Re: Keynes - Creditary Economist?

["Forstater, Mathew" <ForstaterM@xxxxxxxx>]

Are you arguing that demand for commodities is demand for labor because labor is the source of all production?  I don’t think this is what is generally taken to be the meaning of Mill’s dictum.  I think that it means that permanent technological unemployment is possible because capital-labor ratios are not constant in a world of labor- (and capital-) displacing technological change and where factors of production are not perfectly divisible, substitutable or homogeneous.  Employment may not increase pari passu with demand.  Labor-displacing technological change can even result in a decline in aggregate demand if it results in a shift in income distribution away from wages and toward profits and capitalists have a smaller marginal propensity to consume.  There are forces of compensation and forces of displacement, and the compensation mechanisms usually rely on some version of Say’s Law. (See Hans Neisser, 1942, "Permanent" Technological Unemployment: "Demand for Commodities Is Not Demand for Labor", American Economic Review, Vol. 32, No. 1. (Mar.), pp. 50-71, and more recently Harald Hagemann, 1994, “Technological Unemployment,” The Elgar Companion to Radical Political Economy, edited by Philip Arestis and Malcolm Sawyer, Aldershot, Hants, England ; Brookfield, Vt., USA : Edward Elgar, c1994.)  While Keynes assumed in the General Theory that technology and income distribution are given, elsewhere he expressed the view that technological unemployment was possible and a real world concern.  mat

 

-----Original Message-----
From: Gunnar Tomasson [mailto:gunnar.tomasson@xxxxxxxxxxx]
Sent: Thursday, January 23, 2003 1:48 PM
To: pkt@xxxxxxxxxxxxxxxx
Cc: Gang8
Subject: Keynes - Creditary Economist?

 

John Stuart Mill's confident assertion in his Principles that "Demand for commodities is not demand for labour" is curiously at odds with the Keynesian rationale for Aggregate Demand Management - for how could two brilliant minds draw such radically conflicting conclusions from the facts of the matter?