Not so good news
After I sent my message I discovered the duplicate mailings. I have received a number of complaints that pen-l is not identified. I will see what I can do to rectify the problems. Even so, it is sure a lot easier this time. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 916-898-5321 916-898-6141 messages E-Mail [EMAIL PROTECTED]
Not so good news
After I sent my message I discovered the duplicate mailings. I have received a number of complaints that pen-l is not identified. I will see what I can do to rectify the problems. Even so, it is sure a lot easier this time. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 916-898-5321 916-898-6141 messages E-Mail [EMAIL PROTECTED]
Temporary Lectureship (fwd)
Forwarded message: Date: Mon, 14 Mar 1994 09:37:09 EST Sender: Teaching and Research in Economic History <[EMAIL PROTECTED]> From: Sam Williamson <[EMAIL PROTECTED]> Organization: Miami University School of Business Subject: Temporary Lectureship Preliminary Announcement The University of Exeter will shortly be advertising a Chair in Economic and Social History. There will also be one-year Temporary Lectureship for 1994/5 which will be for the 'social' end of economic and social history. -- Bob Lewis, Department of Economic and Social History University of Exeter xx [EMAIL PROTECTED]|Amory Building |Rennes Drive INTERNET: |Exeter, EX4 4RJ [EMAIL PROTECTED] |UK -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 916-898-5321 916-898-6141 messages E-Mail [EMAIL PROTECTED]
Temporary Lectureship (fwd)
Forwarded message: Date: Mon, 14 Mar 1994 09:37:09 EST Sender: Teaching and Research in Economic History <[EMAIL PROTECTED]> From: Sam Williamson <[EMAIL PROTECTED]> Organization: Miami University School of Business Subject: Temporary Lectureship Preliminary Announcement The University of Exeter will shortly be advertising a Chair in Economic and Social History. There will also be one-year Temporary Lectureship for 1994/5 which will be for the 'social' end of economic and social history. -- Bob Lewis, Department of Economic and Social History University of Exeter xx [EMAIL PROTECTED]|Amory Building |Rennes Drive INTERNET: |Exeter, EX4 4RJ [EMAIL PROTECTED] |UK -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 916-898-5321 916-898-6141 messages E-Mail [EMAIL PROTECTED]
FROM THE DEVELOPMENT GAP (fwd)
Forwarded message: Date: Mon, 14 Mar 1994 18:46:21 GMT Sender: Activists Mailing List <[EMAIL PROTECTED]> From: The Development GAP <[EMAIL PROTECTED]> Organization: ? Subject: FROM THE DEVELOPMENT GAP ~Date: Fri, 4 Mar 1994 12:25:19 -0800 ~From: The Development GAP /* Written 6:39 am Feb 25, 1994 by [EMAIL PROTECTED] in igc:mlist.wbbig */ /* -- "MSG. FROM THE DEVELOPOMENT GAP" -- */ Dear Colleagues: The Development Group for Alternative Policies (The Development GAP) has created an electronic mailing list so as to be able to quickly share information on the World Bank, IMF and related issues. The first message you will receive will be a description of the U.S. NGO "50 Years Is Enough" campaign. If you do not wish to receive these mailings, please send me a message at "[EMAIL PROTECTED]" and I will gladly take your name off the list. I also wanted to alert you to a couple of useful conferences on the APC network: "econ.saps" -- has current news and analysis on World Bank and IMF economic policies (known as "structural adjustment") and their impacts in different countries. "act.wb94" -- contains listings of what groups around the world are doing on the ocassion of the 50th anniversary of the World Bank and IMF. I hope this helpful. Ross Hammond The Development GAP 927 15th Street, NW 4th Floor Washington, DC 20005 USA tel: 202-898-1566; fax: 202-898-1612 -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 916-898-5321 916-898-6141 messages E-Mail [EMAIL PROTECTED]
FROM THE DEVELOPMENT GAP (fwd)
Forwarded message: Date: Mon, 14 Mar 1994 18:46:21 GMT Sender: Activists Mailing List <[EMAIL PROTECTED]> From: The Development GAP <[EMAIL PROTECTED]> Organization: ? Subject: FROM THE DEVELOPMENT GAP ~Date: Fri, 4 Mar 1994 12:25:19 -0800 ~From: The Development GAP /* Written 6:39 am Feb 25, 1994 by [EMAIL PROTECTED] in igc:mlist.wbbig */ /* -- "MSG. FROM THE DEVELOPOMENT GAP" -- */ Dear Colleagues: The Development Group for Alternative Policies (The Development GAP) has created an electronic mailing list so as to be able to quickly share information on the World Bank, IMF and related issues. The first message you will receive will be a description of the U.S. NGO "50 Years Is Enough" campaign. If you do not wish to receive these mailings, please send me a message at "[EMAIL PROTECTED]" and I will gladly take your name off the list. I also wanted to alert you to a couple of useful conferences on the APC network: "econ.saps" -- has current news and analysis on World Bank and IMF economic policies (known as "structural adjustment") and their impacts in different countries. "act.wb94" -- contains listings of what groups around the world are doing on the ocassion of the 50th anniversary of the World Bank and IMF. I hope this helpful. Ross Hammond The Development GAP 927 15th Street, NW 4th Floor Washington, DC 20005 USA tel: 202-898-1566; fax: 202-898-1612 -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 916-898-5321 916-898-6141 messages E-Mail [EMAIL PROTECTED]
Xrates, AS-AD, & comparative advantage
I guess this is one of those nostalgic periods on PEN-L when old debates come back for a second run. Tom W. wonders how it can be that, in one context, I claim that absolute advantage does not rule because exchange rates need not adjust to balance the current account, and in another I claim that the neoclassical aggregate demand curve cannot be based on trade substitution effects because exchange rates *will* adjust. Sounds bad for the home team. Here is how I would reply: I would imagine nominal exchange rates to be determined by a function over such variables as demand & supply on the current account, demand and supply on the capital account, safe haven effects, real interest rate differential effects, speculative factors -- AND differences in rates of inflation. Since D&S on the current account is only one small part of this story, I would not expect exchange rates to settle in the manner hypothesized by comparative advantage. But a ceteris paribus argument can be made that, holding the other factors fixed, price level changes alone *should* induce such offsetting movements. The only reason they wouldn't (in principle) would be if there were a logical connection between the rate of inflation and one or more of the arguments being held constant. Well, you might make a case for changes in the safe haven or speculative effects, but (a) that is not what is generally considered by neoclassical economists! and (b) even so, I can't see why the relationship would necessarily be predictable, certainly not at all initial levels of inflation. Moreover, it is also necessary in this case to look at possible price level changes in trading partners. Here the question would be whether the shocks driving up prices in one country are national or international in scope. Wait--there's more. Even if all of the preceding were wrong and increases in inflation did entail corresponding decreases in the real exchange rate, there is still the small matter of the J- curve. For the first quarter or so after the price spike we would expect the current account to improve; it would be at least six quarters before the balance fell. I know we compress (or better, deny) historical time somewhat whenever we contemplate movement along a curve (Joan Robinson), but isn't this stretching things a bit? Peter Dorman
Xrates, AS-AD, & comparative advantage
I guess this is one of those nostalgic periods on PEN-L when old debates come back for a second run. Tom W. wonders how it can be that, in one context, I claim that absolute advantage does not rule because exchange rates need not adjust to balance the current account, and in another I claim that the neoclassical aggregate demand curve cannot be based on trade substitution effects because exchange rates *will* adjust. Sounds bad for the home team. Here is how I would reply: I would imagine nominal exchange rates to be determined by a function over such variables as demand & supply on the current account, demand and supply on the capital account, safe haven effects, real interest rate differential effects, speculative factors -- AND differences in rates of inflation. Since D&S on the current account is only one small part of this story, I would not expect exchange rates to settle in the manner hypothesized by comparative advantage. But a ceteris paribus argument can be made that, holding the other factors fixed, price level changes alone *should* induce such offsetting movements. The only reason they wouldn't (in principle) would be if there were a logical connection between the rate of inflation and one or more of the arguments being held constant. Well, you might make a case for changes in the safe haven or speculative effects, but (a) that is not what is generally considered by neoclassical economists! and (b) even so, I can't see why the relationship would necessarily be predictable, certainly not at all initial levels of inflation. Moreover, it is also necessary in this case to look at possible price level changes in trading partners. Here the question would be whether the shocks driving up prices in one country are national or international in scope. Wait--there's more. Even if all of the preceding were wrong and increases in inflation did entail corresponding decreases in the real exchange rate, there is still the small matter of the J- curve. For the first quarter or so after the price spike we would expect the current account to improve; it would be at least six quarters before the balance fell. I know we compress (or better, deny) historical time somewhat whenever we contemplate movement along a curve (Joan Robinson), but isn't this stretching things a bit? Peter Dorman
Re: LTV
Barkley Rosser (hi, Barkley) takes exception with the way I pose the point that labor values are at best superfluous: > I profoundly hesitate to get involved in the Cottrell- > Skillman-et-al controversies over Marx and the labor theory of > values. But, one point: From someone who does not "believe" > in the LTV to Gil, the argument that prices are on the surface > and therefore are the supreme driving force does not cut it. I > note that most "standard" economists would argue that what matters > are "real" prices, which depend on other prices and in some cases, > expectations of future price levels (ugh, what a can of worms!). Oh, I agree, I agree, I agree. But whatever "surface reality" one posits that people *do* respond to, in light of Barkley's comments, I'll bet it is at least as far removed from labor values as it is from prices of production, for reasons given in my earlier post. Thus I reiterate the original sense of my remarks, with Barkley's amendment. gil [[EMAIL PROTECTED]]
Re: LTV
Barkley Rosser (hi, Barkley) takes exception with the way I pose the point that labor values are at best superfluous: > I profoundly hesitate to get involved in the Cottrell- > Skillman-et-al controversies over Marx and the labor theory of > values. But, one point: From someone who does not "believe" > in the LTV to Gil, the argument that prices are on the surface > and therefore are the supreme driving force does not cut it. I > note that most "standard" economists would argue that what matters > are "real" prices, which depend on other prices and in some cases, > expectations of future price levels (ugh, what a can of worms!). Oh, I agree, I agree, I agree. But whatever "surface reality" one posits that people *do* respond to, in light of Barkley's comments, I'll bet it is at least as far removed from labor values as it is from prices of production, for reasons given in my earlier post. Thus I reiterate the original sense of my remarks, with Barkley's amendment. gil [[EMAIL PROTECTED]]
RE; inflation and real wages
There is one other complication in the question about inflation and real wages: Many of the people in the working class are NET DEBTORS. This is particularly true of the section that owns their own homes -- as well as those who are struggling to get out of the working class with heavy student loans or trying to start a small business with lots of borrowing. NET DEBTORS are helped a great deal by inflation --- here is the class basis, IMHO, of the actions of the monetary authorities that Rudy is identifying: > >I believe that monetary authorities, representing capitalist class >interests, conciously promote a certain level of inflation to >cut or keep real wages in check. However, they don't want inflation >to get too high because it would undermine the role of the $ >as international money which would destablize the world economy. > > >Rudy The latter was certainly a major reason for the activities of Paul Volcker in 1979-82 --- but the general anti-inflation bias sees inflation as dangerous to financial profitability. Mike Mike Meeropol (bitnet%"mmeeropo@wnec") (in%"[EMAIL PROTECTED]") (#100)
RE; inflation and real wages
There is one other complication in the question about inflation and real wages: Many of the people in the working class are NET DEBTORS. This is particularly true of the section that owns their own homes -- as well as those who are struggling to get out of the working class with heavy student loans or trying to start a small business with lots of borrowing. NET DEBTORS are helped a great deal by inflation --- here is the class basis, IMHO, of the actions of the monetary authorities that Rudy is identifying: > >I believe that monetary authorities, representing capitalist class >interests, conciously promote a certain level of inflation to >cut or keep real wages in check. However, they don't want inflation >to get too high because it would undermine the role of the $ >as international money which would destablize the world economy. > > >Rudy The latter was certainly a major reason for the activities of Paul Volcker in 1979-82 --- but the general anti-inflation bias sees inflation as dangerous to financial profitability. Mike Mike Meeropol (bitnet%"mmeeropo@wnec") (in%"[EMAIL PROTECTED]") (#100)
Re: use-value
On the question of whether use-value is quantitative or not, I won't say anything. Hugo Radice said what I wanted to say. But I don't think use-value is irrelevant to Marx's political economy. He abstracts from it at the beginning of CAPITAL. All that's necessary is that a commodity have a use-value or be a use-value. But after that, use-value is introduced again and again. Labor-power is distinguished from other commodities because it has the use-value of being able to create surplus-value. Then in volume II, Marx introduces the differences between "Departments" I and II, which is a matter of use-value: means of production have a different use-value than means of subsistence. In volume III, he starts talking about a large number of industries, each with different products, each having different use-values. Etc. Sometimes Marx's logic is seen as expressing the logic of the contradiction between exchange-value (or surplus-value) and use-value. in pen-l solidarity, Jim Devine BITNET: jndf@lmuacadINTERNET: [EMAIL PROTECTED] Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA 310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950
Re: use-value
On the question of whether use-value is quantitative or not, I won't say anything. Hugo Radice said what I wanted to say. But I don't think use-value is irrelevant to Marx's political economy. He abstracts from it at the beginning of CAPITAL. All that's necessary is that a commodity have a use-value or be a use-value. But after that, use-value is introduced again and again. Labor-power is distinguished from other commodities because it has the use-value of being able to create surplus-value. Then in volume II, Marx introduces the differences between "Departments" I and II, which is a matter of use-value: means of production have a different use-value than means of subsistence. In volume III, he starts talking about a large number of industries, each with different products, each having different use-values. Etc. Sometimes Marx's logic is seen as expressing the logic of the contradiction between exchange-value (or surplus-value) and use-value. in pen-l solidarity, Jim Devine BITNET: jndf@lmuacadINTERNET: [EMAIL PROTECTED] Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA 310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950
LTV defense, part 3
1. At this point I shall digress briefly to cover a flank, i.e. to address a concern that I suspect many students of Marxism may have. 2. I appear to be treating the LTV and the Sraffian system as alternative theories of (the "systematic component" of) relative prices. But isn't this to miss the point? Wasn't Marx's Capital subtitled a Critique of Political Economy, not a Continuation of same? How can I bracket Ricardo and Marx as proponents of the LTV when Marx was concerned to explode Ricardo, not merely to second him? (I think Jim Devine has something like this in mind, and perhaps others too.) 3. There is some force in this objection, but I think it is overdone. True, Marx's primary object was not to develop a theory of relative prices. He wanted to lay bare the basis of profit in the capitalist exploitation of labor, to discern the "laws of motion" of capitalism, and to demonstrate that capitalism is a historically transient mode of production, whose internal contradictions necessarily propel it in the direction of its supercession by socialism. From this standpoint, the LTV was but a stepping stone towards a theory of *surplus value* -- something quite foreign to Ricardo. And, it may be said, whatever is valid or salvageable from among the latter ambitions may be reconstructed without appeal to the LTV. 4. This last claim I will tackle shortly. For the moment I want to point out that although a theory of relative prices was not Marx's central concern, as such, it does nonetheless play a key role in his work -- if not in Roemerian reconstructions of it. And it is a valid scientific question in its own right. (And I might add that Ricardo, too, placed the LTV in the service of an analysis of the "laws of motion" of capitalism as he saw them -- e.g. the progress towards the famous "stationary state" via a falling rate of profit.) 5. Marx's analysis of exploitation assumes that the prices of commodities in terms of money are in proportion to their labor-values. There is weak and a strong reading of this assumption. On the weak reading, it is just an expositional tactic for representing at the level of the individual factory and the individual worker, social relations that obtain between the class of workers and the class of capitalists. It projects onto the *individual* working day a division into surplus and necessary labour time that is in reality a relationship between parts of the *total social working day*. This is divided between time spent in industries producing workers' consumer goods and time spend producing goods used by the capitalists. The weak position would say that these conditions of projection need not hold empirically for the thesis about the social totality to be valid. 6. The strong position would state that the conditions of projection are more or less empirically valid, in the sense that there is such a strong correlation between the prices of commodities and their values that what is true at the social level is also true at the micro level. 7. Hence, although the principal concern of Marx in his famous chapter on the commodity may have been the analysis of the *social form* of value, this does not indicate that he was unconcerned with the empirical relationship between price and value. Generally he held that movements in price reflected movements in value. This indeed was the specific form of representation of the category value (abstract social labour) in capitalist society. The essence of this form of representation was that there was a homomorphism between the structure of prices and the structure of values. Marx of course allows for disturbing elements -- temporary imbalances of supply and demand, differing organic compositions of capital between branches, etc. -- but the existence of these distorting factors no more invalidates the underlying hypothesis than the reality of air resistance invalidated Galileo's theory of falling bodies. The claim is that the underlying tendency will produce clear measurable effects, which can be distinguished from the effects of the disturbing factors. [Paras 5-7 above are based on notes made by Paul Cockshott.] End of third posting. == Allin Cottrell Department of Economics Wake Forest University [EMAIL PROTECTED] (910) 759-5762 ==
LTV defense, part 3
1. At this point I shall digress briefly to cover a flank, i.e. to address a concern that I suspect many students of Marxism may have. 2. I appear to be treating the LTV and the Sraffian system as alternative theories of (the "systematic component" of) relative prices. But isn't this to miss the point? Wasn't Marx's Capital subtitled a Critique of Political Economy, not a Continuation of same? How can I bracket Ricardo and Marx as proponents of the LTV when Marx was concerned to explode Ricardo, not merely to second him? (I think Jim Devine has something like this in mind, and perhaps others too.) 3. There is some force in this objection, but I think it is overdone. True, Marx's primary object was not to develop a theory of relative prices. He wanted to lay bare the basis of profit in the capitalist exploitation of labor, to discern the "laws of motion" of capitalism, and to demonstrate that capitalism is a historically transient mode of production, whose internal contradictions necessarily propel it in the direction of its supercession by socialism. From this standpoint, the LTV was but a stepping stone towards a theory of *surplus value* -- something quite foreign to Ricardo. And, it may be said, whatever is valid or salvageable from among the latter ambitions may be reconstructed without appeal to the LTV. 4. This last claim I will tackle shortly. For the moment I want to point out that although a theory of relative prices was not Marx's central concern, as such, it does nonetheless play a key role in his work -- if not in Roemerian reconstructions of it. And it is a valid scientific question in its own right. (And I might add that Ricardo, too, placed the LTV in the service of an analysis of the "laws of motion" of capitalism as he saw them -- e.g. the progress towards the famous "stationary state" via a falling rate of profit.) 5. Marx's analysis of exploitation assumes that the prices of commodities in terms of money are in proportion to their labor-values. There is weak and a strong reading of this assumption. On the weak reading, it is just an expositional tactic for representing at the level of the individual factory and the individual worker, social relations that obtain between the class of workers and the class of capitalists. It projects onto the *individual* working day a division into surplus and necessary labour time that is in reality a relationship between parts of the *total social working day*. This is divided between time spent in industries producing workers' consumer goods and time spend producing goods used by the capitalists. The weak position would say that these conditions of projection need not hold empirically for the thesis about the social totality to be valid. 6. The strong position would state that the conditions of projection are more or less empirically valid, in the sense that there is such a strong correlation between the prices of commodities and their values that what is true at the social level is also true at the micro level. 7. Hence, although the principal concern of Marx in his famous chapter on the commodity may have been the analysis of the *social form* of value, this does not indicate that he was unconcerned with the empirical relationship between price and value. Generally he held that movements in price reflected movements in value. This indeed was the specific form of representation of the category value (abstract social labour) in capitalist society. The essence of this form of representation was that there was a homomorphism between the structure of prices and the structure of values. Marx of course allows for disturbing elements -- temporary imbalances of supply and demand, differing organic compositions of capital between branches, etc. -- but the existence of these distorting factors no more invalidates the underlying hypothesis than the reality of air resistance invalidated Galileo's theory of falling bodies. The claim is that the underlying tendency will produce clear measurable effects, which can be distinguished from the effects of the disturbing factors. [Paras 5-7 above are based on notes made by Paul Cockshott.] End of third posting. == Allin Cottrell Department of Economics Wake Forest University [EMAIL PROTECTED] (910) 759-5762 ==
Re: Turing Test
On Fri, 11 Mar 1994 15:07:39 -0500 (EST) Gil said: > >For example, if a law were passed mandating that all firms be labor- >owned, Marx's argument of Vol I, Ch. 5 and Vol III, Chs 21-23 would >lead to the conclusion that the elimination of labor's subsumption >under capital would lead to the elimination of exploitation. > Gee, who said one should derive political conclusions from just a few chapters in Marx's long and winding book? Marx would totally agree with Roemer that simply legislating workers' control would not solve the problem of capitalist exploitation. In fact, it was from Marx that Roemer got the idea! Marx was very critical of Proudhon and others who thought that state-sponsored workers' co-operatives were the way to go. In fact, he shed doubt on the whole Gil/Proudhon counterfactual: why would the capitalist state allow such legislation to pass? In Marx's system, as I said in a very long missive last year, both micro and macro subsumption of labor are part of the exploitation story. That is, not only is the micro subsumption of labor by capital in the production process important, but so is the macro subsumption, i.e., the separation of workers from the ownership of the means of production and subsistence. Like the workers' control dream, Roemer's solution (have the state take over all of capitalist wealth) would also be insufficient. Marx saw both workers' co-operatives and the centralization of capital (in corporations and state hands) as precursors of socialism. In my reading, both of these need to be linked. This might be a bit utopian, but that's another issue. in pen-l solidarity, Jim Devine BITNET: jndf@lmuacadINTERNET: [EMAIL PROTECTED] Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA 310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950
Re: Turing Test
On Fri, 11 Mar 1994 15:07:39 -0500 (EST) Gil said: > >For example, if a law were passed mandating that all firms be labor- >owned, Marx's argument of Vol I, Ch. 5 and Vol III, Chs 21-23 would >lead to the conclusion that the elimination of labor's subsumption >under capital would lead to the elimination of exploitation. > Gee, who said one should derive political conclusions from just a few chapters in Marx's long and winding book? Marx would totally agree with Roemer that simply legislating workers' control would not solve the problem of capitalist exploitation. In fact, it was from Marx that Roemer got the idea! Marx was very critical of Proudhon and others who thought that state-sponsored workers' co-operatives were the way to go. In fact, he shed doubt on the whole Gil/Proudhon counterfactual: why would the capitalist state allow such legislation to pass? In Marx's system, as I said in a very long missive last year, both micro and macro subsumption of labor are part of the exploitation story. That is, not only is the micro subsumption of labor by capital in the production process important, but so is the macro subsumption, i.e., the separation of workers from the ownership of the means of production and subsistence. Like the workers' control dream, Roemer's solution (have the state take over all of capitalist wealth) would also be insufficient. Marx saw both workers' co-operatives and the centralization of capital (in corporations and state hands) as precursors of socialism. In my reading, both of these need to be linked. This might be a bit utopian, but that's another issue. in pen-l solidarity, Jim Devine BITNET: jndf@lmuacadINTERNET: [EMAIL PROTECTED] Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA 310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950
AD-AS, response to Peter Dorman
Peter: 1) I am glad to hear that you are free of sin, my brother, in your (past) teaching of micro. However in your remarks about "microland is faster than macroland" I would say it ain't necessarily so, especially when prices are a signaling device. We have seen plenty sudden speculative frenzies, including for commodities such as when Japanese housewives rioted over toilet paper out of fear of an impending shortage after a price increase, in very short times after a price increase. Also, new information, somebody is sticking syringes in something, can change preferences very rapidly. 2) (or is this more of 1)?) I would suggest that the endogeneity of MS is an empirical issue rather than a logical one. I fully agree that in most modern financially sophisticated economies with most money being "bank money" (deposits or accounts of one sort or another) money has a significant endogenous component. But this may not hold in a simple commodity money world (Yap Island rocks, Dahomey cowrie shells, gold in Hume-era Britain). In principle it can be exogenous. The real problem here (which is empirical) is what Mike Meeropol and others, along with myself (and I think you as well) have mentioned which is the lack of independence of AD and AS. 3) no comment 4) On international sub. effect, this is the point I made in my JPKE article. On the other hand foreign exchange markets are perhaps the most notoriously unpredictable and irrational of them all. Cheers. Barkley Rosser JMU to JMC
AD-AS, response to Peter Dorman
Peter: 1) I am glad to hear that you are free of sin, my brother, in your (past) teaching of micro. However in your remarks about "microland is faster than macroland" I would say it ain't necessarily so, especially when prices are a signaling device. We have seen plenty sudden speculative frenzies, including for commodities such as when Japanese housewives rioted over toilet paper out of fear of an impending shortage after a price increase, in very short times after a price increase. Also, new information, somebody is sticking syringes in something, can change preferences very rapidly. 2) (or is this more of 1)?) I would suggest that the endogeneity of MS is an empirical issue rather than a logical one. I fully agree that in most modern financially sophisticated economies with most money being "bank money" (deposits or accounts of one sort or another) money has a significant endogenous component. But this may not hold in a simple commodity money world (Yap Island rocks, Dahomey cowrie shells, gold in Hume-era Britain). In principle it can be exogenous. The real problem here (which is empirical) is what Mike Meeropol and others, along with myself (and I think you as well) have mentioned which is the lack of independence of AD and AS. 3) no comment 4) On international sub. effect, this is the point I made in my JPKE article. On the other hand foreign exchange markets are perhaps the most notoriously unpredictable and irrational of them all. Cheers. Barkley Rosser JMU to JMC
RE: marx on money
In response to Doug Henwood's point that the use of surplus-value is important to the issue, Gil Skillman agrees: >, and of course he's right. And Marx would have agreed, up to the >point of insisting that in a *capitalist* society, the realization of >surplus value via interest presupposes the prior extraction of labor >by industrial capitalists--since interest under capitalism, to Marx, >is a subtraction from the total surplus value extracted by industrial >capitalists. > Of course, Marx would have used his own vocabulary more rigorously. Instead of "realization of surplus via interest" he might have used the phrase "redistribution of surplus-value to money-capital owners." Or something like that: realization of surplus(value) usually refers to the sale of the surplus-product, its conversion into money. But Gil is right that Marx would have stressed the fact that (at least in his theory) the exploitation of wage-labor (or the subordinate classes in other modes of production) was the source of profit. It wasn't sufficient to simply lend money in order to get a share of the surplus-value. (One can't simply be a rentier and loan to the mythical "credit market island.") >Which is a surprise to capitalists who lend to labor-owned firms, to >name just one counter-example. It is interesting that bankers do not like to loan to labor-owned firms and that this causes all sorts of problems for such firms. But sometimes bankers do this kind of thing and they do receive interest. But this is hardly a counter-example to Marx's theory since these worker-owned firms exist within the societal conditions that define capitalism and allow capitalists to extract surplus- value. A worker-owned firm has to compete with capitalist firms in the same product markets. The capitalists can utilize the services of the reserve army of labor to keep their labor costs down. Also, being workers, the owners of the worker-managed firm are not rich. They may have direct access to their means of production, but they have to deal with the capitalist market to get access to means of subsistence (consumer goods). Thus, one might say that they are semi-proletarianized. They also do not have enough assets to diversify their wealth, so they are in a much worse risk position than their capitalist competitors. They are dependent on capitalist bankers for credit, and of course those bankers push them to emulate capitalist practices (while charging them high interest rates). There's a lot of evidence indicating that worker-owned are more efficient than capitalist ones in the short run, but in the long run, the capitalist environment tends to drive them to liquidate. An exception is Mondragon, which has developed a non-capitalist environment that has so far fostered worker ownership. Even that has its limits, since it's dependent on the capitalist world market. The bottom line: capitalist bankers are able to get interest out of workers' co-operatives because those firms are stuck in a capitalist environment (defined as the separation of the direct producers from the ownership of the means of production and subsistence, working in a commodity-producing system). The co-op is pushed to "exploit itself" to pay this above- market interest rate. in pen-l solidarity, Jim Devine BITNET: jndf@lmuacadINTERNET: [EMAIL PROTECTED] Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA 310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950
RE: marx on money
In response to Doug Henwood's point that the use of surplus-value is important to the issue, Gil Skillman agrees: >, and of course he's right. And Marx would have agreed, up to the >point of insisting that in a *capitalist* society, the realization of >surplus value via interest presupposes the prior extraction of labor >by industrial capitalists--since interest under capitalism, to Marx, >is a subtraction from the total surplus value extracted by industrial >capitalists. > Of course, Marx would have used his own vocabulary more rigorously. Instead of "realization of surplus via interest" he might have used the phrase "redistribution of surplus-value to money-capital owners." Or something like that: realization of surplus(value) usually refers to the sale of the surplus-product, its conversion into money. But Gil is right that Marx would have stressed the fact that (at least in his theory) the exploitation of wage-labor (or the subordinate classes in other modes of production) was the source of profit. It wasn't sufficient to simply lend money in order to get a share of the surplus-value. (One can't simply be a rentier and loan to the mythical "credit market island.") >Which is a surprise to capitalists who lend to labor-owned firms, to >name just one counter-example. It is interesting that bankers do not like to loan to labor-owned firms and that this causes all sorts of problems for such firms. But sometimes bankers do this kind of thing and they do receive interest. But this is hardly a counter-example to Marx's theory since these worker-owned firms exist within the societal conditions that define capitalism and allow capitalists to extract surplus- value. A worker-owned firm has to compete with capitalist firms in the same product markets. The capitalists can utilize the services of the reserve army of labor to keep their labor costs down. Also, being workers, the owners of the worker-managed firm are not rich. They may have direct access to their means of production, but they have to deal with the capitalist market to get access to means of subsistence (consumer goods). Thus, one might say that they are semi-proletarianized. They also do not have enough assets to diversify their wealth, so they are in a much worse risk position than their capitalist competitors. They are dependent on capitalist bankers for credit, and of course those bankers push them to emulate capitalist practices (while charging them high interest rates). There's a lot of evidence indicating that worker-owned are more efficient than capitalist ones in the short run, but in the long run, the capitalist environment tends to drive them to liquidate. An exception is Mondragon, which has developed a non-capitalist environment that has so far fostered worker ownership. Even that has its limits, since it's dependent on the capitalist world market. The bottom line: capitalist bankers are able to get interest out of workers' co-operatives because those firms are stuck in a capitalist environment (defined as the separation of the direct producers from the ownership of the means of production and subsistence, working in a commodity-producing system). The co-op is pushed to "exploit itself" to pay this above- market interest rate. in pen-l solidarity, Jim Devine BITNET: jndf@lmuacadINTERNET: [EMAIL PROTECTED] Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA 310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950
Re: the aggregate demand curve
On Mon, 14 Mar 1994 13:55:15 -0500 (EST) Rudy F. said: >... I guess that >I don't understand how a change in investment can be large >enough to cause a recession or a period of expansion, in the >short run, but not have any impact on the production function. The idea is that the flow of investment spending has a big impact on the total flow of spending and aggregate demand but since the existing stock of means of production is so large, the effect of investment spending on this stock (or rather, these stocks) is small. > >The whole distinction between short run and long run is a mess. >Short run in micro is when a factor is fixed. Long run in >micro is when all factors are variable. In macro short run >is when actual price is not equal to expected price. Long run >in macro is when expected price=actual price but the capital >stock is still assumed to be fixed. It's true: there are two different conceptions of the "long run" floating around. One might be called the "medium run." More importantly, I think that we have to distinguish between the neoclassical long run, which assumes that there is a pre-existing state toward which the economy is tending (at the "natural" rate of unemployment, etc.), and other conceptions, which allow for the final state to be affected by the process of getting there (the hysteresis effect). Of course, we never get to the final state, since there are always a bunch of pesky exogenous and endogenous shocks which disrupt the equilibration. in pen-l solidarity, Jim Devine BITNET: jndf@lmuacadINTERNET: [EMAIL PROTECTED] Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA 310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950
Re: the aggregate demand curve
On Mon, 14 Mar 1994 13:55:15 -0500 (EST) Rudy F. said: >... I guess that >I don't understand how a change in investment can be large >enough to cause a recession or a period of expansion, in the >short run, but not have any impact on the production function. The idea is that the flow of investment spending has a big impact on the total flow of spending and aggregate demand but since the existing stock of means of production is so large, the effect of investment spending on this stock (or rather, these stocks) is small. > >The whole distinction between short run and long run is a mess. >Short run in micro is when a factor is fixed. Long run in >micro is when all factors are variable. In macro short run >is when actual price is not equal to expected price. Long run >in macro is when expected price=actual price but the capital >stock is still assumed to be fixed. It's true: there are two different conceptions of the "long run" floating around. One might be called the "medium run." More importantly, I think that we have to distinguish between the neoclassical long run, which assumes that there is a pre-existing state toward which the economy is tending (at the "natural" rate of unemployment, etc.), and other conceptions, which allow for the final state to be affected by the process of getting there (the hysteresis effect). Of course, we never get to the final state, since there are always a bunch of pesky exogenous and endogenous shocks which disrupt the equilibration. in pen-l solidarity, Jim Devine BITNET: jndf@lmuacadINTERNET: [EMAIL PROTECTED] Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA 310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950
Guaranteed Basic Income
I would appreciate comments on: 1) the idea of a basic guaranteed income for individuals, linked to distribution of available paid work via a much shorter work week, incentives for education, community service, environmental restoration, etc., other ideas, and 2) realistically, how such an income program might be financed (combine current transfer programs, taxation, other ideas.) Sally Lerner Futurework Project U. of Waterloo, Ontario, Canada
Guaranteed Basic Income
I would appreciate comments on: 1) the idea of a basic guaranteed income for individuals, linked to distribution of available paid work via a much shorter work week, incentives for education, community service, environmental restoration, etc., other ideas, and 2) realistically, how such an income program might be financed (combine current transfer programs, taxation, other ideas.) Sally Lerner Futurework Project U. of Waterloo, Ontario, Canada
LTV
I profoundly hesitate to get involved in the Cottrell- Skillman-et-al controversies over Marx and the labor theory of values. But, one point: From someone who does not "believe" in the LTV to Gil, the argument that prices are on the surface and therefore are the supreme driving force does not cut it. I note that most "standard" economists would argue that what matters are "real" prices, which depend on other prices and in some cases, expectations of future price levels (ugh, what a can of worms!). I am reminded of Geraldine Ferraro and George Bush arguing in the VP debate in 1984 over interest rates with Geraldine arguing that real rates were very high and George arguing in effect that the nominal rates are the "real" rates. You don't want to be George Bush now do you? Granted, "labor values" may "really" be utterly metaphysical irrelevant constructs. But simply saying "prices are on the surface" and labor values are not is not sufficient. It is nominal prices that are on the surface and few would argue that they are what supremely drives decisionmaking, class relations, etc. Barkley Rosser James Madison University
LTV
I profoundly hesitate to get involved in the Cottrell- Skillman-et-al controversies over Marx and the labor theory of values. But, one point: From someone who does not "believe" in the LTV to Gil, the argument that prices are on the surface and therefore are the supreme driving force does not cut it. I note that most "standard" economists would argue that what matters are "real" prices, which depend on other prices and in some cases, expectations of future price levels (ugh, what a can of worms!). I am reminded of Geraldine Ferraro and George Bush arguing in the VP debate in 1984 over interest rates with Geraldine arguing that real rates were very high and George arguing in effect that the nominal rates are the "real" rates. You don't want to be George Bush now do you? Granted, "labor values" may "really" be utterly metaphysical irrelevant constructs. But simply saying "prices are on the surface" and labor values are not is not sufficient. It is nominal prices that are on the surface and few would argue that they are what supremely drives decisionmaking, class relations, etc. Barkley Rosser James Madison University
Re: the aggregate demand curve
Jim D. writes: >but can't you say that the AS curve is drawn in the "Keynesian >short run" in which the stocks of means of production are >assumed to be given? Then capital investment leads to >shifts in the long-run AS curve over time... The problem I see with this argument is that we tell students that fluctuations in output are primarily the result of changes in investment. If investment increases doesn't the capital stock increase and change the aggregate supply curve? I guess that I don't understand how a change in investment can be large enough to cause a recession or a period of expansion, in the short run, but not have any impact on the production function. The whole distinction between short run and long run is a mess. Short run in micro is when a factor is fixed. Long run in micro is when all factors are variable. In macro short run is when actual price is not equal to expected price. Long run in macro is when expected price=actual price but the capital stock is still assumed to be fixed. In addition, if you ask a neoclassical economist to define economics he/she will reply it is the study of how to allocate scarce resources given unlimited wants. Why are resources scarce? Because they are finite where as wants are infinite. So if resources are finite, they are fixed. This means that in the long run we are in the short run. :-) >> >>According to neoclassical-Keynesian theory inflation does >>not lower real wages. In the real world inflation is the >>major mechnanism for lowering real wages and even >>principles of economics students who don't seem to understand >>much understand this fact. >> >I tell my students that real wages are determined by a race >between prices and wages and that those with more bargaining >power can win the race (so that w/p rises). The greater >the rate of unemployment (cet. par.), the lower workers' >bargaining power. So I blame unemployment (or other anti- >labor policies of the government) for low or falling real >wages. > I tell my students the same thing. in pen-l solidarity, Rudy = + Rudy Fichtenbaum+ Internet [EMAIL PROTECTED] + + Department of Economics + Bitnet [EMAIL PROTECTED]+ + Wright State University + Telephone 513-873-3070/3071+ + Dayton, OH 45435+ + +
Re: the aggregate demand curve
Jim D. writes: >but can't you say that the AS curve is drawn in the "Keynesian >short run" in which the stocks of means of production are >assumed to be given? Then capital investment leads to >shifts in the long-run AS curve over time... The problem I see with this argument is that we tell students that fluctuations in output are primarily the result of changes in investment. If investment increases doesn't the capital stock increase and change the aggregate supply curve? I guess that I don't understand how a change in investment can be large enough to cause a recession or a period of expansion, in the short run, but not have any impact on the production function. The whole distinction between short run and long run is a mess. Short run in micro is when a factor is fixed. Long run in micro is when all factors are variable. In macro short run is when actual price is not equal to expected price. Long run in macro is when expected price=actual price but the capital stock is still assumed to be fixed. In addition, if you ask a neoclassical economist to define economics he/she will reply it is the study of how to allocate scarce resources given unlimited wants. Why are resources scarce? Because they are finite where as wants are infinite. So if resources are finite, they are fixed. This means that in the long run we are in the short run. :-) >> >>According to neoclassical-Keynesian theory inflation does >>not lower real wages. In the real world inflation is the >>major mechnanism for lowering real wages and even >>principles of economics students who don't seem to understand >>much understand this fact. >> >I tell my students that real wages are determined by a race >between prices and wages and that those with more bargaining >power can win the race (so that w/p rises). The greater >the rate of unemployment (cet. par.), the lower workers' >bargaining power. So I blame unemployment (or other anti- >labor policies of the government) for low or falling real >wages. > I tell my students the same thing. in pen-l solidarity, Rudy = + Rudy Fichtenbaum+ Internet [EMAIL PROTECTED] + + Department of Economics + Bitnet [EMAIL PROTECTED]+ + Wright State University + Telephone 513-873-3070/3071+ + Dayton, OH 45435+ + +
Re: the aggregate demand curve
Rudy F. responded to me -- >I think you made a good point about the fact that the >aggregate demand and supply curves are not independent. >This has always bothered me and no one seems to have >solved the problem to my satisfaction. > >The problem is that investment is a component of aggregate >demand but it also affects aggregate supply since >investment is the change in the capital stock. > >There are probably other problems with the theory. I think the "positive feedback" from rising incomes TO rising money supply often is avoided or assumed away in most of the modelling which assumes the FED controls the money supply rather than the fact that the FED tries to "ride herd" on a money supply that in good times grows quite rapidly as loan-making accelerates a la Minsky. In the era of the "Euro-Currency" markets, the idea of causation coming FROM the FEd appears a bit quaint! > >In my opinion one of the major problems in teaching >macro theory is that most textbook models i.e., >neoclassical-Keynesian models argue that anticipated >inflation does not matter or if it does matter it is >because it affects the demand for money. I always >have trouble telling students with a straight face that >if they anticipate inflation it doesn't matter. It is true that all decision makers TRY to anticipate inflation --- but we should remember that while the "cost of living" abstraction may play some role in the "sense" of well being on the part of ordinary citizens and owners of business with very little control over their prices and very little ability to construct their own PERSONAL cost of living index --- from the point of view of any large business attempting to peer into the future, they couldn't care less about the AVERAGE RATE OF INFLATION --- they are focused on the expected rate of change in the prices of THEIR inputs and THEIR products. Since that usually involves nothing more than dressed up extrapolation we can be pretty safe to say that anytime prices deviate from the trend of the recent past, the result is UNANTICIPATED. BTW, I got a kick out of the current C.E.A. attempting to plot the REAL INTEREST RATE by identifying the expected rate of inflation as the average of the ten year blue chip inflation forecasts -- Bowles Gordon and Weiskopf used the average of the previous three year's measured inflation -- I still think there's a lot of value in the ex post real interest rate --- measured inflation subtracted from whatever interest rate you're measuring. > >According to neoclassical-Keynesian theory inflation does >not lower real wages. In the real world inflation is the >major mechnanism for lowering real wages and even >principles of economics students who don't seem to understand >much understand this fact. > >Rudy Actually, this last point supports traditional AS - AD analysis. If inflation DOES lower real wages than at higher prices there will be a higher "aggregate supply" because business will raise outputs as profit margins stretch --- similarly if rising inflation = lower real wages then "quantity demanded" in aggregate will be lower because real consumption will be lower. I don't think the data supports the idea over say a 10 - 20 year period that higher inflation correlates with slower growth of real wages. In Europe I believe it was actually the opposite. (but I'm willing to be immediately proven wrong by anyone with data at their finger-tips!) All the best ... Mike Mike Meeropol (bitnet%"mmeeropo@wnec") (in%"[EMAIL PROTECTED]") (#100)
Re: the aggregate demand curve
Rudy F. responded to me -- >I think you made a good point about the fact that the >aggregate demand and supply curves are not independent. >This has always bothered me and no one seems to have >solved the problem to my satisfaction. > >The problem is that investment is a component of aggregate >demand but it also affects aggregate supply since >investment is the change in the capital stock. > >There are probably other problems with the theory. I think the "positive feedback" from rising incomes TO rising money supply often is avoided or assumed away in most of the modelling which assumes the FED controls the money supply rather than the fact that the FED tries to "ride herd" on a money supply that in good times grows quite rapidly as loan-making accelerates a la Minsky. In the era of the "Euro-Currency" markets, the idea of causation coming FROM the FEd appears a bit quaint! > >In my opinion one of the major problems in teaching >macro theory is that most textbook models i.e., >neoclassical-Keynesian models argue that anticipated >inflation does not matter or if it does matter it is >because it affects the demand for money. I always >have trouble telling students with a straight face that >if they anticipate inflation it doesn't matter. It is true that all decision makers TRY to anticipate inflation --- but we should remember that while the "cost of living" abstraction may play some role in the "sense" of well being on the part of ordinary citizens and owners of business with very little control over their prices and very little ability to construct their own PERSONAL cost of living index --- from the point of view of any large business attempting to peer into the future, they couldn't care less about the AVERAGE RATE OF INFLATION --- they are focused on the expected rate of change in the prices of THEIR inputs and THEIR products. Since that usually involves nothing more than dressed up extrapolation we can be pretty safe to say that anytime prices deviate from the trend of the recent past, the result is UNANTICIPATED. BTW, I got a kick out of the current C.E.A. attempting to plot the REAL INTEREST RATE by identifying the expected rate of inflation as the average of the ten year blue chip inflation forecasts -- Bowles Gordon and Weiskopf used the average of the previous three year's measured inflation -- I still think there's a lot of value in the ex post real interest rate --- measured inflation subtracted from whatever interest rate you're measuring. > >According to neoclassical-Keynesian theory inflation does >not lower real wages. In the real world inflation is the >major mechnanism for lowering real wages and even >principles of economics students who don't seem to understand >much understand this fact. > >Rudy Actually, this last point supports traditional AS - AD analysis. If inflation DOES lower real wages than at higher prices there will be a higher "aggregate supply" because business will raise outputs as profit margins stretch --- similarly if rising inflation = lower real wages then "quantity demanded" in aggregate will be lower because real consumption will be lower. I don't think the data supports the idea over say a 10 - 20 year period that higher inflation correlates with slower growth of real wages. In Europe I believe it was actually the opposite. (but I'm willing to be immediately proven wrong by anyone with data at their finger-tips!) All the best ... Mike Mike Meeropol (bitnet%"mmeeropo@wnec") (in%"[EMAIL PROTECTED]") (#100)
Inflation is a good way to...
While making a list of the ?good things? that inflation can do, don't overlook its wonderful effect on municipal debt loads. At nominal tax dollars increase from income and upward pressure on property prices, the real burden of the last spending round's accumulated debt falls away from the city - and on to someone else. Could never figure out why those city mayors didn't come out strong for inflation since it would disolve their debt burden, save their savings and loan companies, and hit mainly the elderly - who couldn't hit back. Maybe the training for mayors does not include a course in economics? Sam Lanfranco, York U. CANADA [EMAIL PROTECTED]
Inflation is a good way to...
While making a list of the ?good things? that inflation can do, don't overlook its wonderful effect on municipal debt loads. At nominal tax dollars increase from income and upward pressure on property prices, the real burden of the last spending round's accumulated debt falls away from the city - and on to someone else. Could never figure out why those city mayors didn't come out strong for inflation since it would disolve their debt burden, save their savings and loan companies, and hit mainly the elderly - who couldn't hit back. Maybe the training for mayors does not include a course in economics? Sam Lanfranco, York U. CANADA [EMAIL PROTECTED]
Re: inflation and real wages
Peter D. writes: > >I disagree with Rudy F about inflation being a mechanism that lowers real >wages, either logically or historically. Logically, of course, the circular >flow indicates that aggregate purchasing power remains unaffected, and the >main distributional effect of greater-than-expected inflation will be from net >creditors to net debtors. I know that this is what the circular flow indicates. That's the problem as far as I am concerned. While it may be true that aggregate purchasing power remains unchanged when there is inflation the purchasing power of workers is usually reduced. The difference between expected inflation and actual inflation is worthless as far as I am concerned. Even if I could perfectly predict what inflation will be next year I can't force my boss to give me a raise. A basic problem with the aggregate supply and demand framework is that it is totally devoid of any class content. > Historically--well, plot the rate of change of real >wages against price inflation during the post-war period. What do you see? >Of course, if there are constraints against lowering nominal wages (a taboo >that has been dropping before our eyes) at least some inflation is required to >cut real wages. (This is not exactly true: a change in the composition of >wages can do this without price level changes.) But there is no reason that >*more* inflation should be associated with *more* reduction in real wages. As >I mentioned before during an exchange on AS-AD, I regard the battle against >money illusion (both types) to be a major task of intro macro. Any argument >that complicates it should be looked at very closely... > I will not argue that higher rates of inflation are associated with with larger declines in real wages, at least not until I look at the data. But I don't think that is the main issue. Keynesian argue that the reason for unemployment is that real wages are too high. If workers would only realize this and take a wage cut, full employment would be restored. Why won't workers take money wage cuts? Answer, according to the Keynesians is money illusion. I believe in money illusion about as much as I believe in the tooth fairy. The reason why workers won't take cuts in money wages, unless they are forced, is because they are smart enough to know that prices will not stop increasing and there is no mechcanism to guarantee them a job. I believe that monetary authorities, representing capitalist class interests, conciously promote a certain level of inflation to cut or keep real wages in check. However, they don't want inflation to get too high because it would undermine the role of the $ as international money which would destablize the world economy. Rudy = + Rudy Fichtenbaum+ Internet [EMAIL PROTECTED] + + Department of Economics + Bitnet [EMAIL PROTECTED]+ + Wright State University + Telephone 513-873-3070/3071+ + Dayton, OH 45435+ + +
Re: inflation and real wages
Peter D. writes: > >I disagree with Rudy F about inflation being a mechanism that lowers real >wages, either logically or historically. Logically, of course, the circular >flow indicates that aggregate purchasing power remains unaffected, and the >main distributional effect of greater-than-expected inflation will be from net >creditors to net debtors. I know that this is what the circular flow indicates. That's the problem as far as I am concerned. While it may be true that aggregate purchasing power remains unchanged when there is inflation the purchasing power of workers is usually reduced. The difference between expected inflation and actual inflation is worthless as far as I am concerned. Even if I could perfectly predict what inflation will be next year I can't force my boss to give me a raise. A basic problem with the aggregate supply and demand framework is that it is totally devoid of any class content. > Historically--well, plot the rate of change of real >wages against price inflation during the post-war period. What do you see? >Of course, if there are constraints against lowering nominal wages (a taboo >that has been dropping before our eyes) at least some inflation is required to >cut real wages. (This is not exactly true: a change in the composition of >wages can do this without price level changes.) But there is no reason that >*more* inflation should be associated with *more* reduction in real wages. As >I mentioned before during an exchange on AS-AD, I regard the battle against >money illusion (both types) to be a major task of intro macro. Any argument >that complicates it should be looked at very closely... > I will not argue that higher rates of inflation are associated with with larger declines in real wages, at least not until I look at the data. But I don't think that is the main issue. Keynesian argue that the reason for unemployment is that real wages are too high. If workers would only realize this and take a wage cut, full employment would be restored. Why won't workers take money wage cuts? Answer, according to the Keynesians is money illusion. I believe in money illusion about as much as I believe in the tooth fairy. The reason why workers won't take cuts in money wages, unless they are forced, is because they are smart enough to know that prices will not stop increasing and there is no mechcanism to guarantee them a job. I believe that monetary authorities, representing capitalist class interests, conciously promote a certain level of inflation to cut or keep real wages in check. However, they don't want inflation to get too high because it would undermine the role of the $ as international money which would destablize the world economy. Rudy = + Rudy Fichtenbaum+ Internet [EMAIL PROTECTED] + + Department of Economics + Bitnet [EMAIL PROTECTED]+ + Wright State University + Telephone 513-873-3070/3071+ + Dayton, OH 45435+ + +
results
Preliminary results of Jim O'Connor's request for books to use in Political Economy for Sociologists class Percentage of pen-l respondents recommending books they have authored themselves -- 50% Percentage of respondents who think I'm too young to retire -- 16% Percentage of respondents I thank for their time and trouble -- 100% Cheers, Jim
results
Preliminary results of Jim O'Connor's request for books to use in Political Economy for Sociologists class Percentage of pen-l respondents recommending books they have authored themselves -- 50% Percentage of respondents who think I'm too young to retire -- 16% Percentage of respondents I thank for their time and trouble -- 100% Cheers, Jim
Re: the aggregate demand curve
On Mon, 14 Mar 1994 06:50:38 -0800 Rudy Fichtenbaum said: >aggregate demand and supply curves are not independent. >This has always bothered me and no one seems to have >solved the problem to my satisfaction. > >The problem is that investment is a component of aggregate >demand but it also affects aggregate supply since >investment is the change in the capital stock. This is easily dealt with. See Hugh Rose's early work (IER 1966?). In addition, there is the standard "short period" justification. >In my opinion one of the major problems in teaching >macro theory is that most textbook models i.e., >neoclassical-Keynesian models argue that anticipated >inflation does not matter or if it does matter it is >because it affects the demand for money. I always >have trouble telling students with a straight face that >if they anticipate inflation it doesn't matter. In this setting anticipated inflation is usually expansionary since it lowers the user cost of capital. (This focusses on the effect on aggregate demand.) In addition, if we supplement the AS-AD framework with some wage dynamics, expected inflation will generally influence wage bargains. (Again, see Rose's work.) > >According to neoclassical-Keynesian theory inflation does >not lower real wages. In the real world inflation is the >major mechnanism for lowering real wages and even >principles of economics students who don't seem to understand >much understand this fact. This seems wrong as stated, but perhaps I misunderstand since there are difficulties discussing inflation in the standard AS-AD framework. In any case, in the standard setting a demand expansion succeeds in raising output by raising the price level at an exogenous wage (i.e, by lowering the real wage). [][][][][][][][][][][][][][][][][][][][][][][][][][][][][][][][][][] []* * * * *[] [] ** * ** ** * Alan G. Isaac, Associate Professor [] [] *.* **.* * * * Economics, The American University [] [] * * *** * * * ** Washington, DC 20016U.S.A. [] [] FAX: (202)885-3790 Internet: [EMAIL PROTECTED][] [] Phone:(202)885-3785 Bitnet: [EMAIL PROTECTED] [] [][][][][][][][][][][][][][][][][][][][][][][][][][][][][][][][][][]
Re: the aggregate demand curve
On Mon, 14 Mar 1994 06:50:38 -0800 Rudy Fichtenbaum said: >aggregate demand and supply curves are not independent. >This has always bothered me and no one seems to have >solved the problem to my satisfaction. > >The problem is that investment is a component of aggregate >demand but it also affects aggregate supply since >investment is the change in the capital stock. This is easily dealt with. See Hugh Rose's early work (IER 1966?). In addition, there is the standard "short period" justification. >In my opinion one of the major problems in teaching >macro theory is that most textbook models i.e., >neoclassical-Keynesian models argue that anticipated >inflation does not matter or if it does matter it is >because it affects the demand for money. I always >have trouble telling students with a straight face that >if they anticipate inflation it doesn't matter. In this setting anticipated inflation is usually expansionary since it lowers the user cost of capital. (This focusses on the effect on aggregate demand.) In addition, if we supplement the AS-AD framework with some wage dynamics, expected inflation will generally influence wage bargains. (Again, see Rose's work.) > >According to neoclassical-Keynesian theory inflation does >not lower real wages. In the real world inflation is the >major mechnanism for lowering real wages and even >principles of economics students who don't seem to understand >much understand this fact. This seems wrong as stated, but perhaps I misunderstand since there are difficulties discussing inflation in the standard AS-AD framework. In any case, in the standard setting a demand expansion succeeds in raising output by raising the price level at an exogenous wage (i.e, by lowering the real wage). [][][][][][][][][][][][][][][][][][][][][][][][][][][][][][][][][][] []* * * * *[] [] ** * ** ** * Alan G. Isaac, Associate Professor [] [] *.* **.* * * * Economics, The American University [] [] * * *** * * * ** Washington, DC 20016U.S.A. [] [] FAX: (202)885-3790 Internet: [EMAIL PROTECTED][] [] Phone:(202)885-3785 Bitnet: [EMAIL PROTECTED] [] [][][][][][][][][][][][][][][][][][][][][][][][][][][][][][][][][][]
RE: marx on money
On Sun, 13 Mar 1994 23:52:00 -0800 Gil said: >This is to continue my dialogue with Allin C. concerning the results >he and a coauthor recently obtained, which are consistent with >earlier work by Shaikh and others, to the effect that values diverge >very little from prices of production in fact. I am not denigrating >this work by the way, in pointing out that it doesn't really support >the validity of the LTV, just the conclusion that compositions of >capital do not as a matter of fact diverge significantly across >sectors. Rather this is potentially a happy finding for those, like >me, who are not willing to go the whole route with Roemer's non-value >theoretic restatement of exploitation as a normative concept. Much as it pains me, I have to agree with Gil here. In my reading, Marx was as interested in price/value deviations as he was in their connection. While the price/value connection reflects the (covert) socialization of production, price/value deviation are part of Marx's theory of how the level of empirical appearances deceives us and hides class nature of capitalism from the casual observer or what he termed the "vulgar" economist. That is, price/value deviations are part of his theory of commodity fetishism. (oops -- I used the "F word." ;-) ) On the other hand, and here comes the crass commercial announcement, see Devine and Dymski's article in the 1991 ECONOMICS AND PHILOSOPHY and our 1992 reply to Roemer. We argue that Roemer's theory of capitalist exploitation doesn't really explain the phenomenon under study. For example, he assumes but does not explain the scarcity of means of production. To explain that scarcity, one must break out of Roemer's Walrasian strait-jacket. Further, to have a good *normative* theory of exploitation, one has to start with a coherent positive theory, which Roemer does not have. >No, not at all. The indictment of the LTV is that 1) it is based on >invalid logic (if based on any logic at all; many, for example, >disavow Marx's _C_, VI, Ch. 1 argument as an attempt to establish a >logical ground for the LTV); and 2) labor values, at best, are >superfluous constructions. If prices of production are the question >(about which more later), then one can go directly from production >and market conditions to production prices; there is no need, even in >principle, to go from production and market conditions to values to >prices of production. This is pure Steedman. In my article on Marx's law of value (in RESEARCH IN POLITICAL ECONOMY), I argue that such criticisms should be taken seriously. Reading Marx, it turns out that values form a tautologically-true accounting framework. Commodities have both prices and values, which are determined simultaneously, so that one can't determine prices from values or vice-versa. To my mind, values (and the price=value assumption) are conceptual tools (heuristics) that Marx uses to break through the fetishism of commodities and reveal the class nature of capitalist society. As such, Steedman's critique is an excellent criticism of a Ricardian "labor theory of price" (a price theory) but not a criticism of Marx (who presented what might be termed -- gasp! -- a sociological theory of the economy). >No one is arguing that as a matter of fact, values don't closely >approximate prices of production. Of course they might. But it is >well to remember on this score that even prices of production, while >necessarily more fundamental than values (since surface capitalist >reality, the reality to which capitalists and workers respond, is >composed of prices, not values), are themselves a construction. They >don't correspond necessarily with absolute prices out there, thanks >to monopoly power, market failures, unequalized profit rates, etc.etc. I don't see why appearances are "more fundamental." We see the sun come up every day and go down every night. It appears that the sun is rotating around the earth. But most astronomers would argue that more fundamental is the fact that the earth itself is rotating and the sun standing still (relative to the earth's rotation). Just because we don't see the earth's rotation, and because plants, animals, and many people act on the assumption that the earth does not rotate, should we assume that the world does not turn? > On this score recall >Roemer's point that in a world which admits of at least some degree >of factor substitution in production, it is much more valid to say >that prices determine values, rather than vice-versa. In the accounting-framework interpretation of values, factor substitution (to use the non-Marxian lingo) is irrelevant. BTW, I can cite several cases in vol. I of CAPITAL where Marx notes the substitution of means of production for labor-power or vice-versa in response to "relative prices." Not being a neoclassical price theorist, he didn't stress this phenomenon. Rather, he stressed the dynamics of accumulation. in pen-l solidarity, Jim Devine BITNET
RE: marx on money
On Sun, 13 Mar 1994 23:52:00 -0800 Gil said: >This is to continue my dialogue with Allin C. concerning the results >he and a coauthor recently obtained, which are consistent with >earlier work by Shaikh and others, to the effect that values diverge >very little from prices of production in fact. I am not denigrating >this work by the way, in pointing out that it doesn't really support >the validity of the LTV, just the conclusion that compositions of >capital do not as a matter of fact diverge significantly across >sectors. Rather this is potentially a happy finding for those, like >me, who are not willing to go the whole route with Roemer's non-value >theoretic restatement of exploitation as a normative concept. Much as it pains me, I have to agree with Gil here. In my reading, Marx was as interested in price/value deviations as he was in their connection. While the price/value connection reflects the (covert) socialization of production, price/value deviation are part of Marx's theory of how the level of empirical appearances deceives us and hides class nature of capitalism from the casual observer or what he termed the "vulgar" economist. That is, price/value deviations are part of his theory of commodity fetishism. (oops -- I used the "F word." ;-) ) On the other hand, and here comes the crass commercial announcement, see Devine and Dymski's article in the 1991 ECONOMICS AND PHILOSOPHY and our 1992 reply to Roemer. We argue that Roemer's theory of capitalist exploitation doesn't really explain the phenomenon under study. For example, he assumes but does not explain the scarcity of means of production. To explain that scarcity, one must break out of Roemer's Walrasian strait-jacket. Further, to have a good *normative* theory of exploitation, one has to start with a coherent positive theory, which Roemer does not have. >No, not at all. The indictment of the LTV is that 1) it is based on >invalid logic (if based on any logic at all; many, for example, >disavow Marx's _C_, VI, Ch. 1 argument as an attempt to establish a >logical ground for the LTV); and 2) labor values, at best, are >superfluous constructions. If prices of production are the question >(about which more later), then one can go directly from production >and market conditions to production prices; there is no need, even in >principle, to go from production and market conditions to values to >prices of production. This is pure Steedman. In my article on Marx's law of value (in RESEARCH IN POLITICAL ECONOMY), I argue that such criticisms should be taken seriously. Reading Marx, it turns out that values form a tautologically-true accounting framework. Commodities have both prices and values, which are determined simultaneously, so that one can't determine prices from values or vice-versa. To my mind, values (and the price=value assumption) are conceptual tools (heuristics) that Marx uses to break through the fetishism of commodities and reveal the class nature of capitalist society. As such, Steedman's critique is an excellent criticism of a Ricardian "labor theory of price" (a price theory) but not a criticism of Marx (who presented what might be termed -- gasp! -- a sociological theory of the economy). >No one is arguing that as a matter of fact, values don't closely >approximate prices of production. Of course they might. But it is >well to remember on this score that even prices of production, while >necessarily more fundamental than values (since surface capitalist >reality, the reality to which capitalists and workers respond, is >composed of prices, not values), are themselves a construction. They >don't correspond necessarily with absolute prices out there, thanks >to monopoly power, market failures, unequalized profit rates, etc.etc. I don't see why appearances are "more fundamental." We see the sun come up every day and go down every night. It appears that the sun is rotating around the earth. But most astronomers would argue that more fundamental is the fact that the earth itself is rotating and the sun standing still (relative to the earth's rotation). Just because we don't see the earth's rotation, and because plants, animals, and many people act on the assumption that the earth does not rotate, should we assume that the world does not turn? > On this score recall >Roemer's point that in a world which admits of at least some degree >of factor substitution in production, it is much more valid to say >that prices determine values, rather than vice-versa. In the accounting-framework interpretation of values, factor substitution (to use the non-Marxian lingo) is irrelevant. BTW, I can cite several cases in vol. I of CAPITAL where Marx notes the substitution of means of production for labor-power or vice-versa in response to "relative prices." Not being a neoclassical price theorist, he didn't stress this phenomenon. Rather, he stressed the dynamics of accumulation. in pen-l solidarity, Jim Devine BITNET
AD-AS again
I have found the latest flurry of exchanges on the AD-AS question very interesting, and would have jumped in sooner if I only had more time. Now that my name has been mentioned, I can no longer restrain myself -- though time constraints still limit me to one small point. Peter Dorman referred back to an earlier exchange with me in which I suggested that the international substitution effect constituted the strongest case for a downward-sloping AD curve. Peter's argument against this case is that international exchange rates will offset differential trends in national inflation rates, so as to undercut any effect of national price changes on national net exports. But ia such an argument consistent with another argument made by Peter (in the context of a discussion of Daly & Cobb's analysis of international capital mobility), to the effect that it is precisely the failure of international exchange rate adjustment to offset changes in national price-and-cost conditions that is at the heart of the transnational capital mobility phenomenon that undercuts comparative advantage theory? Perhaps I have misunderstood things -- but it seems to me that the same convincing argument that Peter made to undergird the critique of comparative advantage should actually support the downward slope of the AD curve -- namely, international exchange rates are buffeted by all sorts of influences that prevent them from simply offsetting differential inflation rates. P.S.: By the way, PEN-L messages coming to me still identify PEN-L as the "sender," as well as indicating from which PEN-L person the message has come; so Doug Henwood' concern doesn't arise.
AD-AS again
I have found the latest flurry of exchanges on the AD-AS question very interesting, and would have jumped in sooner if I only had more time. Now that my name has been mentioned, I can no longer restrain myself -- though time constraints still limit me to one small point. Peter Dorman referred back to an earlier exchange with me in which I suggested that the international substitution effect constituted the strongest case for a downward-sloping AD curve. Peter's argument against this case is that international exchange rates will offset differential trends in national inflation rates, so as to undercut any effect of national price changes on national net exports. But ia such an argument consistent with another argument made by Peter (in the context of a discussion of Daly & Cobb's analysis of international capital mobility), to the effect that it is precisely the failure of international exchange rate adjustment to offset changes in national price-and-cost conditions that is at the heart of the transnational capital mobility phenomenon that undercuts comparative advantage theory? Perhaps I have misunderstood things -- but it seems to me that the same convincing argument that Peter made to undergird the critique of comparative advantage should actually support the downward slope of the AD curve -- namely, international exchange rates are buffeted by all sorts of influences that prevent them from simply offsetting differential inflation rates. P.S.: By the way, PEN-L messages coming to me still identify PEN-L as the "sender," as well as indicating from which PEN-L person the message has come; so Doug Henwood' concern doesn't arise.
Re: Employment policy
On Sun, 13 Mar 1994 23:34:45 -0800 JKC said: > . . . I get the feeling that >the general view from the left, center and the right seems to indicate that >monetary policy is not all that effective as an employment policy. > >I have not done a lot of review on the efficacy of monetary policy and would >like to hear others opinions. What are other folks' opinions on the viability >of >monetary policy as an effective employment policy? Is the phillips curve >vertical in the long run? My impression (developed in an -- alas -- unpublished paper) is that one can argue that the Phillips curve is indeed vertical in the very long-run BUT: (1) the "natural" rate of unemployment (in more scientific lingo, the non-accelerating inflation rate of unemployment or NAIRU) includes the unemployment necessary to maintain a profit rate seen as adequate by capitalists (the reserve army of labor); (2) this NAIRU is affected by the hysteresis effect: persistent high unemployment (as in Thatcher's England) leads to higher structural unemployment; and (3) government training programs -- combined with high demand for labor -- have the potential of lowering structural unemployment and thus the NAIRU. Monetary policy has the problem of (1) the endogeneity of the money supply, (2) asymmetries: liquidity squeezes work differently than liquidity floods, and (3) see above. in pen-l solidarity, Jim Devine BITNET: jndf@lmuacadINTERNET: [EMAIL PROTECTED] Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA 310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950
Re: Employment policy
On Sun, 13 Mar 1994 23:34:45 -0800 JKC said: > . . . I get the feeling that >the general view from the left, center and the right seems to indicate that >monetary policy is not all that effective as an employment policy. > >I have not done a lot of review on the efficacy of monetary policy and would >like to hear others opinions. What are other folks' opinions on the viability >of >monetary policy as an effective employment policy? Is the phillips curve >vertical in the long run? My impression (developed in an -- alas -- unpublished paper) is that one can argue that the Phillips curve is indeed vertical in the very long-run BUT: (1) the "natural" rate of unemployment (in more scientific lingo, the non-accelerating inflation rate of unemployment or NAIRU) includes the unemployment necessary to maintain a profit rate seen as adequate by capitalists (the reserve army of labor); (2) this NAIRU is affected by the hysteresis effect: persistent high unemployment (as in Thatcher's England) leads to higher structural unemployment; and (3) government training programs -- combined with high demand for labor -- have the potential of lowering structural unemployment and thus the NAIRU. Monetary policy has the problem of (1) the endogeneity of the money supply, (2) asymmetries: liquidity squeezes work differently than liquidity floods, and (3) see above. in pen-l solidarity, Jim Devine BITNET: jndf@lmuacadINTERNET: [EMAIL PROTECTED] Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA 310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950
Re: the aggregate demand curve
On Mon, 14 Mar 1994 07:41:02 -0800 Doug H. said: >I thought Keynes liked the idea of inflation subtly lowering real wages. >Is this a Marxist slander against him? No it isn't. In the GT, Keynes saw inflation exactly in this way. Tarshis and Dunlop criticized his assumption that real wages fall as the economy moves toward full employment (based on empirical evi- dence) and he agreed. But he never (as far as I know) developed a theory to replace the GT one. in pen-l solidarity, Jim Devine BITNET: jndf@lmuacadINTERNET: [EMAIL PROTECTED] Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA 310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950
Re: the aggregate demand curve
On Mon, 14 Mar 1994 07:41:02 -0800 Doug H. said: >I thought Keynes liked the idea of inflation subtly lowering real wages. >Is this a Marxist slander against him? No it isn't. In the GT, Keynes saw inflation exactly in this way. Tarshis and Dunlop criticized his assumption that real wages fall as the economy moves toward full employment (based on empirical evi- dence) and he agreed. But he never (as far as I know) developed a theory to replace the GT one. in pen-l solidarity, Jim Devine BITNET: jndf@lmuacadINTERNET: [EMAIL PROTECTED] Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA 310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950
Re: the aggregate demand curve
On Mon, 14 Mar 1994 06:51:12 -0800 Rudy F. said: >The problem is that investment is a component of aggregate >demand but it also affects aggregate supply since >investment is the change in the capital stock. but can't you say that the AS curve is drawn in the "Keynesian short run" in which the stocks of means of production are assumed to be given? Then capital investment leads to shifts in the long-run AS curve over time... > >According to neoclassical-Keynesian theory inflation does >not lower real wages. In the real world inflation is the >major mechnanism for lowering real wages and even >principles of economics students who don't seem to understand >much understand this fact. > I tell my students that real wages are determined by a race between prices and wages and that those with more bargaining power can win the race (so that w/p rises). The greater the rate of unemployment (cet. par.), the lower workers' bargaining power. So I blame unemployment (or other anti- labor policies of the government) for low or falling real wages. in pen-l solidarity, Jim Devine BITNET: jndf@lmuacadINTERNET: [EMAIL PROTECTED] Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA 310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950
Re: the aggregate demand curve
On Mon, 14 Mar 1994 06:51:12 -0800 Rudy F. said: >The problem is that investment is a component of aggregate >demand but it also affects aggregate supply since >investment is the change in the capital stock. but can't you say that the AS curve is drawn in the "Keynesian short run" in which the stocks of means of production are assumed to be given? Then capital investment leads to shifts in the long-run AS curve over time... > >According to neoclassical-Keynesian theory inflation does >not lower real wages. In the real world inflation is the >major mechnanism for lowering real wages and even >principles of economics students who don't seem to understand >much understand this fact. > I tell my students that real wages are determined by a race between prices and wages and that those with more bargaining power can win the race (so that w/p rises). The greater the rate of unemployment (cet. par.), the lower workers' bargaining power. So I blame unemployment (or other anti- labor policies of the government) for low or falling real wages. in pen-l solidarity, Jim Devine BITNET: jndf@lmuacadINTERNET: [EMAIL PROTECTED] Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA 310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950
Re: micro S & D
On Sun, 13 Mar 1994 21:41:57 -0800 Barkley Rosser said:
> As near
>as I can tell the only alternatives to supply and demand are either
>Marx or (Gil Skillman and Jim Devine, are you reading?)
Of course I'm reading (though I'm dismayed at the large amount of
mail after leaving town for the weekend and I'm a bit bored with AD).
For the record, micro S & D don't contradict Marx (as far as I can
tell). He did use a different lingo: "demand" for him was "quantity
demanded at the long-term equilibrium price" for us. But the main
thing was that he had a non-neoclassical theory of what's behind
micro S & D. S & D determine the constant gyrations about the
underlying "prices of production" (centers of gravity). These
in turn reflect the class nature of capitalist society and the
technical differences amongst industries ("organic compositions
of capital"), in addition to more mundane matters (a theory of
cost-determined prices in the long run).
in pen-l solidarity,
Jim Devine BITNET: jndf@lmuacadINTERNET: [EMAIL PROTECTED]
Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA
310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950
Re: micro S & D
On Sun, 13 Mar 1994 21:41:57 -0800 Barkley Rosser said:
> As near
>as I can tell the only alternatives to supply and demand are either
>Marx or (Gil Skillman and Jim Devine, are you reading?)
Of course I'm reading (though I'm dismayed at the large amount of
mail after leaving town for the weekend and I'm a bit bored with AD).
For the record, micro S & D don't contradict Marx (as far as I can
tell). He did use a different lingo: "demand" for him was "quantity
demanded at the long-term equilibrium price" for us. But the main
thing was that he had a non-neoclassical theory of what's behind
micro S & D. S & D determine the constant gyrations about the
underlying "prices of production" (centers of gravity). These
in turn reflect the class nature of capitalist society and the
technical differences amongst industries ("organic compositions
of capital"), in addition to more mundane matters (a theory of
cost-determined prices in the long run).
in pen-l solidarity,
Jim Devine BITNET: jndf@lmuacadINTERNET: [EMAIL PROTECTED]
Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA
310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950
Re: the aggregate demand curve
Doug H. writes: > >I thought Keynes liked the idea of inflation subtly lowering real wages. >Is this a Marxist slander against him? > Keynes may have liked the idea and was honest enough to admit it. But I was referring to standard textbook treatment of the issue. Are there standard textbooks that make the argument that inflation is a good way of lowering real wages? Rudy = + Rudy Fichtenbaum+ Internet [EMAIL PROTECTED] + + Department of Economics + Bitnet [EMAIL PROTECTED]+ + Wright State University + Telephone 513-873-3070/3071+ + Dayton, OH 45435+ + +
Re: the aggregate demand curve
Doug H. writes: > >I thought Keynes liked the idea of inflation subtly lowering real wages. >Is this a Marxist slander against him? > Keynes may have liked the idea and was honest enough to admit it. But I was referring to standard textbook treatment of the issue. Are there standard textbooks that make the argument that inflation is a good way of lowering real wages? Rudy = + Rudy Fichtenbaum+ Internet [EMAIL PROTECTED] + + Department of Economics + Bitnet [EMAIL PROTECTED]+ + Wright State University + Telephone 513-873-3070/3071+ + Dayton, OH 45435+ + +
inflation and real wages
I disagree with Rudy F about inflation being a mechanism that lowers real wages, either logically or historically. Logically, of course, the circular flow indicates that aggregate purchasing power remains unaffected, and the main distributional effect of greater-than-expected inflation will be from net creditors to net debtors. Historically--well, plot the rate of change of real wages against price inflation during the post-war period. What do you see? Of course, if there are constraints against lowering nominal wages (a taboo that has been dropping before our eyes) at least some inflation is required to cut real wages. (This is not exactly true: a change in the composition of wages can do this without price level changes.) But there is no reason that *more* inflation should be associated with *more* reduction in real wages. As I mentioned before during an exchange on AS-AD, I regard the battle against money illusion (both types) to be a major task of intro macro. Any argument that complicates it should be looked at very closely... Peter Dorman
inflation and real wages
I disagree with Rudy F about inflation being a mechanism that lowers real wages, either logically or historically. Logically, of course, the circular flow indicates that aggregate purchasing power remains unaffected, and the main distributional effect of greater-than-expected inflation will be from net creditors to net debtors. Historically--well, plot the rate of change of real wages against price inflation during the post-war period. What do you see? Of course, if there are constraints against lowering nominal wages (a taboo that has been dropping before our eyes) at least some inflation is required to cut real wages. (This is not exactly true: a change in the composition of wages can do this without price level changes.) But there is no reason that *more* inflation should be associated with *more* reduction in real wages. As I mentioned before during an exchange on AS-AD, I regard the battle against money illusion (both types) to be a major task of intro macro. Any argument that complicates it should be looked at very closely... Peter Dorman
LTV defense, part 2
First substantive remarks: On Sraffa-Steedman
==
1. There is no doubt a nice Latin name for the fallacy of seeking to
defend one's own position by attacking one's opponent's.
Nonetheless I will open by doing exactly that. Why? Because there
is considerable truth in the dictum "It takes a theory to beat a
theory"; and I think that skepticism among progressive economists
concerning the LTV has as one of its bases this sort of thought: Why
conjure with the primitive Ricardo-Marx LTV -- at best only a first
approximation -- when for the same price (i.e. at the same sort of
level of abstraction) one can have the *correct* (i.e. Sraffa-
Steedman) theory? I wish, therefore, to undermine this thought. (Of
course, if the only thing that could be said in favor of the LTV is that
the Sraffa-Steedman theory is faulty, this would not cut much ice.
But please remember what I said about the provisional suspension of
disbelief: there *are* positive arguments to be made too.)
2. Although theorists may sometimes be inclined to forget, the
equalized rate of profit is NOT a fact. It is, however, an assumption
that is absolutely crucial to all theories of Sraffian derivation.
Farjoun ("Production of commodities by means of what?" in Mandel
(ed.) Ricardo, Marx, Sraffa) is able to show, for instance, that many
Steedman-type examples, of the sort used to demonstrate the frailty
of the LTV, fall apart and become economically meaningless given
the slightest deviation from this assumption. (Yes, Marx assumed an
equalized rate of profit too, when producing the concept of prices of
production, but the point is that this assumption is *not* crucial to
the LTV as such -- more on this later.)
3. What IS a fact, is that the distribution of the rate of profit in
capitalist economies is quite wide, and broadly stable over time.
Yes, there are forces working in the direction of equalization, but
there are complementary forces working in the direction of dis-
equalization; and the joint outcome of these forces seems to be an
"equilibrium" degree of dispersion of profit rates (with different
capitals occupying different places in the distribution at different
times). (Farjoun and Machover, Laws of Chaos, Verso, 1983)
4. It is therefore not at all obvious that a theory based centrally on
the assumption of an equalized rate of profit has any claim to
*correctness*, to the status of a benchmark against which the
deficiencies of the LTV may be assessed.
5. The greater the equilibrium dispersion of profit rates, the worse
are Sraffian prices as approximations to actual prices -- or even to
their "centers of gravity," discounting the effects of short-run supply-
demand disequilibria. On the other hand, on the maintained
hypothesis of an equalized rate of profit, the greater the dispersion of
the value composition of capital, the worse are labor-values as
approximations to actual prices. Since both of these distributions are
non-degenerate, the question of whether Sraffian prices or labor-
values offer the better systematic approximation to actual prices is an
empirical one. The evidence to date shows, with remarkable
consistency across data-sets drawn from different capitalist
economies and different time periods, that the two approximations
are *roughly equally good*. It is not the case that labor-values are a
crude first approximation, and Sraffian prices a clearly superior
second approximation.
I have made this point before, but I wanted to set it out
systematically before developing its implications.
End of second posting.
==
Allin Cottrell
Department of Economics
Wake Forest University
[EMAIL PROTECTED]
(910) 759-5762
==
LTV defense, part 2
First substantive remarks: On Sraffa-Steedman
==
1. There is no doubt a nice Latin name for the fallacy of seeking to
defend one's own position by attacking one's opponent's.
Nonetheless I will open by doing exactly that. Why? Because there
is considerable truth in the dictum "It takes a theory to beat a
theory"; and I think that skepticism among progressive economists
concerning the LTV has as one of its bases this sort of thought: Why
conjure with the primitive Ricardo-Marx LTV -- at best only a first
approximation -- when for the same price (i.e. at the same sort of
level of abstraction) one can have the *correct* (i.e. Sraffa-
Steedman) theory? I wish, therefore, to undermine this thought. (Of
course, if the only thing that could be said in favor of the LTV is that
the Sraffa-Steedman theory is faulty, this would not cut much ice.
But please remember what I said about the provisional suspension of
disbelief: there *are* positive arguments to be made too.)
2. Although theorists may sometimes be inclined to forget, the
equalized rate of profit is NOT a fact. It is, however, an assumption
that is absolutely crucial to all theories of Sraffian derivation.
Farjoun ("Production of commodities by means of what?" in Mandel
(ed.) Ricardo, Marx, Sraffa) is able to show, for instance, that many
Steedman-type examples, of the sort used to demonstrate the frailty
of the LTV, fall apart and become economically meaningless given
the slightest deviation from this assumption. (Yes, Marx assumed an
equalized rate of profit too, when producing the concept of prices of
production, but the point is that this assumption is *not* crucial to
the LTV as such -- more on this later.)
3. What IS a fact, is that the distribution of the rate of profit in
capitalist economies is quite wide, and broadly stable over time.
Yes, there are forces working in the direction of equalization, but
there are complementary forces working in the direction of dis-
equalization; and the joint outcome of these forces seems to be an
"equilibrium" degree of dispersion of profit rates (with different
capitals occupying different places in the distribution at different
times). (Farjoun and Machover, Laws of Chaos, Verso, 1983)
4. It is therefore not at all obvious that a theory based centrally on
the assumption of an equalized rate of profit has any claim to
*correctness*, to the status of a benchmark against which the
deficiencies of the LTV may be assessed.
5. The greater the equilibrium dispersion of profit rates, the worse
are Sraffian prices as approximations to actual prices -- or even to
their "centers of gravity," discounting the effects of short-run supply-
demand disequilibria. On the other hand, on the maintained
hypothesis of an equalized rate of profit, the greater the dispersion of
the value composition of capital, the worse are labor-values as
approximations to actual prices. Since both of these distributions are
non-degenerate, the question of whether Sraffian prices or labor-
values offer the better systematic approximation to actual prices is an
empirical one. The evidence to date shows, with remarkable
consistency across data-sets drawn from different capitalist
economies and different time periods, that the two approximations
are *roughly equally good*. It is not the case that labor-values are a
crude first approximation, and Sraffian prices a clearly superior
second approximation.
I have made this point before, but I wanted to set it out
systematically before developing its implications.
End of second posting.
==
Allin Cottrell
Department of Economics
Wake Forest University
[EMAIL PROTECTED]
(910) 759-5762
==
New system
It's confusing not to have PEN-L listed as the source of a message; the new software makes everything look like pseudo-personalized direct mail. And, at least on this system (PINE 3.05, on a Sun UNIX), you can't reply to PEN-L; a reply goes to the author. Can this be fixed? Or is this the price of progress? Doug Doug Henwood [[EMAIL PROTECTED]] Left Business Observer 212-874-4020 (voice) 212-874-3137 (fax)
New system
It's confusing not to have PEN-L listed as the source of a message; the new software makes everything look like pseudo-personalized direct mail. And, at least on this system (PINE 3.05, on a Sun UNIX), you can't reply to PEN-L; a reply goes to the author. Can this be fixed? Or is this the price of progress? Doug Doug Henwood [[EMAIL PROTECTED]] Left Business Observer 212-874-4020 (voice) 212-874-3137 (fax)
Re: the aggregate demand curve
I thought Keynes liked the idea of inflation subtly lowering real wages. Is this a Marxist slander against him? Doug Doug Henwood [[EMAIL PROTECTED]] Left Business Observer 212-874-4020 (voice) 212-874-3137 (fax) On Mon, 14 Mar 1994 [EMAIL PROTECTED] wrote: > Mike, > > I think you made a good point about the fact that the > aggregate demand and supply curves are not independent. > This has always bothered me and no one seems to have > solved the problem to my satisfaction. > > The problem is that investment is a component of aggregate > demand but it also affects aggregate supply since > investment is the change in the capital stock. > > There are probably other problems with the theory. > > In my opinion one of the major problems in teaching > macro theory is that most textbook models i.e., > neoclassical-Keynesian models argue that anticipated > inflation does not matter or if it does matter it is > because it affects the demand for money. I always > have trouble telling students with a straight face that > if they anticipate inflation it doesn't matter. > > According to neoclassical-Keynesian theory inflation does > not lower real wages. In the real world inflation is the > major mechnanism for lowering real wages and even > principles of economics students who don't seem to understand > much understand this fact. > > Rudy > > > = > + Rudy Fichtenbaum+ Internet [EMAIL PROTECTED] + > + Department of Economics + Bitnet [EMAIL PROTECTED]+ > + Wright State University + Telephone 513-873-3070/3071+ > + Dayton, OH 45435+ + > +
Re: the aggregate demand curve
I thought Keynes liked the idea of inflation subtly lowering real wages. Is this a Marxist slander against him? Doug Doug Henwood [[EMAIL PROTECTED]] Left Business Observer 212-874-4020 (voice) 212-874-3137 (fax) On Mon, 14 Mar 1994 [EMAIL PROTECTED] wrote: > Mike, > > I think you made a good point about the fact that the > aggregate demand and supply curves are not independent. > This has always bothered me and no one seems to have > solved the problem to my satisfaction. > > The problem is that investment is a component of aggregate > demand but it also affects aggregate supply since > investment is the change in the capital stock. > > There are probably other problems with the theory. > > In my opinion one of the major problems in teaching > macro theory is that most textbook models i.e., > neoclassical-Keynesian models argue that anticipated > inflation does not matter or if it does matter it is > because it affects the demand for money. I always > have trouble telling students with a straight face that > if they anticipate inflation it doesn't matter. > > According to neoclassical-Keynesian theory inflation does > not lower real wages. In the real world inflation is the > major mechnanism for lowering real wages and even > principles of economics students who don't seem to understand > much understand this fact. > > Rudy > > > = > + Rudy Fichtenbaum+ Internet [EMAIL PROTECTED] + > + Department of Economics + Bitnet [EMAIL PROTECTED]+ > + Wright State University + Telephone 513-873-3070/3071+ > + Dayton, OH 45435+ + > +
more AS-AD
Now that I have been pulled back into this discussion of AS-AD I can't seem to get out. So here is my reply to Barkley Rosser (hi Bark!): 1. Why do I get so agitated about the assumption that nominal MS remains constant as AS shifts? Why isn't this just like the pleasant fiction about demand curves remaining fixed as supply curves gyrate in microland? Well, for the record, I look skepti cally at the micro formulation as well when I teach micro (which I no longer do...). I *do* include expectations as ceteris paribus conditions of both curves and discuss circumstances under which the shift in one curve will induce changes in the expectations underlying the other. This is an important tool for analysis in many markets. My particular gripe with fixed nominal MS is two- fold: First, insofar as MS is endogenous there is a logical, and not merely incidental, relationship between changes is AS and the MS. That is, movement along an AD curve indicates a change in the price level, which in turn induces agents to alter their money- creating activities. Second, the relationship between time-scale and the rate of change in (presumed) ceteris paribus conditions is different in microland and macroland. In the former, the time frame is usually on the order of weeks or months, and during that period it is reasonable to suppose, for instance, that consumer preferences are fairly stable. The time frame for AS-AD, on the other hand, is quarters, and it is *always* the case that nominal MS changes drastically from one quarter to the next. A misde meanor in one context becomes a felony in the other. 2. The bottleneck theory of a relationship between the price level and real output is somewhat plausible, although it should be remembered that in a mass production economic with large fixed costs there will be a large zone within which greater capacity utilization leads to lower costs. But this reasoning pertains to *realized* combinations of output and prices, not to a notional curve that represents only one blade of the scissors. 3. Back in the days when I taught micro, I did exactly as Barkley suggests: I presented the Keynesian cross in nominal terms and then discussed to what extent movements were also real. 4. I took on the international substitution effect argument for the AD curve in an exchange with Tom W. In short, I pointed out that such an effect requires fixed nominal exchange rates, but that in an otherwise ceteris paribus world, differences in na tional inflation rates would result in offsetting exchange rate adjustments. To argue that they wouldn't would imply nonrational behavior by traders. Peter Dorman
more AS-AD
Now that I have been pulled back into this discussion of AS-AD I can't seem to get out. So here is my reply to Barkley Rosser (hi Bark!): 1. Why do I get so agitated about the assumption that nominal MS remains constant as AS shifts? Why isn't this just like the pleasant fiction about demand curves remaining fixed as supply curves gyrate in microland? Well, for the record, I look skepti cally at the micro formulation as well when I teach micro (which I no longer do...). I *do* include expectations as ceteris paribus conditions of both curves and discuss circumstances under which the shift in one curve will induce changes in the expectations underlying the other. This is an important tool for analysis in many markets. My particular gripe with fixed nominal MS is two- fold: First, insofar as MS is endogenous there is a logical, and not merely incidental, relationship between changes is AS and the MS. That is, movement along an AD curve indicates a change in the price level, which in turn induces agents to alter their money- creating activities. Second, the relationship between time-scale and the rate of change in (presumed) ceteris paribus conditions is different in microland and macroland. In the former, the time frame is usually on the order of weeks or months, and during that period it is reasonable to suppose, for instance, that consumer preferences are fairly stable. The time frame for AS-AD, on the other hand, is quarters, and it is *always* the case that nominal MS changes drastically from one quarter to the next. A misde meanor in one context becomes a felony in the other. 2. The bottleneck theory of a relationship between the price level and real output is somewhat plausible, although it should be remembered that in a mass production economic with large fixed costs there will be a large zone within which greater capacity utilization leads to lower costs. But this reasoning pertains to *realized* combinations of output and prices, not to a notional curve that represents only one blade of the scissors. 3. Back in the days when I taught micro, I did exactly as Barkley suggests: I presented the Keynesian cross in nominal terms and then discussed to what extent movements were also real. 4. I took on the international substitution effect argument for the AD curve in an exchange with Tom W. In short, I pointed out that such an effect requires fixed nominal exchange rates, but that in an otherwise ceteris paribus world, differences in na tional inflation rates would result in offsetting exchange rate adjustments. To argue that they wouldn't would imply nonrational behavior by traders. Peter Dorman
CSE 1994 Conference
We are currently putting together the programme for this year's Conference of Socialist Economists annual conference. CSE'94: SOCIALISMAND BEYOND? University of Leeds, July 8th-10th 1994 Programme so far includes: plenaries: on globalisation and on racism. streams/workshops: capital, reproduction & domestic labour; disability & capitalism; Marx & Keynes; anti-roads campaign; society beyond work; managerialism; development; higher education; new management strategies; value theory for beginners; Marxism and utopia...and more. Cost: 10/20/40/80 pounds for unwaged/low-waged/higher-waged/paid by employer. Accomodation and childcare available. Disability access/facilities. As you can see, an energetic and diverse mix! All pen-l subscribers are invited to offer papers. These should go to [EMAIL PROTECTED] Later on, we'll send out a booking form on the network which you can return by e- mail. Hugo Radice [EMAIL PROTECTED] School of Business & Economic Studies University of Leeds Leeds LS2 9JT, UK tel: 0532-334507 fax: 0532-332640
CSE 1994 Conference
We are currently putting together the programme for this year's Conference of Socialist Economists annual conference. CSE'94: SOCIALISMAND BEYOND? University of Leeds, July 8th-10th 1994 Programme so far includes: plenaries: on globalisation and on racism. streams/workshops: capital, reproduction & domestic labour; disability & capitalism; Marx & Keynes; anti-roads campaign; society beyond work; managerialism; development; higher education; new management strategies; value theory for beginners; Marxism and utopia...and more. Cost: 10/20/40/80 pounds for unwaged/low-waged/higher-waged/paid by employer. Accomodation and childcare available. Disability access/facilities. As you can see, an energetic and diverse mix! All pen-l subscribers are invited to offer papers. These should go to [EMAIL PROTECTED] Later on, we'll send out a booking form on the network which you can return by e- mail. Hugo Radice [EMAIL PROTECTED] School of Business & Economic Studies University of Leeds Leeds LS2 9JT, UK tel: 0532-334507 fax: 0532-332640
quantifiability of use-value in Marx
The use-value of labour-power is not that it IS a quantity exceeding its own (exchange)-value, but that it is a SOURCE of a quantity of value exceeding its own EV, as one of Steve Keen's Marx quotes makes clear. In addition, LP is only a POTENTIAL source of value (and thus to an unquantifiable extent) until it is actually consumed as a use- value by the purchaser. It yields a surplus value only by its transformation into other use-values. The reason why Marx's concept of use-value is both so different from the neoclassical concept of utility, and so essential to all aspects of Marx's analysis, is that this transformation takes place OUTSIDE the sphere of exchange. An additional point is that use-values are only quantifiable against themselves - i.e. they usually appear in a form that can be counted: 1 Cadillac, 2 Cadillacs It is precisely the special social characteristic of value, visible in its appearance as exchange-value, that it, and it alone, makes different use-values socially commensurate (utility being, on the contrary, individually subjective). Hugo Radice [EMAIL PROTECTED]
quantifiability of use-value in Marx
The use-value of labour-power is not that it IS a quantity exceeding its own (exchange)-value, but that it is a SOURCE of a quantity of value exceeding its own EV, as one of Steve Keen's Marx quotes makes clear. In addition, LP is only a POTENTIAL source of value (and thus to an unquantifiable extent) until it is actually consumed as a use- value by the purchaser. It yields a surplus value only by its transformation into other use-values. The reason why Marx's concept of use-value is both so different from the neoclassical concept of utility, and so essential to all aspects of Marx's analysis, is that this transformation takes place OUTSIDE the sphere of exchange. An additional point is that use-values are only quantifiable against themselves - i.e. they usually appear in a form that can be counted: 1 Cadillac, 2 Cadillacs It is precisely the special social characteristic of value, visible in its appearance as exchange-value, that it, and it alone, makes different use-values socially commensurate (utility being, on the contrary, individually subjective). Hugo Radice [EMAIL PROTECTED]
Central America and World Bank/IMF Adjustment Programs
One of my students is researching the impact of World Bank/IMF structural adjustment programs in Central America for a course he is taking in political science. While he and I are familar with World Bank/IMF activities in Africa (he is Nigerian) and the recent World Bank report on East Asia, we are less well informed on these organizations activities in Central America. If anyone is able to help us with some good references critiquing World Bank/IMF activities in Central America we'd be most grateful. You may e-mail me direct at the address below if you prefer. Thanks. Cheers, |~~~| Brent McClintock| | Economics | | Carthage College| THERE IS NO WEALTH | Kenosha, Wisconsin 53140| BUT LIFE| USA | | Phone: (414) 551-5852 | John Ruskin | Fax: (414) 551-6208 | | Internet: [EMAIL PROTECTED] | | ~
Central America and World Bank/IMF Adjustment Programs
One of my students is researching the impact of World Bank/IMF structural adjustment programs in Central America for a course he is taking in political science. While he and I are familar with World Bank/IMF activities in Africa (he is Nigerian) and the recent World Bank report on East Asia, we are less well informed on these organizations activities in Central America. If anyone is able to help us with some good references critiquing World Bank/IMF activities in Central America we'd be most grateful. You may e-mail me direct at the address below if you prefer. Thanks. Cheers, |~~~| Brent McClintock| | Economics | | Carthage College| THERE IS NO WEALTH | Kenosha, Wisconsin 53140| BUT LIFE| USA | | Phone: (414) 551-5852 | John Ruskin | Fax: (414) 551-6208 | | Internet: [EMAIL PROTECTED] | | ~
RE: marx on money
Something else that just occurred to me with respect to Allin's post. Under conditions such as those discovered by Allin and co-author, to the effect that labor values correlate very closely with prices of production, the prices of production which emerge from Sraffa's "standard system" would also correlate very closely to prices of production. Should this result be taken to establish support for a Sraffian "standard commodity" theory of value? Gil [[EMAIL PROTECTED]]
RE: marx on money
Something else that just occurred to me with respect to Allin's post. Under conditions such as those discovered by Allin and co-author, to the effect that labor values correlate very closely with prices of production, the prices of production which emerge from Sraffa's "standard system" would also correlate very closely to prices of production. Should this result be taken to establish support for a Sraffian "standard commodity" theory of value? Gil [[EMAIL PROTECTED]]
