Re: RE: Re: RE: Re: Re: Re: Re: recent economic trends
Mat, So, did either Carver (never heard of him before) or Bouniatian have the tech bunching theory of macro fluctuations? The accelerator can certainly be associated with that, but is not it per se. BTW, Haberler gives Marx credit for being the first to postulate a regular endogenous business cycle, I think the basis for Michael Perelman's original remarks, even though as Michael noted, Engels thought Marx's theory was based on questionable foundations (a replacement wave with most capital equipment having the same age of replacement ). Indeed, even though many of us accept that there are tendencies for endogenous cycles, it is now hard to find anyone who believes that there are mechanical regularities of the sort that provide fluctuations of precise lengths. There are too many complications that can change the frequency. BTW, I note that some chaotic cycles appear to be (almost) periodic, but vary slightly in both frequency and amplitude with each oscillation. This is what one gets with the famous Lorenz attractor (along with occasional flips to a completely different pattern). It has also been argued by some who see chaotic fluctuations in certain micro markets, e.g. the work of Jean-Paul Chavas and Matthew Holt on milk prices that track the almost-14 year cattle cycle (Jean-Paul Chavas and Matthew T. Holt, "Market Instability and Nonlinear Dynamics," American Journal of Agricultural Economics, 1993, vol. 75, pp. 113-120). Barkley Rosser -Original Message- From: Forstater, Mathew [EMAIL PROTECTED] To: [EMAIL PROTECTED] [EMAIL PROTECTED] Date: Friday, February 02, 2001 6:08 PM Subject: [PEN-L:7719] RE: Re: RE: Re: Re: Re: Re: recent economic trends from Hagemann's piece in the Lowe volume: "Bouniatian also contributed to the evolution of the accelerator principle in the economic literature. [in a footnote here, Hagemann writes that "the essence of the accelerator principle can already be found in Carver (1903)"]. He argued that fluctuations in 'backwardly linked' production goods and raw materials supplying industries would automatically be stronger than in industries which produce final consumption goods."" "Aftalion thus can be credited for further developing and integrating the acceleration principle, namely the idea that a relatively small increase (decrease) in the demand for consumption goods can produce a much larger increase (decrease) in the demand for capital goods, into a theory of the business cycle." Bouniatian 1908 Aftalion 1913 Carver, T. N. (1903) "A suggestion for a theory of industrial depressions" QJE, 17, pp497ff. -Original Message- From: J. Barkley Rosser, Jr. [mailto:[EMAIL PROTECTED]] Sent: Friday, February 02, 2001 12:54 PM To: [EMAIL PROTECTED] Subject: [PEN-L:7711] Re: RE: Re: Re: Re: Re: recent economic trends Mat, So, since you seem to have this paper, does it answer the question? Aftalion's 1913 paper was the first appearance of the accelerator effect, to the best of my knowledge, although I do not remember what its take was on tech bunching, if we can call it that. The 20s and 30s are of course after Schumpeter's original book. I have just looked at Haberler's _Prosperity and Depression_. He dates Spiethoff's work to 1925. Tugan-Baranowsky's work dates from 1901, but Haberler's brief description of it suggests that his cyclical theory depended largely on financial factors. Did he have the tech bunching theory? I think the others you all mention, even if they had the tech bunching theory, published after 1911 when Schumpeter's work appeared. Jim D. has noted that the accelerator effect may be at work now, and I suspect he may be right. I find it ironic that it has almost completely disappeared from most current macro texts at all levels, and especially at higher levels. After all, it represents "irrational behavior," and therefore obviously cannot happen Barkley Rosser Barkley Rosser -Original Message- From: Forstater, Mathew [EMAIL PROTECTED] To: [EMAIL PROTECTED] [EMAIL PROTECTED] Date: Friday, February 02, 2001 1:04 PM Subject: [PEN-L:7703] RE: Re: Re: Re: Re: recent economic trends I would look at Harald Hagemann's work on the history of business cycle theories. The debate in the 20s and 30s in German speaking countries between the Austrians and the Kiel School focused on monetary theories of the cycle vs. those approaches that viewed technological change (and the structure of production) as the fundamental underlying cause, with monetary factors exacerbating the cycle. An important paper in this debate was Burchardt's. Hagemann's paper in the Lowe memorial volume (co-authored with Michael Landesmann) looks at Tugan-Baranowsky, Bouniatian, Aftalion, Spiethoff, as well as Lowe, Burchardt and Hayek. Hagemann has other papers that cover some of the same ground, as well as Schumpeter, etc. The collections ed
Re: Re: Re: Re: recent economic trends
Michael, Fair enough. Anybody out there know who was the first to identify bunching specifically with technologically related investment waves? Schumpeter did it in his 1911 Theorie der Wirtschaftlichen Entwicklung (English translation, 1934, The Theory of Economic Development). This just barely predates the original long wave paper in Dutch that did so also, J. van Gelderen's, "Springvloed: Beschouwingen over industrieele ontwikkeiling en prisjsbeweging," De Nieuwe Tijd, 1913, vol. 18, pp. 4-6. Bart Verspagen published an English translation of this classic article in 1998 in Structural Change and Economic Dynamics. Barkley Rosser -Original Message- From: Michael Perelman [EMAIL PROTECTED] To: [EMAIL PROTECTED] [EMAIL PROTECTED] Date: Thursday, February 01, 2001 5:10 PM Subject: [PEN-L:7681] Re: Re: Re: recent economic trends Marx suggested something like an echo cycle occurring every ten years, but he never gave a reason for the original bunching. On Thu, Feb 01, 2001 at 03:44:41PM -0500, J. Barkley Rosser, Jr. wrote: Michael, We are all in full agreement on this business of the replacement cycles and Marx, and Jim D. has even helpfully noted where in Capital Vol. II it appears (possibly elsewhere as well). The issue is that you identified Marx as the father of the "bunching" theory of technologically related waves of investment. Clearly he gets a cycle from some kind of bunching, which could be due to demand factors. But, did he ever identify the (at least initial) bunching with waves of investment in particular technologies in the way that Schumpeter, Trotsky, and others did? Barkley Rosser -Original Message- From: Michael Perelman [EMAIL PROTECTED] To: [EMAIL PROTECTED] [EMAIL PROTECTED] Date: Thursday, February 01, 2001 2:33 PM Subject: [PEN-L:7672] Re: recent economic trends Here is a section from my Marx book regarding Marx's theory of replacement cycles. Notice Engel's firm rejection at the end. The simplest of these versions of a reproduction crisis reflected the life cycle of fixed capital. This idea was first broached when Marx was reading the works of Charles Babbage. He was skeptical about Babbage's notion that most capital equipment turns over within five years (see Marx to Engels, 2 March 1858; in Marx and Engels 1983: 40, pp. 278). He requested that Engels send him some information on the typical patterns of turnover of fixed capital. Engels quickly supplied Marx with figures that contradicted Babbage's conjecture (Engels to Marx, 4 March 1858; in Marx and Engels 1983: 40, pp. 279-81). According to Engels' estimates, the average piece of equipment lasted about 13 years (Ibid.). More importantly, relatively little has been written about devalorization and replacement investment, which has gone beyond Engels' brief comments on the subject. He began: The most reliable criterion [of the turnover of capital] is the percentage by which a manufacturer writes down his machinery each year for wear and tear and repairs, thus recovering the entire cost of his machines within a given period. This percentage is normally 7 1/2, in which case the machinery will be paid for over 13 1/3 years by an annual deduction from profits. . . . Now 13 1/3 years is admittedly a long time in the course of which numerous bankruptcies may occur; you may enter other branches, sell your old machinery, introduce new improvements, but if this calculation wasn't more or less right, practice would have changed it long ago [given the absence of taxes on profits at the time]. Nor does the old machinery that has been sold promptly become old iron; it finds takers among the small spinners, etc., etc., who continue to use it. We ourselves have machines in operation that are certainly 20 years old and, when one occasionally takes a glance inside some of the more ancient and ramshackle concerns up here, one can see antiquated stuff that must be 30 years old at least. Moreover, in the case of most of the machines, only a few of the components wear out to the extent that they have to be replaced after 5 or 6 years. And even after 15 years, provided the basic principle of a machine has not been supersceded by new inventions, there is relatively little difficulty in replacing worn out parts, so that it is hard to set a definite term on the effective life of such machinery. Again, over the last 20 years improvements in spinning machinery have not been such as to preclude the incorporation of almost all of them in the existing structure of the machines, since nearly all are minor innovations. [Ibid., pp. 280-81] Marx uncharacteristically disregarded many of Engels' subtleties. Instead, he confused the time required fully to depreciate equipment on the books with its economic lifetime. Thus, in his response to Engels, Marx noted that the typical business cycle
RE: Re: Re: Re: Re: recent economic trends
I would look at Harald Hagemann's work on the history of business cycle theories. The debate in the 20s and 30s in German speaking countries between the Austrians and the Kiel School focused on monetary theories of the cycle vs. those approaches that viewed technological change (and the structure of production) as the fundamental underlying cause, with monetary factors exacerbating the cycle. An important paper in this debate was Burchardt's. Hagemann's paper in the Lowe memorial volume (co-authored with Michael Landesmann) looks at Tugan-Baranowsky, Bouniatian, Aftalion, Spiethoff, as well as Lowe, Burchardt and Hayek. Hagemann has other papers that cover some of the same ground, as well as Schumpeter, etc. The collections edited by Baranzini and Scazzieri and books by each of them as well as Amendola and Gaffard, and also Landesmann, all cover a lot of this ground as well. The journal Structural Change and Economic Dynamics also has relevant papers, including its reprint of classic articles series. -Original Message- From: J. Barkley Rosser, Jr. [mailto:[EMAIL PROTECTED]] Sent: Friday, February 02, 2001 10:15 AM To: [EMAIL PROTECTED] Subject: [PEN-L:7698] Re: Re: Re: Re: recent economic trends Michael, Fair enough. Anybody out there know who was the first to identify bunching specifically with technologically related investment waves? Schumpeter did it in his 1911 Theorie der Wirtschaftlichen Entwicklung (English translation, 1934, The Theory of Economic Development). This just barely predates the original long wave paper in Dutch that did so also, J. van Gelderen's, "Springvloed: Beschouwingen over industrieele ontwikkeiling en prisjsbeweging," De Nieuwe Tijd, 1913, vol. 18, pp. 4-6. Bart Verspagen published an English translation of this classic article in 1998 in Structural Change and Economic Dynamics. Barkley Rosser -Original Message- From: Michael Perelman [EMAIL PROTECTED] To: [EMAIL PROTECTED] [EMAIL PROTECTED] Date: Thursday, February 01, 2001 5:10 PM Subject: [PEN-L:7681] Re: Re: Re: recent economic trends Marx suggested something like an echo cycle occurring every ten years, but he never gave a reason for the original bunching. On Thu, Feb 01, 2001 at 03:44:41PM -0500, J. Barkley Rosser, Jr. wrote: Michael, We are all in full agreement on this business of the replacement cycles and Marx, and Jim D. has even helpfully noted where in Capital Vol. II it appears (possibly elsewhere as well). The issue is that you identified Marx as the father of the "bunching" theory of technologically related waves of investment. Clearly he gets a cycle from some kind of bunching, which could be due to demand factors. But, did he ever identify the (at least initial) bunching with waves of investment in particular technologies in the way that Schumpeter, Trotsky, and others did? Barkley Rosser -Original Message- From: Michael Perelman [EMAIL PROTECTED] To: [EMAIL PROTECTED] [EMAIL PROTECTED] Date: Thursday, February 01, 2001 2:33 PM Subject: [PEN-L:7672] Re: recent economic trends Here is a section from my Marx book regarding Marx's theory of replacement cycles. Notice Engel's firm rejection at the end. The simplest of these versions of a reproduction crisis reflected the life cycle of fixed capital. This idea was first broached when Marx was reading the works of Charles Babbage. He was skeptical about Babbage's notion that most capital equipment turns over within five years (see Marx to Engels, 2 March 1858; in Marx and Engels 1983: 40, pp. 278). He requested that Engels send him some information on the typical patterns of turnover of fixed capital. Engels quickly supplied Marx with figures that contradicted Babbage's conjecture (Engels to Marx, 4 March 1858; in Marx and Engels 1983: 40, pp. 279-81). According to Engels' estimates, the average piece of equipment lasted about 13 years (Ibid.). More importantly, relatively little has been written about devalorization and replacement investment, which has gone beyond Engels' brief comments on the subject. He began: The most reliable criterion [of the turnover of capital] is the percentage by which a manufacturer writes down his machinery each year for wear and tear and repairs, thus recovering the entire cost of his machines within a given period. This percentage is normally 7 1/2, in which case the machinery will be paid for over 13 1/3 years by an annual deduction from profits. . . . Now 13 1/3 years is admittedly a long time in the course of which numerous bankruptcies may occur; you may enter other branches, sell your old machinery, introduce new improvements, but if this calculation wasn't more or less right, practice would have changed it long ago [given the absence of taxes on profits at the time]. Nor does the old machinery that has been sold promptly become old iron; it finds takers among the small
RE: Re: RE: Re: Re: Re: Re: recent economic trends
from Hagemann's piece in the Lowe volume: "Bouniatian also contributed to the evolution of the accelerator principle in the economic literature. [in a footnote here, Hagemann writes that "the essence of the accelerator principle can already be found in Carver (1903)"]. He argued that fluctuations in 'backwardly linked' production goods and raw materials supplying industries would automatically be stronger than in industries which produce final consumption goods."" "Aftalion thus can be credited for further developing and integrating the acceleration principle, namely the idea that a relatively small increase (decrease) in the demand for consumption goods can produce a much larger increase (decrease) in the demand for capital goods, into a theory of the business cycle." Bouniatian 1908 Aftalion 1913 Carver, T. N. (1903) "A suggestion for a theory of industrial depressions" QJE, 17, pp497ff. -Original Message- From: J. Barkley Rosser, Jr. [mailto:[EMAIL PROTECTED]] Sent: Friday, February 02, 2001 12:54 PM To: [EMAIL PROTECTED] Subject: [PEN-L:7711] Re: RE: Re: Re: Re: Re: recent economic trends Mat, So, since you seem to have this paper, does it answer the question? Aftalion's 1913 paper was the first appearance of the accelerator effect, to the best of my knowledge, although I do not remember what its take was on tech bunching, if we can call it that. The 20s and 30s are of course after Schumpeter's original book. I have just looked at Haberler's _Prosperity and Depression_. He dates Spiethoff's work to 1925. Tugan-Baranowsky's work dates from 1901, but Haberler's brief description of it suggests that his cyclical theory depended largely on financial factors. Did he have the tech bunching theory? I think the others you all mention, even if they had the tech bunching theory, published after 1911 when Schumpeter's work appeared. Jim D. has noted that the accelerator effect may be at work now, and I suspect he may be right. I find it ironic that it has almost completely disappeared from most current macro texts at all levels, and especially at higher levels. After all, it represents "irrational behavior," and therefore obviously cannot happen Barkley Rosser Barkley Rosser -Original Message- From: Forstater, Mathew [EMAIL PROTECTED] To: [EMAIL PROTECTED] [EMAIL PROTECTED] Date: Friday, February 02, 2001 1:04 PM Subject: [PEN-L:7703] RE: Re: Re: Re: Re: recent economic trends I would look at Harald Hagemann's work on the history of business cycle theories. The debate in the 20s and 30s in German speaking countries between the Austrians and the Kiel School focused on monetary theories of the cycle vs. those approaches that viewed technological change (and the structure of production) as the fundamental underlying cause, with monetary factors exacerbating the cycle. An important paper in this debate was Burchardt's. Hagemann's paper in the Lowe memorial volume (co-authored with Michael Landesmann) looks at Tugan-Baranowsky, Bouniatian, Aftalion, Spiethoff, as well as Lowe, Burchardt and Hayek. Hagemann has other papers that cover some of the same ground, as well as Schumpeter, etc. The collections edited by Baranzini and Scazzieri and books by each of them as well as Amendola and Gaffard, and also Landesmann, all cover a lot of this ground as well. The journal Structural Change and Economic Dynamics also has relevant papers, including its reprint of classic articles series. -Original Message- From: J. Barkley Rosser, Jr. [mailto:[EMAIL PROTECTED]] Sent: Friday, February 02, 2001 10:15 AM To: [EMAIL PROTECTED] Subject: [PEN-L:7698] Re: Re: Re: Re: recent economic trends Michael, Fair enough. Anybody out there know who was the first to identify bunching specifically with technologically related investment waves? Schumpeter did it in his 1911 Theorie der Wirtschaftlichen Entwicklung (English translation, 1934, The Theory of Economic Development). This just barely predates the original long wave paper in Dutch that did so also, J. van Gelderen's, "Springvloed: Beschouwingen over industrieele ontwikkeiling en prisjsbeweging," De Nieuwe Tijd, 1913, vol. 18, pp. 4-6. Bart Verspagen published an English translation of this classic article in 1998 in Structural Change and Economic Dynamics. Barkley Rosser -Original Message- From: Michael Perelman [EMAIL PROTECTED] To: [EMAIL PROTECTED] [EMAIL PROTECTED] Date: Thursday, February 01, 2001 5:10 PM Subject: [PEN-L:7681] Re: Re: Re: recent economic trends Marx suggested something like an echo cycle occurring every ten years, but he never gave a reason for the original bunching. On Thu, Feb 01, 2001 at 03:44:41PM -0500, J. Barkley Rosser, Jr. wrote: Michael, We are all in full agreement on this business of the replacement cycles and Marx, and Jim D. has even helpfully noted where in Capital Vol. II
Re: recent economic trends
Michael Perelman wrote, The actual conspiracy that I was accused suggesting was that Adam Smith wrote in such a way as to intentionally mislead his readers. In that case, the conspiracy consisted of Adams Smith alone. So he must have engaged in a "spiracy," since there were no cons involved in the plot. Unless, that is, he plagiarized his work, in which case the ghost of some dead Frenchman could be held as a con-spiriting henchman. Tom Walker Sandwichman and Deconsultant Bowen Island, BC
Re: recent economic trends
Jim Devine wrote saith Rev. Tom: Sounds interesting. Could you expand a bit? sure, I'm a sucker for such things. No -- on second thought, I can't, since I've got too much work. Look at my article in Baiman, Boushey, and Saunders, eds., POLITICAL ECONOMY AND CONTEMPORARY CAPITALISM: RADICAL PERSPECTIVES ON ECONOMIC THEORY AND POLICY (M.E. Sharpe, 2000). The CHALLENGE article (to come) is a revised version of that article, with more up-to-date data. Thanks, Jim, that's all I need. Tom Walker Sandwichman and Deconsultant Bowen Island, BC
Re: recent economic trends
I may well be a conspiracy theorist, but the rest of my conspiratorial group will not let me go public with it. The actual conspiracy that I was accused suggesting was that Adam Smith wrote in such a way as to intentionally mislead his readers. In that case, the conspiracy consisted of Adams Smith alone. So he must have engaged in a "spiracy," since there were no cons involved in the plot. On Tue, Jan 30, 2001 at 09:34:58PM -0800, Jim Devine wrote: except that the author suggested you were a conspiracy theorist. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Re: Re: Re: recent economic trends
I am not sure about this, but keynes and hayek in some correspondence seemed to be in agreement on the causes of the cycle but not on the remedy. It is true that Hayek's use is wrong not only for this but also for methodological reasons. I probably meant that intervention of the usual kind is not likely to pull things back together; evidently, my use of Hayek was merely illustrative and for that matter a poor choice I admit. There is definitely contagion in this if the US goes first and more so for East Asia than others. What I should have said is that there is less autonomy in so far as the use of macro policy is concerned for national entities and this may include the US. So policies of containing crisis via the conventional money tools may not deliver because some can whether the storm better than others, e.g. Europe and Japan. So it is true that there are imbalances, and there always was and will be for at least some time, but the state may have been more effective then. Now, without a concerted effort, crisis management is difficult. The extent of the crisis will represent a test of the cohesion of OECD joint economic policy. There comes a time when economist whom keynes likened to dentist may perform root canals or extractions. Theoretically one must address a new role for the national state in the global age. Mediating global crisis requires very institutions with global reach, and reordering of the posture of the North vis-à-vis the South. The developing world has woken up to this reality already. The case of Malaysia short-term capital controls only worked because Malaysia mustered enough resources to oppose speculators. That was an exception and I do not think that it will be possible again. The other day I heard the Brazilian economist Couthinio explain to the world how it was impossible for the state of Brazil to attempt any controls since without external borrowing given the extent of openness the whole country would collapse; he also added that 72 million Brazilian (half the population) lived under one dollar a day. This may be typical of the developing world. Globalization for the developed world meant an export of crisis, but also an import of crisis as the Mexican bailout hinted at that. So is the developed world willing to bail out the US at any cost. Of course this is merely speculative and related to sharp drop in US output performance. I gathered from your reply that the bears can get bigger only for a while making things worst, so I presume the fall could be hard and certainly a surplus is not here to last not even if Bush relegates welfare functions to the Churches. Here one must introduce political economy, i.e. War, and a New World order in which immediate re-division and even the old dream of re-colonizing the newly independent states may not be ruled out although highly unlikely since many of these have already surrendered national sovereignty . --- Jim Devine [EMAIL PROTECTED] wrote: Ali wrote: Does the oncoming recession represent a typically keynsian business cycle or is there a Hayek story where given the extent of misallocated investments in the new technology (bunching up shumpeterian innovation), bankruptcies on mass are the way to deal with the problem and intervention may add fuel to the fire. It's wrong to give Hayek credit here. As Haberler suggests in his book on business cycle theories, theories of recessions that arise from imbalances that arise during the boom precede Hayek. In fact, Marx's at least one of cycle theories can be interpreted in this way. (As Schumpeter admitted, a lot of "Austrian" ideas are developments on Marx's ideas.) Also, Keynesians such as Minsky have a purging of imbalances view of recessions. I agree that recessions have a purging effect, ridding the economy of imbalances and thus allowing a new recovery. The main imbalances I see in the US economy are consumer debt, corporate debt, and external debt. (These are what I've called Momma Bear, Baby Bear, and Poppa Bear, respectively, for the "Goldilocks economy.") If the Fed succeeds in preventing recession, these "Bears" will likely grow bigger, necessitating a worse recession down the line (unless Jubilee happens). However, it's possible that the economy could "cross the line" into a purer Keynesian territory. (More and more, I see references to such "tipping points" in economics.) When capitalists start competing to cut wages (relative to labor productivity) in order to survive recession and thus depress consumer demand, making the recession worse, they've entered what I've called the underconsumption trap. When prices start falling, a debt-deflation situation threatens to create a replay of Irving Fisher's depression. Also, such a situation encourages social disorder, which might encourage working class radicalization but also might encourage an increase in the popularity of fascist-type ideas
Re: Re: Re: recent economic trends
That was my reading of Smith. Jim Devine wrote: Michael Perelman wrote: The actual conspiracy that I was accused suggesting was that Adam Smith wrote in such a way as to intentionally mislead his readers. In that case, the conspiracy consisted of Adams Smith alone. So he must have engaged in a "spiracy," since there were no cons involved in the plot. any pros? anyway, isn't it possible that Smith simply misled himself (via ideology) and thus misled others? -- Michael Perelman Economics Department California State University [EMAIL PROTECTED] Chico, CA 95929 530-898-5321 fax 530-898-5901
Re: Re: Re: Re: recent economic trends
At 06:10 AM 2/1/01 -0800, you wrote: Here one must introduce political economy, i.e. War, and a New World order in which immediate re-division and even the old dream of re-colonizing the newly independent states may not be ruled out although highly unlikely since many of these have already surrendered national sovereignty . Frankly, I don't think the rich countries want to recolonize the newly independent states, since that would entail increased responsibility. It's easier to just let them stew in stagnation (as with Africa) or destroy them (Iraq) or destroy their economic independence (S. Korea). It's easier to rule them indirectly via the IMF World Bank. I thus doubt that Lenin-style wars of re-division will happen. More likely are wars against nationalists who try to "opt out." Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevine
Re: Re: recent economic trends
Michael Perelman wrote: The actual conspiracy that I was accused suggesting was that Adam Smith wrote in such a way as to intentionally mislead his readers. In that case, the conspiracy consisted of Adams Smith alone. So he must have engaged in a "spiracy," since there were no cons involved in the plot. any pros? anyway, isn't it possible that Smith simply misled himself (via ideology) and thus misled others? Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevine
Re: Re: Re: Re: Re: Re: recent economic trends
Jim,
I also fully agree that later Marxists certainly did
have bunching theories of cycles tied to investments
in specific technologies. I would note that the inspiration
for Mandel's arguments came from Trotsky and Parvus.
Barkley Rosser
-Original Message-
From: Jim Devine [EMAIL PROTECTED]
To: [EMAIL PROTECTED] [EMAIL PROTECTED]
Date: Wednesday, January 31, 2001 5:17 PM
Subject: [PEN-L:7614] Re: Re: Re: Re: Re: recent economic trends
At 01:29 PM 1/31/01 -0500, you wrote:
Marx had a bunching theory tied to replacement
wave cycles a la the sort of thing now advocated
by Kydland and Prescott ("real business cycles").
The latter even attribute their beginnings to "technology
shocks."
But Marx emphasized the demand side (i.e., accumulation), whereas "real
business cycles" are on the supply side.
But, did Marx tie the original bunching to a
wave of investment in a particular technology? Where
did he do so if he did? Schumpeter certainly did,
although I would agree he was not the first.
I don't think Marx linked the bunching of investment to investment in a
particular technology, but I'm willing to be convinced otherwise. Marxists
such as Mandel or Baran Sweezy have done so...
Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevine
Re: Re: Re: Re: Re: Re: recent economic trends
Jim,
Not clear to me that "accumulation" is clearly tied
to either the supply side or the demand side. I fully
agree that Marx made much of the demand side
("failure to realize surplus value" etc.) in his discussions
of macro fluctuations. He also did have a replacement
wave theory of endogenous cycles, although I forget
exactly where he presented that right now.
But, as you well know, "accumulation" according
to Marx can take a variety of forms. In the case of
"primitive accumulation" this is often simply in the
form of highway robbery, somebody seizing something
that belongs to somebody else. Is the supply or demand?
It also includes the case where a capitalists pays
for the building of produced means of production, aka
"real capital stock." He may be induced to do so by
demand factors, but the act of doing so also changes
aggregate supply. Not such a simple matter.
BTW, the question regarding bunching was addressed
to our list host who is an expert in both Marx's thought and
in the history of economics more generally. So, I await
a response from him on a citation from Marx on this matter,
unless someone comes up with one first.
Barkley Rosser
-Original Message-
From: Jim Devine [EMAIL PROTECTED]
To: [EMAIL PROTECTED] [EMAIL PROTECTED]
Date: Wednesday, January 31, 2001 5:17 PM
Subject: [PEN-L:7614] Re: Re: Re: Re: Re: recent economic trends
At 01:29 PM 1/31/01 -0500, you wrote:
Marx had a bunching theory tied to replacement
wave cycles a la the sort of thing now advocated
by Kydland and Prescott ("real business cycles").
The latter even attribute their beginnings to "technology
shocks."
But Marx emphasized the demand side (i.e., accumulation), whereas "real
business cycles" are on the supply side.
But, did Marx tie the original bunching to a
wave of investment in a particular technology? Where
did he do so if he did? Schumpeter certainly did,
although I would agree he was not the first.
I don't think Marx linked the bunching of investment to investment in a
particular technology, but I'm willing to be convinced otherwise. Marxists
such as Mandel or Baran Sweezy have done so...
Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevine
Re: recent economic trends
Here is a section from my Marx book regarding Marx's theory of replacement cycles. Notice Engel's firm rejection at the end. The simplest of these versions of a reproduction crisis reflected the life cycle of fixed capital. This idea was first broached when Marx was reading the works of Charles Babbage. He was skeptical about Babbage's notion that most capital equipment turns over within five years (see Marx to Engels, 2 March 1858; in Marx and Engels 1983: 40, pp. 278). He requested that Engels send him some information on the typical patterns of turnover of fixed capital. Engels quickly supplied Marx with figures that contradicted Babbage's conjecture (Engels to Marx, 4 March 1858; in Marx and Engels 1983: 40, pp. 279-81). According to Engels' estimates, the average piece of equipment lasted about 13 years (Ibid.). More importantly, relatively little has been written about devalorization and replacement investment, which has gone beyond Engels' brief comments on the subject. He began: The most reliable criterion [of the turnover of capital] is the percentage by which a manufacturer writes down his machinery each year for wear and tear and repairs, thus recovering the entire cost of his machines within a given period. This percentage is normally 7 1/2, in which case the machinery will be paid for over 13 1/3 years by an annual deduction from profits. . . . Now 13 1/3 years is admittedly a long time in the course of which numerous bankruptcies may occur; you may enter other branches, sell your old machinery, introduce new improvements, but if this calculation wasn't more or less right, practice would have changed it long ago [given the absence of taxes on profits at the time]. Nor does the old machinery that has been sold promptly become old iron; it finds takers among the small spinners, etc., etc., who continue to use it. We ourselves have machines in operation that are certainly 20 years old and, when one occasionally takes a glance inside some of the more ancient and ramshackle concerns up here, one can see antiquated stuff that must be 30 years old at least. Moreover, in the case of most of the machines, only a few of the components wear out to the extent that they have to be replaced after 5 or 6 years. And even after 15 years, provided the basic principle of a machine has not been supersceded by new inventions, there is relatively little difficulty in replacing worn out parts, so that it is hard to set a definite term on the effective life of such machinery. Again, over the last 20 years improvements in spinning machinery have not been such as to preclude the incorporation of almost all of them in the existing structure of the machines, since nearly all are minor innovations. [Ibid., pp. 280-81] Marx uncharacteristically disregarded many of Engels' subtleties. Instead, he confused the time required fully to depreciate equipment on the books with its economic lifetime. Thus, in his response to Engels, Marx noted that the typical business cycle lasted approximately as long as the average piece of equipment (Marx to Engels, 5 March 1858; in Marx and Engels 1983: 40, pp. 282-84). Following this line of thought thought, Marx speculated that the business cycle might reflect the cycle of reproduction of fixed capital. Moreover, he noted that this approach would locate the engine of the cycle within large scale industry (Ibid.). Four years later, just after asking Engels to visit in order to help him with details on the Contribution to the Critique of Political Economy, Marx again brought up the question of the durability of fixed capital (Marx to Engels, 20 August 1862; in Marx and Engels 1973: 30: 279-81; see also Marx to Engels, 7 May 1868; in Marx and Engels 1973: 32, p. 82; and Engels to Marx, 10 May 1868; in Ibid., pp. 83-85). Engels, caught up in the pressures of the Cotton Famine, was a bit impatient with Marx's notion of the wear and tear of plant and equipment. He suggested that Marx had "gone off the rails. Depreciation time is not, of course, the same for all machines" (Engels to Marx, September 9 1862; in Marx and Engels 1985, p. 414). Atypically, Marx never absorbed Engels' lessons on the turnover of plant and equipment. Instead, he frequently referred to the decennial cycles brought on by the pattern of renewing fixed capital (see, for example, Marx 1967: 2, pp. 185-86; and 1963-1971; Pt. 1, p. 699). -- Michael Perelman Economics Department California State University [EMAIL PROTECTED] Chico, CA 95929 530-898-5321 fax 530-898-5901
Re: Re: recent economic trends
Michael, We are all in full agreement on this business of the replacement cycles and Marx, and Jim D. has even helpfully noted where in Capital Vol. II it appears (possibly elsewhere as well). The issue is that you identified Marx as the father of the "bunching" theory of technologically related waves of investment. Clearly he gets a cycle from some kind of bunching, which could be due to demand factors. But, did he ever identify the (at least initial) bunching with waves of investment in particular technologies in the way that Schumpeter, Trotsky, and others did? Barkley Rosser -Original Message- From: Michael Perelman [EMAIL PROTECTED] To: [EMAIL PROTECTED] [EMAIL PROTECTED] Date: Thursday, February 01, 2001 2:33 PM Subject: [PEN-L:7672] Re: recent economic trends Here is a section from my Marx book regarding Marx's theory of replacement cycles. Notice Engel's firm rejection at the end. The simplest of these versions of a reproduction crisis reflected the life cycle of fixed capital. This idea was first broached when Marx was reading the works of Charles Babbage. He was skeptical about Babbage's notion that most capital equipment turns over within five years (see Marx to Engels, 2 March 1858; in Marx and Engels 1983: 40, pp. 278). He requested that Engels send him some information on the typical patterns of turnover of fixed capital. Engels quickly supplied Marx with figures that contradicted Babbage's conjecture (Engels to Marx, 4 March 1858; in Marx and Engels 1983: 40, pp. 279-81). According to Engels' estimates, the average piece of equipment lasted about 13 years (Ibid.). More importantly, relatively little has been written about devalorization and replacement investment, which has gone beyond Engels' brief comments on the subject. He began: The most reliable criterion [of the turnover of capital] is the percentage by which a manufacturer writes down his machinery each year for wear and tear and repairs, thus recovering the entire cost of his machines within a given period. This percentage is normally 7 1/2, in which case the machinery will be paid for over 13 1/3 years by an annual deduction from profits. . . . Now 13 1/3 years is admittedly a long time in the course of which numerous bankruptcies may occur; you may enter other branches, sell your old machinery, introduce new improvements, but if this calculation wasn't more or less right, practice would have changed it long ago [given the absence of taxes on profits at the time]. Nor does the old machinery that has been sold promptly become old iron; it finds takers among the small spinners, etc., etc., who continue to use it. We ourselves have machines in operation that are certainly 20 years old and, when one occasionally takes a glance inside some of the more ancient and ramshackle concerns up here, one can see antiquated stuff that must be 30 years old at least. Moreover, in the case of most of the machines, only a few of the components wear out to the extent that they have to be replaced after 5 or 6 years. And even after 15 years, provided the basic principle of a machine has not been supersceded by new inventions, there is relatively little difficulty in replacing worn out parts, so that it is hard to set a definite term on the effective life of such machinery. Again, over the last 20 years improvements in spinning machinery have not been such as to preclude the incorporation of almost all of them in the existing structure of the machines, since nearly all are minor innovations. [Ibid., pp. 280-81] Marx uncharacteristically disregarded many of Engels' subtleties. Instead, he confused the time required fully to depreciate equipment on the books with its economic lifetime. Thus, in his response to Engels, Marx noted that the typical business cycle lasted approximately as long as the average piece of equipment (Marx to Engels, 5 March 1858; in Marx and Engels 1983: 40, pp. 282-84). Following this line of thought thought, Marx speculated that the business cycle might reflect the cycle of reproduction of fixed capital. Moreover, he noted that this approach would locate the engine of the cycle within large scale industry (Ibid.). Four years later, just after asking Engels to visit in order to help him with details on the Contribution to the Critique of Political Economy, Marx again brought up the question of the durability of fixed capital (Marx to Engels, 20 August 1862; in Marx and Engels 1973: 30: 279-81; see also Marx to Engels, 7 May 1868; in Marx and Engels 1973: 32, p. 82; and Engels to Marx, 10 May 1868; in Ibid., pp. 83-85). Engels, caught up in the pressures of the Cotton Famine, was a bit impatient with Marx's notion of the wear and tear of plant and equipment. He suggested that Marx had "gone off the rails. Depreciation time is not, of course, the same for all machines" (Engels to Marx, September 9 1862; in Marx and Engels 1985, p. 414). Atypically, Marx n
Re: Re: Re: recent economic trends
Marx suggested something like an echo cycle occurring every ten years, but he never gave a reason for the original bunching. On Thu, Feb 01, 2001 at 03:44:41PM -0500, J. Barkley Rosser, Jr. wrote: Michael, We are all in full agreement on this business of the replacement cycles and Marx, and Jim D. has even helpfully noted where in Capital Vol. II it appears (possibly elsewhere as well). The issue is that you identified Marx as the father of the "bunching" theory of technologically related waves of investment. Clearly he gets a cycle from some kind of bunching, which could be due to demand factors. But, did he ever identify the (at least initial) bunching with waves of investment in particular technologies in the way that Schumpeter, Trotsky, and others did? Barkley Rosser -Original Message- From: Michael Perelman [EMAIL PROTECTED] To: [EMAIL PROTECTED] [EMAIL PROTECTED] Date: Thursday, February 01, 2001 2:33 PM Subject: [PEN-L:7672] Re: recent economic trends Here is a section from my Marx book regarding Marx's theory of replacement cycles. Notice Engel's firm rejection at the end. The simplest of these versions of a reproduction crisis reflected the life cycle of fixed capital. This idea was first broached when Marx was reading the works of Charles Babbage. He was skeptical about Babbage's notion that most capital equipment turns over within five years (see Marx to Engels, 2 March 1858; in Marx and Engels 1983: 40, pp. 278). He requested that Engels send him some information on the typical patterns of turnover of fixed capital. Engels quickly supplied Marx with figures that contradicted Babbage's conjecture (Engels to Marx, 4 March 1858; in Marx and Engels 1983: 40, pp. 279-81). According to Engels' estimates, the average piece of equipment lasted about 13 years (Ibid.). More importantly, relatively little has been written about devalorization and replacement investment, which has gone beyond Engels' brief comments on the subject. He began: The most reliable criterion [of the turnover of capital] is the percentage by which a manufacturer writes down his machinery each year for wear and tear and repairs, thus recovering the entire cost of his machines within a given period. This percentage is normally 7 1/2, in which case the machinery will be paid for over 13 1/3 years by an annual deduction from profits. . . . Now 13 1/3 years is admittedly a long time in the course of which numerous bankruptcies may occur; you may enter other branches, sell your old machinery, introduce new improvements, but if this calculation wasn't more or less right, practice would have changed it long ago [given the absence of taxes on profits at the time]. Nor does the old machinery that has been sold promptly become old iron; it finds takers among the small spinners, etc., etc., who continue to use it. We ourselves have machines in operation that are certainly 20 years old and, when one occasionally takes a glance inside some of the more ancient and ramshackle concerns up here, one can see antiquated stuff that must be 30 years old at least. Moreover, in the case of most of the machines, only a few of the components wear out to the extent that they have to be replaced after 5 or 6 years. And even after 15 years, provided the basic principle of a machine has not been supersceded by new inventions, there is relatively little difficulty in replacing worn out parts, so that it is hard to set a definite term on the effective life of such machinery. Again, over the last 20 years improvements in spinning machinery have not been such as to preclude the incorporation of almost all of them in the existing structure of the machines, since nearly all are minor innovations. [Ibid., pp. 280-81] Marx uncharacteristically disregarded many of Engels' subtleties. Instead, he confused the time required fully to depreciate equipment on the books with its economic lifetime. Thus, in his response to Engels, Marx noted that the typical business cycle lasted approximately as long as the average piece of equipment (Marx to Engels, 5 March 1858; in Marx and Engels 1983: 40, pp. 282-84). Following this line of thought thought, Marx speculated that the business cycle might reflect the cycle of reproduction of fixed capital. Moreover, he noted that this approach would locate the engine of the cycle within large scale industry (Ibid.). Four years later, just after asking Engels to visit in order to help him with details on the Contribution to the Critique of Political Economy, Marx again brought up the question of the durability of fixed capital (Marx to Engels, 20 August 1862; in Marx and Engels 1973: 30: 279-81; see also Marx to Engels, 7 May 1868; in Marx and Engels 1973: 32, p. 82; and Engels to Marx, 10 May 1868; in Ibid., pp. 83-85). Engels, caught up in the pressures of the Cotton Famine,
Re: recent economic trends
Does the oncoming recession represent a typically keynsian business cycle or is there a Hayek story where given the extent of misallocated investments in the new technology (bunching up shumpeterian innovation), bankruptcies on mass are the way to deal with the problem and intervention may add fuel to the fire. There appears to be high unevenness in the economic performance of different economic poles within the OECD and outside of it. The cycle starting point varies. Europe, excluding England (for there are question whether the junior partner is European), is exhibiting slow but steady growth that started not long ago. Socially Europe (class antagonisms and economic stabilizers are part of that) is better positioned to absorb shocks than the U.S., i.e. it will not bend too much in crisis. America is not well positioned; it hit the end the road with the new technology and guessing work says that they're maybe overinvestment and a text book accelerator story. Of course this whole thing can be said in the Language of Marxian political economy, a terminology like overproduction and capital disengagement stem from a different system of thought that attempts to adequately rationalize the historical in its state of becoming. However, this language, to some, appears cryptic and a formal framework is much easier to follow. So, the punch line in a formal framework is: one needn't put down all the descriptive details but capital flight may make monetary intervention useless in the US since it is far over-stretched, and the dollar may need another war (deus ex machina) to stay put. Oddly enough, the only redeeming option for the West in this instance is the extent of the crisis in socialist ideology, it seems to be so severe that capital may organize its own affairs and make the third world pay the bill once more. I have to end here since the intellectual proletariat has no right of thought. But that is awfully interesting, i mean "the right of thought of the intellectual proletariat." --- Jim Devine [EMAIL PROTECTED] wrote: On Michael Perelman's advice, I read the article by the late Harold Vatter and John Walker in the current CHALLENGE, comparing the US economy of the 1920s and the 1990s. (Hey, there's a review of Michael's book I'll have to read, while the article by me that was supposed to appear didn't.) It was a little disappointing, since it was saddled with poor data (an unavoidable problem), a "the data speak for themselves" empiricist view, and too much emphasis on the "did the 1990s represent a 'new' economy?" question. But its conclusion that the big difference between the 1990s and previous decades is the surge of investment in producer durable equipment (especially if one emphasizes the late 1990s) is interesting -- as is their view that that surge is unsustainable without an increase in government's role (which they see as unlikely given current trends). It fits with an overinvestment theory of the sort I've been pushing (see the annotated version of my 1994 paper on the Great Depression on my web-site). The fact that manufacturing was suffering so badly during the last two months of 2000 suggests that the boom of producer durable equipment has peaked and is crashing, as part of the classic accelerator effect. In other news, the current issue of BUSINESS WEEK shows two interesting graphs. One shows a precipitous fall in consumer confidence, which has been reinforced by data revealed today. In another story a couple of weeks ago, analysts were surprised that consumer indebtedness soared despite the slowdown in consumer spending. This seems to be a case of what Bob Pollin calls "necessitous borrowing." If so, and given the data on consumer expectations, we should expect consumer spending to crash. The other BW story shows a surge in refinancing of mortgages. Perhaps instead of responding to the Fed's lower rates via expansion, re-fi is the only way that households will go. If so, St. Alan was too little and too late with his rate cuts, as with his first recession (1990). I expect that the Fed Open Market Committee will cut rates again in the near future (they're meeting), but it won't have much effect. Debt and over-investment sap the positive effects of low interest rates. Maybe Dubya's tax cuts will save the day? or a war? Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~JDevine __ Get personalized email addresses from Yahoo! Mail - only $35 a year! http://personal.mail.yahoo.com/
Re: Re: recent economic trends
Ali wrote: Does the oncoming recession represent a typically keynsian business cycle or is there a Hayek story where given the extent of misallocated investments in the new technology (bunching up shumpeterian innovation), bankruptcies on mass are the way to deal with the problem and intervention may add fuel to the fire. It's wrong to give Hayek credit here. As Haberler suggests in his book on business cycle theories, theories of recessions that arise from imbalances that arise during the boom precede Hayek. In fact, Marx's at least one of cycle theories can be interpreted in this way. (As Schumpeter admitted, a lot of "Austrian" ideas are developments on Marx's ideas.) Also, Keynesians such as Minsky have a purging of imbalances view of recessions. I agree that recessions have a purging effect, ridding the economy of imbalances and thus allowing a new recovery. The main imbalances I see in the US economy are consumer debt, corporate debt, and external debt. (These are what I've called Momma Bear, Baby Bear, and Poppa Bear, respectively, for the "Goldilocks economy.") If the Fed succeeds in preventing recession, these "Bears" will likely grow bigger, necessitating a worse recession down the line (unless Jubilee happens). However, it's possible that the economy could "cross the line" into a purer Keynesian territory. (More and more, I see references to such "tipping points" in economics.) When capitalists start competing to cut wages (relative to labor productivity) in order to survive recession and thus depress consumer demand, making the recession worse, they've entered what I've called the underconsumption trap. When prices start falling, a debt-deflation situation threatens to create a replay of Irving Fisher's depression. Also, such a situation encourages social disorder, which might encourage working class radicalization but also might encourage an increase in the popularity of fascist-type ideas (as in the era around the 1990 recession, which gave us Timothy McVeigh the bomber). In any event, the need for Keynesian-type monetary or fiscal stimulus takes precedence over the problem of short-circuiting the process of the purging of imbalances. (I don't think monetary policy is effective in this situation, but that doesn't say it shouldn't be tried.) Ali also writes: There appears to be high unevenness in the economic performance of different economic poles within the OECD and outside of it. The cycle starting point varies. Europe, excluding England (for there are question whether the junior partner is European), is exhibiting slow but steady growth that started not long ago. Socially Europe (class antagonisms and economic stabilizers are part of that) is better positioned to absorb shocks than the U.S., i.e. it will not bend too much in crisis. America is not well positioned; it hit the end the road with the new technology and guessing work says that they're maybe overinvestment and a text book accelerator story. unevenness is normal. The key thing is that the US has been the consumer of last resort. When it stops consuming, the rest of the world suffers, including Europe, though of course the effect is largest in East Asia. It's not just that this encourages an accelerator effect of investment falling too. The processes of competitive austerity and export promotion (and the "race" to the bottom), which have been mellower of late, will then assert themselves with a vengeance, encouraging an underconsumption trap on a world scale. Of course this whole thing can be said in the Language of Marxian political economy, a terminology like overproduction and capital disengagement stem from a different system of thought that attempts to adequately rationalize the historical in its state of becoming. However, this language, to some, appears cryptic and a formal framework is much easier to follow. I tried to make the language less cryptic above (and in the 1994 article that shows up on my web-site). And it's crucial to remember, though, that the "Austrians" vs. Marx isn't just a matter of translation. Though the "Austrians" got a lot from Marx, they also added a bunch of subjectivist nonsense. ... Oddly enough, the only redeeming option for the West in this instance is the extent of the crisis in socialist ideology, it seems to be so severe that capital may organize its own affairs and make the third world pay the bill once more... sad, but quite possible. It also seems possible that the core countries will go through 10 years of hell before we see the revival of the world economy via war and/or welfare statism. Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~JDevine
Re: Re: Re: recent economic trends
The investment bunching business cycle theory begins with Marx. Robertson picked it up from him, making it respectable. Hayek got his theory of bunching from Mises. Incidentally, David Laidler's Fabricating the Keynesian Revolution does a good job of telling this story -- without mentioning the Marxian roots. The Hayek story is a bit different from what we have today. His theory predicts that excessive investment will mean that a bottleneck will appear in terms of physical shortages of consumer goods. On Wed, Jan 31, 2001 at 07:07:04AM -0800, Jim Devine wrote: It's wrong to give Hayek credit here. As Haberler suggests in his book on business cycle theories, theories of recessions that arise from imbalances that arise during the boom precede Hayek. In fact, Marx's at least one of cycle theories can be interpreted in this way. (As Schumpeter admitted, a lot of "Austrian" ideas are developments on Marx's ideas.) Also, Keynesians such as Minsky have a purging of imbalances view of recessions. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Re: Re: recent economic trends
Just for the record, I have an article that was supposed to appear in Jan.-Feb. also. Who knows? Barkley Rosser -Original Message- From: Michael Perelman [EMAIL PROTECTED] To: [EMAIL PROTECTED] [EMAIL PROTECTED] Date: Wednesday, January 31, 2001 12:25 AM Subject: [PEN-L:7577] Re: recent economic trends The one thing that Walker/Vatter neglected to point out is that the recent investment is not in very durable capital goods, so the depreciation is very high. Thus, net investment is not as high as gross investment figures suggest. The review of my book in Challenge was very flattering. What J. Devine article will be appearing. They are not very good about putting their articles out at the promised time. I have an article that was supposed to appear there in Sept. 2000. It will actually appear in March. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Re: Re: recent economic trends
Ali, It may be Schumpeterian, but it is probably not Hayekian. In the Hayekian case, the overinvestment occurs because monetary policy was "too easy" and pushed the "market rate of interest below the natural rate of interest." Maybe one can argue that the Fed should not have cut interest rates in the fall of 1998 to bail out the financial system from the Russia/LTCM mess. But, it is indeed likely in my view that there would have been a bad crash then if they had not. Plus, I think there is no such thing as the "natural rate of interest." No, it looks Schumpeterian-Keynesian-Pigovian, a classic overinvestment due to overhyped psychology regarding a major new technology, leading to a classic accelerator effect, as Jim D. notes. Barkley Rosser -Original Message- From: ALI KADRI [EMAIL PROTECTED] To: [EMAIL PROTECTED] [EMAIL PROTECTED] Date: Wednesday, January 31, 2001 5:21 AM Subject: [PEN-L:7579] Re: recent economic trends Does the oncoming recession represent a typically keynsian business cycle or is there a Hayek story where given the extent of misallocated investments in the new technology (bunching up shumpeterian innovation), bankruptcies on mass are the way to deal with the problem and intervention may add fuel to the fire. There appears to be high unevenness in the economic performance of different economic poles within the OECD and outside of it. The cycle starting point varies. Europe, excluding England (for there are question whether the junior partner is European), is exhibiting slow but steady growth that started not long ago. Socially Europe (class antagonisms and economic stabilizers are part of that) is better positioned to absorb shocks than the U.S., i.e. it will not bend too much in crisis. America is not well positioned; it hit the end the road with the new technology and guessing work says that they're maybe overinvestment and a text book accelerator story. Of course this whole thing can be said in the Language of Marxian political economy, a terminology like overproduction and capital disengagement stem from a different system of thought that attempts to adequately rationalize the historical in its state of becoming. However, this language, to some, appears cryptic and a formal framework is much easier to follow. So, the punch line in a formal framework is: one needn't put down all the descriptive details but capital flight may make monetary intervention useless in the US since it is far over-stretched, and the dollar may need another war (deus ex machina) to stay put. Oddly enough, the only redeeming option for the West in this instance is the extent of the crisis in socialist ideology, it seems to be so severe that capital may organize its own affairs and make the third world pay the bill once more. I have to end here since the intellectual proletariat has no right of thought. But that is awfully interesting, i mean "the right of thought of the intellectual proletariat." --- Jim Devine [EMAIL PROTECTED] wrote: On Michael Perelman's advice, I read the article by the late Harold Vatter and John Walker in the current CHALLENGE, comparing the US economy of the 1920s and the 1990s. (Hey, there's a review of Michael's book I'll have to read, while the article by me that was supposed to appear didn't.) It was a little disappointing, since it was saddled with poor data (an unavoidable problem), a "the data speak for themselves" empiricist view, and too much emphasis on the "did the 1990s represent a 'new' economy?" question. But its conclusion that the big difference between the 1990s and previous decades is the surge of investment in producer durable equipment (especially if one emphasizes the late 1990s) is interesting -- as is their view that that surge is unsustainable without an increase in government's role (which they see as unlikely given current trends). It fits with an overinvestment theory of the sort I've been pushing (see the annotated version of my 1994 paper on the Great Depression on my web-site). The fact that manufacturing was suffering so badly during the last two months of 2000 suggests that the boom of producer durable equipment has peaked and is crashing, as part of the classic accelerator effect. In other news, the current issue of BUSINESS WEEK shows two interesting graphs. One shows a precipitous fall in consumer confidence, which has been reinforced by data revealed today. In another story a couple of weeks ago, analysts were surprised that consumer indebtedness soared despite the slowdown in consumer spending. This seems to be a case of what Bob Pollin calls "necessitous borrowing." If so, and given the data on consumer expectations, we should expect consumer spending to crash. The other BW story shows a surge in refinancing of mortgages. Perhaps instead of responding to the Fed's lower
Re: Re: Re: Re: recent economic trends
Michael,
Marx had a bunching theory tied to replacement
wave cycles a la the sort of thing now advocated
by Kydland and Prescott ("real business cycles").
The latter even attribute their beginnings to "technology
shocks." But, did Marx tie the original bunching to a
wave of investment in a particular technology? Where
did he do so if he did? Schumpeter certainly did,
although I would agree he was not the first.
Barkley Rosser
-Original Message-
From: Michael Perelman [EMAIL PROTECTED]
To: [EMAIL PROTECTED] [EMAIL PROTECTED]
Date: Wednesday, January 31, 2001 12:05 PM
Subject: [PEN-L:7587] Re: Re: Re: recent economic trends
The investment bunching business cycle theory begins with Marx. Robertson
picked it up from him, making it respectable. Hayek got his theory of
bunching from Mises. Incidentally, David Laidler's Fabricating the
Keynesian Revolution does a good job of telling this story -- without
mentioning the Marxian roots.
The Hayek story is a bit different from what we have today. His theory
predicts that excessive investment will mean that a bottleneck will appear
in terms of physical shortages of consumer goods.
On Wed, Jan 31, 2001 at 07:07:04AM -0800, Jim Devine wrote:
It's wrong to give Hayek credit here. As Haberler suggests in his book on
business cycle theories, theories of recessions that arise from
imbalances
that arise during the boom precede Hayek. In fact, Marx's at least one of
cycle theories can be interpreted in this way. (As Schumpeter admitted, a
lot of "Austrian" ideas are developments on Marx's ideas.) Also,
Keynesians
such as Minsky have a purging of imbalances view of recessions.
--
Michael Perelman
Economics Department
California State University
Chico, CA 95929
Tel. 530-898-5321
E-Mail [EMAIL PROTECTED]
Re: Re: Re: recent economic trends
Although nobody has asked, the title will be (according to the galley proofs), "Failure of the Washington Consensus on Inequality and Underground Transition Economies." A version with a slightly different title is available on my website. It is coauthored with my wife, Marina. Barkley Rosser http://cob.jmu.edu/rosserjb -Original Message- From: J. Barkley Rosser, Jr. [EMAIL PROTECTED] To: [EMAIL PROTECTED] [EMAIL PROTECTED] Date: Wednesday, January 31, 2001 1:14 PM Subject: [PEN-L:7595] Re: Re: recent economic trends Just for the record, I have an article that was supposed to appear in Jan.-Feb. also. Who knows? Barkley Rosser -Original Message- From: Michael Perelman [EMAIL PROTECTED] To: [EMAIL PROTECTED] [EMAIL PROTECTED] Date: Wednesday, January 31, 2001 12:25 AM Subject: [PEN-L:7577] Re: recent economic trends The one thing that Walker/Vatter neglected to point out is that the recent investment is not in very durable capital goods, so the depreciation is very high. Thus, net investment is not as high as gross investment figures suggest. The review of my book in Challenge was very flattering. What J. Devine article will be appearing. They are not very good about putting their articles out at the promised time. I have an article that was supposed to appear there in Sept. 2000. It will actually appear in March. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
RE: Re: Re: recent economic trends
Jr. wrote Ali, It may be Schumpeterian, but it is probably not Hayekian. In the Hayekian case, the overinvestment occurs because monetary policy was "too easy" and pushed the "market rate of interest below the natural rate of interest." Maybe one can argue that the Fed should not have cut interest rates in the fall of 1998 to bail out the financial system from the Russia/LTCM mess. But, it is indeed likely in my view that there would have been a bad crash then if they had not. Plus, I think there is no such thing as the "natural rate of interest." No, it looks Schumpeterian-Keynesian-Pigovian, a classic overinvestment due to overhyped psychology regarding a major new technology, leading to a classic accelerator effect, as Jim D. notes. Barkley Rosser Well, one of the unanswered questions is why all that cash wasn't used to broaden investment in a larger, more diverse portfolio of technologies? Is there no patience among the investor class anymore? Surely the world needs more than better computers and software to make "the business cycle" an anachronism... Ian
Re: RE: Re: Re: recent economic trends
Ian, Exactly the point. There is no patience. In a true boom there is a mania for the quick return that takes over, and that is seen (rightly at least for awhile) as holding largely in the "new tech" sector, whatever it is or was. Barkley Rosser -Original Message- From: Lisa Ian Murray [EMAIL PROTECTED] To: [EMAIL PROTECTED] [EMAIL PROTECTED] Date: Wednesday, January 31, 2001 2:09 PM Subject: [PEN-L:7601] RE: Re: Re: recent economic trends Jr. wrote Ali, It may be Schumpeterian, but it is probably not Hayekian. In the Hayekian case, the overinvestment occurs because monetary policy was "too easy" and pushed the "market rate of interest below the natural rate of interest." Maybe one can argue that the Fed should not have cut interest rates in the fall of 1998 to bail out the financial system from the Russia/LTCM mess. But, it is indeed likely in my view that there would have been a bad crash then if they had not. Plus, I think there is no such thing as the "natural rate of interest." No, it looks Schumpeterian-Keynesian-Pigovian, a classic overinvestment due to overhyped psychology regarding a major new technology, leading to a classic accelerator effect, as Jim D. notes. Barkley Rosser Well, one of the unanswered questions is why all that cash wasn't used to broaden investment in a larger, more diverse portfolio of technologies? Is there no patience among the investor class anymore? Surely the world needs more than better computers and software to make "the business cycle" an anachronism... Ian
RE: Re: RE: Re: Re: recent economic trends
Just goes to show that 'new' along with 'freedom' are still the most abused words in English. There were/are plenty of other 'new' technologies to invest in, nonetheless... Ian -Original Message- From: [EMAIL PROTECTED] [mailto:[EMAIL PROTECTED]]On Behalf Of J. Barkley Rosser, Jr. Sent: Wednesday, January 31, 2001 11:31 AM To: [EMAIL PROTECTED] Subject: [PEN-L:7603] Re: RE: Re: Re: recent economic trends Ian, Exactly the point. There is no patience. In a true boom there is a mania for the quick return that takes over, and that is seen (rightly at least for awhile) as holding largely in the "new tech" sector, whatever it is or was. Barkley Rosser -Original Message- From: Lisa Ian Murray [EMAIL PROTECTED] To: [EMAIL PROTECTED] [EMAIL PROTECTED] Date: Wednesday, January 31, 2001 2:09 PM Subject: [PEN-L:7601] RE: Re: Re: recent economic trends Jr. wrote Ali, It may be Schumpeterian, but it is probably not Hayekian. In the Hayekian case, the overinvestment occurs because monetary policy was "too easy" and pushed the "market rate of interest below the natural rate of interest." Maybe one can argue that the Fed should not have cut interest rates in the fall of 1998 to bail out the financial system from the Russia/LTCM mess. But, it is indeed likely in my view that there would have been a bad crash then if they had not. Plus, I think there is no such thing as the "natural rate of interest." No, it looks Schumpeterian-Keynesian-Pigovian, a classic overinvestment due to overhyped psychology regarding a major new technology, leading to a classic accelerator effect, as Jim D. notes. Barkley Rosser Well, one of the unanswered questions is why all that cash wasn't used to broaden investment in a larger, more diverse portfolio of technologies? Is there no patience among the investor class anymore? Surely the world needs more than better computers and software to make "the business cycle" an anachronism... Ian
Re: Re: Re: Re: Re: recent economic trends
At 01:29 PM 1/31/01 -0500, you wrote:
Marx had a bunching theory tied to replacement
wave cycles a la the sort of thing now advocated
by Kydland and Prescott ("real business cycles").
The latter even attribute their beginnings to "technology
shocks."
But Marx emphasized the demand side (i.e., accumulation), whereas "real
business cycles" are on the supply side.
But, did Marx tie the original bunching to a
wave of investment in a particular technology? Where
did he do so if he did? Schumpeter certainly did,
although I would agree he was not the first.
I don't think Marx linked the bunching of investment to investment in a
particular technology, but I'm willing to be convinced otherwise. Marxists
such as Mandel or Baran Sweezy have done so...
Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevine
Re: Re: recent economic trends
At 02:50 PM 1/31/01 -0800, you wrote: Jim Devine wrote, it's on the "cost of living" inflation rate, something that first appeared in rudimentary form in pen-l a couple of years ago. The basic idea is that if you include non-market aspects of the cost of living as part of a measure of average prices (the actual price of buying the use-values measured by real GDP), then the inflation rate has been higher than even as measured by the old, non-bowdlerized, version of the CPI. Of course, it's not a kind of inflation that's relevant to monetary policy, but it's relevant to our real living standards. saith Rev. Tom: Sounds interesting. Could you expand a bit? sure, I'm a sucker for such things. No -- on second thought, I can't, since I've got too much work. Look at my article in Baiman, Boushey, and Saunders, eds., POLITICAL ECONOMY AND CONTEMPORARY CAPITALISM: RADICAL PERSPECTIVES ON ECONOMIC THEORY AND POLICY (M.E. Sharpe, 2000). The CHALLENGE article (to come) is a revised version of that article, with more up-to-date data. Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~jdevine
Re: recent economic trends
Jim Devine wrote, it's on the "cost of living" inflation rate, something that first appeared in rudimentary form in pen-l a couple of years ago. The basic idea is that if you include non-market aspects of the cost of living as part of a measure of average prices (the actual price of buying the use-values measured by real GDP), then the inflation rate has been higher than even as measured by the old, non-bowdlerized, version of the CPI. Of course, it's not a kind of inflation that's relevant to monetary policy, but it's relevant to our real living standards. Sounds interesting. Could you expand a bit? Tom Walker Sandwichman and Deconsultant Bowen Island, BC
recent economic trends
On Michael Perelman's advice, I read the article by the late Harold Vatter and John Walker in the current CHALLENGE, comparing the US economy of the 1920s and the 1990s. (Hey, there's a review of Michael's book I'll have to read, while the article by me that was supposed to appear didn't.) It was a little disappointing, since it was saddled with poor data (an unavoidable problem), a "the data speak for themselves" empiricist view, and too much emphasis on the "did the 1990s represent a 'new' economy?" question. But its conclusion that the big difference between the 1990s and previous decades is the surge of investment in producer durable equipment (especially if one emphasizes the late 1990s) is interesting -- as is their view that that surge is unsustainable without an increase in government's role (which they see as unlikely given current trends). It fits with an overinvestment theory of the sort I've been pushing (see the annotated version of my 1994 paper on the Great Depression on my web-site). The fact that manufacturing was suffering so badly during the last two months of 2000 suggests that the boom of producer durable equipment has peaked and is crashing, as part of the classic accelerator effect. In other news, the current issue of BUSINESS WEEK shows two interesting graphs. One shows a precipitous fall in consumer confidence, which has been reinforced by data revealed today. In another story a couple of weeks ago, analysts were surprised that consumer indebtedness soared despite the slowdown in consumer spending. This seems to be a case of what Bob Pollin calls "necessitous borrowing." If so, and given the data on consumer expectations, we should expect consumer spending to crash. The other BW story shows a surge in refinancing of mortgages. Perhaps instead of responding to the Fed's lower rates via expansion, re-fi is the only way that households will go. If so, St. Alan was too little and too late with his rate cuts, as with his first recession (1990). I expect that the Fed Open Market Committee will cut rates again in the near future (they're meeting), but it won't have much effect. Debt and over-investment sap the positive effects of low interest rates. Maybe Dubya's tax cuts will save the day? or a war? Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~JDevine
Re: recent economic trends
The one thing that Walker/Vatter neglected to point out is that the recent investment is not in very durable capital goods, so the depreciation is very high. Thus, net investment is not as high as gross investment figures suggest. The review of my book in Challenge was very flattering. What J. Devine article will be appearing. They are not very good about putting their articles out at the promised time. I have an article that was supposed to appear there in Sept. 2000. It will actually appear in March. -- Michael Perelman Economics Department California State University Chico, CA 95929 Tel. 530-898-5321 E-Mail [EMAIL PROTECTED]
Re: Re: recent economic trends
At 09:20 PM 01/30/2001 -0800, you wrote: The one thing that Walker/Vatter neglected to point out is that the recent investment is not in very durable capital goods, so the depreciation is very high. Thus, net investment is not as high as gross investment figures suggest. that's true. The review of my book in Challenge was very flattering. except that the author suggested you were a conspiracy theorist. What J. Devine article will be appearing. it's on the "cost of living" inflation rate, something that first appeared in rudimentary form in pen-l a couple of years ago. The basic idea is that if you include non-market aspects of the cost of living as part of a measure of average prices (the actual price of buying the use-values measured by real GDP), then the inflation rate has been higher than even as measured by the old, non-bowdlerized, version of the CPI. Of course, it's not a kind of inflation that's relevant to monetary policy, but it's relevant to our real living standards. BTW, what kind of educational ideas did Rudolf Steiner have? socialist ones? Jim Devine [EMAIL PROTECTED] http://bellarmine.lmu.edu/~JDevine
