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

["Barkley Rosser" <rosserjb@xxxxxxx>]

     I don't think any of this has much to do with the
"scissors" story, but there is a good reason why
Marshall, following a bunch of Germans initiated by
Johannes Heinrich Rau in 1841, began putting P
on the vertical axis and Q on the horizontal, in
contrast to Cournot and Walras and the French
tradition, which had them the other way, and which
fits the stories that we now generally tell students
in classes, of prices changing and quantities supplied
and demanded responding to those changes.
     Marshall was always interested in the state of the
poor, and the most important item determining the
condition of the poor in his day (and most before)
was the price of bread.  In the wheat("corn") and
thus bread markets the great exogenous variable
is the weather, which profoundly impacts the amount
of quantity supplied.  There is a harvest, providing
a quantity supplied, and this then determines that
all important price of bread, which when low meant
most people are well off, and when high meant that
most people were not well off, possibly to the point
of starvation.  (He was certainly aware that planting
decisions reflected earlier prices, but now we are
in cobweb land, and once the planting happened,
the weather happens and the quantity arrives after
the harvest apparently exogenously, especially in
a world before futures markets).
Barkley Rosser
----- Original Message -----
From: "pdavidso" <pdavidso@xxxxxxx>
To: "Robert Williams" <vic93@xxxxxxxxxxxx>
Cc: <pkt@xxxxxxxxxxxxxxxx>
Sent: Sunday, September 28, 2003 10:18 AM
Subject: Re: US Trade Deficit As 'World Engine Of Growth'?


> >===== Original Message From Robert Williams <vic93@xxxxxxxxxxxx> =====
> >Paul
> >
> >>As I explain in my book FINANCIAL MARKETS, MONEY AND THE REAL WORLD,
> >>
> >Is this a quote?
>
> No -- it is a description.
> >
> >> Keynes
> >>deflated all nominal values by the money wage unit in order to use
> Marshall's
> >>scissor analogue of supply and demand -- where demand is one blde of a
> scissor
> >>and supply is the other blade.  Marshall then noted thast if we keep one
> blade
> >>of the scissor constant (by construction) then we can say that the other
> blade
> >>did all the cutting.
> >>
> >I'm not clear on what you are saying here or its implications.  I am
> >aware that Marshal reversed the dependent asnd independent variables
>
> [I
> >find changing them back more useful] in order to develop his "Scissor"
> >analogy and Keyenes followed in his footsteps.  I've never learned why
> >he (Marshal) did this or why Keynes and everyone else followed suit and
> >still use the analogy to this day.
>
>
> The scissor analogy has nothing to do with reversing P and Q as idependent
and
> dependent variables-- The reversible thing you mention merely im plies
that
> the Marshallian cross should have Q on the vertical axis and P on the
> horizontal axis.
>
>
>
>
> >
> >I also wonder at the validity of the "scissor" analogy as a fair
> >representation of "the economy as a whole" it may address to some degree
> >Keynes' concern for full employment [though I tend to think it doesn't]
>
>
> Please read my book on FINANCIAL MARKETS, MONEY AND THE REAL WORLD --
> ESPECIALLY CHAPTER 2 -- where I show how Keynes aggregated Marsdhallian
> microsupply and demand curves for every fim in the economy to an aggregate
> demand and supply functions.  It was these functions that underlay his
> "principle of effective demand". Then, as Keynes wrote to Dennis
Robertson,
> Keynes was ewilling to accept the classical analysis of supply functions
in
> Marshall---
>
> but nevertheless, by deflating these two aggregate functions by the
money-wage
> unit -- demonstrate that any exogeneous change in aggregate demand that
moved
> the economy away from full employment could NOT be automatically offset by
> freely fluctuating money wages (the classical solution underlying Say's
Law);
>
> Instead Keynes's Marshallian micro to macro economics  required showing
that a
> return to full employment must show how a mechanism that shifts the
aggregate
> demand function (scissor blade) back to intersecting the aggregate supply
> (fixed, by construction, scissor blade ) function at the point of full
> employment.
>
>
> >but it can in no way that I can envisage his concern for the fair and
> >equitable distribution of the output of the economy.
> If you read the first sentences of the last chapter of the GT, you will
note
> that Keynes indicated that the two major faults of the entrepreneurial
> economics system was its inability to maintain full employment and its
> inequitgable and arbitrary distribution of income and wealth.  The GT was
> aimed at directly fixing the first fault -- and only indirectly toward
> ameliorating fault two.
>
>
>
> >>
> >I have a number of thoughts on this matter. 1)  it may not be AG that
> >needs managing at all if higher levels  of employment are the target.
>
> What is AG?
>
> >2) the use of the DD-SS analogy (scissors) returns a solution that is a
> >point of intersection [the result of the reversal of the dependent and
> >independent variables]  when a broader vista is needed [ that would
> >return a solution of areas under the curve.]
>
> Not if you are interested in curing involun tary unemployment -- as Keynes
was
> -- and with doubler digit uneployment in Euroland and significant
unemployment
> in most of the rest of the world (e.g., Japan) including most LDCs  -- I
do
> not think  a "broader vista" is needed.  Lets get to global full
employment
> first -- then we will have enugh goods and services available to worry
about
> "broader vistas".
>
>
> 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
>
>