Re: Income = Output?

[Gunnar Tómasson <gunnar.tomasson@xxxxxxxxxxx>]

Re. the following:

 

> I accept the pre-classical doctrine, but translating the doctrine into
> mathematics is a delicate matter. If one embraces the doctrine, then the
> assumption that income is equivalent to output logically implies labour is
> exclusively motivated by output.

 

Comment:

 

Indeed - and Say's Law of Markets is a logical corollary thereof.

 

How, then, could Keynes "sympathise" with its analytical premises while rejecting the empirical validity of Say's Law?

 

The answer is indicated by the following remarks by John Stuart Mill:

 

"In the definition which we have attempted to frame of the science of Political Economy, we have characterized it as essentially an abstract science, and its method as the method a priori.  Such is undoubtedly its character as it has been understood and taught by all its most distinguished teachers.  It reasons, and, as we contend, must necessarily reason, from assumptions, not from facts.  It is built upon hypotheses, strictly analogous to those which, under the name of definitions, are the foundation of the other abstract sciences.  Geometry presupposes an arbitrary definition of a line, "that which has length but not breadth."  Just in the same manner does Political Economy presuppose an arbitrary definition of man, as a being who invariably does that by which he may obtain the greatest amount of necessaries, conveniences, and luxuries, with the smallest quantity of labour and physical self-denial with which they can be obtained in the existing state of knowledge.  [...]  Political Economy, therefore, reasons from assumed premises - from premises which might be totally without foundation in fact, and which are not pretended to be universally in accordance with it.  The conclusions of Political Economy, consequently, like those of geometry, are only true, as the common phrase is, in the abstract; that is, they are only true under certain suppositions, in which none but general causes - causes common to the whole class of cases under consideration - are taken into account.

 

"This ought not to be denied by the political economist.  If he deny it, then, and then only, he places himself in the wrong.  The a priori method which is laid to his charge, as if his employment of it proved his whole science to be worthless, is, as we shall presently show, the only method by which truth can possibly be attained in any department of the social science.  All that is requisite is, that he be on his guard not to ascribe to conclusions which are grounded upon an hypothesis a different kind of certainty from that which really belongs to them.  They would be true without qualification, only in a case which is purely imaginary.  In proportion as the actual facts recede from the hypothesis, he must allow a corresponding deviation from the strict letter of his conclusion; otherwise it will be true only of things such as he has arbitrarily supposed, not of such things as really exist.  That which is true in the abstract, is always true in the concrete with proper allowances.  When a certain cause really exists, and if left to itself would infallibly produce a certain effect, that same effect, modified by all the other concurrent causes, will correctly correspond to the result really produced.

 

"The conclusions of geometry are not strictly true of such lines, angles, and figures, as human hands can construct.  But no one, therefore, contends that the conclusions of geometry are of no utility, or that it would be better to shut up Euclid's Elements, and content ourselves with "practice" and "experience."" ('On The Definition of Political Economy; And on the Method of Investigation Proper to it', in Essays On Some Unsettled Questions Of Political Economy, Third Edition, Longmans, Green, And Co., London, 1877, pp. 143-145)

 

As noted on several earlier occasions, Mill's comments on the analytical and empirical aspects of 'Political Economy' were mirrored in Keynes' definition of 'The Theory of Economics'  (1922) as "an apparatus of the mind, a technique of thinking" which, while not directly applicable to real-world economic phenomena, yet "helps its possessor to arrive at correct conclusions" with respect thereto.

 

For PKTers, who do not understand or choose to dismiss the Mill-Keynes viewpoint, there is now this to consider:

 

A coherent concept of Income - one that identifies it with Output - is possible only in the context of analytical economics.

 

 

Gunnar

 

 

 

 

----- Original Message -----

From: "Harry Veeder" <eo200@xxxxxxxxxxxxxxxxxxx>

To: "post keynesian thought" <pkt@xxxxxxxxxxxxxxxx>

Sent: Saturday, September 27, 2003 7:31 AM

Subject: Income = Output?

> Gunnar Tómasson wrote:
> <snip>
> >
> > "I sympathise, therefore, with the pre-classical doctrine that everything is
> > produced by labour [Of course!], 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."
> >
> > Amen!
> >
> > As for those who would contend otherwise, let them attempt to make their case
> > - and, in so doing, come to recognize that there is NO refuting Keynes' lucid
> > conclusion.
> >
> > Gunnar
>
>
> I accept the pre-classical doctrine, but translating the doctrine into
> mathematics is a delicate matter. If one embraces the doctrine, then the
> assumption that income is equivalent to output logically implies labour is
> exclusively motivated by output.
>
> Harry Veeder
>
>
> > ----- Original Message -----
> > From: Robert Williams <mailto:vic93@xxxxxxxxxxxx>
> > To: Gunnar Tómasson <mailto:gunnar.tomasson@xxxxxxxxxxx>
> > Sent: Friday, September 26, 2003 8:19 PM
> > Subject: Re: US Trade Deficit As 'World Engine Of Growth'?
> >
> > I wonder if this is why Keynes measured all things in labour units with the
> > insistence that one distribution of labour would produce one unique level of
> > output because of the labour that went into it.
> > Bob Williams
> > It ignores the implications for monetary economics of Keynes' "conviction"
> > that one must "commence [by] identify[ing] income with the value of output."
> >
> >
> >
> >
> >
>
>
>