|
Bill,
Re. the following:
If we take "value" to mean price-values, they are not
identically
equal.
Comment:
Indeed not!
In his History of Economic Analysis, Schumpeter made two comments
on related issues.
First. He acknowledged that John Stuart Mill had
brought classical economics to a "half-way house", whence it was hijacked by
neoclassical/mathematical economists, of whom Walras (hailed by
Schumpeter as the "greatest" of purely theoretical economists - dismissed by
Keynes as creator of "nonsense" economics) was primus inter pares.
Second. He cautioned that any economic scholar who believes he
has caught Mill in "logical error" is well advised to think - and think
again.
To which I would add this.
The post-Mill change from "value" to "price" theory was the root cause of a
state of affairs of which young Samuelson wrote around 1940 as
follows:
"[The economics] literature abounds with false
generalisation. "We do not have to dig deep to find examples.
Literally hundreds of learned papers have been written on the subject of utility
[CORE aspect of neo-classical PRICE theory - insert]. Take a little bad
psychology, add a dash of bad philosophy and ethics, and liberal quantities of
bad logic, and any economist can prove that the demand curve for a commodity is
negatively inclined. His instinct is good; the attempt to derive a
meaningful useful theorem [Samuelson's OWN hobby horse become that of PK
economists - insert] is commendable - much more so than the innocuous position
that utility is always maximized because people do what they do ["innocuous" but
true - insert]. How refreshing then is a paper like Slutsky's which
attempted, with partial success, to deduce once and for all the hypotheses upon
PRICE-QUANTITY budget behavior implied in the UTILITY approach.
"The economist has consoled himself for his barren results
with the thought that he was forging tools which would eventually yield
fruit. The promise is always in the future; we are like highly trained
athletes who never run a race, and in consequence grow stale. It is still
too early to determine whether the innovations in thought of the last decade
[Keynes' General Theory - insert] will have stemmed the unmistakable
signs of decadence which were clearly present in economic thought prior to
1930." (Foundations of Economic Analysis, p. 4)
Of course, the "still too early" qualification should be
taken with a grain of salt - for, so long as economic scholars have their
intellectual capital invested in whatever version of neo-classical economics may
have caught their youthful fancy, it is ALWAYS "too early" to call their OWN
spade a spade!
Gunnar
----- Original Message -----
Sent: Tuesday, May 06, 2003 12:09
PM
Subject: Re: [SOCIAL CREDIT] Mill to
Keynes to A+B
The dialog is quite muddled in terms of the A + B
theorem.
Particularly I would take issue with the
following:
__________
"That is to say, "value" is identically equal to
payments made by Entrepreneurs to Suppliers of Factor
Services - and,
as and when Entrepreneurs recover the
full "value" of Work in Progress
become Final Output,
they come out EVEN and, while they MAY undertake
further productive activity, mere demand for their
final output does
NOT in and of itself provide any
incentive for them to do
so."
__________
If we take "value" to mean price-values, they
are not
identically equal. At best they could remain
proportional through time in steady state. Deviation
from steady
state--and especially deviation from
steady state represented by labor
displacement--is
the analytical subject of the A + B theorem.
In
steady state equilibrium, entrepreneurial profit
for the economy as a
whole is zero, though accounting
profit is some positive number.
That means that
salaries, wages and dividends are continuing to be
paid, enabling continuing consumption of what is
continuing to be
produced. That is incentive enough
for continued "productive
activity."
Entrepreneurial profit reflects competitive
juxtapositioning between entrepreneurs. The
increased accounting
profit of one entrepreneur
represents the comparative decreased accounting
profit of another entrepreneur. The prospect for
increased
profit is the incentive for innovation.
The A + B theorem concludes
that because of the
"flaw" in the system of national accountancy, what
should be permanently positive accounting profit for
the economy as a
whole tends to fall to zero and
below, putting a monkey wrench into the
mechanism of
continuing production.
--
On Tue, 6 May
2003 07:20:47
Keith Wilde wrote:
>It would be very
helpful to me if some one or more of our resident experts would put the
following exchange into A+B
language.
>
>Keith
>
>Subject: Re: Liquidity
Preference and State Theory of Money
>
>Re. the
following:
>
>I don't see why J. S. Mill's statement that the
"demand for commodities
>is not the demand for labour" need be thought
of as an "anti-General
>Theory dictum". Certainly not an anti-Keynesian
dictum, anyway.
>
>Comment:
>
>The statement "demand
for commodities is not demand for labour" was used by
>Mill as a section
heading in his 'Principles'.
>
>In the section itself, as I recall
it from 25 years ago, Mill commented
>substantively as
follows:
>
>"This proposition is perhaps the most difficult one to
grasp in the science
>of political economy. Indeed, to understand it is
to understand economics."
>
>While the precise phrasing is mine,
the substance is Mill's.
>
>And, as a matter of logic, the
proposition itself is IMPLIED by Keynes in
>parts of the _General
Theory_, where he reasoned [correctly from Mill's
>point of view] that
the "value" of the Economy's Work in Progress is
>identically equal to
the "value" of Net Factor Content of such Work
in
>Progress.
>
>That is to say, "value" is identically
equal to payments made by
>Entrepreneurs to Suppliers of Factor Services
- and, as and when
>Entrepreneurs recover the full "value" of Work in
Progress become Final
>Output, they come out EVEN and, while they MAY
undertake further productive
>activity, mere demand for their final
output does NOT in and of itself
>provide any incentive for them to do
so.
>
>In the General Theory, Keynes made a tortured effort to
conjure up
>wiggle-room around this ZERO-PROFIT logical implication of
classical "value"
>theory by replacing it with the concept of
entrepreneurial "expectation of
>profit".
>
>Thereby, Keynes
fell into an intellectual trap against which Mill cautioned
>in
connection with his following statement cited (and ridiculed) by
Milton
>Friedman in his essay on 'The Methodology of Positive
Economics':
>
>"...happily, there is nothing in the laws of value
which remains [1848] for
>the present or any future writer to clear up;
the theory of the subject is
>complete."
>
>Again, while the
precise wording is mine, the substance of the warning is
>Mill's
-
>
>"Value theory is the foundation of the science of political
economy. The
>least error made therein by economic scholars will infect
with like error
>the whole superstructure of theory built
thereon."
>
>Keynes' concept of "expectation of profit"
exemplified such error in "value"
>theory.
>
>Later,
Samuelson swept the analytical issues involved under the rug with
his
>statement - echoed implicitly if not explicitly by PK scholars -
that "It is
>quite clear that in the real world net revenue
[entrepreneurial profit -
>insert] is not zero for all firms, nor is it
tending towards zero. This is
>true under pure competition as well as
impure competition. It is clear that
>this residuum must be "due" to
SOMETHING, and it may be labeled by any name
>we please (rent to
institutional advantage, etc.)" ('Foundations of Economic
>Analysis', p.
87)
>
>A "something" variable, of course, reduces any would-be
model of
>entrepreneurial market economies to an
absurdity.
>
>Gunnar
>
>----- Original Message -----
>From: "Forstater, Mathew" <ForstaterM@xxxxxxxx
><mailto:ForstaterM@xxxxxxxx>>
>To: "Gunnar Tomasson"
<gunnar.tomasson@xxxxxxxxxxx
><mailto:gunnar.tomasson@xxxxxxxxxxx>>; "Harry
Veeder"
><eo200@xxxxxxxxxxxxxxxxxxx
><mailto:eo200@xxxxxxxxxxxxxxxxxxx>>; "post keynesian thought"
<pkt@xxxxxxxxxxxxxxxx
><mailto:pkt@xxxxxxxxxxxxxxxx>>
>Sent: Monday, May 05, 2003
12:09 PM
>Subject: RE: Liquidity Preference and State Theory of
Money
>
>
>I don't see why J. S. Mill's statement that the
"demand for commodities
>is not the demand for labour" need be thought
of as an "anti-General
>Theory dictum". Certainly not an anti-Keynesian
dictum, anyway.
>
>Keynes held technological change (and other
factors) constant in the
>General Theory, not because he believed these
assumptions reflected the
>"economic society in which we actually live"
but for ease of exposition
>writing in a time of great crisis. There are
a number of other places
>where Keynes expressed concern about
technological unemployment, which
>is what I take Mills dictum to be
about.
>
>Technological unemployment and Keynesian unemployment
are complementary,
>not opposed. Look at Pasinetti's work, e.g. They can
even be related,
>as labor-displacing technological change can result in
an effective
>demand shock.
>
>As Lerner pointed out, with a
full employment policy, we can welcome
>technological change, instead of
lamenting it because we allow
>unemployment to result from technical
advances.
>
>-----Original Message-----
>From: Gunnar
Tomasson [mailto:gunnar.tomasson@xxxxxxxxxxx]
>Sent: Sunday, May 04,
2003 1:38 PM
>To: Harry Veeder; post keynesian thought
>Subject:
Re: Liquidity Preference and State Theory of Money
>
>Re. the
following:
>
>> When you say this, do you have in mind Keynes'
type of saving
>> (where saving = income - consumption
spending)...
>
>Yes - (where saving = income - consumption
spending = Net Factor
>Investment
>in the Economy's Work in
Progress).
>
>> Also, if THAT TYPE of saving and investment are
one and the same
>thing,
>then
>> a boost in consumption
spending does not boost that type
of
>investment.
>
>Agree.
>
>Hence John Stuart
Mill's anti-General Theory dictum:
>
>"Demand for commodities is
not demand for labour."
>
>Gunnar
>
>----- Original
Message -----
>From: "Harry Veeder" <eo200@xxxxxxxxxxxxxxxxxxx
><mailto:eo200@xxxxxxxxxxxxxxxxxxx>>
>To: "post keynesian
thought" <pkt@xxxxxxxxxxxxxxxx
><mailto:pkt@xxxxxxxxxxxxxxxx>>
>Sent: Saturday, May 03,
2003 8:31 PM
>Subject: Re: Liquidity Preference and State Theory of
Money
>
>
>> Gunnar wrote:
>>
>>
<SNIP)
>> >
>> > For, by joining Ohlin et al. in
debate on a NON-issue insofar as
>"the
>> > process of
capital formation" is concerned, Keynes overlooked the
>BIG
>>
> issue - namely, that the "equality between saving and
investment:"
>is
>NOT a
>> > function of "the level of
income".
>> >
>> > That "saving" - 'finance' provided
by suppliers of factor services -
>and
>> > "investment" -
net factor content of the economy's work in
progress
>-
>are
>> > one and the same thing at ALL
levels of income.
>>
>> When you say this, do you have in
mind Keynes' type of saving
>> (where saving = income - consumption
spending) or the alternate type
>known
>> as the flow funds
account as described in my recent post 'NIPA and
>saving'.
>>
If you have in mind the former, then I agree.
>>
>> Also, if
THAT TYPE of saving and investment are one and the
same
>thing,
>then
>> a boost in consumption spending
does not boost that type
of
>investment.
>>
>>
>> Harry
Veeder
>
____________________________________________________________
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It would be very helpful to me if some one
or more of our resident experts would put the following exchange into A+B
language.
Keith
Subject: Re: Liquidity Preference and State Theory of Money
Re. the
following:
I don't see why J. S. Mill's statement that the "demand for
commodities
is not the demand for labour" need be thought of as an
"anti-General
Theory dictum". Certainly not an anti-Keynesian dictum,
anyway.
Comment:
The statement "demand for commodities is not
demand for labour" was used by
Mill as a section heading in his
'Principles'.
In the section itself, as I recall it from 25 years ago,
Mill commented
substantively as follows:
"This proposition is
perhaps the most difficult one to grasp in the science
of political
economy. Indeed, to understand it is to understand economics."
While
the precise phrasing is mine, the substance is Mill's.
And, as a matter
of logic, the proposition itself is IMPLIED by Keynes in
parts of the
_General Theory_, where he reasoned [correctly from Mill's
point of view]
that the "value" of the Economy's Work in Progress is
identically equal to
the "value" of Net Factor Content of such Work in
Progress.
That is
to say, "value" is identically equal to payments made by
Entrepreneurs to
Suppliers of Factor Services - and, as and when
Entrepreneurs recover the
full "value" of Work in Progress become Final
Output, they come out EVEN
and, while they MAY undertake further productive
activity, mere demand for
their final output does NOT in and of itself
provide any incentive for them
to do so.
In the General Theory, Keynes made a tortured effort to
conjure up
wiggle-room around this ZERO-PROFIT logical implication of
classical "value"
theory by replacing it with the concept of
entrepreneurial "expectation of
profit".
Thereby, Keynes fell into
an intellectual trap against which Mill cautioned
in connection with his
following statement cited (and ridiculed) by Milton
Friedman in his essay
on 'The Methodology of Positive Economics':
"...happily, there is
nothing in the laws of value which remains [1848] for
the present or any
future writer to clear up; the theory of the subject
is
complete."
Again, while the precise wording is mine, the
substance of the warning is
Mill's -
"Value theory is the foundation
of the science of political economy. The
least error made therein by
economic scholars will infect with like error
the whole superstructure of
theory built thereon."
Keynes' concept of "expectation of profit"
exemplified such error in "value"
theory.
Later, Samuelson swept the
analytical issues involved under the rug with his
statement - echoed
implicitly if not explicitly by PK scholars - that "It is
quite clear that
in the real world net revenue [entrepreneurial profit -
insert] is not zero
for all firms, nor is it tending towards zero. This is
true under pure
competition as well as impure competition. It is clear that
this residuum
must be "due" to SOMETHING, and it may be labeled by any name
we please
(rent to institutional advantage, etc.)" ('Foundations of
Economic
Analysis', p. 87)
A "something" variable, of course,
reduces any would-be model of
entrepreneurial market economies to an
absurdity.
Gunnar
----- Original Message -----
From:
"Forstater, Mathew" <ForstaterM@xxxxxxxx
<mailto:ForstaterM@xxxxxxxx>>
To: "Gunnar Tomasson"
<gunnar.tomasson@xxxxxxxxxxx
<mailto:gunnar.tomasson@xxxxxxxxxxx>>; "Harry
Veeder"
<eo200@xxxxxxxxxxxxxxxxxxx
<mailto:eo200@xxxxxxxxxxxxxxxxxxx>>; "post keynesian
thought" <pkt@xxxxxxxxxxxxxxxx
<mailto:pkt@xxxxxxxxxxxxxxxx>>
Sent: Monday, May 05,
2003 12:09 PM
Subject: RE: Liquidity Preference and State Theory of
Money
I don't see why J. S. Mill's statement that the "demand for
commodities
is not the demand for labour" need be thought of as an
"anti-General
Theory dictum". Certainly not an anti-Keynesian dictum,
anyway.
Keynes held technological change (and other factors) constant
in the
General Theory, not because he believed these assumptions reflected
the
"economic society in which we actually live" but for ease of
exposition
writing in a time of great crisis. There are a number of other
places
where Keynes expressed concern about technological unemployment,
which
is what I take Mills dictum to be about.
Technological
unemployment and Keynesian unemployment are complementary,
not opposed.
Look at Pasinetti's work, e.g. They can even be related,
as
labor-displacing technological change can result in an effective
demand
shock.
As Lerner pointed out, with a full employment policy, we can
welcome
technological change, instead of lamenting it because we
allow
unemployment to result from technical advances.
-----Original
Message-----
From: Gunnar Tomasson
[mailto:gunnar.tomasson@xxxxxxxxxxx]
Sent: Sunday, May 04, 2003 1:38
PM
To: Harry Veeder; post keynesian thought
Subject: Re: Liquidity
Preference and State Theory of Money
Re. the following:
>
When you say this, do you have in mind Keynes' type of saving
> (where
saving = income - consumption spending)...
Yes - (where saving = income
- consumption spending = Net Factor
Investment
in the Economy's Work in
Progress).
> Also, if THAT TYPE of saving and investment are one and
the same
thing,
then
> a boost in consumption spending does not
boost that type of
investment.
Agree.
Hence John Stuart
Mill's anti-General Theory dictum:
"Demand for commodities is not
demand for labour."
Gunnar
----- Original Message -----
From: "Harry Veeder" <eo200@xxxxxxxxxxxxxxxxxxx
<mailto:eo200@xxxxxxxxxxxxxxxxxxx>>
To: "post keynesian
thought" <pkt@xxxxxxxxxxxxxxxx
<mailto:pkt@xxxxxxxxxxxxxxxx>>
Sent: Saturday, May 03,
2003 8:31 PM
Subject: Re: Liquidity Preference and State Theory of
Money
> Gunnar wrote:
>
> <SNIP)
>
>
> > For, by joining Ohlin et al. in debate on a NON-issue
insofar as
"the
> > process of capital formation" is concerned,
Keynes overlooked the
BIG
> > issue - namely, that the "equality
between saving and investment:"
is
NOT a
> > function of "the
level of income".
> >
> > That "saving" - 'finance' provided
by suppliers of factor services -
and
> > "investment" - net
factor content of the economy's work in progress
-
are
> > one
and the same thing at ALL levels of income.
>
> When you say this,
do you have in mind Keynes' type of saving
> (where saving = income -
consumption spending) or the alternate type
known
> as the flow funds
account as described in my recent post 'NIPA and
saving'.
> If you
have in mind the former, then I agree.
>
> Also, if THAT TYPE of
saving and investment are one and the same
thing,
then
> a boost
in consumption spending does not boost that type
of
investment.
>
>
> Harry Veeder
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