Jim Devine wrote:
me:
I don't quite get the drift of what you're saying. I wasn't talking
about solvency but about the need to maintain the distinction between
"real goods & services inflation or deflation" and "asset-price
inflation or deflation." Market clearing does not seem to be a
necessary topic in that discussion.
John Vertegaal:
I understood you to mean by: "keep[ing] real goods & services inflation
or deflation conceptually separate from asset-price inflation or
deflation" that there were no influential connections between the two;
each having their independent building blocks. IOW, at least to a large
extent, independently determined. I tried to explain why you cannot look at
them in isolation. More about solvency later.
no. "Conceptually separate" does not mean there are no shared
characteristics or interactions between real goods & services (and
their price changes) on the one hand, and assets (and their prices) on
the other.
My body and its local environment are conceptually separate, but both
involve oxygen (and a lot of other elements). There's also a lot of
inhaling and exhaling going on (and a lot of other interactions).
"Conceptually separate" refers to the way in which we look at the
world, not to the world itself.
Later on you're asking for some first principles [on which my logic is
based]. A combination of the first two, in connection to the above, is
that the economy is a man-made system, having a particular purpose
namely to provide us with a standard of living. From this it follows
that the values we place on systemic (means) elements, ultimately have
to cancel out at the point of becoming an (end) living-standard element.
The requirement for eventual resolution is paramount, the accumulation
of asset values is subservient and limited.
Aside from thus rendering a circuitously dynamic rather than a linearly
static valid construct, it places the population exogenous, allowing us
to observe the economy in an objective way. This not only makes it
potentially extremely powerful, but also would enable us to identify in
advance, which human propensities have positive and which have negative
effects with respect to the economy's ultimate goal. So that endogenous
countermeasures can be verified and enacted; illegitimatizing, or fee
burdening to the extent that this would nullify, the negative ones.
Psychological influences, being essentially extraneous to the system,
thus no longer are immutable forces we have to put up with; both in
theory and in practice.
Your "conceptually separate" example above, has no bearing on such a
system at all; since your elements do not concern a value determination
in terms of an in/deflatable common denominator as unit of account. So
the economic domain (being entirely man-made and subject to resolution)
and the way we look at it should be identical in principle; though there
is a bit more to it. See later.
me:
If a stock magnitude can be sold, then it has a determinate price on
the market. As far as capitalism is concerned, that's its value.
JV:
A determinate price means the system is in equilibrium and ready to move
on.
Maybe the system (or more accurately, the market for that stock
magnitude) is in equilibrium, but that equilibrium might be only a
short-run equilibrium, which means that there may be endogenous
reasons for change (to attain a longer-term equilibrium). See the
reference to Minsky, below.
Let's see if there is any agreement to be had here at all. If a
financial institution sells a set of CDOs to another one, is at that
point _in_ time the system in equilibrium, its sale value determinate
and only _later_ effects may alter this equilibrium status? _If_ the
above implies you think so, I'd strongly disagree. The value of these
CDOs is indeterminate at that time, because it depends on the inherent
debt resolution possibility _over_ time; accordingly, the system is
already in disequilibrium as a matter of course.
I'm saying, there invariabl[y] are systematic consequences to such a
sale that in aggregate could even bring the system down; capitalism's
axioms are powerless to detect that capital values are indeterminate.
I think it's a big mistake to refer to capitalism as having "axioms"?
Rather, _thinkers_ have axioms in order to (try to) understand the
object of our thought (in this case, capitalism). Axioms are mental
constructs, not real phenomena. We'd like the two to be as similar as
possible, but axioms and phenomena rarely if ever coincide.
I agree, especially with the latter part. Sloppy taxonomy on my part.
BTW, what "sale" are you referring to here? [by the way, here and
below, at least for me in the context of this discussion, "values"
refers to prices, not to the Marxian concept of values or to moral
values.]
Above I referred to a type of stock sale where I hope you may tend to
agree with me. As far as I'm concerned however, there is no substantial
difference between a CDO and any other kind of stock sale. In the first,
there is an obvious link to a debt resolution requirement; in the
second, this link may be obscure, but nevertheless is there. I realize
there's still a lot of convincing to be done though.
I prefer to talk in terms of value; as so-called free-market prices
especially on the asset side, are subject to manipulation that makes
them deviate from the range of values that allow an overall resolution
in real terms to remain feasible over time, possibly resulting in
unemployment and/or waste. Involuntary unemployment is counter to the
third of my first principles, and waste is counter to the second. It is
a cost of production plus rate of growth concept of value, and in no way
relies on moral (normative) values.
However, I'm interested in _your_ point of view regarding determination; not
in capitalism's, which I reject on a level where you still seem to agree
with it.
Capitalism's rules (or "laws of motion") apply in a capitalist
economy. I don't agree with the morality they imply.
Doesn't this mean that your rejection of capitalism is normative? How
can you blame capitalists, or NCs as their exculpators, for a haughty
dismissal of your objections? Also I fail to see how this squares with
"In normative terms, Marxian economics provides nothing", your quote
from a previous thread. Do your objections derive from elsewhere?
Rather, if you
want to understand what's going on in a capitalist society, it's good
to get some understanding of those rules. We don't know what
capitalism's true laws of motion are, but we have some very good
guesses.
Capitalism's rules are epistemological. They are subject to an ontology
that cannot be faked. Sure, it's expedient to know one's enemy, and you
no doubt know it a lot better than I. But there are definite limits to
its usability, and taking it's "laws of motion" as a point of departure
is senseless in a quest of what is.
IOW, I'm trying to get a grip on your defense of economic theory and its
ability to explain the economy's functioning on the one hand; while on the
other, as a Marxian you must be convinced of deep-seated theoretical
shortcomings that are bound to lead to its collapse. Are you playing devils
advocate, or what is your stance here?
here, as far as I can tell, "economic theory" is nothing but supply &
demand, something that Marx never rejected. Do you reject the general
idea of supply & demand, so that I must feel compelled to defend it?
BTW, supply & demand do not explain the economy's functioning, only
the functioning of one part of it. (It also doesn't have to S&D
described in imaginative stories of perfect markets.)
I guess you're mainly right. As I recall, Marx did think capitalism to
be an expedient vehicle for the accumulation of capital assets. So the
big difference between Marx, you, and me lies in the definition of
functioning. Entities with indeterminate values, cannot be fitted inside
functions. So if the value of supply is indeterminate, as I maintain it
follows from my first principles, no functional expression can exist on
the supply side.
More importantly, it's a big mistake to presume that you know anyone's
theoretical perspective without asking them. (It's an insult, by the
way, but I have a thick skin.)
Fair enough, I should at least have interjected a "don't you?" in that
sentence somewhere. I obviously lack diplomatic skills, but believe me,
the last thing I want to do is be insulting, or patronizing for that
matter. I appreciate your engagement too much, so my excuses for any
offense.
I am _not_ convinced that capitalism
is always on the edge of collapse.
I agree with that too.
It has gone for long periods
without collapse, because (1) it's able to dump costs on working-class
and third-world people and (2) those people aren't organized enough to
resist that dumping and to reverse the process.
I think the reasons are more fundamental, as the winners in the above
processes cannot stave off economic collapse because of them.
(1) Asset inflation is seen as a wealth increase in real terms.
(2) Everyone with financial assets expects to be able to convert those
at some time into standard of living in terms of the current price level.
Expectation, not reality upholds the capitalist system; but note that
this happens at the empirical level only. To make sense of it all,
analysis is a necessary first.
JV, earlier:
Once one agrees however, that a stock without a return is valueless, and I don't think anyone can
disagree with that, you at least don't seem to do so when you say "that financial assets are,
strictly speaking, nothing but claims on real goods and services (now and in the future)";
there is no other way to *determine* the value of a stock but through a flow. <<<
me:
right, but the value of the stock is conceptually separate from the flow.
JV:
??? If I take "conceptually separate" to mean independently determined, this
does not make sense to me. Additionally, we have a problem between ex ante
and ex post; maybe this will clear itself up later...
Again, "conceptually separate" refers to something in one's mind,
i.e., one's mental concepts. That is different from being separate in
the real world.
Perhaps this distinction is useful in your model. After all, as I just
conceded, it's not indeterminate values per se that cause an economic
collapse in the real world, but the popular realization of what those
values mean; so I, to a certain extent, differentiate too. A separation
however, between the ontological and the epistemological leaves a
scientific explanation muddled if in any way possible at all, to
paraphrase good ol' Albert; thus a model able to pin-point the how and
why of such a distinction has got to be more complete.
Just because an economy isn't visibly collapsing, this doesn't mean it
is in equilibrium with determinable equity values keeping it that way;
until for whatever reason, those values all of a sudden weren't really
determinate after all. Such a model,as far as I'm concerned, isn't
useful enough.
JV, earlier:
So, in order to be consistent: up until that flow has taken place, all stock
magnitudes are indeterminate.
me:
before the flow has taken place, the value [of] all stock magnitudes are
based on _expected_ flows.
JV:
Exactly, agreement already. But now the question becomes whether those
expectations are exogenous impulses and by definition are resulting in
indeterminate values, which is my position;
I don't see how the idea that expectations are "exogenous impulses"
automatically implies indeterminate values.
Oops, my bad. This shortcut in logic apparently doesn't exist. Not quite
sure where it came from, but it did migrate from a question mark in a
previous thread to a definition here; inexcusable, luckily my model
doesn't depend on it.
In one interpretation of
Keynes, for example, the "state of long-term expectations" is
exogenously given, which in turn can determine an underemployment
equilibrium.
While I agree with the overall sentiment, since my model doesn't allow
determinants on the supply side, my take on it has to differ in detail.
So, since the primal cause of what you (Keynes) call an underemployment
equilibrium is a lack of exercised demand for real-goods output, through
hoarding and/or asset inflation, which in turn causes the "state of
long-term expectations" to be a negative one; I would define it as a
disequilibrium state, without any inherent tendency to re-equilibrate.
"Given exogenously" is an easy way out theoretical attempt on an
insufficiently high enough level of generality. This is exemplified by
the fact that the proposed remedial pump-priming cannot annul the
previous disequilibrium, but only make a supplemental afresh start, with
all the pitfalls and unresolved forces of the former situation still intact.
I suspect Keynes reached his conclusions, because his first principles
taught him that the economic structure was essentially linear and could
be entered at will with new investments as a determinate point of
departure. I disagree. New investments introduce unresolved forces into
the systemic structure, rendering it indeterminate at that point in
time, while simultaneously allowing a valorization of those investments
to be determined over time.
The result is determinant, since the more pessimistic
expectations are, all else constant, the more unemployment there is in
equilibrium.
There is no determinant, as I see it.
or, whether you believe that
endogenous rationality of its economic agents *determines* equilibrium
magnitudes at all times, thereby ruling out the occurrence of crashes at
any time.
Individuals determine their expectations of future flows of profit
based on their personal experience in the system and the information
they receive from others. This may or may not be "rational." An
individual may act rationally (in the economic sense of trying to
attain consistent and pre-determined goals as completely as possible).
But part of the data an individual acts on (the "fundamentals")
involves others' guesses about the future. So we might get into the
"betting on a beauty contest" process that Keynes described: for
example, people may rationally pay more attention to what others think
about the future of an equity's price instead of to the actual
dividends (etc.) that the company has reaped.
In other words, like in many or most capitalist markets, the market
for equities (the "stock market") may involve individual rationality
but collective irrationality. We can have crashes (or bull markets)
because of -- or despite -- "endogenous rationality" (whatever that
is).
There isn't really anything in the above for me to disagree with, if the
economic structure would evolve linearly or perhaps chaotically as some
economists maintain. So what are _your_ first principles upon which the
above is based? Do you have definitions for capital value determination
and that of its unit of account, or are these deduced from more basic
axioms in your model?
Which is it? Or perhaps, do you have some other explanation of
_determining_ the expected flows' magnitudes? If you don't, would it not
be sensible to concede that perhaps economic values _are_ indeterminate and
therefore a potential cause of systematic collapse?
I do not see the admission that economic values are indeterminate as
somehow a concession. At any specific point in time when the equities
market is open, for example, there are a lot of different offer prices
and a lot of different bid prices for any specific equity. So you
might say that the price is "indeterminate."
You might, but in terms of the above insufficiently high enough level of
generalization, I would say the price is determined to be between offer
and bid.
But there are
supply/demand forces pushing the offer and bid prices to converge.
(Sellers would like to sell (up to a point), while buyers want to buy
(up to a point).) I don't see why this indeterminacy automatically
implies that the market for that equity is on the verge of collapse.
See above. Indeterminate as far as I'm concerned means that nothing in
the "givens" allows us to deduce any price at all; so that conceivably
it could be anywhere on the positive or perhaps even negative side of
zero, and no stability can be inferred from it whatsoever. We are at
this point talking past each other, because our first principles differ.
Even more, even if the market for a specific equity _is_ on the edge
of collapse, that says nothing about the equities market _as a whole_.
The US stock markets, for example, have circuit breakers: if a
stock-price falls drastically, dealing in that stock is shut down.
If the entire Dow falls drastically, the entire New York Stock
Exchange can be shut down. Even if the stock market does collapse, I
don't see how this automatically causes "systematic collapse." After
all, the Federal Open Market Committee can and does act to stem the
spread of a financial crisis outside of Wall Street, as in 1987 or
2007-08.
"[A]utomatically" is your interpretation, I said "potential"; very
different, and explained before.
<ellipsis>
JV:
Only if you fall for the conventional idea of the macro being based on
micro principles. As a Marxian, you possibly cannot see anything wrong with
that view? A GT Keynesian would disagree
_Of course_ I reject "microfoundations of macro" reductionism. I never
proposed anything different. Don't be patronizing, please.
Again, you misinterpret what I meant. Originally you told me that your
perspective is Marxian combined with some Keynsianism. I know a bit
about the latter, a lot less about the former. As I understand it, the
underlying theme of the GT is that macro rules and let [the values of]
its micro elements fall where they may; as [axiomatically?] there is a
fundamental uncertainty involved with respect to its individual agents.
So that's where it stood for me at the time.
I've since re-read some of your thoughts as expressed in the Winslow
branch of this discussion; and have, I think, a better understanding
now. While we may both agree that the GT isn't entirely coherent, it
cannot be made to "gel" your way. "Fundamental uncertainty" means
exactly that regardless of _any_ feedback from the macro, through
internal relations or whatever, the micro elements are not to be taken
as a valid point of departure to (re-)establish the macro; because ex
ante, the necessary info just isn't there to be had.
I noticed in your latest reply in that thread that you are yet moving a
step closer to my position. But it still isn't quite enough if you're
still of the view, that it remains in some way possible to push economic
development into action from the position of a determinate point of
departure. Following my set of first principles, the only way to fully
explain its motion is to invoke a pulling action as the sole determining
force.
and this controversy in one form or
another has been keeping heterodox thought divided for what seems forever.
what controversy?
Whether the whole is the sum of its parts, or not. I have no way of
knowing how heterodoxy splits up in favour of one side or the other,
except that both factions are substantial. From the above it's clear
that I remain to be convinced, that even those considering themselves to
be on one side of the argument aren't really on the other.
My own (short) reasoning is that micro values are indeterminate and in
no position to be added up at any time. It thus goes one step further
than Keynes; by concluding that not only is the future uncertain, but so
is the present. The long version is has to with the economy's inherent
complexity; as, on both its micro and macro levels, there are two
separate but intertwined determinants at work, both in the same unit of
account; one acting as a whole (costs), the other bit by bit over time
(profits). This is not entirely new, as the original concept of separate
determinants harks back to the Classicals.
BTW, I see no major obstacles to learning from both
Marx and the GT. Keynes fills a lot of holes in Marx's theory (and
vice-versa).
I don't disagree. Unfortunately there are still quite a few holes left to
be filled, or all of you economists would be proverbial "dentists" by now.
Actually, as I will try to show later, there is no causal connection
whatsoever. Given imperfect available information, nothing an individual
does with his "equity" has any determinate effect on the stability of the
system as a whole.
It's not the individual who drives the market, but the large number of
individuals as a group (a group with a lot of internal interaction). I
reject the "representative agent" nonsense so popular among mainstream
economists. (Serious neoclassicals do too.)
At this point I fail to see how groups and/or internal interactive
forces can alter micro determinants in such a way that the whole is
different from the sum of its parts.
It is the resolution
[??]
Any clearer now, after having stated my first principles?
of capital values that provides this
systematic stability; not what individuals are doing with respect to
increasing economic "wealth". The admission that the value of a stock
without a return is nil, and only *determinable* through flows doesn't just
move the goalposts on the same playing field; it turns the playing field
upside down, unless and this now becomes imperative, you can show exactly
what determines that connection ex ante.
huh? I don't understand. I think you may be battling a straw man. I
don't accept the microfoundations of macro crap. I do not reject
Keynes.
When there is _any_ way that the parts can make the whole, you reject
the "fundamental uncertainty" principle of Keynes. As far as I'm
concerned, there would be a contradiction in terms involved. BTW, the
designation "fundamental" I'm getting from Paul Davidson, a well-known
Keynesian fundamentalist (no pun intended); Keynes himself may have
never uttered the word himself for all I know. You yourself now call it
"true" uncertainty; I could live with that too.
JV, then:
It is not such a big deal that all economic
equity signifies an unresolved debt, for that's the meaning of a _claim_;
or, at least there is no reason for it to be disconcerting to those with
a social conscience.
Me:
in economics, "equity" refers to net worth, one's capital. It does not
correspond to debt. If I own stock in Microsoft, it's like I'm a
partner in the business. It's not that they owe me money in a
contractual sense, even though I may expect and hope to be paid
dividends and/or capital gains. My stock represents a claim on their
property (software, etc.) but it's different from a debt claim.
JV:
I agree, your explanation seems to make perfect sense; but it presumes as
you said _some_ [ex ante] connection between its value as a stock and a
[returning] flow. So, what is a piece of owned Microsoft worth, if MS owned
the entire world? Such a reductio ad absurdum would find MS profit earning
income dependent on the direct spending of its own profit income earners.
What has become the point now, of charging profits over costs in the first
place? May as well determine shareholder share of output ex ante as a cost.
No? So the point is, it's not any physical presence, but the power of the
account setter on the demand side that determines.
I'll ignore the last part of this, because it does not make sense to me.
I'll try to explain it better because it's vital. The point of the above
reductio ad absurdum theorization was to try to show, that in the real
workings of an economy, cause and effect do not follow each other in the
linear fashion, that just about every economic theory professes they do.
e.g. The lower the costs are determined to be _on the supply-side_, the
greater the profits will become; no? But that instead, when all costs
readily can be seen to cancel each other out, it is only profits that
determine profits.
I don't see how following conventional economic theory, there is any way
to somehow get close to determine, that shareholder value maximization
depends on the direct spending of shareholders. And, if they'd all
refrain from doing that, during such time pertinent output is reaching
the market, there wouldn't be any profit realization at all and thus
their shares would be worthless; _regardless of whatever magnitude they
were supposed to be_. So how can there be _any_ connection between what
IS, and any shareholder's understanding of the value of their shares and
the underlying reason of why they buy and sell them at whatever price?
The value of stocks is nothing but a figment of the imagination, its
"reality" supported by conventional economic theories and expectation;
up until the time _reality_ comes home to roost. But more importantly,
that crap about investments being the driving force of the economy is
finally starting to get exposed for the con game it really is. My theory
shows, pretty well without a doubt, that the internal resolution process
is able to keep the economy progressing at about the same rate it has
been doing for the last generation or so; but without the burden of a
more than substantial faction of FIRE, and a far more equitable
distribution of productivity gains.
What's the point of "charging profits [prices??] over costs"? That is,
what's the point of profits? In this hypothetical case, there's a
small minority of the population (the capitalists) who would own MS.
They would want to live well, living the luxurious life to which
they've become accustomed, so they'd want to continue to exploit the
majority (the workers). They'd likely stop the public trading of the
stock in this case, BTW, so that the equity would have no price. But
they'd still own MS; the equity would still not be the same as debt.
Reductio ad absurdum is indeed not very helpful in showing that equity
equals debt. Although that case could possibly be made there too, it's
probably more obvious in a multi-producer vertically integrated economy.
Production takes place in advance of return. When producers on behalf of
their shareholders partake in production, their bookkeeping entries show
credits. IOW as far as suppliers are concerned, they go into a debt that
will need to be resolved before reproduction can take place again. From
that point the system is in disequilibrium and all values on the supply
side are dependent on returns; no returns, no value. Since there are
only debits and credits in the governing accounting system, and debits
are reserved for returns; all equities economically in play at any time
are credits, equaling resolvable debt.
Capital, stock, equity, whatever you want to call it, is therefore not
valuable in and of itself, at least not in terms of its unit of account.
right, that's what I said.
For me to accept that, I need to know your definitions for capital value
determination in terms of its unit of account, as well as a definition
of its unit of account.
Instead, the determinant of "generated" profits on behalf of capital
accounts in a multi-producer environment, is in fact _others_ putting up
advances, i.e. going into debt through providing new income and with it
potential demand, in the realistic _expectation_ that others still, will
reciprocate in kind. And it so happens, that in normal times, indeed they
do; and just about every stock _seems_ to materialize returns, in the way
conventional economic theory teaches it does.
the generation of any specific company's profits is based directly or
indirectly on the extraction of surplus-value. There does have to be
enough aggregate demand to realize the surplus-product as money
(surplus-value), but that aggregate demand does not have to be based
on debt accumulation. Debt accumulation only helps. The US economy was
very profitable during the 1950s and 1960s without either private or
government debt rising relative to GDP.
As I see it, the above depends on how debt is defined. In my model all
money is credit, or again: a resolvable debt. It comes into existence as
a loan and in no way can be made to represent a net asset, or "surplus
value" whatever that means.
In other words, a time involving obscure circuitous process, without a
"savings" spatial relation, _appears_ as a common linearity, implying
determinate values and the possibility to build up or draw down savings at
will, every step of the way. But normal times don't preclude crashes!
did anyone say that "normal times" preclude crashes? not I. As Minsky
(another Marxo-Keynesian) pointed out, persistently "normal" times can
encourage excessive leveraging and financial fragility. Normal times
can sow the seeds of their own destruction.
I know there is a lot we agree on. Our ontologies may even be identical.
It's the details of "laws of motion" that are different.
The potential for crashes occurs when the policy of powers that be, has been
able to convince individuals to build up wealth in terms of a unit of
account; oblivious to the fact that the value of the unit of account itself
diminishes in that same process.
why is it that the "powers that be" have to "convince" people to use
money (the unit of account)? isn't the use of the unit of account part
of the workings of any economy not suffering from hyperinflation?
I wasn't talking about "use" i.e. transactions; but about the process of
saving and related activities, like personal investing not realizing it
promotes asset inflation. That is, if in the aggregate it absorbs income
from the real-goods sector; and inflation in the latter, if it released
from the investment sector into the real-goods sector.
why is it that the value of money (the unit of account) diminishing?
sometimes an increase in the supply of money encourages inflation and
decreases the value of money (as nowadays), but sometimes it doesn't:
when capitalism is significantly below full employment,
Talking in terms of "supply of money" is duplicitous; by which I don't
mean deliberate deceit, but that it connotes the existence of a "stock"
that hasn't as of yet been indisputably defined or deduced from first
principles. As far as I can tell, economists are concerned with money
"in play"; disregarding to a large degree asset inflation having taken
place in the past, while facilitated by misguided CB policies. This
again touches on the meaning of equity, as discussed previously. Second,
empirical expectation in both directions and not analytical possibility
sets off bouts of commonly observed inflation or keeps it under wraps.
The way out of that in theory, is to come up with a broader definition
of the term "inflation".
Keynes pointed
out that raising the money supply (or the stock of high-powered money)
can stimulate increases in real production, the realization of
profits, etc. To rule out the second case, we need to embrace Say's
"Law" (or what should be called Say's Fallacy).
As far as I'm concerned, Keynes was confused or at least confusing on a
number of points. 1. How and when value determination takes place. 2. A
definition of money.
I don't foresee much difference of opinion re: Say's Fallacy.
The above described overall economic
account of debt acquisition and resolution, now becomes saddled with
additional resolution requirements that it cannot handle; since all
generated income in the real-goods economy is already required for the
resolution of its own output. The crash actually occurs when it becomes
obvious that an evolutionary resolution of this debt has indeed become
impossible; and a substantial number of players try to "cash out" in
uninflated terms and leave the system.
I don't understand.
Its understanding requires the abandonment of the (silly?) idea that a
unit of account can somehow be transposed into a stock.
The magnitude of your above "net worth" therefore, is abstracting from the
essential time element, during which its accounted for wealth is resolvable
and returns standard of living _in real terms_ to its owner.
does abstracting from the "time element" mean that there is some sort
of absolute barrier between a "diachronic" moment in time (being
considered here) and the "synchronic" "essential" process over time?
no, because being conceptually distinct does not imply that the actual
parts are separate in the real world.
Again, this does not apply to my model of economic elements. Questions
remaining: is my model irrelevant, incomplete, or self-contradictory?
With only three first principles, it has no peers in the Occam's Razor
department, that I'm aware of.
Without this
intrinsic limitation on the meaning of wealth, economics as I see it becomes
quackery.
are you saying that, in the end, net worth has to correspond to real
assets ("capital goods" that are actually used in production)? who
could disagree? not me.
Yet you hold on to a reserve "stock" of some kind that has "value" to be
drawn from; and you have your concept of "conceptually separate" to keep
contradiction at bay. Most significantly though, it gives credence to
your faith that the economy can be pushed and be definitively balanced
at the same time; at least so far, that's how I interpret your stance of
positively valuing a stock.
In the end, the price of equities have to be consistent with the real
production of surplus-value (or the redistribution of really-produced
surplus-value from another sector)
See above. The concept of surplus value as a stock is meaningless as far
as I'm concerned; and you still have to indubitably define it, for me to
accept it in your model.
However, in practice, the prices
of equities (stocks) can be totally fictitious, based on irrational or
unrealistic expectations, as with Keynes' story of betting on a beauty
contest. If the two (the fundamentals and the actual price) get out of
line, with the former far above the latter, there can be a steep fall
in the equity price.
At this point our models converge about as close as they are ever going
to get; the point of contention here is legitimacy. The above described
process of indirect spending is not consequence free; For while this is
going on, it upsets the dynamic equilibrium of the real-goods sector,
doing real harm in terms of involuntary unemployment and/or the creation
of waste. As long as it is not fully understood that money is a property
of the economy, and never free and clear to do with whatever seems
appropriate by individuals; economic models are fatally deficient.
BTW, the power of satiation is a potent ally in the equitable
distribution of wealth, when returns are limited to be those in real-terms
only; quite possibly much more so than most Marxians realize.
huh? are you saying that rich people sometimes get so rich that they
get bored with it and give some of their wealth away? that's sometimes
true, but usually not. Usually, they give money to some tax-free
foundation which they control and use to provide jobs for useless
relatives and to provide "charitable events" where they can drink and
hang out with their friends and cronies.
No, what I'm trying to convey is that with a proper taxation schedule,
the economy's "movers and shakers" could never have acquired all that
so-called "wealth", exceeding their living-standard requirements, in the
first place. "The art of governance is to allow people to be useful" to
paraphrase Quesnay. The legitimacy of the financial set up as it is now,
precludes the government from correcting private sector failures in that
regard, within yet overall solvency conditions.
But also note
that the above delineation does not really refer to a Marxian command
economy, with its helicopter money;
By a "Marxian command economy," do you mean the late unlamented USSR?
I mean any economic system wherein central planning has supplanted
planning by private enterprise. The latter lacks the ability of the
former to inject cost-free money from exogenous sources, whenever
bottlenecks in production cause cost overruns.
they didn't use "helicopter money." None of the Soviet-bloc countries
did. I have heard rumors that Chiang Kai-shek's Chinese government
once dumped money out of airplanes, but he wasn't a Marxist.
Helicopter money is jargon for exogenous money, à la monetarism. I
thought this terminology was generally recognized as such. But, while I
cannot see any reason why this is not a legitimate mode of operation for
a command economy; in our vertically integrated economy, where money is
first and foremost a unit of account supposedly keeping the entire
system fair and straight, its efficacy equates to money crankiness as
far as I'm concerned.
Are you denying that the money we use is ultimately based on
government fiat?
Quite the opposite, but aside of embracing the concept of endogenous
money, I deny the valuability of loanable funds (a stock of money assets
available at a cost); whether this is supposed to exist exogenously or
endogenously for that matter.
is that what the reference to "helicopter money" is
about? I would say instead that our money is currently based on state
power.
Agree, up to a point. Money as a unit of account is able to readily
escape state power. The latter comes into its own as the result of being
able to enforce contract law. But, as I showed in a previous thread, the
private sector is quite well able to create money through inflationary
means; and this without any help either of the banking sector per se.
but only to a balance-sheet regulated,
free-market, living standard providing one. [??] Accounts in the latter are
furthermore to be understood as notional only, since there can never be a
universal identity at any point _in_ time; but only an ongoing process,
potentially in dynamic equilibrium _over_ time. That is also why solvency
kept reappearing in my argument, just like time it is a vital entity and
cannot be abstracted from.
please explain.
This post has already become too long for its own good. If I've still
got your interest, we'll get back to these points at some later time.
I'm snipping, at least for now, the rest of the post. Bringing in Keynesian
identities was unhelpful to say the least; as the above goes too far beyond
him to be able to draw easily fitting parallels. Even though they are there,
I concede to making mistakes while trying to use them before; but if you
deem it worthwhile, I'm also willing to retrace. I hope that herewith I
summarized my perspective, for whatever it's worth, that you had asked for
in the snipped part of the post. I much appreciate the opportunity of being
able to bring this alternative and quite deep going indictment of
capitalism's exculpating theories to the fore, but wouldn't mind at all if
someone smarter than me were to refute its logic, so I could spend the rest
of my life doing something else; rather than being a bothersome gnat, trying
to convince patient and open minded economists like yourself of internal
contradictions and/or gaping holes in their theories, that seem to defy all
attempts at closure.
I think it would be useful if you were to explain your point of view
by starting with first principles. Are you following a specific
thinker's point of view, or is all yours?
The idea that the accumulation of wealth is a useless abstraction, when
approached independently from affecting human well-being as its final
goal, is unadulterated Sismondi; contradistinguishing his fundamentally
dynamic theory from all his contemporaries, including Malthus and
Ricardo, and of course later the Marginalists and NCs. But I'm only a
follower in the sense that he came up with his ideas almost a couple of
centuries before I independently arrived at mine. Without Sismondi as
progenitor however, I doubt I would have taken the necessary time to
work these ideas out into what I believe is a coherent theory; starting
with translating and annotating the essential parts of his MO Nouveaux
Principes... available on my website.
BTW, if you're going to try to convince me (thanks for the compliment)
of the "internal contradictions and/or gaping holes" in my theory, it
would be best if you first tried to understand what I'm talking about.
It is nowhere near my intention not to try to understand what you are
talking about. I'm sorry if I'm giving you that impression. I think we
are very close ideologically, but differ in theoretically justifying our
common goal. If Marxo-Keynesianism has it in it to be rigorous enough,
to convert the mainstream and become the new orthodoxy, that's just fine
by me; and I most certainly would like to understand such a theory to
the best of my ability. Thanks also for the interest in my perspective
you've shown so far.
John V
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