Sandwichman quoted: > "Moving beyond Keynes’ short-term analysis, Pasinetti provides new > foundations for the principle of effective demand by showing the > sectoral origin of the macroeconomic condition for full employment. > > "Starting from the sectoral side, Pasinetti (1993: 52) finds that the > evolution of employment in each (final) sector i is the result of the > algebraic sum of three rates of change: 1) population growth (g), > which produces a general increase of demand, and therefore of > employment in all sectors; ii) the specific demand for any commodity i > (r1), which has a positive impact on employment in the sector > concerned; iii) sectoral productivity (ρ1), which acts in the opposite > direction.
Kalecki, among others, have criticized assertions that population growth determines aggregate demand. That says that we can't leave out the trend as the next paragraph does. But the posited relationship between demand (or rather, the quantity demanded) and the labor productivity, on the one hand, and employment demand, on the other, is true by definition under continuous time. > "Leaving aside the growth of population (which in Western countries is > near to zero), we see that the crucial element is the balance between > the growth of demand and the increase in productivity. Technological > change influences both: it has a direct effect on the second element, > since the level and evolution of productivity fundamentally depends on > the technological basis of the firm, and it has two effects on the > first: a specific effect, via the price of the commodity involved in > technological change, and a general effect resulting from the wage > increases. The price effect arises because, tendentially, the increase > in productivity for any commodity i produces a corresponding decrease > in its price and an increase of its demand. The importance of this > upward pressure on demand depends on the price elasticity for the > commodity in question. The general influence of technological change > (income effect) comes from the fact that, if the real wage follows the > dynamic of productivity, the increase of the purchasing power of the > employees entails: i) an increase of the demand for each commodity > they already buy (Engel curve effect), and ii) the appearance of a > demand for new commodities. Technological change is not the same as the "income effect." Further, in light of the history of the last 30 years (at least in the US), how can we assumes that the real wage follows [labor?] productivity? In any event, this paragraph seems commonplace. Nothing new here! > "At the macroeconomic level the condition for full employment is > derived from the solution of the system of equations describing the > physical flows of commodities produced in the economy. > > "Total labor supply is simply obtained from total population, by > correcting it for the proportion of active to total population (μ) as > well as for the proportion of total time to working time (ν). On the > global demand side reappear the same factors which are relevant for > the single sectors, i.e., the rate of increase of demand for the > individual commodities (ri) and the sectoral productivity growth (ρi). That's the standard equation mentioned above that's true by definition (in continuous time): rate of growth of demand for any commodity minus rate of growth of employment equals the rate of growth of employment. > "This implies that, at the macroeconomic level, full employment is far > from being the automatic outcome of some market mechanism; it is > rather a permanent task for public policy. That seems to be a Harrod knife-edge result, though this selection doesn't explain it well at all. It's essentially an _assumption_ of Cambridge-style linear models. But what's new here? > In fact, every r~ [an undefined symbol -- is it ri?] is > different from the others, and the same applies for the p, (obviously, > ri ≠ ρi). Some sectors expand (those for which ri > ρi), others > contract, new sectors appear and others disappear. Full employment > cannot be reached and maintained without a continuous shift of the > labor force from the declining to the expanding sectors; among other > things, this will require a permanent retraining and skill development > of the population. this is the kind of thing I've been saying. Technological change (that causes increased labor productivity in a sector) doesn't cause unemployment if people can easily move to other sectors. It does cause (structural) unemployment if retraining and skill development are not readily available. > The government can direct action on this through > the education system and can also influence the magnitude of the > coefficients μ and ν. In periods of high unemployment, this latter > possibility could materialize in measures to reduce the participation > rate of the labor force (coefficient μ) and to foster reductions in > working time. The government can also stimulate aggregate demand, can't it? of course, we could kick women out of the paid labor forces, as was done in the 1930s in the US. and of course, we could reduce hours per worker. Good idea, but how are we going to pull it off? > "It is interesting to note that, in Pasinetti’s view, the > macroeconomic condition for full employment implies the boundedness of > economic systems because the responsibility of the government to > generate full employment exclusively concerns its own citizens. The > international migration of labor should thus be subject to some > control, to avoid indiscriminate movements of population that would > impede the fulfillment of full employment in each country (Pasinetti > 1993: 148-150)." I doubt that this anti-immigrant conclusion actually follows logically from his model. This seems an interpretation. In general, I see absolutely nothing new in Pasinetti's analysis as presented here. -- Jim Devine / "All science would be superfluous if the form of appearance of things directly coincided with their essence." -- KM _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
