RE: Re: RE: Profit Rates -- From Michael Yates
-Original Message- From: Louis Proyect [mailto:[EMAIL PROTECTED]] Sent: 18 April 2002 19:45 To: [EMAIL PROTECTED] Subject: [PEN-L:25116] Re: RE: Profit Rates -- From Michael Yates What do you meant that poor countries accrue interest liabilities that they don't pay? I was under the impression that the need to pay off debts to imperialist funding agencies is convulsing the 3rd world right now. These statements aren't inconsistent if one takes into account the difference between cash and accruals. The Highly Indebted Poor Countries have massive foreign debts that they can't pay. Because of this, every year, the IMF, World Bank and similar extend new loans to them which cover the interest payments due on their old loans. This is a cruel and stupid game which keeps them in poverty forever, but its net effect is that, when you factor aid and trade into the equation, the cash flow to most HIPCs from the G7 is positive. It's rather similar to the dot com business model where operational losses were supported by positive cash flows from equity issues, although the analogy is not so strong that I want to pursue it. Also (although I wouldn't dream of putting words in Michael's mouth) isn't the problem we are dealing with in the Argentina thread is exactly the need to get past surface impressions when discussing societies like Mexico? Of course, Mexico is not Tanzania but what sense does it make to categorize it (or Poland and Turkey) as a non-poor country just because it shares membership in the OECD? Mexico and Turkey are peripheral nations that will never join the front ranks of other OECD nations such as Norway or Austria. I take your point here (that is, if I understand you correctly as saying that we' re talking about imperialism rather than poverty per se here). But would you have said the same thing about Spain twenty years ago? One of the indicators that we need to take into account is yearly emigration because of unemployment. There are Turkish (and Polish) streetsweepers, prostitutes, newspaper vendors and non-unionized construction workers in Norway and Austria but few Norwegian or Austrian guest workers in Turkey or Poland. But this indicator is also unreliable over time; it has certainly flipped in Ireland which is now full of Italian fund managers. dd ___ Email Disclaimer This communication is for the attention of the named recipient only and should not be passed on to any other person. Information relating to any company or security, is for information purposes only and should not be interpreted as a solicitation or offer to buy or sell any security. The information on which this communication is based has been obtained from sources we believe to be reliable, but we do not guarantee its accuracy or completeness. All expressions of opinion are subject to change without notice. All e-mail messages, and associated attachments, are subject to interception and monitoring for lawful business purposes. ___
Re: RE: Re: RE: Profit Rates -- From Michael Yates
On Fri, 19 Apr 2002 10:48:16 +0100, Davies, Daniel wrote: I take your point here (that is, if I understand you correctly as saying that we' re talking about imperialism rather than poverty per se here). But would you have said the same thing about Spain twenty years ago? No. Spain had a rather powerful economy that developed under Franco's protectionist brand of fascism in the 1950s, with auto manufacturing, etc. But this indicator is also unreliable over time; it has certainly flipped in Ireland which is now full of Italian fund managers. I have no idea what Italian fund managers in Ireland have to do with my point. It is not working overseas that I am calling attention to, but the need to leave one's country in order to survive. This is a south to north, periphery to core dynamic. -- Louis Proyect, [EMAIL PROTECTED] on 04/19/2002 Marxism list: http://www.marxmail.org
RE: Re: Re: RE: RE: Profit Rates -- From Michael Yates
To be fair, although there are known serious problems with depreciation, the WorldCom and Global Crossing affaires aren't really relevant to the statistics Doug quoted. The assets of WorldCom and Global Crossing are worth exactly what they were worth before the meltdown, as stock market movements don't mean much to cables in the ground. The fact that the stock market's assessment of the future excess returns to be earned from renting out those cables no longer provide a viable basis for making interest payments don't change the capital employed for the purpose of the BEA numbers. dd Gene, this is one of the great secrets of economics. Of course, everyone knows, as Jim mentioned, that we have no theory of depreciation, but we go on pretending that out data is of good quality. Eugene Coyle wrote: How do you adjust for the change in capital in telecom companies, before and after the melt-down? What's the denominator? World Com Global Crossing -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED] ___ Email Disclaimer This communication is for the attention of the named recipient only and should not be passed on to any other person. Information relating to any company or security, is for information purposes only and should not be interpreted as a solicitation or offer to buy or sell any security. The information on which this communication is based has been obtained from sources we believe to be reliable, but we do not guarantee its accuracy or completeness. All expressions of opinion are subject to change without notice. All e-mail messages, and associated attachments, are subject to interception and monitoring for lawful business purposes. ___
RE: RE: Profit Rates -- From Michael Yates
I think you missed Doug's sarcasm, or I have missed his seriousness. the public sector people are quite well educated. sometimes they are given things to do that are impossible to do well. but they still have to do them. they are not paid as well as some in the private sector, but you would be foolish to take this as a sign of their worth. mbs I think what Doug mentioned is important. By the way, it is not just the public sector, where those who are in charge of producing such statistics are in desparate need of education. A similar problem exists also in the private sector, even at Investments Banks, where they are willing to pay good salaries for well educated people. One way to look at this is that it is an adverse selection problem. Of course, there is also a problem of moral hazard: when you have deadlines, the accuracy of your estimates becomes a very minor concern. Sabri
Re: Re: Re: RE: RE: Profit Rates -- From Michael Yates
Doug, Gee, Solow and Samuelson never thought of it either, when defending the idea of the production function. Luckily they had Joan Robinson to call it to their attention. But you and I are talking about different profit rates, as Daniel Davies has just pointed out. Gene Coyle Doug Henwood wrote: Eugene Coyle wrote: How do you adjust for the change in capital in telecom companies, before and after the melt-down? What's the denominator? Gee, better contact the folks at the Bureau of Economic Analysis. I bet they never thought of this! In fact, I'm sure they've never thought of many of the objections brought up on PEN-L over the last several days. They are, after all, just a bunch of third-rate public sector bean counters. A handy reference list of people who need an education can be found at http://www.bea.gov/bea/beatel.htm. The person who handles the capital stock estimates is Leonard Loebach, at 202-606-9764. If he's like most of them, he'll probably answer his own phone and be happy to talk to any knowledgeable, friendly caller. Doug
RE: RE: Profit Rates -- From Michael Yates
but according to the Cambridge UK folks, you can't measure capital stock to begin with . . . To me the interest rate(s) is more meaningful, since at least it is observed and is the object of literal transactions, unlike capital. profits are susceptible to what I suspect are flaky inventory valuation and capital consumption adjustments, and even a pristine profit rate can mislead in light of the time profile of investment returns. mbs From Michael Yates In the discussion about profit rates, I am confused. Doug Henwood suggests dividing profits by capital stock. Wouldn't this involve dividing a flow (profits) by a stock (capital stock) and therefore making a not very meaningful calculation? Dividing flows by stocks is not always bad voodoo. This calculation would give a ratio equivalent at the macro level to Return on Capital Employed, which is always a useful thing to know in the context of companies and I don't see a fallacy-of-composition type argument which would make it not a useful thing to know about whole economies. Or to put it another way, it's a flow divided by a stock in the same way that the rate of interest is a flow divided by a stock; it's a rate of return.
Re: RE: Profit Rates -- From Michael Yates
Daniel Davies: Isn't it the case that more money flows from the poor countries to the rich ones than vice versa? Repatriated profits, interest, etc. are greater than than the inflow of money to the poor countries. Vastly depends on your definition of a poor country. If you mean non-OECD, then the answer is broadly no on a cash basis but yes on an accounting basis (because poor countries accrue interest liabilities that they don't pay). But this definition would not count Mexico as a poor country because it's OECD. What do you meant that poor countries accrue interest liabilities that they don't pay? I was under the impression that the need to pay off debts to imperialist funding agencies is convulsing the 3rd world right now. Also (although I wouldn't dream of putting words in Michael's mouth) isn't the problem we are dealing with in the Argentina thread is exactly the need to get past surface impressions when discussing societies like Mexico? Of course, Mexico is not Tanzania but what sense does it make to categorize it (or Poland and Turkey) as a non-poor country just because it shares membership in the OECD? Mexico and Turkey are peripheral nations that will never join the front ranks of other OECD nations such as Norway or Austria. One of the indicators that we need to take into account is yearly emigration because of unemployment. There are Turkish (and Polish) streetsweepers, prostitutes, newspaper vendors and non-unionized construction workers in Norway and Austria but few Norwegian or Austrian guest workers in Turkey or Poland. Louis Proyect Marxism mailing list: http://www.marxmail.org
RE: RE: RE: Profit Rates -- From Michael Yates
Max writes:but according to the Cambridge UK folks, you can't measure capital stock to begin with . . . you can measure aggregate capital stocks (K), simply by multiplying price times quantity of each type and then adding up, but the question is what that measurement means. The Cambridge UK folks said that you could measure K, but that you couldn't use it as an independent variable as part of a theory of distribution, where the marginal product of K was somehow related to the rate of profit received (or the interest rate). The value of the rate of profit or of the interest rate has an effect on the value of K, so it's not the one-way causation that the neoclassicals assume. Of course, there are all sorts of _other_ measurement problems. The hardest is that of measuring depreciation in order to figure out the K net of depreciation. To me the interest rate(s) is more meaningful, since at least it is observed and is the object of literal transactions, unlike capital. but it's quite important to have some idea of the benefit to a industrial-capitalist borrower (the rate of return) in addition to understanding the cost to that borrower (the rate of interest). Estimated rates of return are always going to be approximations, but it's better than nothing. Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevine
Re: RE: RE: Profit Rates -- From Michael Yates
How do you adjust for the change in capital in telecom companies, before and after the melt-down? What's the denominator? World Com Global Crossing etc. I vote with the Cambridge UK folks. Max Sawicky wrote: but according to the Cambridge UK folks, you can't measure capital stock to begin with . . . To me the interest rate(s) is more meaningful, since at least it is observed and is the object of literal transactions, unlike capital. profits are susceptible to what I suspect are flaky inventory valuation and capital consumption adjustments, and even a pristine profit rate can mislead in light of the time profile of investment returns. mbs From Michael Yates In the discussion about profit rates, I am confused. Doug Henwood suggests dividing profits by capital stock. Wouldn't this involve dividing a flow (profits) by a stock (capital stock) and therefore making a not very meaningful calculation? Dividing flows by stocks is not always bad voodoo. This calculation would give a ratio equivalent at the macro level to Return on Capital Employed, which is always a useful thing to know in the context of companies and I don't see a fallacy-of-composition type argument which would make it not a useful thing to know about whole economies. Or to put it another way, it's a flow divided by a stock in the same way that the rate of interest is a flow divided by a stock; it's a rate of return.
Re: Re: RE: RE: Profit Rates -- From Michael Yates
Gene, this is one of the great secrets of economics. Of course, everyone knows, as Jim mentioned, that we have no theory of depreciation, but we go on pretending that out data is of good quality. Eugene Coyle wrote: How do you adjust for the change in capital in telecom companies, before and after the melt-down? What's the denominator? World Com Global Crossing -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
