Posts
12 years ago
Friday, February 27, 2009
The Poverty of Economic Philosophy
Steve Keen brings to our attention a couple of attacks, based on the ongoing global economic crisis, on mainstream academic economics:
Tuesday, February 24, 2009
Davidson Writes A Letter
This is from last Sunday's (22 February) New York Times:
Paul D. Ryan repeats the tired idea that when the Federal Reserve prints money for the government to spend on economic recovery, the result will be inflation because "it is a situation in which too few goods are being chased by too much money." This is based on a false assumption that the output of the country will not increase when government lets contracts to business to produce more goods and services that will improve the productivity and health of our country.
If there is significant unemployment and idle capacity in the private sector (and who can deny there is?), then this deficit spending will not cause inflation. Rather, the "printed" money spent on a recovery plan creates profit opportunities that induce private enterprise to hire and produce more goods. Then there will be many more goods for this money to chase and no inflation need occur.
Paul Davidson
Boynton Beach, Fla, Feb 14, 2009
The writer is editor of The Journal of Post Keynesian Economics
Sunday, February 22, 2009
Another Reswitching Example
1.0 Introduction
I have previously presented examples of reswitching and capital reversing. These phenomena were discovered as part of the Cambridge Capital Controversy, and you will occasionally see commentators bring up the CCC on various blogs. This post presents another example. This example has a different structure than my favorite models. In this example, not all commodities are produced with the aid of commodities. Some capital goods not explicitly shown are produced directly with unassisted labor.
2.0 Some Theory And An Example
Consider a firm choosing among a set of techniques for producing a given commodity. Each technique, as in Table 1, exhibits Constant Returns to Scale (CRS) and can be represented as a series of dated labor inputs. The first element in this series is the amount of labor that must be applied in the technique during the current production cycle to produce one unit of the commodity. The second element is the amount of labor that must be applied one cycle ago to produce the capital goods required for use by the first labor input in the series. And so on. This representation of a technique is known as a flow-input, point-output model.
Consider the the cost of producing a unit of output with a given technique, where the calculation of the cost is performed at the end of the year in which the output becomes available. The cost is the sum of the cost of the labor inputs over previous years, with the cost of each labor input including an interest charge:
The best rate of profits (also known as the interest rate) available to the firm should be used in finding the cost of producing a unit of output with each technique. Since the only use of financial capital available to the firm here is to produce with one or another of the techniques of production, the best rate of profits is the rate of profits obtainable with cost-minimizing techniques. The following algorithm traverses the techniques to find the rate of profits associated with cost-minimizing techniques:
Figures 1, 2, and 3 illustrate the application of the algorithm to the example. Figure 1 shows the wage-rate of profits curves associated with each technique. In flow-input, point-output models, these curves never cross the axis for the rate of profits. Instead, the curves approach it asymptotically. Points at which such curves intersect are called switch points. The "perverse" or "paradoxical" switch point is at a wage of 1/78 units of output per person year and a rate of profits of 50%. The higher-wage switch point is at a wage of 5/286 units of output per person-year and a rate of profits of 10%. A switch point is called "paradoxical" merely because it illustrates behavior contradicting mistaken and outdated neoclassical beliefs. The algorithm can be considerably simplified:
The theorem is easily applied to the example. By the theorem, the alpha technique is cost-minimizing for wages between the switch points. The beta technique is cost-minimizing for wages below 1/78 units of output per person-year and between wages of 5/286 and the maximum wage of 1/52 units of output per person-year.
Now to show that the algorithm yields the same answers. Suppose one starts by choosing the alpha technique at Step 1. The rate of profits sought in Step 2 is read off the wage-rate of profits curve for the alpha technique in Figure 1, given the wage. The costs found in Step 3 are shown in Figure 2. Figure 1 shows that the alpha technique is, indeed, cost minimizing for intermediate wages, that is, between the switch points. If the wage is either too low or too high, the beta technique is selected in Step 4, as shown in Figure 2. According to Step 6, the flow of control in the algorithm then goes to Step 2 with the beta technique selected. Figure 3 shows the costs of the techniques using the rate of profits for the beta technique. Here too, the algorithm concludes with the same answer as suggested by the theorem.
3.0 Conclusion
Once the cost-minimizing technique has been determined, one can consider how much labor firms will want to hire per unit output at any given wage. Figure 4, which is based on the assumption of a stationary-state output, illustrates this calculation for the example. If a firm is operating the alpha technique, for example, to produce an unchanged output over the next three years, workers producing consumption goods available at the end of the current year, producing capital goods to be used to produce consumption goods available at the end of the next year, and producing capital goods to be used to produce capital goods available at the end of the next year will all be working side-by-side. That is, 53 workers will be employed per unit output under the alpha technique for a stationary state. As the graph shows, around the switch point at the lower wage, a higher wage is associated with a cost-minimizing technique in which firms want to employ more workers for a given stationary-state output.
So much for the theory that wages and employment are determined by the intersection of well-behaved supply and demand curves in the labor market.
I have previously presented examples of reswitching and capital reversing. These phenomena were discovered as part of the Cambridge Capital Controversy, and you will occasionally see commentators bring up the CCC on various blogs. This post presents another example. This example has a different structure than my favorite models. In this example, not all commodities are produced with the aid of commodities. Some capital goods not explicitly shown are produced directly with unassisted labor.
2.0 Some Theory And An Example
Consider a firm choosing among a set of techniques for producing a given commodity. Each technique, as in Table 1, exhibits Constant Returns to Scale (CRS) and can be represented as a series of dated labor inputs. The first element in this series is the amount of labor that must be applied in the technique during the current production cycle to produce one unit of the commodity. The second element is the amount of labor that must be applied one cycle ago to produce the capital goods required for use by the first labor input in the series. And so on. This representation of a technique is known as a flow-input, point-output model.
| Year Before Output | Labor Hired for Each Technique | |
| Alpha | Beta | |
| 0 | 33 Person-Years | 0 Person-Years |
| 1 | 0 Person-Years | 52 Person-Years |
| 2 | 20 Person-Years | 0 Person-Years |
Consider the the cost of producing a unit of output with a given technique, where the calculation of the cost is performed at the end of the year in which the output becomes available. The cost is the sum of the cost of the labor inputs over previous years, with the cost of each labor input including an interest charge:
L0 w + L1 w (1 + r) + L2 w (1 + r)2 + ... + Ln w (1 + r)n + ...where w is the wage for a unit of labor, r is the rate of profits, and (L0, L1, L2, ...) is the series of dated labor inputs representing the technique. The wage is paid at the end of the year for the labor expended during that year.
The best rate of profits (also known as the interest rate) available to the firm should be used in finding the cost of producing a unit of output with each technique. Since the only use of financial capital available to the firm here is to produce with one or another of the techniques of production, the best rate of profits is the rate of profits obtainable with cost-minimizing techniques. The following algorithm traverses the techniques to find the rate of profits associated with cost-minimizing techniques:
- Choose a technique.
- For the given wage w, find the rate of profits r that, when used to cost up the labor inputs, equates that cost to the price of a unit of the produced commodity.
- Cost up the labor inuts for all techniques with this wage and rate of profits.
- Choose a technique with the minimum of the costs found in Step 3.
- If the technique for which the rate of profits was obtained in Step 2 can be selected in Step 4, stop. You have found a cost-minimizing technique and the rate of profits.
- Else, go to Step 2 and repeat with the newly selected technique.
Figures 1, 2, and 3 illustrate the application of the algorithm to the example. Figure 1 shows the wage-rate of profits curves associated with each technique. In flow-input, point-output models, these curves never cross the axis for the rate of profits. Instead, the curves approach it asymptotically. Points at which such curves intersect are called switch points. The "perverse" or "paradoxical" switch point is at a wage of 1/78 units of output per person year and a rate of profits of 50%. The higher-wage switch point is at a wage of 5/286 units of output per person-year and a rate of profits of 10%. A switch point is called "paradoxical" merely because it illustrates behavior contradicting mistaken and outdated neoclassical beliefs. The algorithm can be considerably simplified:
Theorem: Consider a technology specified as a choice among techniques, where each technique is represented by a flow-input, point-output model. Let the outer envelope of the wage-rate of profits curves for each technique be constructed by finding the maximum rate of profits for each wage over all wage-rate of profits curves. For each point on the outer envelope, a technique in which the technique’s corresponding wage-rate of profits curve contains that point is selected by the above algorithm as a cost-minimizing technique at that wage.
 |
| Figure 1: Rate of Profits by Technique |
The theorem is easily applied to the example. By the theorem, the alpha technique is cost-minimizing for wages between the switch points. The beta technique is cost-minimizing for wages below 1/78 units of output per person-year and between wages of 5/286 and the maximum wage of 1/52 units of output per person-year.
Now to show that the algorithm yields the same answers. Suppose one starts by choosing the alpha technique at Step 1. The rate of profits sought in Step 2 is read off the wage-rate of profits curve for the alpha technique in Figure 1, given the wage. The costs found in Step 3 are shown in Figure 2. Figure 1 shows that the alpha technique is, indeed, cost minimizing for intermediate wages, that is, between the switch points. If the wage is either too low or too high, the beta technique is selected in Step 4, as shown in Figure 2. According to Step 6, the flow of control in the algorithm then goes to Step 2 with the beta technique selected. Figure 3 shows the costs of the techniques using the rate of profits for the beta technique. Here too, the algorithm concludes with the same answer as suggested by the theorem.
 |
| Figure 2: Cost of Techniques at Alpha Rate of Profits |
 |
| Figure 3: Cost of Techniques at Beta Rate of Profit |
3.0 Conclusion
Once the cost-minimizing technique has been determined, one can consider how much labor firms will want to hire per unit output at any given wage. Figure 4, which is based on the assumption of a stationary-state output, illustrates this calculation for the example. If a firm is operating the alpha technique, for example, to produce an unchanged output over the next three years, workers producing consumption goods available at the end of the current year, producing capital goods to be used to produce consumption goods available at the end of the next year, and producing capital goods to be used to produce capital goods available at the end of the next year will all be working side-by-side. That is, 53 workers will be employed per unit output under the alpha technique for a stationary state. As the graph shows, around the switch point at the lower wage, a higher wage is associated with a cost-minimizing technique in which firms want to employ more workers for a given stationary-state output.
 |
| Figure 4: Labor Intensity of Cheapest Technique |
So much for the theory that wages and employment are determined by the intersection of well-behaved supply and demand curves in the labor market.
Friday, February 20, 2009
The Undermining Social Democratic Downhill Slide...
"[Michael] Harrington was a 'democratic socialist', not a social democrat. Whereas social democracy endorsed the welfare state, democratic socialism expanded proletarian decision-making into every corner of society, including the workplace, thereby reversing capitalist priorites. In America, democratic socialism meant taking the New Deal beyond its first two stages [1930s and 1960s?]. By empowering workers, a 'Third New Deal' would complete the process begun in 1929, when control of key economic investments was passed from unfettered boardrooms to a capitalist-controlled welfare state." -- Robert A. Gorman, Michael Harrington: Speaking American, Routledge (1995)
Tuesday, February 17, 2009
Two Crises Of Economic Theory
The American Economic Association held their annual meeting in New Orleans in 1971. At the invitation of John Kenneth Galbraith, the AEA president that year, Joan Robinson delivered the keynote Ely address. She identified "The Second Crisis of Economic Theory".
The first crisis occurred in the 1930s. Economists had no theory, at the time, to guide policy for addressing the dramatic drop in the volume of output and the increase in unemployment. John Maynard Keynes, as well as Michal Kalecki, developed the theory to address this crisis.
As I recall, the second crisis of economic theory relates to the mix of goods being produced, even when the volume is such that more-or-less full employment is being achieved. Many of her time did not think the balance correct. Conspicuous consumption, positional goods, and the means of destruction are produced in abundance. But as for the production of amenities useful for modern life typically provided by government (e.g., public transportation) - not so much. Mainstream economic theory does not provide a perspective for a thorough-going improvement on what comes out of more-or-less capitalist markets.
Consider the context of Robinson's Ely lecture. Although she had already developed a theory of stagflation, she couldn't have known how poor western economies would perform over the next decades. So at the time of her lecture, the second crisis of economic theory might have been more readily apparent than the first.
It seems to me that both crises are evident today. The world's economic problems are not only how to get people back to work during this worldwide global downturn. We also need to reorient the world's economy to operate with more sustainable and renewable energy resources, encourage the production of more public goods in many economies, decrease the workweek, etc.
Reference
The first crisis occurred in the 1930s. Economists had no theory, at the time, to guide policy for addressing the dramatic drop in the volume of output and the increase in unemployment. John Maynard Keynes, as well as Michal Kalecki, developed the theory to address this crisis.
As I recall, the second crisis of economic theory relates to the mix of goods being produced, even when the volume is such that more-or-less full employment is being achieved. Many of her time did not think the balance correct. Conspicuous consumption, positional goods, and the means of destruction are produced in abundance. But as for the production of amenities useful for modern life typically provided by government (e.g., public transportation) - not so much. Mainstream economic theory does not provide a perspective for a thorough-going improvement on what comes out of more-or-less capitalist markets.
Consider the context of Robinson's Ely lecture. Although she had already developed a theory of stagflation, she couldn't have known how poor western economies would perform over the next decades. So at the time of her lecture, the second crisis of economic theory might have been more readily apparent than the first.
It seems to me that both crises are evident today. The world's economic problems are not only how to get people back to work during this worldwide global downturn. We also need to reorient the world's economy to operate with more sustainable and renewable energy resources, encourage the production of more public goods in many economies, decrease the workweek, etc.
Reference
- Joan Robinson (1972) "The Second Crisis of Economic Theory", American Economic Review, Papers and Proceedings, V. 62 (May): 1-10
Sunday, February 15, 2009
Empirical Evidence On Minimum Wages
A theme of this blog is that it is illogical to explain wages and employment by the interaction of well-behaved demand and supply curves in the labor market, even under assumptions of perfect competition, no information asymmetries, etc. Since orthodox teaching on the subject is simply incorrect, David Card's empirical results on minimum wages did not astonish me.
For those interested in these results, I notice that researchers at Berkeley have extended them. So this paper goes on my long list of ones to read some day:
For those interested in these results, I notice that researchers at Berkeley have extended them. So this paper goes on my long list of ones to read some day:
"We use policy discontinuities at state borders to identify the effects of minimum wages on earnings and employment in restaurants and other low-wage sectors. Our approach generalizes the case study method by considering all local differences in minimum wage policies between 1990 and 2006. We compare all contiguous county pairs in the U.S. that straddle a state border and find no adverse employment effects. We show that traditional approaches that do not account for local economic conditions tend to produce spurious negative effects due to spatial heterogeneities in employment trends that are unrelated to minimum wage policies. Our findings are robust to allowing for long term effects of minimum wage changes." -- Amdrajit Dube, T. Wiliam Lester, and Michael Reich "Minimum Wage Effects Across State Borders: Estimates Using Contiguous Counties", working paper (2008)
Thursday, February 12, 2009
In Honor Of The Day
Today is the bicentennial of Darwin's birth.
I think of evolutionary economics as equivalent to (old) institutional economics.
Clarence Ayres was one prominent institutionalist economist, maybe the most prominent of his generation. He ended up at the University of Texas at Austin and helped develop the Texas school of institutional economics. (James Galbraith is currently at UT.) Ayres most well known book is probably The Theory of Economic Progress, which I have not read. I have read The Divine Right of Capital, in which I found some echoes of Joan Robinson's capital critique, even though it precedes the relevant portions of her work.
But I want to point out that Ayres also wrote Huxley, a 1932 biography of Thomas Huxley, also known as "Darwin's bulldog". In 1860 Huxley debated Bishop Samuel Wilberforce:
I think of evolutionary economics as equivalent to (old) institutional economics.
Clarence Ayres was one prominent institutionalist economist, maybe the most prominent of his generation. He ended up at the University of Texas at Austin and helped develop the Texas school of institutional economics. (James Galbraith is currently at UT.) Ayres most well known book is probably The Theory of Economic Progress, which I have not read. I have read The Divine Right of Capital, in which I found some echoes of Joan Robinson's capital critique, even though it precedes the relevant portions of her work.
But I want to point out that Ayres also wrote Huxley, a 1932 biography of Thomas Huxley, also known as "Darwin's bulldog". In 1860 Huxley debated Bishop Samuel Wilberforce:
"Turning to Huxley he inquired with a charming show of solicitude whether the scientist supposed himself to be descended from an ape on the side of his grandmother or his grandfather... And then [Huxley] delivered his famous counterstroke, the upshot of which is that ancestor apes are preferable to bishops."
Sunday, February 08, 2009
Infinite Are The Arguments Of Mages
The following letter comes after five interchanges of letters between Keynes and Hayek and a summary letter by Keynes. Keynes was trying to get at what definitions of saving and investment Hayek was using, what Hayek meant by "forced saving", and why Hayek thought a constant proportion of the money in circulation must be saved to keep the capital stock at the same level. The date of this letter is 29 March 1932, and it is reprinted in The Collected Works of F. A. Hayek: Volume 9: Contra Keynes and Cambridge: Essays, Correspondence (edited by Bruce Caldwell, Chicago University Press, 1995):
Dear Hayek,
I will certainly reserve you space in this June [Economic] Journal for a reply to Sraffa. But let it be no longer than it need be. It is the trouble of controversy - from an editor's point of view - that it is without end. Your MS should reach me not later than May 1.
Having been much occupied in other directions, I have not yet studied your Economica article as closely as I shall. But, unless it be dealt with in isolation from the main issue, I doubt if I shall return to the charge in Economica. I am trying to re-shape and improve my central position, and that is probably a better way to spend one's time than in controversy.
Yours sincerely
J. M. Keynes
Wednesday, February 04, 2009
Economists As Creationists Who Have Never Heard Of Evolution
I found this quote amusing:
"One of Brad DeLong’s commentators compares what’s going on to the discovery that some eminent biologists are creationists, but it’s actually worse than that: it’s like discovering that some eminent biologists have never heard of the theory of evolution and the concept of natural selection." -- Paul KrugmanI am in agreement with, for instance, Krugman and DeLong that the U.S.A. government currently needs to spend a lot on a stimulus package. But I wondered if such more-or-less liberal economists acknowledge other controversies in economics. Have they heard factor prices (like wages) cannot necessarily be explained by the interaction of well-behaved supply and demand curves in factor markets, even under ideal assumptions of perfect competition, flexible prices, perfect information, etc? I don't know whether I want to put much emphasis on Brad DeLong's failure to note such in this post about immigration.
Tuesday, February 03, 2009
Simple And Expanded Reproduction
1.0 Introduction
This is a repost. I've switched templates, and the new one interferes with the layout of the mathematics in the previous version. I've made a few minor changes here and there.
This post presents a model in which a capitalist economy smoothly reproduces itself. The purpose of such a model is not to predict that capitalist economies will converge to some such path as illustrated in the model. Rather, the model provides a basis for the analysis of where things can go wrong.
This sort of model has a long history. My exposition is close to Marx (1956), with the difference that Marx sets out the conditions of simple and expanded production in terms of labor values, not in terms of prices of production. Rosa Luxemburg (1951) and Michal Kalecki (1969) used Marx's department break-down to develop a Keynes-like model of the long run and the short run. Shigeto Tsuru (1942) apparently exposed this model to english-speaking academics when few were looking at Marx's analysis. Paul Samuelson (1957) thought this model of interest. Joan Robinson (1962) drew on these ideas, among others, in her models of metallic ages. Goodwin's generalization (1949) of Keynes to a multisectorial model and Pasinetti's (1981, 1993) analyses of vertically integrated sectors also seem to me to bear family resemblances to this model. Doubtless, my references could be extended in many directions.
2.0 Two Departments
This model considers a capitalist economy with no government and no foreign trade. The outputs of this economy are grouped into two great departments. In the first department, capitalists direct workers to produce means of production (also known as capital goods) with the means of production in that department. In the second department, the workers are directed to produce means of consumption (also known as consumption goods) with the means of production in that department.
For ease of exposition, I make certain additional simplifying assumptions. The workers consume all of their wages. Only the capitalists save, and they save only in the case of expanded reproduction. All capital is circulating capital. That is, there is no fixed capital, such as long-lived machinery. In other words, all capital goods are totally used up each year in producing the yearly output. No technological innovations are introduced.
I think introducing technological innovations and fixed capital makes the possibility of smooth reproduction more incredible. A government can be introduced as a third department, or perhaps by dividing government output among the two departments shown. Foreign trade introduces the possibility of correcting imbalances in domestic demand from outside the domestic economy. But then one could recast the model as of the world economy.
3.0 Prices
A necessary condition for smooth reproduction of a competitive capitalist economy is that the same rate of profit be made in all departments. Otherwise, some capitalists are finding that the expectations on which investments were made are being unfulfilled. They would want to have contracted some departments and expanded others. I also impose the condition that spot prices remain stationary. The following equations express these conditions:
4.0 In Balance
4.1 Simple Reproduction
The economy is in simple reproduction when it is replicated on the same scale year after year. A necessary condition for an economy in simple reproduction is that the production of capital goods each year be equal to the capital goods used up each year. In the model shown here, the value of the capital goods used up each year must equal the value of the output of the first department:
An alternate method of deriving the last equation is available. Start from the equation of the value of total demand for consumption goods and the value of the output of the department producing consumption goods. This condition, when simplified, yields the same equation.
4.2 Expanded Reproduction
The economy experiences expanded reproduction when it consistently expands each year. In this case, the demand for capital goods from the second department includes the savings of the capitalists receiving profits from that department. Likewise, the demand for consumption goods from the first department excludes the savings of the capitalists in that department. Observing these qualifications, it is easy to mathematically express the condition that the demand for capital goods from the second department match the demand for consumption goods from the first department:
5.0 Conclusion
In the model, capitalists independently decide on what department to enter, and how much to produce in that department. A collective result of those decisions is the total output of each department. For those decisions to be validated, the value of consumer goods demanded by workers and capitalists in the department producing capital goods must match the value of capital goods demanded by the capitalists in the department producing consumption goods.
The model is silent on how such an equality can come about. Supply and demand seems like an inadequate answer to me.
References
This is a repost. I've switched templates, and the new one interferes with the layout of the mathematics in the previous version. I've made a few minor changes here and there.
This post presents a model in which a capitalist economy smoothly reproduces itself. The purpose of such a model is not to predict that capitalist economies will converge to some such path as illustrated in the model. Rather, the model provides a basis for the analysis of where things can go wrong.
This sort of model has a long history. My exposition is close to Marx (1956), with the difference that Marx sets out the conditions of simple and expanded production in terms of labor values, not in terms of prices of production. Rosa Luxemburg (1951) and Michal Kalecki (1969) used Marx's department break-down to develop a Keynes-like model of the long run and the short run. Shigeto Tsuru (1942) apparently exposed this model to english-speaking academics when few were looking at Marx's analysis. Paul Samuelson (1957) thought this model of interest. Joan Robinson (1962) drew on these ideas, among others, in her models of metallic ages. Goodwin's generalization (1949) of Keynes to a multisectorial model and Pasinetti's (1981, 1993) analyses of vertically integrated sectors also seem to me to bear family resemblances to this model. Doubtless, my references could be extended in many directions.
| Variable | Definition |
|---|---|
| a01 | The person-years of labor hired per unit output (e.g., ton steel) in the first sector. |
| a02 | The person-years of labor hired per unit output (e.g., bushel corn) in the second sector. |
| a11 | The capital goods (measured in tons) used up per unit output in the first (steel-producing) sector. |
| a01 | The capital goods (measured in tons) used up per unit output in the second (corn-producing) sector. |
| p1 | The price of a unit output in the first sector. |
| p2 | The price of a unit output in the second sector. |
| r | The rate of profits. |
| s | The savings rate out of profits. |
| w | The wage, that is, the price of hiring a person-year. |
| X1 | The number of units (ton steel) produced in the first sector. |
| X2 | The number of units produced (bushels corn) in the second sector. |
| g | The rate of growth. |
2.0 Two Departments
This model considers a capitalist economy with no government and no foreign trade. The outputs of this economy are grouped into two great departments. In the first department, capitalists direct workers to produce means of production (also known as capital goods) with the means of production in that department. In the second department, the workers are directed to produce means of consumption (also known as consumption goods) with the means of production in that department.
For ease of exposition, I make certain additional simplifying assumptions. The workers consume all of their wages. Only the capitalists save, and they save only in the case of expanded reproduction. All capital is circulating capital. That is, there is no fixed capital, such as long-lived machinery. In other words, all capital goods are totally used up each year in producing the yearly output. No technological innovations are introduced.
I think introducing technological innovations and fixed capital makes the possibility of smooth reproduction more incredible. A government can be introduced as a third department, or perhaps by dividing government output among the two departments shown. Foreign trade introduces the possibility of correcting imbalances in domestic demand from outside the domestic economy. But then one could recast the model as of the world economy.
3.0 Prices
A necessary condition for smooth reproduction of a competitive capitalist economy is that the same rate of profit be made in all departments. Otherwise, some capitalists are finding that the expectations on which investments were made are being unfulfilled. They would want to have contracted some departments and expanded others. I also impose the condition that spot prices remain stationary. The following equations express these conditions:
(a11 p1)(1 + r) + a01 w = p1
(a12 p1)(1 + r) + a02 w = p2I suppose one could put time indices on the prices in the above equations, thereby defining a dynamic system for prices. Suppose distribution and the ratios of physical quantity flows remain unchanged year after year. Then the steady-state prices expressed in the above equations (without time indices) would be a limit point of the dynamic process so defined. It is this caveat, I think, that allows me to ignore that constant prices are, perhaps, not a necessary condition for smooth reproduction.
| Department | Capital | Wages | Profits |
| Capital Goods | a11 X1 p1 | a01 X1 w | a11 X1 p1 r |
| Consumption Commodities | a12 X2 p1 | a02 X2 w | a12 X2 p1 r |
4.0 In Balance
4.1 Simple Reproduction
The economy is in simple reproduction when it is replicated on the same scale year after year. A necessary condition for an economy in simple reproduction is that the production of capital goods each year be equal to the capital goods used up each year. In the model shown here, the value of the capital goods used up each year must equal the value of the output of the first department:
a11 X1 p1 + a12 X2 p1 = (a11 X1 p1)(1 + r) + a01 X1 wThe above equation can be simplified:
a12 X2 p1 = a01 X1 w + a11 X1 p1 rThe above is easily summarized in words. It states that the value of capital goods demanded from the second department matches the demand for consumption goods from the first department. In a sense, this equation is a generalization of Keynes' idea of effective demand. The condition that all workers looking for a job are able to find one at the going wage is a separate condition, not stated here. This model generalizes Keynes' theory, in some sense, to the long-run.
An alternate method of deriving the last equation is available. Start from the equation of the value of total demand for consumption goods and the value of the output of the department producing consumption goods. This condition, when simplified, yields the same equation.
4.2 Expanded Reproduction
The economy experiences expanded reproduction when it consistently expands each year. In this case, the demand for capital goods from the second department includes the savings of the capitalists receiving profits from that department. Likewise, the demand for consumption goods from the first department excludes the savings of the capitalists in that department. Observing these qualifications, it is easy to mathematically express the condition that the demand for capital goods from the second department match the demand for consumption goods from the first department:
a12 X2 p1 + s a12 X2 p1 r = a01 X1 w + (1 - s) a11 X1 p1 rOr:
a12 X2 p1(1 + s r) = a01 X1 w + (1 - s) a11 X1 p1 rFocus on the left-hand side of the above equation. Is it apparent that the rate of growth of the value of the capital goods in the second department is the product of the capitalists' saving propensity and the rate of profit? In expanded reproduction, under these simplifying assumptions, both departments and their components all grow at the same rate. In other words, the rate of profit along a warranted growth path is the quotient of the rate of growth and the saving propensity of the capitalists.
r = g/sThis is the famous Cambridge equation typically arising in a Post Keynesian theory of distribution, especially in, say, Luigi Pasinetti's version.
5.0 Conclusion
In the model, capitalists independently decide on what department to enter, and how much to produce in that department. A collective result of those decisions is the total output of each department. For those decisions to be validated, the value of consumer goods demanded by workers and capitalists in the department producing capital goods must match the value of capital goods demanded by the capitalists in the department producing consumption goods.
The model is silent on how such an equality can come about. Supply and demand seems like an inadequate answer to me.
References
- Richard M. Goodwin (1949). "The Multiplier as Matrix", Economic Journal, V. 59, N. 236 (Dec.): 537-555
- M. Kalecki (1969). Theory of Economic Dynamics: An Essay on Cyclical and Long-Run Changes in Capitalist Economy, Second Edition, Augustus M. Kelly
- Rosa Luxemburg (1951). The Accumulation of Capital (Trans. by Agnes Schwarzschild), Yale University Press
- Karl Marx (1956). Capital, Volume 2, Progress Publishers
- Luigi L. Pasinetti (1981). Structural Change and Economic Growth: A Theoretical Essay on the Dynamics of the Wealth of Nations, Cambridge University Press
- Luigi L. Pasinetti (1993). Structural Economic Dynamics: A Theory of the Economic Consequences of Human Learning, Cambridge University Press
- Joan Robinson (1962). Essays in the Theory of Economic Growth, Macmillan
- Paul A. Samuelson (1957). "Wages and Interest: A Modern Dissection of Marxian Economic Models", American Economic Review, V. 47 (Dec.): 884-912
- Shigeto Tsuru (1942). "On Reproduction Schemes", Appendix A in Paul Sweezy's The Theory of Capitalist Development, Monthly Review Press [This reference I haven't read]
Sunday, February 01, 2009
Leijonhufvud's Corridor
The ideas of a number of economists have been cited in popular accounts of the current economic crisis.
Some have been calling this a "Minsky moment" and have been exploring the Post Keynesian economist Hyman Minsky. In building on this trend, Michael Perelman sees connections to Marx's views on fictious capital. I have pointed out Hugh Townshend basically describing (in 1937) the housing crisis as part of his account of
Another popular interpretation points to erroneous Austrian Business Cycle Theory. For some reason - probably political, although I'm willing to accept ignorance also - very few who go on about the ABCT bring up the Austrian concept of the "secondary depression". Yet this epicycle would seem to be precisely relevant as the crisis becomes a general downturn, instead of being more restricted to financial institutions.
Another interesting idea, although one I am not sure I agree with, is Axel Leijonhufvud's corridor. Leijonhufvud became famous for arguing "Keynesians" had misinterpretated Keynes. As I understand it, his interpretation is closely related to that offered by Robert Clower in his 1965 paper, "The Keynesian Counter-Revolution: A Theoretical Appraisal". Clower argues that households, in making consumption and savings decisions, are constrained by realized income, not by the income they would receive at a point of full-employment equilibrium. Clower and Leijonhufvud end up with thinking of Keynes as describing a disequilibrium. I think Keynes claimed to have described an equilibrium that could be consistent with the presence of involuntary unemployment.
I think Leijonhufvud developed his notion of the corridor later. The corridor constitutes time paths near enough to full employment. If the economy falls outside the corridor, agents no longer have well-developed norms and expectations about what happens that are mutually consistent and likely to quickly lead the economy back to full employment.
Some have been calling this a "Minsky moment" and have been exploring the Post Keynesian economist Hyman Minsky. In building on this trend, Michael Perelman sees connections to Marx's views on fictious capital. I have pointed out Hugh Townshend basically describing (in 1937) the housing crisis as part of his account of
Another popular interpretation points to erroneous Austrian Business Cycle Theory. For some reason - probably political, although I'm willing to accept ignorance also - very few who go on about the ABCT bring up the Austrian concept of the "secondary depression". Yet this epicycle would seem to be precisely relevant as the crisis becomes a general downturn, instead of being more restricted to financial institutions.
Another interesting idea, although one I am not sure I agree with, is Axel Leijonhufvud's corridor. Leijonhufvud became famous for arguing "Keynesians" had misinterpretated Keynes. As I understand it, his interpretation is closely related to that offered by Robert Clower in his 1965 paper, "The Keynesian Counter-Revolution: A Theoretical Appraisal". Clower argues that households, in making consumption and savings decisions, are constrained by realized income, not by the income they would receive at a point of full-employment equilibrium. Clower and Leijonhufvud end up with thinking of Keynes as describing a disequilibrium. I think Keynes claimed to have described an equilibrium that could be consistent with the presence of involuntary unemployment.
I think Leijonhufvud developed his notion of the corridor later. The corridor constitutes time paths near enough to full employment. If the economy falls outside the corridor, agents no longer have well-developed norms and expectations about what happens that are mutually consistent and likely to quickly lead the economy back to full employment.
Friday, January 30, 2009
Influence Of Government Size On Income Distribution
I have been reading Philip A. Klein's Economics Confronts the Economy (Edward Elgar, 2006). He presents data in two tables that I thought, when combined, suggest relationships. So I drew the regression lines below. The data on income distribution is from 1998. Total government expenditures as a percentage of GDP is from 1999. Government expenditures include, for example state and local spending in the United States. The graphed data are for the United States, and, in order of decreasing percentage of government spending as a percentage of Gross Domestic Product, Sweden, Denmark, Belgium, Finland, France, Austria, Italy, Netherlands, Norway, Canada, Germany, New Zealand, the United Kingdom, Spain, Ireland, Australia, and Japan. Apparently, in advanced industrial democracies, as government spending directs a greater percentage of resources, the poorest have relatively more income and the richest have relatively less. One can see why the richest would like lackeys to fight the latter tendency.
I haven't finished Klein's book, but I think I'll note two points I find of interest. He argues that when economists advocate for positive analysis of existing economies, they implicitly accept the status quo. This is a value judgement that could be contested. Secondly, when economists limit normative theory to Pareto-improving recommendations, they restrict themselves from commenting on such matters as income distribution and the quality of life of the vast population. (Moving along one of the regression lines probably makes some worse off.)
| Figure 1: Share of Income in Lowest 10% Among Developed Economies |
 |
| Figure 2: Share of Income in Highest 10% Among Developed Economies |
 |
I haven't finished Klein's book, but I think I'll note two points I find of interest. He argues that when economists advocate for positive analysis of existing economies, they implicitly accept the status quo. This is a value judgement that could be contested. Secondly, when economists limit normative theory to Pareto-improving recommendations, they restrict themselves from commenting on such matters as income distribution and the quality of life of the vast population. (Moving along one of the regression lines probably makes some worse off.)
Thursday, January 29, 2009
A Brouhaha
Some mainstream economics have been pointing out other well-known economists are simply incompetent. Among those doing the pointing are Paul Krugman and Brad DeLong. Robert Waldmann provides some background. (I'm not sure if this is Waldmann.) Mark Thoma comments. I think Uwe Reinhardt's post somehow fits in this grouping. Matthew Yglesias opts for believing the economists being pointed at are deliberately misleading, instead of merely stupid.
I was amused at the ignorance exhibited by a self identifed "UMN Econ Student" in the comments to Waldmann's post:
The above posts are a selection. It is only in the comments that anybody points out that both saltwater and freshwater economists totally ignore Post Keynesians. I like this comment by A. Senderowicz.
Update: Somehow I missed Daniel's overview. Neil Sinhababu, at Ezra Klein's blog, has noticed this contretemps.
I was amused at the ignorance exhibited by a self identifed "UMN Econ Student" in the comments to Waldmann's post:
"The short of it, and this is coming from a Minnesota Econ PhD student, is that we try hard not to bullshit people by hiding our assumptions, no matter how ridiculous you may find them."A canonical freshwater macroeconomic model is not merely a General Equilibrium model with perfect competition, perfect information, etc. It will also have a single representative agent and, in each period, a single homogeneous produced good that can be used either as a consumption good or as a capital good. What special-case assumptions on technology and preferences would one like to impose in a multi-good multi-agent model such that such a model behaves like a one agent, one good model? Economists have no answer.
The above posts are a selection. It is only in the comments that anybody points out that both saltwater and freshwater economists totally ignore Post Keynesians. I like this comment by A. Senderowicz.
Update: Somehow I missed Daniel's overview. Neil Sinhababu, at Ezra Klein's blog, has noticed this contretemps.
Wednesday, January 28, 2009
Samuelson Jests
I might as well document some jibes Kevin Quinn finds amusing. These are from two different articles from two different periods:
"I have dealt with Karl Marx the economist, not Marx the philosopher of history and revolution. A minor Post-Ricardian, Marx was an autodidact cut off in his lifetime from competent criticism and stimulus."-- Paul A. Samuelson (1957) "Wages and Interest: A Modern Dissection of Marxian Economic Models", American Economic Review, V. 47 (Dec.): pp. 884-912
"The 'transformation algorithm' is precisely of the following form: 'contemplate two alternative and discordant systems. Write down one. Now transform by taking an eraser and rubbing it out. Then fill in the other one. Voila! You have completed your transformation algorithm.'" -- Paul A. Samuelson (1971) "Understanding the Marxian Notion of Exploitation: A Summary of the So-Called Transformation Problem Between Marxian Values and Competitive Prices", Journal of Economic Literature, V. 9, N. 2 (June): pp. 399-431
"The truth has now been laid bare. Stripped of logical complication and confusion, anybody's method of solving the famous transformation problem is seen to involve returning from the unnecessary detour taken in Volume I's analysis of values. As I have cited in my mathematical paper, such a 'transformation' is precisely like that in which an eraser is used to rub out an earlier entry, after which we make a new start to end up with the properly calculated entry." -- Paul A. Samuelson (1971) "Understanding the Marxian Notion of Exploitation: A Summary of the So-Called Transformation Problem Between Marxian Values and Competitive Prices", Journal of Economic Literature, V. 9, N. 2 (June): pp. 399-431Samuelson refers to:
- Paul A. Samuelson (1970) "The 'Transformation' from Marxian 'Values' to Competitive 'Prices': A Process of Rejection and Replacement", Proceedings of the National Academy of Sciences, 67(1) (Sept.): pp. 423-425.
Monday, January 26, 2009
Krugman Correct
More than a decade ago, Paul Krugman characterized Austrian Business Cycle Theory (ABCT) as "The hangover theory":
Elsewhere, Krugman adopts a Post Keynesian point:
"It is the idea that slumps are the price we pay for booms, that the suffering the economy experiences during a recession is a necessary punishment for the excesses of the previous expansion"The other day, Steven Horwitz, one of the leading advocates of ABCT offered the following analogy for economics:
"the mistake is drinking too much and being hungover is the correction."(Steven Horwitz is the secretary and webmaster for the Society of the Development of Austrian Economics and manages to get letters to the editor published in the Watertown Daily Times. Myself, I read the Lowville Journal & Republican if I want to know who is growing the largest pumpkin and who has been visited over the weekend by their children away at college.) I think my critique of ABCT goes more into the nuts and bolts of the theory.
Elsewhere, Krugman adopts a Post Keynesian point:
"I should also point out this, in [Robert] Barro’s article:'John Maynard Keynes thought that the problem lay with wages and prices that were stuck at excessive levels. But this problem could be readily fixed by expansionary monetary policy, enough of which will mean that wages and prices do not have to fall.'Is it too much to ask that someone criticizing Keynes actually, you know, read Keynes — at least enough to know that he devoted a whole chapter to explaining why a fall in wages would not expand employment?"
Saturday, January 24, 2009
Hart and Zingales, Stupid or Dishonest?
On 3 December 2008, Oliver Hart and Luigi Zingales wrote on the funny pages of the Wall Street Journal:
It is obviously untrue that any such consensus existed. Corporations for which their owners have limited liability could not be founded without a selective government intervention in the economy. Any legal protection for Intellectual Property, such as any non-zero period for copyrights and patents, is a selective government intervention. The existence of the Federal Reserve is a selective government intervention. Furthermore, economists have had no consensus for decades on claims that monetary policy is ineffective or that the monetary authorities should conform to the Cassels/Friedman rule of growing the money supply at a constant rate. Bankruptcy law, including its recent tweaking against the interests of debtors, is a selective government intervention. Hart and Zingales demonstrate, with the balderdash in their first paragraph, that they have not given a serious moment's thought to the theory of the firm, industrial organization, or macroeconomics.
What has been demonstrated is, in general, orthodox economists are willing to serve as lackeys to the malefactors of great wealth. (I could pick many more examples.) What effect on elite opinion does this willingness of supposed academic experts to teach nonsense in the news organs of the affluent have, do you think?
"This year will be remembered not just for one of the worst financial crises in American history, but also as the moment when economists abandoned their principles. There used to be a consensus that selective intervention in the economy was bad."What kind of principle of economics is this that tells us what policy should be?
It is obviously untrue that any such consensus existed. Corporations for which their owners have limited liability could not be founded without a selective government intervention in the economy. Any legal protection for Intellectual Property, such as any non-zero period for copyrights and patents, is a selective government intervention. The existence of the Federal Reserve is a selective government intervention. Furthermore, economists have had no consensus for decades on claims that monetary policy is ineffective or that the monetary authorities should conform to the Cassels/Friedman rule of growing the money supply at a constant rate. Bankruptcy law, including its recent tweaking against the interests of debtors, is a selective government intervention. Hart and Zingales demonstrate, with the balderdash in their first paragraph, that they have not given a serious moment's thought to the theory of the firm, industrial organization, or macroeconomics.
What has been demonstrated is, in general, orthodox economists are willing to serve as lackeys to the malefactors of great wealth. (I could pick many more examples.) What effect on elite opinion does this willingness of supposed academic experts to teach nonsense in the news organs of the affluent have, do you think?
Thursday, January 22, 2009
A Theory of the Rate of Change in Exchange Rates
1.0 Introduction
I created this model by thinking about what would happen if no basic commodity existed, and yet no commodity could be produced with unassisted labor alone. That is, suppose (seed) corn can be used to produce corn, and rice can be used to produce rice. But corn does not enter either directly or indirectly into the production of rice. Nor does rice enter either directly or indirectly into the production of corn.
The mathematical problem posed by these thoughts can be set out in a model of two countries trading. I end up with an explanation of relative rates of currency appreciation across countries by the interaction of technology and the distribution of income - class struggle, if you will - in each country. I think this model illustrates that non-mainstream ways of thinking about economics can suggest new models and new insights.
I don't claim originality for this model. I was re-reading Samuelson (1957) to confirm my impression that that is where Samuelson describes Marx as "a minor Post-Ricardian". (I'm fairly sure Samuelson sets out his eraser algorithm in his 1971 JEL article.) I did not recall that Samuelson had set out a Marxist scheme of reproduction in his 1957 paper, albeit with a poor supply and demand interpretation. Anyways, I stopped at this passage:
2.0 The Model
Consider two countries, each producing one of two commodities, corn and rice. The commodity produced in each country is a basic good in that country's economy. Assume no migration of labor is possible between the countries. Hence, wages can vary across economies. Assume, however, that no barriers to international flows of (financial) capital have been erected. Thus, a tendency exists for the same rate of profits to arise across countries, where financial outlays and revenues are calculated in some common abstract unit of account.
Without loss of generality, assume the price of corn is always one dollar per unit. The price of rice is one yen per unit. And the exchange rate at the start of the year is one yen per dollar.
These assumptions allow one to formulate equations for the prices of production in a common unit of account, for example, dollars. In the corn-producing country, prices of production satisfy the following equation:
The remaining equation specifying the model relates the revenues, in terms of dollars per unit rice produced, to costs in the rice-producing country. That equation is:
One can easily solve the above equations for the exchange rate at the end of the year:
3.0 Conclusion
This model suggests that the smaller the rate of surplus value the capitalists are able to extract from the workers in a given country, the stronger their currency tends to become.
Update: I originally had the conclusion incorrect.
References
I created this model by thinking about what would happen if no basic commodity existed, and yet no commodity could be produced with unassisted labor alone. That is, suppose (seed) corn can be used to produce corn, and rice can be used to produce rice. But corn does not enter either directly or indirectly into the production of rice. Nor does rice enter either directly or indirectly into the production of corn.
The mathematical problem posed by these thoughts can be set out in a model of two countries trading. I end up with an explanation of relative rates of currency appreciation across countries by the interaction of technology and the distribution of income - class struggle, if you will - in each country. I think this model illustrates that non-mainstream ways of thinking about economics can suggest new models and new insights.
I don't claim originality for this model. I was re-reading Samuelson (1957) to confirm my impression that that is where Samuelson describes Marx as "a minor Post-Ricardian". (I'm fairly sure Samuelson sets out his eraser algorithm in his 1971 JEL article.) I did not recall that Samuelson had set out a Marxist scheme of reproduction in his 1957 paper, albeit with a poor supply and demand interpretation. Anyways, I stopped at this passage:
"Without going into the social relations of the past or future, any economist... can evisage a case where Industry III [luxuries] alone, by virtue of having a3 = 0 and b3 < 1 will determine its own-rate of profit by itself, and he will realize that if this new r differs from that of (11) what must give is not bourgeois economic theory or the capitalistic institutional economy but rather the assumption of stationary relative prices." -- Paul A. Samuelson (1957)This quote jostled my memory of a Joan Robinson review of Sraffa's book. I also dimly recall Keynes' 1923 analysis of arbitrage in forward trades in international currency markets and expected rates of inflation. I'd have to review whether one of the papers collected in Steedman (1979) sets out something like this model. I don't recall any conclusion as simple as the one I obtain, but I think there must be something like this in older Marxist models.
2.0 The Model
Consider two countries, each producing one of two commodities, corn and rice. The commodity produced in each country is a basic good in that country's economy. Assume no migration of labor is possible between the countries. Hence, wages can vary across economies. Assume, however, that no barriers to international flows of (financial) capital have been erected. Thus, a tendency exists for the same rate of profits to arise across countries, where financial outlays and revenues are calculated in some common abstract unit of account.
Without loss of generality, assume the price of corn is always one dollar per unit. The price of rice is one yen per unit. And the exchange rate at the start of the year is one yen per dollar.
These assumptions allow one to formulate equations for the prices of production in a common unit of account, for example, dollars. In the corn-producing country, prices of production satisfy the following equation:
ac,c (1 + r) + a0,c wc = 1where
- ac,c is the amount of corn needed as input per unit corn produced
- a0,c is the person-years labor needed as input per unit corn produced
- wc is the wage in units corn in the corn-producing country
- r is the rate of profits
The remaining equation specifying the model relates the revenues, in terms of dollars per unit rice produced, to costs in the rice-producing country. That equation is:
ar,r (1 + r) + a0,r wr/p = 1/pwhere
- ar,r is the amount of rice needed as input per unit rice produced
- a0,r is the person-years labor needed as input per unit rice produced
- wr is the wage in units rice in the rice-producing country
- p is the exchange rate of yens per dollar at the end of the year
One can easily solve the above equations for the exchange rate at the end of the year:
p = [(1 - a0,r wr)/ar,r]/[(1 - a0,c wc)/ac,c]The left-hand side of the above equation is ratio of the exchange rate at the end of the year to the exchange rate at the start of the year. The right-hand side is the quotient of two ratios, each ratio characterizing one of the two countries. These are the ratios of the net product remaining after compensating the workers for their labor power to the outlay needed to produce that surplus.
3.0 Conclusion
This model suggests that the smaller the rate of surplus value the capitalists are able to extract from the workers in a given country, the stronger their currency tends to become.
Update: I originally had the conclusion incorrect.
References
- John Maynard Keynes (1923) A Tract on Monetary Reform
- Paul A. Samuelson (1957) "Wages and Interest: A Modern Dissection of Marxian Economic Models", American Economic Review, V. 47, N. 6 (December): pp. 884-912
- Paul A. Samuelson (1971) "Understanding the Marxian Notion of Exploitation: A Summary of the So-Called 'Transformation Problem' Between Marxian Values and Competitive Prices", Journal of Economic Literature, V. 9, N. 2: pp. 399-431.
- Ian Steedman (editor) (1979) Fundamental Issues in Trade Theory, Macmillan
Monday, January 19, 2009
Samuelson on Hayek
Barkley Rosser, Jr., has published a piece by Samuelson on Hayek in the current issue of The Journal of Organization and Behavior, as well as an article, by Andrew Farrant and Edward McPhail, about a dispute between Hayek and Samuelson. I here record some thoughts by Samuelson in justifying his tone in an earlier article on Sraffa:
The comments sections for these posts is of varying length. I'm in the one on Rosser's co-blog. In discussing Hayek's contribution to the socialist calculation debate on Thoma's blog, Rosser brings up Jean-François Revel's The Totalitarian Temptation. I haven't read this book in decades. I'd have to reread it to see if Revel predicted the fall of the Soviet Union.
I also want to point out Chris Dillow's comments on Keynes' anti-semitism. I don't think much about Sraffa being of Jewish descent; Sraffa angered Mussolini directly anyways, what with his reporting on Italian banking in the December 1922 issue of the Guardian and Sraffa's support for Gramsci. I had known about Keynes' support of Sraffa, including intervention with the British government to obtain his release from internment. Dillow points to documentation of more broad-based support of Keynes for Jewish refugees. (I've previously linked to some other post on that month's discussion on that list.)
"If a scholar in his ninth decade is to record his considered opinions on an important topic, it had better be a matter not of when but of now... Dr. Samuel Johnson said that being hung in the morning greatly clarifies the mind. Nonsense. It is more likely to paralyze coherent thought. True though that as the days grow shorter, one does dispense with nice diplomancies and ancient jockeyings for victory." -- Paul A. Samuelson, "Sraffa's Hits and Misses", in Critical Essays on Piero Sraffa's Legacy in Economics (edited by Heinz D. Kurz), Cambridge University Press (2000)Anyway, a number of bloggers have reacted. I noticed Tyler Cowen, Brad DeLong, Peter T. Leeson, Mark Thoma, and Barkley Rosser himself.
The comments sections for these posts is of varying length. I'm in the one on Rosser's co-blog. In discussing Hayek's contribution to the socialist calculation debate on Thoma's blog, Rosser brings up Jean-François Revel's The Totalitarian Temptation. I haven't read this book in decades. I'd have to reread it to see if Revel predicted the fall of the Soviet Union.
I also want to point out Chris Dillow's comments on Keynes' anti-semitism. I don't think much about Sraffa being of Jewish descent; Sraffa angered Mussolini directly anyways, what with his reporting on Italian banking in the December 1922 issue of the Guardian and Sraffa's support for Gramsci. I had known about Keynes' support of Sraffa, including intervention with the British government to obtain his release from internment. Dillow points to documentation of more broad-based support of Keynes for Jewish refugees. (I've previously linked to some other post on that month's discussion on that list.)
Economists Without Ethics
As I understand it, the American Economic Association (AEA) is almost unique among professional organizations. The AEA does not have a code of ethics.
Sunday, January 18, 2009
School Rankings
I have been reading Philip A. Klein's Economics Confronts the Economy, which I purchased in the Strand, several weeks ago. This 2006 book is an institutionalist critique of mainstream economics. At one point, Klein wants to establish that mainstream economists at the best schools are, for the most part, no longer taught, for example, the history of economic thought. He provides the following list of schools:
- University of Chicago
- Harvard
- MIT
- Princeton
- Stanford
- Norwestern
- Yale
- University of Pennsylvania
- University of California at Berkeley
- University of California at Los Angeles
- University of Wisconsin
- Columbia
- University of Rochester
- Cornell
- University of Minnesota
- University of Michigan
Subscribe to:
Comments (Atom)
