CB: >How does going off the gold standard give capitalists more
control over prices ? <
with the gold standard, the labor theory of value works pretty
directly. Of course, prices of production (long term equilibrium
prices, with profit rates equalized) are not exactly proportional to
values, as usual. But on average, prices of production equals values.
The idea of inflation is based on the dollar price of commodities. For
this to happen, under the gold standard, the value of gold would have
to fall relative to that of other products.
The fall in the relative value of gold (the amount of labor needed to
produce an ounce of gold relative to the amount of labor needed to
produce the average non-gold commodity) can happen, due to new gold
discoveries (or the looting of the New World). But this doesn't happen
as a direct (endogenous) result of the normal workings of the economy.
It's "accidental," coming from outside (exogenous to) the normal
workings of the economy.
On the other hand, with fiat money, the central bank can decide to
validate (allow) inflation by increasing the amount of money in
circulation if profit margins are squeezed. This allows businesses
more pricing power. Further, the financial system can do this even
without the consent of the central bank.
CB:>...this seemingly would complicate how "capitalists" would use
their greater control of prices in the non-gold standard system.<
yes: the issue of monetary control is fraught with political conflicts
even within the capitalist class. However, the rentiers (creditors)
tend to dominate the debate, so that central banks are quite
anti-inflation.
Me:>> what works empirically may change. For example, to many
economists("monetarists") in the 1970s, it looked as if one could
easily control inflation by restricting the growth of the money supply
(based on an empirical generalization). But then when Volcker applied
this advice,the empirical generalization began to break down. <<
CB:>Did the Phillips Curve empirical generalization really stop
working , or did economists (Friedman ?) who didn't like that it
(seemingly) was so pro working class , uhhh, falsely claim that it was
no longer valid ? <
yes and no (though I don't think that the PC is especially pro-working class).
yes: The PC stopped working in the late 1960s, when persistent low
unemployment rates led to worsening (accelerating) inflation that got
stuck in the economy, not falling much at all during the Nixon
recession. Similarly, persistently high unemployment in the early
1980s led to slowing inflation (disinflation).
no: MF exaggerated the death of the PC. There is clearly an
unemployment/inflation trade-off of some sort, but the terms change
over time. More importantly, MF's alternative, the "natural" rate of
unemployment, is very hard to find in the data and changes over time,
often in unpredictable ways. There's a shifting range of possible
"natural" rates of unemployment where inflation rates tend to be
stable. This makes Greenspan's generally intuitive approach to
inflation and unemployment issues look pretty good. (Of course, AG is
just as conservative as MF is, so this is an intramural spat.)
BTW, persistently high unemployment tends to feed back to raise MF's
"natural" rate. Under Thatcher, high unemployment seems to have messed
up the labor force in a way that encouraged structural unemployment
(pocket-of-poverty unemployment).
Secondly, could the configuration of economies cause the Phillips
Curve to become empirically valid again sometime, ( assuming it was
not valid for a while) ? <
The PC is valid for a year or three. But the trade-off can shift.
I'm sort of amazed at all these economic ideas and schools that come
and go over the years. Can it really be that Keynesianism was only
valid for the time it was in vogue ? How could Samuelson, and
neo-classical synthesis be the prevailing or a main theory , and now
it is just passe ? Wasn't it Friedman (!) who said "we are all
Keynesians now" and then seemingly it is he who started the ball
rolling to end the Keynesian dominance. It's hard to understand how
each period can be so "empirically" unique from all others. <
Macroeconomics is famous for undergoing style changes. It depends a
lot on the political economy. Keynesianism was more appropriate for
the the 1950s/1960s warfare-welfare state in the US, when it dominated
world trade and did not have to worry much about foreign-trade
competition or capital flight. What is currently called "new
Keynesianism" is a neo-liberal version of monetarism rather than of
J.M. Keynes' ideas.
It was Richard Nixon who said that "we are all Keynesians now."
I have to suspect that there is _political_economy still, but the
politics is not admitted. It's very suspicious that Friedman began the
"invalidation" of a school of economics that clearly seems relatively
much more pro working class than his thinking and what follows. And
then economists say that Friedman theories are passe. Well, if they
are passe, why isn't Keynesianism reinvigorated ? <
the US economy is still pretty "globalized," so the original
Keynesianism is unlikely to come back. Whereas the 1950s version of
Keynesianism (the "neo-classical synthesis") pretty much fit with the
idea of a US domestic consensus (against communism, etc.), the
popularity of MF's monetarism was an early stage in the neo-liberal
policy revolution, a one-sided class war against labor in order to
restore profitability, using the restoration of a larger reserve army
of labor (as in the early 1980s) combined with anti-labor efforts of
other sorts.
Me:>> Price control made more sense in the 1970s than it does today,
because more domestic markets were oligopolized then than now. <
CB: >In auto, has the reduction in oligopoly been by entry of foreign
"big biznesses"? <
yes, along with the fact that US-based auto got fat during the 1950s
and 1960s and had a hard time adapting to the competition.
Why does price control make more sense with more oligopoly ? <
because oligopolies artificially restrict the quantity of the product
on the market to keep the price up (if the firms don't start
squabbling with each other). Price controls take this kind of pricing
power away from them.
--
Jim Devine / "Sanity is a madness put to good use." -- George Santayana.
