Re: PKT and The Washington Consensus

[Gunnar Tómasson <gunnar.tomasson@xxxxxxxxxxx>]

Paul:

In response to my point -

> >For surely ALL Factor Income generated in the Production Process is
> >"available" to Factor Income Recipients in the first instance - their
> >disposition of such Income is another matter.

- you write:

> Yes the income recipients can spend all of this period;s income this
period,
> but if they want to spend more of their aggregate income on  consumables
> during the current period than the available output produced during the
> current period,  and if production takes time , then, by definition, they
can
> only buy available output - nonavailable existing output is not available
for
> consumption.
>
> And that's not true by definition -- Now change available to C and
> nonavailable to non-consumable goods -- and you are back to the GT
> classification system.

Comment:

In the context, "nonavailable existing output" denotes "work in progress".

That is to say, Factor Inputs en route to transformation into Final Output.

This was clear to Keynes in those parts of GT, where - as noted by Samuelson
in his 1939 paper on "The Rate of Interest Under IDEAL Conditions" - he
reasoned that the VALUE of the economy's work in progress could change ONLY
as a result of a change in the NET factor content thereof.

While Samuelson professed to "believe that [Keynes] was demonstrably wrong"
in this respect (cited from memory), he has yet to 'demonstrate' any such
thing - for the very good reason that, in principle, the point cannot be
disputed.

Yet, as noted by Samuelson, in other parts of GT Keynes himself "reasoned"
as if the point was 'demonstrably wrong', importing thereby into GT the
conceptual muddle on related monetary issues which he had failed to resolve
in the Treatise - a muddle in which "keynesians" of all persuasions remain
stuck to this day.

How to get unstuck?

By recognizing the monetary implications of what was clear to Keynes in
parts of GT, namely, that ANY change in the value of the economy's work in
progress - your "nonavailable existing output" - MUST be identically matched
by concurrent change in the VALUE of purchasing power in the hands of
Suppliers of Factor Inputs to such work in progress.

That is to say, ANY change in the value of the economy's work in progress
MUST be identically matched by concurrent change in CREDIT extended,
directly or indirectly, to Entrepreneurs by Suppliers of Factor Inputs.

This ANALYTICAL conclusion has NOTHING to do with the interest rate
mechanism.

Whence it follows that the GT model of entrepreneurial market economies is
analytically incoherent etc. etc.

Gunnar



----- Original Message -----
From: "pdavidso" <pdavidso@xxxxxxx>
To: "Gunnar Tómasson" <gunnar.tomasson@xxxxxxxxxxx>
Cc: <pkt@xxxxxxxxxxxxxxxx>
Sent: Friday, February 27, 2004 5:53 PM
Subject: RE: PKT and The Washington Consensus


> Your "Ad hominem argument" statements, do not deserve a reply.
>
> Paul
>
> >===== Original Message From Gunnar Tómasson <gunnar.tomasson@xxxxxxxxxxx>
> =====
> >Paul:
> >
> >Let me answer your points one by one.
> >
> >1.  > I guess Gunnar never heard of consumer credit -- or households
> >refinancing
> >> their residents when the market value rises and he equity taken out is
> >used to
> >> buy consumrt goods.
> >
> >Ad hominem argument.
> >
> >2.  > You would not make such a mistake Gunnar if you read Keynes's
> >amendment to the
> >> GT in the EJ in1937 -- on the finance motive.
> >
> >Ad hominem argument.
> >
> >3.  > This has nothing to do weth the ex post definition of savings --
> >Keynes might
> >> have been better off if he had stuck to the TREATISE definition where
> >> everything produced was either AVAILABLE INCOME [Consumption in the GT]
or
> >NON
> >> AVAILABLE INCOME [ investment in the GT].. It would then be absolutely
> >clear
> >> that anything classified as NON AVAILABLE income can not be consumed in
> >the
> >> current accounting period -- and therefore must be "saved".
> >
> >The concept of NON-AVAILABLE INCOME is an oxymoron - one that Keynes
> >struggled with in the Treatise and, having failed to clear his mind on
the
> >subject matter, pushed it into the background in the General Theory under
> >the pretext that "whilst it is found that money enters into the economic
> >scheme in an essential and peculiar manner, [he chose to let] technical
> >monetary detail fall[] into the background."
> >
> >For surely ALL Factor Income generated in the Production Process is
> >"available" to Factor Income Recipients in the first instance - their
> >disposition of such Income is another matter.
>
> Yes the income recipients can spend all of this period;s income this
period,
> but if they want to spend more of their aggregate income on  consumables
> during the current period than the available output produced during the
> current period,  and if production takes time , then, by definition, they
can
> only buy available output - nonavailable existing output is not available
for
> consumption.
>
> And that's not true by definition -- Now change available to C and
> nonavailable to non-consumable goods -- and you are back to the GT
> classification system.
>
> >
> >4.  > Your submission is rejected -- on the grounds that you are fighting
> >the
> >> Neoclassical synthesis Keynesians such as Samuelson and Solow and not
> >Keynes
> >> of American Post Keynesians.
> >
> >The point at issue concerns Keynes himself - not Samuelson, Solow, or
> >Davidson.
> >
> >Hence, my submission stands unchallenged on substantive grounds.
>
> I don't think so!!
>
> Paul
>
> Paul Davidson
> Editor, Journal of Post Keynesian Economics
> University of Tennessee
> SMC 503
> Knoxville, Tennessee 37996-0550
> office phone #;(865)974-3303; office fax#(865)974-4601
> home phone and fax # (561)369-1951
> email pdavidson@xxxxxxx
> http://econ.bus.utk.edu/Davidson.html
>