Re: Economic Science [Was: Re: The Widow's Cruse

["William B. Ryan" <william_b_ryan@xxxxxxxxx>]

***|Comment:  1.  This is how Paul Davidson expresses
the M->C->M' relation:  "It has nothing to do with
final demand inflation -- only that the present value
of a future stream of quasi-rents associated with a
new piece of real investment [M'] exceed the present
cost of producing that piece of investment [M]."|***

Actually, this has nothing to do with Marx's relation
or the definition or "source" of "profit" per se, but
the inducement to invest, which is another though
related matter.  What is striking to me about this is
the degree to which even Keynesian economists are
beholden to marginalist modes of thought and language
or terminology.  They would do well to become
assertively post marginalist as Keynes was on the
road to becoming.  Businessmen do not think in
marginalist terms nor does double entry accounting
conform to marginalist concepts, like opportunity
costs.

This is a typical marginalist statement:

"The ultimate source of opportunity cost is the
pervasive problem of scarcity (unlimited wants and
needs, but limited resources). Opportunity cost is
fundamental to the study of economics (and life)
because scarcity is fundamental to the study of
economics (and life). Whenever limited resources are
used to satisfy one want or need, an unlimited number
of other wants and needs remain unsatisfied. Hence
pursuing one activity means alternatives are not
pursued. Herein lies the essence of opportunity cost.
Doing one thing prevents doing another."

There are two fundamental axioms or postulates here
which the modern approach rejects:  1) unlimited
wants and needs; and 2) limited resources.

Keynes's "psychological law" that the "propensity to
consume" is inversely proportional to income is the
definite rejection of the first.

He didn't quite get to the point of rejecting the
second.  But, within the depressed context of the
1930s, he certainly did recognize that due to the
"unemployment" of capital and labor that had been
previously "employed," there existed an abundancy of
"idled" resources that could enable the economy to
attain a higher level of production and consumption
within the confines of existing resource
availability.  That could be achieved more rapidly
through conscious intervention--rather than waiting
for the "hidden hand" to run its course.

Resources become abundant (rather than scarce)
through discovery, invention and innovation.

They are continually assembled into their most
efficient combination through *entrepreneurship*, in
terms of the effective demand of consumers expressed
through free markets--that are enabled through
mechanisms of credit broadly defined.



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