I study economics as a hobby. My interests lie in Post Keynesianism, (Old) Institutionalism, and related paradigms. These seem to me to be approaches for understanding actually existing economies.
The emphasis on this blog, however, is mainly critical of neoclassical and mainstream economics. I have been alternating numerical counter-examples with less mathematical posts. In any case, I have been documenting demonstrations of errors in mainstream economics. My chief inspiration here is the Cambridge-Italian economist Piero Sraffa.
In general, this blog is abstract, and I think I steer clear of commenting on practical politics of the day.
I've also started posting recipes for my own purposes. When I just follow a recipe in a cookbook, I'll only post a reminder that I like the recipe.
Comments Policy: I'm quite lax on enforcing any comments policy. I prefer those who post as anonymous (that is, without logging in) to sign their posts at least with a pseudonym. This will make conversations easier to conduct.
I read Karl Polanyi's The Great Transformation: The Political and Economic Origins of our Time years ago.
I find itsthesis on the first passage
of the first chapter:
"Nineteenth-century civilization rested on four institutions. The
first was the balance-of-power system which for a century prevented
the occurrence of any long and devastating war between the Great
Powers. The second was the international gold standard which symbolized
a unique organization of world economy. The third was the
self-regulating market which produced an unheard-of material welfare.
The fourth was the liberal state. Classified in one way, two of these
institutions were economic, two political. Classified in another way,
two of them were national, two international. Between them they determined
the characteristic outlines of the history of our civilization.
Of these institutions the gold standard proved crucial; its fall was
the proximate cause of the catastrophe. By the time it failed, most of
the other institutions had been sacrificed in a vain effort to save it.
But the fount and matrix of the system was the self-regulating
market. It was this innovation which gave rise to a specific civilization.
The gold standard was merely an attempt to extend the domestic market
system to the international field; the balance-of-power system was
a superstructure erected upon and, partly, worked through the gold
standard; the liberal state was itself a creation of the self-regulating
market. The key to the institutional system of the nineteenth century
lay in the laws governing market economy.
Our thesis is that the idea of a self-adjusting market implied a stark
Utopia. Such an institution could not exist for any length of time without
annihilating the human and natural substance of society; it would
have physically destroyed man and transformed his surroundings into
a wilderness. Inevitably, society took measures to protect itself, but
whatever measures it took impaired the self-regulation of the market,
disorganized industrial life, and thus endangered society in yet another
way It was this dilemma which forced the development of the
market system into a definite groove and finally disrupted the social
organization based upon it.
" -- Karl Polanyi
We live, dead to the land beneath us,
Ten steps away no one hears our speeches.
But where there’s so much as half a conversation
The Kremlin's mountaineer will get his mention.
His fingers are fat as grubs,
And the words, final as lead weights, fall from his mouth.
His cockroache whiskers leer
And his boot tops gleam.
Around him a rabble of ring-necked leaders -
Fawning half men for him to play with.
They whinny, purr or whine.
As he prates and points a finger.
One by one forging his laws, to be flung
Like horeseshoes at the head, the eye or the groin.
And every killing is a treat
For the broad-chested Ossete.
-- Oslip Mandelshtam
This is just a bibliography.
I have posted bibliographies before.
I want people that are sympathetic to socialism of some sort or another.
As usual, I am limited to works in or translated to English.
Some of these examples are not clearly anti-communist. These are a mixture of novels and non-fiction.
Some of these I have not read.
I am sure this selection can be expanded.
Richard Crossman (ed.). 1949. The God that Failed
Milovan Djilas. 1957. The New Class: An Analysis of the Communist System. London: Thames and Hudson.
Stefan Heym. 2022. Radek: A Novel. Monthly Review Press.
Arthur Koestler. 1941. Darkness at Noon. Macmillan
Janos Kornai. 1992. The Socialist System: The Political Economy of Communism. Princeton University Press.
Nadezhda Mandelshtam. 1999. Hope Against Hope: A Memoir. Random House.
George Orwell. 1945. Animal Farm.
Boris Pasternak. 1957. Doctor Zhivago. New York: Pantheon Books.
Francis Spufford. 2012. Red Plenty. Graywolf Press.
'Keynesian Spaceman', in comments, informs me I was once brought up in a dispute on a discord server associated with some Austrian economists.
Some arguments about the CCC have emerged on subreddits over the years.
Shattering 'Market Theory', an old post on Daily Kos, reporting a discussion on a private email list of one of my numeric examples. (I have mentioned this before.)
My article with the post title is
now available
at the Bulletin of Political Economy (Volume 16, issue 2, pp. 133-146). The abstract follows:
Abstract:
This article presents an example of the reswitching of the order of fertility and
of the order of rentability. Whether or not these orders differ from one another varies with
distribution for certain parameter ranges in the example. This analysis emphasizes that
more rent per acre is not necessarily associated with more fertile land and that the ranking
of lands by fertility cannot, in general, be determined from only data on physical inputs
and outputs for the available processes.
Thesepostsdemonstrate,
in a model of fixed capital, that the cost-minimizing choice of the economic life of a machine need not conform to traditional
Austrian and marginalist theory. The cost-minimizing choice of technique around a switch point might associate a
shorter economic life of a machine with an increased capital intensity. This counter-intuitive variation of the economic life of a
machine is independent of capital reversing and the re-switching of techniques, both of which are also illustrated in these posts.
These posts build on the Cambridge capital controversy (CCC). A lower rate of profits may be associated with a
decreased value of capital per worker, a decreased ratio of the value of capital to output, and a decreased sustainable
steady state of consumption per worker (Harcourt 1972). Capital is not a factor of production, and an equilibrium rate of profits,
assuming competitive conditions, is generally not equal to the marginal product of capital (Harris 1973). The unfounded idea in the
background is that, in a supply-and-demand explanation of prices and distribution, an increased relative supply of a factor of production
supposedly drives its price down and incentivizes entrepreneurs to adopt techniques, out of a given technology, that use that factor
more intensively. All sides to the CCC accepted that this theory lacks rigorous foundation:
"Such an unconventional behavior of the capital/output ratio is seen to be definitely possible. ... Moreover, this phenomenon can be
called 'perverse' only in the sense that the conventional parables did not prepare us for it" (Samuelson 1996).
Han and Schefold (2006) and Zambelli (2018) have recently found some examples of such 'perverse' switch points, albeit not many, in
empirical data obtained from national income and product accounts. Kurz (2021) raises some challenges to this empirical work.
Much of the discussion in the CCC focused on models with only circulating capital. Bidard (2004), Pasinetti (1980), and Schefold (1989)
are canonical references in post Sraffian price theory to fixed capital. The economic life of a machine, in the general case of non-constant
efficiency, varies with distribution. Steedman (2020) considers a model with an infinite number of alternative types of machines, each being
the only basic commodity in the technique in which it used. Machines operate with constant physical efficiency, for possibly a
different number of years in industry and agriculture. He finds that a machine with a shorter life can be adopted at a lower interest rate,
independently of capital-reversing. In contrast, this article considers variation in the economic life of a single machine.
The results established here and by Steedman can be seen as complementary.
The method of analysis is based on comparing stationary states, where prices of production prevail. These models are open,
with distribution taken as exogenous. The numeric example is simple enough such that net output consists of a single consumption good, called 'corn'.
Corn also functions as circulating capital, while a machine with a physical life of three years represents fixed capital. Both corn and new machines
are basic commodities, in the sense of Sraffa. Although no attempt is made to represent production by a series of dated labor inputs, the economic
life of the machine seems to be of interest for claims among economists developing capital theory along the lines of the Austrian school.
Economists of this school have argued that a greater willingness to defer
consumption leads to a greater supply of capital, a lower interest rate, and a greater period of production. In these posts,
a greater period of production is identified with a longer economic life of a machine.
The application of perturbation analysis to the analysis of the choice of technique, to identify fluke cases, and to explore how switch points
vary with technological change is relatively novel. A fluke case is such that almost any perturbation of model parameters disturbs its qualitative
properties. Kurz and Salvadori (1995) is a classic textbook for the analysis of the choice of technique. Vienneau (2018, 2019, 2021, 2024a, and 2024b)
extends this analysis to consider the effects of perturbing selected model parameters. In these posts, applying this approach
to a single numeric example uncovers surprising variation in the economic life of a machine, including its non-monotonic variation with the
rate of profits with neither capital-reversing nor the re-switching of techniques.
Harwick (2022) has noted that some followers of the Austrian school have recently tried to consider Austrian capital theory separately from
business-cycle theory. Lewin and Cachanosky (2019) consider a financial measure of capital-intensity, namely the average duration of an
investment project. Around any switch point, an increased Duration is associated with a lower interest rate. As emphasized by Fratini (2019), an
increased capital intensity, in this sense, is associated with reduced net output per worker around a so-called 'perverse' switch point. Even so,
any measure of capital intensity that always increases with a lower rate of profits around a switch point can be associated with a
reduction in the economic life of a machine.
Capital-intensity is assessed
intheseposts
by evaluating the price of inputs, either for a given net output or per worker. A reduction in the economic life of a machine is
consistent with an increase in capital-intensity. This association between a shorter economic life and greater capital-intensity
can arise around a switch point in which a smaller rate of profits results in the adoption of a more capital-intensive technique,
with a consequent greater net output per worker. It can also arise around a 'perverse' switch point in which a less capital-intensive
technique is adopted at a lower rate of profits. Neither type of switch point is a fluke case, as can be seen
by contrasting such switch points with genuine fluke cases.
If you believed something different, you wouldn't be sitting where you are sitting
Suppose one wants to discuss capitalism versus socialism or some smaller matter. One
might think the discipline of political economy, now known as economics would be
helpful.
But it is not.
What is taught in most universities in the United States was shown to be nonsense
more than half a century ago. I find it hard to account for this except on the grounds of
political ideology.
I realize that most academic economists and their students that persist do not experience
themselves as propagandists.
And it does take some study to master the mathematical models, even if they are incoherent.
Obviously, exceptions exist. I am most aware of the economics departments at the University of Massachusetts at Amherst,
the New School, the University of Missouri at Kansas City, and the University of Utah.
And I think the situation might be different in some other countries. At least, they can list
some prominent universities like the above.
Furthermore, in taking courses in academic economics, one should learn something useful about how national products and income accounts
are kept.
Many economists might think they are doing measurement without theory, that
these theoretical incoherences that I go on about do not matter to them.
And there are many partial models that might be useful in a narrow context.
These sort of questions should have clear answers:
For some model, what are the parameters and and what are the variables found in the solution?
For each parameter or variable, what are the units of measure?
Lately, I have been recommending
a John Eatwell lecture
on the bomb that Piero Sraffa placed at the foundations of economic theory.
Working through Kurz and Salvadori's 1995
textbook is also a good way to understand my favorite devasting criticism of marginalist economics.
Smith's natural prices, Ricardo's prices of production,
and Marshall's normal prices all characterize a long-period position or equilibrium, depending on the theory.
Marginalist economics is about the allocation of given resources.
The quantity and initial distribution of capital goods are among the givens,
at least in Walras' formulation.
Supply and demand are supposed to clear in all markets in equilibrium, and the
capitalists obtain the same rate of profits in all markets.
This model is ovedetermined and inconsistent.
Walras was mistaken.
Taking the numeraire quantity of capital and its initial distribution as given was
another incorrect marginalist approach. The physical composition of capital
is supposed to be endogeneous. But prices of capital goods are found as solutions
of the model. The quantity of capital is simultaneously inside and outside the
model. Knut Wicksell realized this approach does not work. And waiting or
abstinence cannot explain profits either.
So from about 1930 to the 1970s, marginalists abandoned long period theory
in their most general models.
The Arrow-Debreu-McKenzie model of intertemporal equilibrium is the cumulation
of this trend. In the model, commodities are distinguished
by physical properties, when they are available, and the state of the world.
Prices are established in forward markets, found at the start of time.
This is a model of supply and demand in some sense. Households maximize utility subject to
constraints. Plans are precoordinated, and all markets clear for all time. On the other hand,
one can not draw well-behaved supply and demand schedules at the level of the market, as
is shown by the Sonnenschein-Debreu-Mantel theorem.
Economists cannot explain how any economy would get in or approach such an equlibrium.
Franklin Fisher investigated this question.
Fabio Petri notes
that the givens of initial quantities of capital equipment would
change if production goes on while the economy is in disequilibrium.
The equilibria consistent with the givens are not the equilibria that would be approached. The model
does not depict tendencies in any possible capitalist economy.
Given an equilibrium, however, the forward prices embody predictions of what spot prices
would be. Mainstream economics, when talking about dynamics, often mean the
time paths of these spot prices. A conceptual problem arises here.
If markets can open and close later, the model is not the Arrow-Debreu-McKenzie model.
Anyways, the rate of profits is not the same among industries at any time period, since
prices are typically not stationary.
Mainstream economists have basically given up, as I understand it, on trying to develop any general
approach to explaining prices and distribution in a capitalist economy. I think
the textbooks are not clear on this point. I like some of the bits of mathematics,
such as game theory, in some of these textbooks.
Why study this stuff? Even though academic economists are mostly trapped in
an intellectual ghetto, they still have a connection to what ideas are hegemonic.
And the disciple of economics provides a puzzle for the sociology of 'knowledge'
and the philosophy of science.
If academic economists were merely useless, the world would be improved.
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