxx

Cc: ChrisOfDulwich@xxxxxxx ; geoffrey.gardiner@xxxxxxxxxxxxxxx ; kwilde@xxxxxxxxxxxx

Sent: Thursday, October 03, 2002 1:00 PM

Subject: Re: Samuelson vs. Keynes on "theory"

Certainly the source of profit is an interesting question.

This is from Louis-Philippe Rochon's dissertation:

"...This is the familiar debate over the existence of profits, or in Marx's terminology, how can M become M'.  As Saccareccia...asks, 'How can firms collect more money revenues than the amount that economic agents are willing to borrow collectively from the banking system?'  Similarly, Nell and Deleplace...also ask, 'How firms who borrow a given sum can reimburse it and pay the interest, if all money comes from bank credit?'  Even Schumpeter...asked this question.  Consider the following reference:  'Within the circular flow...it is impossible with a given money sum to obtain a greater money sum.'"

The question is nonsensical within the definitions of double-entry accounting, for within those definitions profit is not contingent on firms collecting "more money revenues than the amount that economic agents are willing to borrow collectively from the banking system."

The relationship* is this:  Costs > Sales > Expense, where Profit = Sales - Expense.

The general dynamic is this:  At any point in time, firms are disbursing more to the suppliers of capital and labor than they are collecting through sales, yet are booking a profit.

*(For a normal economy that is expanding.  The stationary relationship is:  Costs = Sales = Expense, where profit is zero.)
----------------------------

 

Re: Keynes Stood On His Head?
by Gunnar Tomasson
02 October 2002 16:59 UTC

Bill:
 
Re. the following:
 
"Actually, it's a variation of the old "ten can't repay eleven" fallacy that is the perennial argument of monetary cranks..."
 
Here is what Schumpeter - a monetary crank by your lights? - had to say on the subject matter:
 
"I have not been able to convince myself, for example, that such questions as the source of interest [on entrepreneurial credit and/or profit - insert GT] are either unimportant or uninteresting.  They could be made so, at all events, only by the fault of the author." (The Theory of Economic Development, Preface to the English Edition, Oxford University Press, 1961, p. x)
 
Apparently, Major Douglas was one such author.
 
Gunnar
 
 
----- Original Message -----
From: William B. Ryan
To: pkt@xxxxxxxxxxxxxxxx
Cc: gunnar.tomasson@xxxxxxxxxxx
Sent: Wednesday, October 02, 2002 12:31 PM
Subject: Re: Keynes Stood On His Head?

The "point of issue" about Keynes is predicated on your "final demand inflation" concept that you "formulated" in the "mid-1970s."

Actually, it's a variation of the old "ten can't repay eleven" fallacy that is the perennial argument of monetary cranks:  Since only the principal is lent it is impossible to repay principal plus interest; since only so much money is paid out during the course of production, profit is impossible unless there is an extraneous source of money, etc., etc.

>From: "Gunnar Tomasson"

>To: "William B. Ryan" ,
>Subject: Re: Keynes Stood On His Head?
>Date: Mon, 30 Sep 2002 09:23:20 -0400
>
>Bill:
>
>The point at issue is Keynes' "primary objective".
>
>Your comments are non-responsive thereto.
>
>Gunnar
>
> ----- Original Message -----
> From: William B. Ryan
> To: gunnar.tomasson@xxxxxxxxxxx ; pkt@xxxxxxxxxxxxxxxx
> Sent: Monday, September 30, 2002 12:41 AM
> Subject: Re: Keynes Stood On His Head?
>
>
> "...the primary objective for Keynes was to overcome "sound money" objections to using Credit Creation for purposes of Final Demand Inflation in the analytical sense - namely, a technical means of ensuring Aggregate Sales Proceeds in excess of Aggregate Factor Cost of Output Sold alias Profits."
> ----------
>
> In terms of the flux-reflux dynamic, the reality is the reverse of what you imply. It seems you are defining profit to be equal to "aggregate sales proceeds" minus "aggregate factor cost" in recast of M-C-M'...

 

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