Re: Income = Output?

[Gunnar Tómasson <gunnar.tomasson@xxxxxxxxxxx>]

Re. the following:

> I must say I am
> astounded to read this statement from Schumpeter.  I
> will have to look it up to see if it's taken out of
> context.
>
> It becomes clear to me why you think there has to be
> "final demand inflation" and have answered
> Schumpeter's conundrum, which would put you among the
> ranks of the geniuses.

Two brief comments.

First.  Here is an "astounding" Gunnar-like statement from Keynes:

"Income. - We propose to mean identically the same thing by the three
expressions:

(1)  the community's money income;

(2)  the earnings of the factors of production; and

(3)  the cost of production;

and we reserve the term _profits_ for the difference between the cost of
production of the current output and its actual sale-proceeds, so that
profits are NOT part of the community's income as thus defined."

The statement comes at the outset of Ch. 9 ('Certain Definitions') of Vol. I
of 'A Treatise on Money', of which John Hicks (whom Paul Davidson holds in
high regard) commented in 1973 as follows:

"...now, at greater distance, we find (I believe) that the 'General Theory'
loses stature, while the 'Treatise', in spite of its eccentricities, grows.
The 'General Theory' is a brilliant squeezing of dynamic economics into
static habits of thoughts.  The 'Treatise' is more genuinely dynamic, and
therefore more human."


Second.  In economics, the Edison rule of 1% inspiration and 99%
perspiration has greater explanatory power than "genius".

For, as Keynes wrote in his biographical essay on Alfred Marshall:

"The study of economics does not seem to require any specialised gifts of an
unusually high order.  Is it not, intellectually regarded, a very easy
subject compared with the higher branches of philosophy and pure science?
Yet good, or even competent economists are the rarest of birds.  An easy
subject, at which very few excel!  The paradox finds its explanation,
perhaps, in that the master-economist must possess a rare _combination_ of
gifts.  He must reach a high standard in several different directions and
must combine talents not often found together.  He must be mathematician,
historian, statesman, philosopher - in some degree.  He must understand
symbols and speak in words.  He must contemplate the particular in terms of
the general, and touch abstract and concrete in the same flight of thought.
He must study the present in the light of the past for the purposes of the
future.  No part of man's nature or his institutionns must lie entirely
outside his regard.  He must be purposeful and disinterested in a
simultaneous mood; as aloof and incorruptible as an artist,  yet sometimes
as near the earth as a politician."

Gunnar






----- Original Message -----
From: "William B. Ryan" <william_b_ryan@xxxxxxxxx>
To: <pkt@xxxxxxxxxxxxxxxx>
Cc: <gunnar.tomasson@xxxxxxxxxxx>
Sent: Thursday, October 02, 2003 12:52 PM
Subject: Re: Income = Output?


> "...net profit cannot exist, because the value and
> price of the original productive services will always
> absorb the value and price of the product, even if
> the productive process is parceled out among ever so
> many independent firms."  (_The Theory of Economic
> Development_, Oxford University Press, 1961, p. 31)
>
> I cannot conceive of anyone thinking the matter
> through and concluding otherwise.
> ----------------------------------------
>
> In "real" terms there is "net profit" because there
> is surplus that is output greater than the sum total
> inputted.  In financial terms there is "net profit"
> through the interaction of credit and the techniques
> of accounting which you (and apparently Schumpeter)
> do not understand.  Real profit and accounting profit
> do not necessarily coincide.  I must say I am
> astounded to read this statement from Schumpeter.  I
> will have to look it up to see if it's taken out of
> context.
>
> It becomes clear to me why you think there has to be
> "final demand inflation" and have answered
> Schumpeter's conundrum, which would put you among the
> ranks of the geniuses.  But in principle there is no
> inherent reason why the reflux cannot completely
> amortize its flux if there were no other factors in
> consideration.  That is to say, if Say's Law holds.
> And if Say's Law does hold there is no need whatever
> for there to be "final demand inflation" to enable
> "net profit."  I thought I demonstrated that to you
> previously.
>
> Say's Law most emphatically does not hold because
> there are indeed other factors in consideration.
>
>
>
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