Jim Devine wrote:
me:
as one heterodox economist (old Karlos) wrote: >capital is not a
thing, but a social relation between persons, established by the
instrumentality of things.<
since the instrumentality of things is crucial here, it makes sense
for the heterodox to count "capital" (the stock of fixed capital
goods).
John Vertegaal writes:
It would make sense only if one could actually do it; some prerequisites
being: 1. An economic structure wherein capital values are determinable at
every step of the way, on a linear (or chaotic) path from here to there; any
present always deemed to be complete. 2. A unit of account whose value is
inelastic over a significant amount of track. 3. The no-show of internal
contradictions (or paradoxes)from well established axioms, due to exogenous
impulses creating a null-set.
This last one doesn't make any sense to me. But the other points
simply say to me that the fixed capital can be measured only in terms
of exchange value (using either current prices or historical prices)
but cannot be measured as a use-value (as the Cambridge Critique
says).
Let me first say that in trying to answer Jim's questions, I'm facing a
huge obstacle of being a paradigm removed from his thinking. Added to
that, in economics everything depends on everything else, so it's not
just a matter of clearing up one question and moving on to the next one.
Some of his questions I started to answer in terms of excessive
background info and then realized this is getting out of hand. I'd
written most of this already in a more extensive way elsewhere. And
although the last question is explained in somewhat greater detail, it
too doesn't scratch more than the surface. So if the below is less than
satisfactory, the choice is yours to keep digging or give up on me. It
goes without saying though that I'm most appreciative of the
accommodation expressed so far.
As deduced from my model's axioms, non of the three points above applies
to our economic structure; it being one that we are in the _process_ of
making, (incomplete at any point in time), and not a ready-made one that
we endogenously find ourselves in.
Internal contradictions are the result of either a wrong combination of
axioms, or an exogenously originated impulse that can have both a
positive and a negative effect internally; it all depends on how it is
endogenously reacted upon. The cardinal point here is: are capital
values determinate, so that they can be counted as a stock? My answer:
only in the absence of exogenous impulses affecting them. An exogenously
determined factor, say interest setting by the CB, does not accordingly
determine capital value, i.e. provide a solid footing from which to
proceed; those values might now collapse, or at least depend on what the
beneficiaries of interest income do with it. Exogenous impulses create
indeterminacy, endogenous ones are determinate. At least that's how I
understand logic to work. Am I wrong?
... But in terms of a truly "free" enterprise economy, wherein demand determines
the value of supply, IMHO Marxism has nothing to offer. And the question now
becomes, which is more efficient, command or demand? As there is no
difference in equitability.
I don't know whether you're talking in normative or positive terms.
I'm talking in terms of the economy being a man-made system of accounts.
Exogenous population, exogenous resources; put in place in order to add
to naturally available utilities, and only valuable insofar it does so
in perpetuity. Positive? Normative? I would define it as positive, but
you tell me.
In normative terms, Marxian economics provides nothing. It's true that,
in general, Marxists prefer a democratically-controlled "command"
economy rather than a private wealth-controlled "market" economy
(capitalism). But Marx never sketched a model for how this would be
organized. It's not part of his political economy. He studied
capitalism, mostly in positive terms. (Of course, as a human being, he
couldn't avoid normative judgments.)
I don't know what your perspective on capitalism is, but I see the
Marxian one (combined with some Keynesianism) as superior to the
neoclassical and neo-Ricardian (Sraffian) ones.
I reject capitalism, because there is no inherent power in capital
providing a determinate point of departure regarding its causality.
As for the "usurping of productive
output" from the productive sector, that's standard Marx: there is a
"transfer of surplus-value" going on:
I beg to differ. In my demand determinative model, whose ontology I believe
underlies our existing economic structure, there is no room for
surplus-value; at least not in the sense that Marxists understand the term.
I don't know what you're talking about. what is your "demand
determinative model"? It seems to me that both supply and demand play
a role...
Sure, supply plays a role, but its value is indeterminate; without a
return, capital is valueless. Demand ex post determines the value of
supply. So if economists identify themselves by their skill to determine
endogenous values, I'm afraid they won't be interested in my model; if
on the other hand they could see themselves as macro-accountants, an
awful lot of useful work still needs to be done in terms of it.
Any set profit rate is achievable, as it is the direct spending by profit
income earners (or the newly hired, as substitutes) that determines it; and
not some inherent, but mystic attribute of capital over labour cost.
It's bad form to accuse others of believing in "mystic attributes"
without first knowing what their perspective is.
Point taken.
Your view _seems_ to be akin to the Cambridge Keynesian equation, in
which (in its simplest form) the rate of profit is determined by
investment and the rate of accumulation out of property income. I
think that's quite an incomplete story. It only deals with the demand
(realization) side and not the supply (production) side. Both play a
role.
First, there is no "rate" of profit associated with any particular
capital. I believe that already sets me apart from the Cambridge
Keynesians. Profit is only realizable thanks to other capitals and not
one's own. Gates made his billions thanks to other capitalists providing
income so that their employees could buy his OS, and those other
capitalists in turn depended on yet others and so on.... If supply is in
any way able to generate profits, I'd like seeing its inherent
analytical rate if only a single capitalist owned all existing means of
production.
An
aggregate realized rate over the natural rate of growth however, is simply
inflationary.
I don't understand what you're talking about.
See below
The only existent surplus-value, comes into being as a result
of having learned by doing; which requires the setting of a margin over
cost, because such expanded output could not be distributed otherwise.
this makes no sense to me. Please explain.
In a system wherein all entries are accounted for in terms of a to be
resolved debt, natural growth happens as a result of having learned by
doing; so that periodically, more output per unit of accounted for input
becomes available, which needs to be distributed in order to allow
reproduction to take place. If the goal of our economic structure is
unencumbered reproduction, then its unit of account has to accommodate
this natural growth; in other words, be elastic without becoming
overstretched and inflationary. Note that this has nothing to do with
any so-called quantity of money. A unit of account doesn't have such a
physical attribute in a system of credit and debit accounts. Nor, as we
will see below, does it require any accommodation or intervention by a
CB authority. Most paradigms identify inflation with rising prices of
commodities. Such a definition is highly incomplete, but it will do for
the purpose of answering this question.
So, at any period under consideration we have a set of retail books
having assumed that portion of economy-wide costs and profits, which
their stock on hand is supposed to resolve through the spending of
economy-wide gathered personal income; be it cost or profit sourced,
retailers have no way of knowing its composition nor do they care, all
they are interested in is a return on their outlay.
Prices on the retail level too are set at cost covering, plus a margin.
The latter being based on previous returns, that of one's competition,
or even a wild guess; it doesn't really matter. The market fills and
partially clears as all those whose incomes derived from periodical
costs cancel each other out. On average, the books will now show not
only the funds necessary to reproduce at cost, but also the quantity of
output that couldn't be sold due to as yet insufficiently disbursed
income, namely the average set profit margin. How to clear that output
as well?
Most paradigms rely on money, turning over several times its own value,
but then get stuck in its definition. "Money is what money does" is the
usual answer; which of course is no answer at all, but an article of
faith. Others conclude that only the income disbursed from newly
attempted ventures could take care of it. But such unrelenting growth
would turn a beneficial economic structure into a pernicious tumor; so
they decide that a profitless economy is the answer. This paradigm takes
a different tack. Although the average outcome, after all cost-sourced
income has canceled out on the retail level, hasn't realized any net
retail level profit yet; abstracting from lagged payment schedules, but
closer to reality, will be the fact that for a substantial amount of
retailers, the market will already have been cleared. On their books,
profit income has been noted; furthermore, profits regarding the latest
batch of retail output, had already been noted on the books of retail
level suppliers, as soon as the retail level was stocked. If these
profits are distributed in such a way that its final recipients will
spend them directly, a whole new slough of retailers will start to see
profits appearing combined with a stock reduction; and this clearing
process, with regards to our original periodical batch of retail output,
will continue by being mixed in with subsequent periodical batches of
retail output, for quite some time to come until it slowly peters out.
The above more or less idealized depiction (depending on the degree of
directly spent profit income) on how a profit setting market economy
gets cleared, shows how this "after the fact" remuneration can pull the
economy along a dynamic equilibrium path, regardless whether the to be
resolved debt takes place over a stationary, or increasing stock of
retail output. Unlike the vertical cost-sourced income exchange, coming
to a stop immediately; the horizontal profit-sourced income exchange
provides all the flexibility we have come to enjoy in a capitalist
economy, without necessarily its dog-eat-dog attitudes due to retained
profits. A non-profit economy on the other hand could be expected to be
as inefficient in its exchanges as a barter economy, as far as quantity
and quality of its demanded goods are concerned. And by the time that
most funds have been returned to allow reproduction; any natural growth
in output, in addition to what is unwanted, will only be clearable by
giving it away.
As previously indicated, there is no hint of a "rate" of profit; as it
conceivably could be different for each enterprise's growth. All the
above summarily tried to show is the necessary existence of profits to
clear a market where output expands with respect to already disbursed
income; under the mandate of debits and credits in real terms. Does the
average rate need to exactly match the natural rate of expansion, in
order to avoid any inflation? The above hints that profits set slightly
higher will aid in overcoming a stickiness in exchanges due to an exact
match. In other words, a little bit of inflation is likely to be
helpful; it's probably more of an empirical than an analytically
solvable question.
John V
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