Bill:
Agree.
And so would Keynes notwithstanding his contention
that "Interest to-day rewards no genuine sacrifice." (General Theory, Ch.
24)
For financial services provided to the production
sector represent essential "factor input".
In this respect, 'financial services' are on par
with those of "the entrepreneur and his assistants" of which Keynes
wrote:
"It is much preferable to speak of capital as
having a yield over the course of its life in excess of its original cost, than
as being productive.....
"I sympathise, therefore, with the
pre-classical doctrine that everything is produced by labour,
aided by what used to be called art and is now called technique, by natural
resources which are free or cost a rent according to their scarcity or
abundance, and by the results of past labour, embodied in assets, which also
command a price according to their scarcity or abundance. It is preferable
to regard labour, including, of course, the personal services of the
entrepreneur and his assistants, as the sole factor of production, operating in
a given environment of technique, natural resources, capital equipment and
effective demand. This partly explains why we have been able to take the
unit of labour as the sole physical unit which we require in our economic
system, apart from units of money and of time." (Ch. 16)
The point at issue between Paul and myself relates
to purely theoretical concerns which, many years ago, I raised with Robert Solow
roughly as follows:
"Why do mainstream economists reason
AS IF productive investment is financed with "savings" from current income and
NOT with new credit created by the banking system with a stroke of the
pen/computer key?"
Of course, the question of "interest" as reward for
giving up liquidity does not arise with respect to such new credit.
Hence my question to Paul, "how
does the interest-as-reward-for-giving-up-liquidity concept apply to the U.S.
economy, where MPC has exceeded unity in recent
years?"
years?"
The brief
answer, I submit, is that it does NOT apply.
Gunnar
----- Original Message -----From: William B. RyanSent: Thursday, April 17, 2003 12:41 PMSubject: Re: [gang8] Re: What is Creditary Economics?Interest is the service charge for financial services
rendered.
--
On Thu, 17 Apr 2003 09:55:06
Gunnar Tomasson wrote:
>Paul:
>
>Re. the following:
>
>> REALLY GUNNAR YOU ARE HOPELESS. YOU RECEIVE INTEREST NOT FOR SAVING A
>DOLLAR
>> -- FOR IF YOU PUT THAT DOLLAR IN YOUR MATTRESS -- YOU SAVED IT BUT EARNED
>> NOTHING.
>
>Your $1 mattress strawman has no bearing on my argument - "I save/lend you a
>dollar at x% interest per annum."
>
>More to the point, how does the interest-as-reward-for-giving-up-liquidity
>concept apply to the U.S. economy, where MPC has exceeded unity in recent
>years?
>
>Gunnar
>
>
>
>
>
>----- Original Message -----
>From: "pdavidso" <pdavidso@xxxxxxx>
>To: "Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>
>Cc: <pkt@xxxxxxxxxxxxxxxx>
>Sent: Wednesday, April 16, 2003 10:33 PM
>Subject: RE: What is Creditary Economics?
>
>
>> >===== Original Message From Gunnar Tomasson <gunnar.tomasson@xxxxxxxxxxx>
>> =====
>> >Paul:
>> >
>> >Re. the following:
>> >
>> >> >Warren:
>> >> >
>> >> >The point at issue is Economics 101.
>> >> >
>> >> >For Interest denotes (a) the PRICE of Credit, and (b) the RETURN on
>> >> >Savings.
>> >>
>> >>
>> >>
>> >
>> >If it walks like a duck ...
>> >
>> >I save/lend you a dollar at x% interest per annum.
>> >
>> >I give up/you receive a dollar's worth of liquidity at x% interest per
>> >annum.
>> >
>>
>> REALLY GUNNAR YOU ARE HOPELESS. YOU RECEIVE INTEREST NOT FOR SAVING A
>DOLLAR
>> -- FOR IF YOU PUT THAT DOLLAR IN YOUR MATTRESS -- YOU SAVED IT BUT EARNED
>> NOTHING.
>>
>> WHEN YOU LEND THE DOLLAR TO ME -- YOU GAVE UP THE LIQUIDITY OF THAT
>DOLLAR --
>> I.E., YOU CAN NOT USE IT TO SETTLE A CONTRACTUAL OBLIGATION--- BUT I CAN
>AND
>> AM WILLING TO PAY YOU TO GIVE UP THE LIQUIDITY TO ME.
>> THEREFORE -- AS I SAID BEFORE:
>>
>> HERE IS YOUR PROBLEM GUNNAR-- THE RATE OF INTEREST IS NOT THE RETURN ON
>> >> SAVINGS!!! IT IS THE RETURN FOR GIVING UP LIQUIDITY!!!
>>
>>
>> pAUL
>>
>> Paul Davidson
>> Editor, Journal of Post Keynesian Economics
>> University of Tennessee
>> SMC 503
>> Knoxville, Tennessee 37996-0550
>> office phone #;(865)974-4221; office fax# (865)974-1686 or (865)974-4601
>> home phone and fax # (865)692-0802
>> email pdavidson@xxxxxxx
>> http://econ.bus.utk.edu/davidsonextra/Davidson.html
>>
>>
>
>
>
____________________________________________________________
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Paul:
Re. the following:
> REALLY GUNNAR YOU ARE HOPELESS. YOU RECEIVE INTEREST NOT FOR SAVING A
DOLLAR
> -- FOR IF YOU PUT THAT DOLLAR IN YOUR MATTRESS -- YOU SAVED IT BUT EARNED
> NOTHING.
Your $1 mattress strawman has no bearing on my argument - "I save/lend you a
dollar at x% interest per annum."
More to the point, how does the interest-as-reward-for-giving-up-liquidity
concept apply to the U.S. economy, where MPC has exceeded unity in recent
years?
Gunnar
----- Original Message -----
From: "pdavidso" <pdavidso@xxxxxxx>
To: "Gunnar Tomasson" <gunnar.tomasson@xxxxxxxxxxx>
Cc: <pkt@xxxxxxxxxxxxxxxx>
Sent: Wednesday, April 16, 2003 10:33 PM
Subject: RE: What is Creditary Economics?
> >===== Original Message From Gunnar Tomasson <gunnar.tomasson@xxxxxxxxxxx>
> =====
> >Paul:
> >
> >Re. the following:
> >
> >> >Warren:
> >> >
> >> >The point at issue is Economics 101.
> >> >
> >> >For Interest denotes (a) the PRICE of Credit, and (b) the RETURN on
> >> >Savings.
> >>
> >>
> >>
> >
> >If it walks like a duck ...
> >
> >I save/lend you a dollar at x% interest per annum.
> >
> >I give up/you receive a dollar's worth of liquidity at x% interest per
> >annum.
> >
>
> REALLY GUNNAR YOU ARE HOPELESS. YOU RECEIVE INTEREST NOT FOR SAVING A
DOLLAR
> -- FOR IF YOU PUT THAT DOLLAR IN YOUR MATTRESS -- YOU SAVED IT BUT EARNED
> NOTHING.
>
> WHEN YOU LEND THE DOLLAR TO ME -- YOU GAVE UP THE LIQUIDITY OF THAT
DOLLAR --
> I.E., YOU CAN NOT USE IT TO SETTLE A CONTRACTUAL OBLIGATION--- BUT I CAN
AND
> AM WILLING TO PAY YOU TO GIVE UP THE LIQUIDITY TO ME.
> THEREFORE -- AS I SAID BEFORE:
>
> HERE IS YOUR PROBLEM GUNNAR-- THE RATE OF INTEREST IS NOT THE RETURN ON
> >> SAVINGS!!! IT IS THE RETURN FOR GIVING UP LIQUIDITY!!!
>
>
> pAUL
>
> Paul Davidson
> Editor, Journal of Post Keynesian Economics
> University of Tennessee
> SMC 503
> Knoxville, Tennessee 37996-0550
> office phone #;(865)974-4221; office fax# (865)974-1686 or (865)974-4601
> home phone and fax # (865)692-0802
> email pdavidson@xxxxxxx
> http://econ.bus.utk.edu/davidsonextra/Davidson.html
>
>
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