Re: The Axiom of Gross Substitution

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

Harry:

Re. the following:

> My example does not prove Samuelson is right. The example may simply mean
> value can redistribute itself without some preceding net investment. An
> increase  in the total value of the economy over time would still require
a
> net investment.

Comment:

Agree.

The proposition that "an increase in the total value of the economy over
time would still require a net investment" has HUGE implications for both
monetary theory and the methodology of theoretical economics.

In his 1939 paper, Samuelson professed to "believe that it is demonstrably
wrong" (I quote this from memory) for Keynes to have supposed that "value"
could NOT increase withouth "net factor investment" in the economy's work in
progress - but, of course, Samuelson NEVER 'demonstrated' what he professed
to 'believe' to be the case with respect to the point at issue.

This - to my mind - unprofessional approach permitted Samuelson and his
mainstream/monetarist peers to make believe that Interest earned on
Production Credit represented the share which Money/Laundry Tickets made to
the "value" of the Economy's Work in Progress/Laundry at the Cleaners.

The contrary view was stated by Schumpeter in Preface to the 1934 English
translation of his 'Theory of Economic Development' - a work which Samuelson
is certain to have read - as follows:

"I have not been able to convince myself, for example, that such questions
as the source of interest [on Production Credit - insert] are either
unimportant or uninteresting.  They could be made so, at all events, only by
the fault of the author."

The methodological implication of Schumpeter's view - and that of Keynes
which Samuelson attacked in his 1939 paper - is this:

IF the "source of interest" is NOT an increase in "value" attributable to
Production Credit, THEN the "marginal productivity of capital" aspect of the
General Theory itself is incoherent.

Gunnar


----- Original Message -----
From: "Harry Veeder" <eo200@xxxxxx>
To: "post keynesian thought" <pkt@xxxxxxxxxxxxxxxx>
Sent: Sunday, March 16, 2003 7:02 PM
Subject: Re: The Axiom of Gross Substitution


>
>
> Gunnar:
>
> >
> > It is ten to one that your thesis does NOT square with Paul Davidson's
> > understanding of the Axiom of Gross Substitution.
> >
> > Now let me spell out the substantive point at issue.
> >
> > Briefly, in his 1939 paper on "The Rate of Interest Under Ideal
Conditions",
> > Paul Samuelson advanced the proposition (a) that the "value" of the
> > economy's work in progress (my shirt at the cleaners) could increase
without
> > Net Factor Investment therein (without my sending another shirt to the
> > cleaners), and (b) that Keynes was a fool for suggesting otherwise - or
> > words to that effect.
>
> My example does not prove Samuelson is right. The example may simply mean
> value can redistribute itself without some preceding net investment. An
> increase  in the total value of the economy over time would still require
a
> net investment.
>
> > IF the Axiom of Gross Substitution does NOT apply to (a) Laundry
Tickets,
> > and (b) the Laundry ON which such Tickets represent a claim, THEN it is
back
> > to Square One for Post-Keynesians who reason AS IF the General Theory
had
> > proved otherwise.
> >
>
> It doesn't mean starting over completely. Let us keep digging at the site
of
> knowledge first excavated by Keynes. As we dig deeper we will change our
> understanding of the logic-structure first revealed by Keynes.
>
> Harry Veeder
>
>
> > ----- Original Message -----
> > From: "Harry Veeder" <eo200@xxxxxx>
> > To: "post keynesian thought" <pkt@xxxxxxxxxxxxxxxx>
> > Sent: Saturday, March 15, 2003 8:12 AM
> > Subject: Re: The Axiom of Gross Substitution
> >
> >
> >>
> >> Gunnar,
> >>
> >> Yes, and such a scenario could arise. For example, if you are
unemployed
> >> and looking for a new job, you might consider a clean and pressed as an
> >> investment in your future.
> >>
> >> Harry
> >>
> >>
> >>> Harry:
> >>>
> >>> Your point still eludes me.
> >>>
> >>> If "value" were "stored" in a Laundry Ticket, then the total "value"
> >>> attaching to my shirt at the cleaners would exceed that of the same
> > shirt in
> >>> my closet.
> >>>
> >>> Gunnar
> >>>
> >>>
> >>> ----- Original Message -----
> >>> From: "Harry Veeder" <eo200@xxxxxx>
> >>> To: "post keynesian thought" <pkt@xxxxxxxxxxxxxxxx>
> >>> Sent: Friday, March 14, 2003 9:51 PM
> >>> Subject: Re: The Axiom of Gross Substitution
> >>>
> >>>
> >>>> Gunnar,
> >>>>
> >>>> The point is a 'claim on value' may also function as a store of
value.
> >>>> It doesn't matter what form money takes, it is out of your control.
> >>>> So go for a walk and smell the roses.
> >>>>
> >>>> Harry
> >>>>
> >>>>> From: Gunnar Tomasson <gunnar.tomasson@xxxxxxxxxxx>
> >>>>> Date: Fri, 14 Mar 2003 23:01:46 -0500
> >>>>> To: Harry Veeder <eo200@xxxxxxxxxxxxxxxxxxx>, post keynesian thought
> >>>>> <pkt@xxxxxxxxxxxxxxxx>
> >>>>> Cc: Gang8 <gang8@xxxxxxxxxxxxxxx>
> >>>>> Subject: Re: The Axiom of Gross Substitution
> >>>>>
> >>>>> Harry:
> >>>>>
> >>>>> I don't get your point.
> >>>>>
> >>>>> First-hand peddling of Laundry Tickets - claims ON value - is
Banking,
> >>> not
> >>>>> Scalping.
> >>>>>
> >>>>> Gunnar
>
> >
>