Re: US Trade Deficit As 'World Engine Of Growth'?

[pdavidso <pdavidso@xxxxxxx>]

>===== Original Message From Gunnar Tómasson <gunnar.tomasson@xxxxxxxxxxx>
=====
>>> In my view, you are just condfused-- It hjas nothing to do with final
>demand
>> inflation -- only that the present value of a future stream of quasi-rents
>> associagted with a new piece of real investment exceed the present cost of
>> producing that piece of investment.
>
>
>Comment:
>
>Consider first that Final Demand Inflation is short-hand for Aggregate
>Demand 'inflated' beyond Aggregate Supply Cost through Credit Creation in
>the amount of Entrepreneurial Profit - when integrated into Keynes' summary
>statement in Ch. 6 ...

And as I said before to Harry V.that if you define birds as "horses" you can
prove that horses can fly.  To define an increase in aggregate demand -- as
demand inflation -- is just a bad use of terms that have other cognastive
meanings already in economic discourse.  Demand inflation is usually used to
denote asn INCREASE in demand at full employment so that the increase in
demand merely raises prices --(as aggregate demand deflated by the money wage
unit and aggregate supply deflated by the money wage unit BOTH increase pari
passu.



>
>"We can then define the _income_ of the entrepreneur as being the excess of
>the value of his finished output sold during the period over his prime cost
>[...]  it is the entrepreneur's expectation of the excess of this quantity
>over his outgoings to the other factors of production which he endeavours to
>maximise when he decides how much employment to give to the other factors of
>production, it is the quantity which is causally significant for
>employment."

But this could hold even if aggregate demand does not increase relative to
aggregate supply --i.e., when the point of effective demand is the same in two
periods of time.  Why would you call this demand inflation when there is no
change in the intersection of the aggregate demand or supply functions?
>
>..the statement would read as follows:
>
>"We can then define the _income_ of the entrepreneur as being the excess of
>the value of his finished output sold during the period [Aggregate Demand]
>over his prime cost ["his outgoings to the other factors of production"
>alias Factor Supply Cost]  ... it is the entrepreneur's expectation of
>[Final Demand Inflation resulting in an] excess of this quantity over his
>outgoings to the other factors of production which he endeavours to maximise
>when he decides how much employment to give to the other factors of
>production, it is the quantity which is causally significant for
>employment."

Remember that profit recipients also spend money to buy things-- and that
profit income is NOT prime costs of production --
Hence if profit recipients spend part of their income on consumer goods then,
ceteris paribus, entrepreneurs in the consumer goods industries can find that
their "excess of value of finished products" (total revenue) exceeds prime
costs (i.e., wage costs plus raw materials costs plus intermediary product
costs).

>
>
>Second.  In _Foundations of Economic Analysis_, Paul A. Samuelson advanced
>the proposition that the "excess of this quantity over [the entrepreneur's]
>outgoings to the other factors of production" is a measure of "quasi-rents"
>rather than Final Demand Inflation as follows:

And that is true of Marshall's definition of quasi rents!
>
>"It is quite clear that in the real world net revenue 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." (Atheneum, 1979, p. 87)

So what?
>
>
>Third.  And what is this SOMETHING?  To the best of my knowledge, Samuelson
>has NEVER answered that question - of which Schumpeter wrote as follows in
>Preface to the 1934 English translation of his _Theory Of Economic
>Development_:
>
>"I have not been able to convince myself, for example, that such questions
>as the source of interest [on Production Credit  alias Entrepreneurial
>Profit - insert GT] are either unimportant or uninteresting.  They could be
>made so, at all events, only by the fault of the author." (Oxford University
>Press, 1961, p. x)
>
>

Well Keynes told you that the source of interest was when a saver departed
with liquidity.

>
>I respectfully submit,
>
>(a)  that this "something" is Final Demand Inflation;

no!
>
>(b)  that, being exogenous to the Production Process, the rate of Final
>Demand Inflation is INDETERMINATE;
>
i don't know what you are talking about-- since you are using a lexicon that
are self-indulgent.

>(c)  that the "entrepreneur's expectation" with respect thereto =
>"entrepreneur's expectation" of Final Demand Inflation; and
>


no --see above.

>(d)  that inclusion of Entrepreneurial Net Revenue therein renders the
>concept of Income INDETERMINAT


not true.

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
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