Re: Samuelson vs. Keynes on "theory"

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

Re. the following:

> Being casual about the dimensions of the terms that you are talking
> about ($ versus $/period, in this case) often leads into fallacies
> when the same term can be used to refer values of different
> dimension.

Comment:

The point at issue does not concern ($ versus $/period) but analytical vs.
empirical economics.

A case in point.

> To be a bit more precise, the question is nonsensensical given
> that interest is an income while oustanding credit obligations
> is a stock.

Here is Schumpeter's account of Böhm-Bawerk's - implicit - debunking of the
proposition that "interest is an income":

"Böhm-Bawerk was indeed the first who expressly said that the whole value of
the product must in principle be divided between labor and land, if the
process of production is to proceed with ideal perfection." (Theory of
Economic Development, Oxford University Press, 1961, p. 32).

A few weeks back, I cited Adam Smith's comment that "It would be too
ridiculous to go about seriously to prove that wealth does not consist in
money, or in gold and silver, but in what money purchases and is valuable
only for purchasing."

As I recall it, Bruce expressed his agreement with Smith's comment.

If money is NOT wealth - or, more generally, if money is not an economic as
distinct from free good - WHY should interest on production credit be
regarded as Income?

Gunnar




----- Original Message -----
From: "Dr. Bruce R. McFarling" <ecbm@xxxxxxxxxxxxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Sent: Saturday, October 05, 2002 1:13 PM
Subject: Re: Samuelson vs. Keynes on "theory"


> On Thursday, October 03, 2002 1:00 PM, William B. Ryan wrote:
>
> >  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."
>
> To be a bit more precise, the question is nonsensensical given
> that interest is an income while oustanding credit obligations
> is a stock.  The question assumes a velocity of money of one
> between the time it is created and the time the obligation is
> satisfied and the money is destroyed, which is a silly assumption.
> Depending on the term of the credit obligation, the credit-money
> may have participated in the income-expenditure loop a number of
> times before it is exinguished in the repayment of principle.
>
> Being casual about the dimensions of the terms that you are talking
> about ($ versus $/period, in this case) often leads into fallacies
> when the same term can be used to refer values of different
> dimension.
>
>
>
>