Jim Devine wrote:
I'm trying to deal with my mailbox being so full. Now I'm using FIFO
rather than my usual LIFO...
FIFO or LIFO, I much appreciate you're engaging and welcome leaving me a
bit of time for reflection; both past and present.
me:
Since I don't have a unified deductive theory of everything, there's
no point in counting "axioms." As I've said before, I think it's silly
to rely entirely on deductive/axiomatic reasoning.
Inductive/descriptive reasoning is just as important.
several weeks ago, John Vertegaal replied:
In any natural system, yes (as if we had a choice). But _my_ economic
system is an entirely _man-made_ set of accounts.
You should have made it clear that you're talking about an accounting
system rather than an actual description of empirical reality.
Perhaps I should have made it clear that I meant: my depiction of _our_
empirical economic reality is that it occurs entirely in terms of its
unit of account? Since use-values aren't subject to arithmetic, all your
own formal depictions of (empirical?) macro reality have to be in terms
of the economy's unit of account too, no? The questions are: 1. is there
anything of substance _added_, rather than fine-tuning analytical
conclusions by employing inductive/descriptive reasoning. 2. As static
representations of a fundamentally dynamic condition, can economic
identities in any way be considered true? See below for my take on this.
Different standards apply to these different cases.
[??] Either there is an ontology we are trying to make sense of, or
there isn't. Where do you stand? Isn't Marx's synthesis all about the
inevitability of ontological truth?
(BTW, I don't know
what you're talking about when you mention a "natural system."
A self-replicating system, wherein actors and the be acted upon are
endogenously functioning according to some unknowable exogenous design.
The
economy is human-made, not natural.)
My point exactly. You also happens to concur with my first axiom. But
this consequently places the human population outside the system! You
cannot have it both ways.
John:
Its [what does "it" refer to here?]
The economic system, whose ontology is being investigated.
accounted for
inputs are either going to be resolved by its outputs, fulfilling its
purpose, or they are not and will be wasted.
The real world has waste, so shouldn't accounting systems do so too?
In business, accountants refer to "wastage" and the like.
Waste as a systematic antinomy is distinct from systemic waste on the
micro level. Wouldn't you agree?
Except for setting its
axioms, and given that waste as an antinomy is not directly derivable from
those, the only need for induction would be to to conclude that perhaps some
waste isn't all bad; thus not ruling inductive reasoning out entirely, but
relegating it to be of very limited use instead. Is there inductive
reasoning in accountancy?
Yes, there is inductive reasoning involved in accounting. In the
National Income and Product Accounts (the accounting system I know
best), not only are the concepts of "investment" and "consumption"
based on induction, but empirically it's sometimes hard to decide what
gets put into which category. Does the CEO's company jet count as an
investment, part of the costs of production (an intermediate input),
or consumption.
Being based on induction equates to an impossibility of determining its
truth (at least in finite time). Don't you think an institution with the
prominence of NIPA should be able to do better? One of the four known
assumptions the accounting system is deduced from, (see Wiki) is that
the subject accounted for is a going concern. And since a definition of
a going concern is a productive entity, able to pass on investment costs
through the sale of its output, it not only follows that C can only take
place after _final_ output is taken off the market by consumers, but
that C and I are of _opposite_ algebraic signs. Hence, according to
standard accounting principles of a solvent economy, Y = C+I is a
_false_ identity, and there is _no_ way to discover that by inductive
reasoning. So either Keynes was or I am confused, what's your take?
The NIPA people have an answer, but it's arbitrary.
There shouldn't be anything arbitrary about it.
Economics is macro-accountancy. Tell me what this
assertion misses, and why that is so vitally important.
First, there's microeconomics, which is more than accounting and helps
us understand a lot of issues in the economy.
In the reality of the economy being forever out on a limb, all
microeconomic values are ex ante elastic. That's the reason for the
whole not simply being the sum of its parts. How could the latter
possibly be building blocks to any firm understanding?
Second, accountancy refers to a true-by definition system of
identities (such as that GDP by definition equals C+I+G+NX).
It seems to me that your above example is much more an indictment of
conventional macroeconomics, than an alleged shortcoming of accounting
principles with respect to economics understanding. First, accountants
realize full well the artificiality of a fixed time frame in which their
figures are supposed to fit. It's one of their assumptions (see Wiki
again). Second, but more importantly, C+I+G+NX is a macro-Econ 101
assumption that a static formulation is quite able to represent a
fundamentally dynamic condition, without grievous double-counting
effects.
C+I+G+NX is not only wrong for the same reason that the identity Y = C+I
is, but also for singling out G, as if this is a self-contained entity.
There is no separate "cost" involved in the creation of Gov. provided
services and infrastructure; for, given that all taxes and bonds are
paid for out of income, the corporate cost structure already encompasses
them all. As such these costs, like any other kind, become embodied in
retail output, to be resolved at that level by the final beneficiaries
of Gov. expenditures. Retailers couldn't possibly have a clue, nor would
they care in the least, how much of the costs they assume in return for
their supplies consist of taxes, or profits for that matter. Can you
foresee a time in our mixed economy when supermarket shelves are empty,
because all those bloody civil servants, welfare recipients and retirees
with their free time got there first? And yet, that situation would be
the only conceivable one where there would be an associated "cost" to
G's output.
In the abstract but dynamically equilibrated humanity-wide economic
system we are analyzing and NXs cannot be, C alone determines GDP. The
rest is hope and prayers; i.e., expectations. Could it be that we are in
the middle of a depression, because inductive reasoning has not been
able to prevent us from stepping into it? For didn't the few opposing
voices crying wolf use deductive rather than inductive reasoning?
Macroeconomics tries to get beyond accounting to talk about behavioral
equations (as ways of describing actual, empirical, economic behavior,
e.g., C rises with income, all else constant).
Is "tries" the extent of it? Or are there any success stories with
respect to improved living conditions, that economists can boast about
having been instrumental in?
Even if it is merely
notional, the theoretical and non-accounting idea of equilibrium plays
(and should play) a big role in macroeconomics. (NB: it doesn't have
to be a full-employment equilibrium as in J-B Say's neoclassical
tradition. It also doesn't have to be stable.)
I like your insertion of notional. Now if you'd only accept that all
microeconomic values are "merely notional" too, we'd be at least halfway
to full agreement... (back to reality) I don't know your definition of
equilibrium, but mine certainly doesn't exclude the accounting principle
of thwarting creditors from pulling the plug, by meeting payrolls and
passing incurred costs on to customers. Your argument seems semantic to me.
Equilibrium, at least in a dynamic sense (somewhat like a bicycle),
plays a big role in my approach as well. Economists using static
equilibrium theory (GE, partial, whatever) to infer micro pricings are
charlatans; akin to a mechanical engineer who would be using static
equations to determine the forces affecting a bike in motion.
Cousin of an NC perspective eh?
John:
But no particular empirical description can lead us to the general
underlying systematic truth. Didn't Marx say something to that effect
too? Aren't our discussions meant to seek out that truth? ...
I didn't say that "empirical descriptions" can lead us to a "general
underlying systematic truth." Rather, I said that empirical
descriptions and analysis are complementary aspects of trying to
understand the truth (to the extent we can do so).
It seems to me that this differs considerably from KM's argument. Marx
"knew" the truth. His dialectic, and with it all uncertainty, comes to
an end, once communism is inevitably established, as the only true way
for human beings to live.
What do you mean by "complementary"? Additional to, or just fine-tuning,
analysis?
Marx did, as John mentions, say that abstraction was needed to get to
reality: "The body, as an organic whole, is more easy of study than
are the cells of that body. In the analysis of economic forms,
moreover, neither microscopes nor chemical reagents are of use. The
force of abstraction must replace both. But in bourgeois society, the
commodity-form of the product of labour — or value-form of the
commodity — is the economic cell-form." (1867 Preface to vol. I of
CAPITAL.)
KM's abstraction did involve accounting (that's what a lot of CAPITAL
volume I's value theory consists of)
[??] Accounting and abstraction are fundamentally contra distinct! The
essence of an abstraction is the difference between the whole and the
sum of its parts; while in accounting there is no difference between
those formulations. There is no way to get from established accounting
figures to the abstract whole. I'd sure like to know how Marx performed
that trick!
The only way of involving the two concepts in a coherent discourse, is
by making use of the wiggle room provided by the assumptions of the
deductively reasoned accounting discipline. This advances the inevitable
conclusion that accounting figures are _notional_ at any point _in_
time, yet able to depict an equilibrium _over_ time. Abstracting from
time in the determination of value makes the latter process meaningless.
So unless there is something in Marxian economics, that is able to take
us beyond the static and deterministic approach it appears to be at the
surface, it's a dead end.
but it also included a
dialectical method of epistemology (asking questions about empirical
reality) and also of presenting his theory. He didn't stay with
accounting. He was also interested in understanding the behavior of
capitalism.
Marx's dialectics is as much a bastard version of the real thing as the
New Keynesians' version of Keynes is. It seems to me that the essence of
Hegel's dialectics is its everlasting continuance, which Marx defines
away inductively. Dialectics is a perpetually ongoing refinement towards
the essentially unknowable. KM's version is a transitory refinement to
what is already known.
John had said:
In mine, the identity of money rolls out of a total of _three_ axioms,
it doesn't look like your theory going to beat that. Would you agree
that the theory requiring the least amount of axioms is the most
general and therefore is a superior one (all else being equal and no
ideologies entering the picture)?<<<
me:
This represents an utter commitment to axiomatic/deductive reasoning.<<
John now says:
Because, if applicable, it's ["axiomatic/deductive reasoning" is] by far
the best mind-tool we've got. It allows us to establish the general, and
from that determine the truth of the particular. There is no way to get
there the other way around, for inductively reasoned particulars may or
may not be true. Empirical observation remains an indispensable means to
detect contradictions, but a reliance on inductive reasoning is a good
way to find yourself in the middle of nowhere, unable to see the forest
through the trees.<
Axiomatic reasoning could easily miss the trees by focusing on the forest.
This critique seems a reversal from the usual critique of NC from
heterodox quarters.
Here's an example: in neoclassical economics, which tends to love
axiomatic reasoning, there's a gigantic tendency to treat (say) firms
in a market as totally homogeneous, so that the "representative firm"
is the same as each and every firm in the market. That's the story of
a perfectly competitive market. But it even infests neoclassical
stories of Robinson-Chamberlin monopolistic competition. The point of
this concept is that each of the firms is supposed to be different
from all the others, but I've seen a lot of models where each firm has
the same demand curve and the same cost function as all the others.
Why? because it makes the mathematics easier! The trees are lost in
the forest.
As far as I understand it, there is nothing here for me to disagree
with. But I fail to see how it affects either my model, or its mode of
reasoning.
There are other kinds of abstract reasoning besides axiomatic
reasoning. I already mentioned KM's dialectical approach.
See above
me:
BTW, what are your axioms? does having fewer axioms make you a better
person?
John:
My axioms are concise assertions of WHAT the economy is, WHY it exists,
and WHO is supposed to benefit from it. I don't like to pull them out of
context if I don't have to; http://www.vcn.bc.ca/~vertegaa/outline.pdf
Since there is no way to prove the truth of an axiom, having fewer of
them makes it less dependent on potential untruths, as well as easing
its subject's comprehension, those are its "virtues". Perhaps there are
others, but I'm not a philosopher.
I really don't need to see John's axioms unless you tell me what new
and different insights he derives from them.
Since nobody else is chiming in here, I guess I do have to speak up for
myself. I neither claim originality nor exclusivity by saying that my
model can show that Keynes's GT framework is overdetermined. If memory
serves, Basil Moore did so long before me on PKT. But I don't remember
ever having seen in print why. Now perhaps this isn't a big deal, as the
GT has been critiqued from many perspectives. And of course this far in
the missive, you may already have shot me down too.
That's because all theories, axiomatic or not, involve untruths.
Theeories are abstractions. The question is whether the the benefits
of the untruths exceed the costs. The answer to that in turn depends
on one's goals and values. The reasonableness of a theory would be
different from the point of view of über-Chicago schooler Gary Becker
than from mine.
The way I see it, the reasonableness of a theory depends on two
parameters: truth and relevance. A theory may be true, i.e, without
discernible contradictions and yet be totally irrelevant, the latter
depending (as you say) on one's goals and values. I have no problems
submitting my theory to that. And by enlarge I do agree with the above.
The untruth of an axiom cannot be proved within an axiomatic system,
but it can be shown to be unrealistic (anti-empirical).
Don't agree. If a contradiction follows from deductive reasoning having
an axiom as its base, the axiom is not just unrealistic, it's false; and
unless replaceable, the entire theory is supposed to succumb with it. It
is the truth of an axiom that cannot be proved (in finite time), because
an axiom is inductive.
me:
In the kind of property-rights
system we live under, equity (capital) is not the same as debt.
John:
Before we get to Max's stock, let's deal with this assertion as it
stands. Is "equity (capital)" a means or an end?
Does it have to be either?
Yes. In any theoretical construct, means are systematically endogenous,
while an end is exogenous to the system. Without clearly distinguishing
between the two, _no_ reasoning is possible at all.
equity in a company represents a _claim_ of
ownership of that company.
Okay, but this also means that from the company's end, it is in debt to
the claim holder. All I see is another justification for my call that
the most logical designation of capital is as if it were a debt.
A stockholder shares in ownership, in
risk-taking, and in decision-making (though most often not very much
of the latter) and sometimes in receipt of dividends and/or capital
gains. _Owning_ equity is a means to the end of receiving dividends
and/or capital gains.
That depends again on the motives of the particular capitalist; as the
end of receiving dividends and/or capital gains, may or may not be the
means to an ostentatious lifestyle.
The equity itself is neither a means nor an end.
This observation is quite interesting from my perspective. I cannot see
it derived from the above, so if that is true it's inductively reasoned
by you. In my model however, it is deductively true and signifies the
total impotence of all existing equity to in any way influence the
success or failure of its own venture. The latter is strictly a function
of whether drawing a debt from any of those other equities out there,
will foster a demand for the output of the said venture, which thereby
would become realized. So even though it is not a means towards its own
realization, it is a means towards the realization of other equities.
Not only has ownership nothing to do with that, but it emasculates
"powerful" capitalists.
If you'd say that for
capitalists it is an end, I would tentatively agree but also say that
this has nothing in common with the underlying, and presumably desired,
stable economy I'm trying to clarify; so a discussion along this line
would need to be suspended until we get to the point of discovering
impediments to stability. For now, only capital as a means is fodder for
pursuance.
To my mind, the capitalists' goal (end) is simply to live the high
life with all sorts of material goodies and servants, get respect,
power, political influence, etc. (along with being able to get dates
on Saturday night). Having capital is a means for attaining those
goals.
As despicable as some of this may be, it will not result in an economic
crisis. Far from it, ostentatiousness per se is a _source_ of profit
(more about this later). Therefore in and of itself, it is a stable
situation. In order to remedy such excessiveness, countervailing
authoritative measures are required beforehand.
(Capitalism itself does not have a goal, though in practice it acts
_as if_ accumulation of capital were the goal.)
My deferred point is that the practical result of all such activity is
inherently destabilizing, as the so-called capital it accumulates is of
the fictitious kind. With your underlining of "as if", are you saying
that in reality this doesn't happen?
John mentions "the underlying, and presumably desired, stable economy
I'm trying to clarify." Well, he and I have different world-views ans
purposes. I don't know of any economy that's "underlying" the
actually-existing one. If it exists, I don't know if it's desirable or
stable. Since I don't have any inkling of an "underlying" stable
economic system, I'm not going to look to find it.
[??] I was talking about capitalists' motives based on an existing
economy as they perceive it to be; not some other economy underlying the
actually existing one. As far as different world-views are concerned:
yes, if your prescription to cure (current) economic malfeasance is an
inevitable communist revolution. And thus a social-democratic stability
is about as far away from your objective as can be. Anything short of
that, our world-views are bound to more or less overlap.
You see it [capital, equity] as inherently positive, inductively
because (from what I gathered so far) it commands a price.<
equity can be negative, as many a homeowner has discovered.
Yes, but what does that really mean? since neither the Marxian nor the
Keynesian model seems adequate to determine how much was real and how
much fictitious in the first place; that is before the market collapsed.
I'm tracing it from its humble beginnings as a loan, a to be resolved
debt, peddled by a bank; wondering under what circumstances this can
turn into the positive quantity you now hold it to be.<
To understand equity institutionally, I'd start with partnerships, not
bank lending, because joint-stock companies (for example) are a
developed form of partnerships.
You can of course start wherever you like; but in order to make sense
shouldn't you explain what it is exactly, that those partners are
bringing to the table?
They have limited liability only
because of laws.
I have no problem with this tangent, but it certainly doesn't explain
what equity _is_.
Let's assume our enterprise, situated
somewhere above the retail level, to be successful; having been able to
sell its output at cost+ prices to other enterprises having made similar
borrowings, until the output is resolved at the retail level by our
entrepreneurial employees, bank employees and various profit/rent
collectors, whose wages and fees had all become embodied in retail output.
"entrepreneurial employees"??
Sorry to have confused you. I thought the context would have made it clear.
who are they?
Employees _of_ entrepreneurs, as opposed to G's final beneficiaries. I
could have included the latter too as in fact they are (see above). But
without another explanation, as to why there is no need for the usual G
abstraction, I just narrowed it down.
standard economics of all
stripes treats entrepreneurs and employees as distinct and
non-overlapping sets.
So do I.
I guess one (empirical) person could be both --
like the new entrepreneurs that C. Wright Mills refers to who climb
the ladder between government and business (e.g., Henry Kissinger) --
but the abstract categories are distinct.
Sorry again, but your argument is a straw-man.
What happens if at some point all the loans are paid off, but the means
of production is still going strong. Does the above economy yet come to
a sudden stop because all the money had supposedly disappeared? Has all
its capital now become the positive entity, enabling renewed borrowings
to keep it all going; making bank loans indispensable in perpetuity? In
spite of what conventional economics, not having a coherent theory of
money, might have you believe, the answer is no to both questions....
"all the money has supposedly disappeared"?? what in heck does that
mean? that we've switched over to barter?
My understanding is that standard economics of all stripes treat money
as being created by loans and destroyed by paying back those loans. Is
that wrong? In any case, even though I maintain they got that last part
wrong, money as being synonymous with debt is entirely congruent with my
own approach. Alas it seems that Marxians reckon differently. A holdover
from Marx's commodity money?
As Marx noted, most businesses _start_ with positive capital (M) and
not simply borrowed money.
Marx's (M) was commodity money. No? We don't live in Marx's time.
Perhaps his argument had some validity then; but the as yet unsolved
problem of capital value aggregation must have been in play then too, so
I doubt it. How did Marx figure this (M) got created originally?
I can only see it as ironic that a branch of thought, stressing the
significance of inaggregative use-values, not only insists on putting an
exchange value on something that cannot be aggregated, but make it the
linchpin of their theory.
The capitalists put this M into production
because they hope they can turn it into M' > M. It doesn't always do
that, but in most cases it does; at the macroeconomic level it usually
does.
Of course, not all of the M' is reinvested. But much of it is, so that
this M -> M' can become a growing spiral, M -> M' -> M" -> M"" etc.
You seem to be assuming that companies are well on their way to infinite
M. Where exactly is the inherent brake in all of this? What definition
of M can account for: 1. its original creation, 2. its growth spiral,
and 3. its crash(?)? With M being the only variable in the above
scenario, wouldn't you agree that without such a definition it's all
pretty meaningless?
You seem to be assuming that companies start with zero capital
(equity). If so, they are infinitely leveraged (i.e., the debt/equity
ratio equals infinity).
And what exactly is the direct influence (quantification) of a company's
debt/equity ratio with respect to obtaining a gross return from the economy?
Few if any businesses beyond Ponzi's realm
work that way.
Straw-man, without an unequivocal definition of M and the effects of a
derived D/E ratio.
So where do we stand so far? Because outlays occur before returns come
in, the economy is always in debt to itself; that is, at least with
respect to its costs. But what about its mark-ups? Retailers readily
assume all mark-ups above their own level as a cost, so that their books
show a to be resolved debt of virtually the entire economy's cost+
billings; while at the same time the potentiality of its resolution is
there too, in the form of disbursed personal incomes. The only aspect of
resolution not yet dealt with are retail mark-ups. These can only be
resolved by retailers themselves (or again any newly hired retail
employees) bit by bit in a horizontal fashion, slowly petering out over
time. In other words, the direct spending of retail level profit, allows
a whole new set of retailers to realize their profits too, and these
being spend directly will have the same effect, etc., on an ever
diminishing scale; while being mixed in with the resolution of
vertically integrated output, that will be coming down during those
successive periods.
Marx showed that actual profits (M' minus M) could be realized on a
macroeconomic level.
I doubt it, at least he didn't do it as follows.
For a non-growing economy (with only simple
reproduction) the profits of the sector producing means of production
(S1) are positive as long as the wages of that sector (V1) are less
than the cost of using up means of production in the consumer goods
sector (C2).
This is a rather opaque static outline of a somewhat more involved
dynamic chain of events. What you seem to be saying is that: to the
extent that depreciation on the V1-level, passed on as a cost to the
C2-level, exceeds the aggregate wage bill on the V1-level, profits on
the V1-level are determined. If so, C2 (depreciation-charge embodied)
output will need to be realized through the effective demand of its own
customers, so that proceeds can be fed back to V1-level capitalists. Who
are those consumers having the necessary wherewithal to do so? Obviously
we can exclude V1-level wage earners, but they need to exist otherwise
the successful passing on of depreciation charges to the C2-level and
ensued feedback to V1-level capitalists is a (Marx's?) pipe dream.
Another question: how exactly does (S1) morph into (M)?
Please correct me if I'm wrong, but from your previous submissions I've
been getting the impression, that you consider the "realization problem"
to be an autonomous case, as far as basic Marxian analysis is concerned;
and that the "problem" is inherent in the capitalist mode of production.
If so, how would this render a capitalist system unstable other than by
definition? Wouldn't this be exactly the same (though conversely) as GE
analysis? There's got to be more to Marxian analysis than that, no?
The profits can be even larger in an economy undergoing
expanded reproduction.
[??]
Of course, the underlying process of
exploitation must also be successful.
[??] This might be obvious to you, but you don't seem to have a theory
wherein the realization of profit is integral, so how can you be so
sure? (more later)
With M' > M, not only do we see positive equity but the potential for
an upward spiral of accumulation.
Sorry, but all I've seen so far is a pipe dream. And the irony of all
this glorification of the power of capital, is that without a clearly
identified integral link to crises (subjecting the process to successful
exploitation I'm afraid is not enough), such capital idolization seems
to me to be indistinguishable from the reasoning of Wall Street buncos.
Of course, it's possible that M = M'
so that surplus-value = 0 and the market-price of corporate stock = 0
(because it reflects the expected value of future earnings), but
that's a capitalist economy in severe crisis, worse than anything
we've seen (except perhaps after 1917 in Russia).
It seems to me that John may have introduced a major inductive
assumption into your deductive system. That is, you seem to be
assuming that the system we live under is what Marx called "simple
commodity production," a system of small businesses in which the total
profit at the macroeconomic level = 0.
I assumed no such thing, quite the opposite in fact. Although he didn't
put it quite as such in a single sentence; already almost 200 years ago,
Sismondi correctly identified the fact that if all cost-sourced income
is exchanged for final output, it will be a wash for capitalists in the
aggregate, at _any_ level of worker remuneration, regardless of the
complexity of the economy. If at the end of the day, capitalists want to
see a net profit (other than confiscating their own workers' output, for
which they can hardly have any use, let alone accumulation desire), they
are going to have to do some direct spending themselves, because there
exists _no_ other net source of exchangeable value. They can try every
exploitative tactic available to them, all the way down to slavery; it
cannot change this basic fact. Aggregate profits are entirely determined
by the _direct_ spending of profit income (and the _depletion_ of the
labour reserve army). As such these profits can be set and realized at
_any_ "rate", but capitalists' satiation for final output and penchant
for so-called "investments" play a huge role in profit determination.
Unless you can show the foregoing _exchangeable value_ scenario to be a
crock, Marx's deterministic, static, whatever, theories of exploitation
and profit simply don't hold water, in the dynamic setting the workings
of an economy should be evaluated.
From another of John's missives, I got the impression that he was
following the lead of Sisimondi in his economics. I don't know much
about his thinking, but I understand that Marx criticized and -- more
importantly -- built on his insights. If so, John can learn from Marx.
Not so if Sismondi's model, being inherently dynamic, is way ahead of
Marx's. And in that respect not only of Marx, but of Keynes as well.
And that's not the end of it. Sismondi was obsessed with the feasibility
of returns. His book is saturated with the term "revenu" and he didn't
mean just income. He basically said you can create all the capital you
want, but returns are distinctly limited; and it is those returns that
realize capital, rendering it _worthless_ without them.
We are in this financial mess right now, because Sismondi's sagacity is
totally forgotten. With an average rate of yearly realized growth being
around 2% or so for umpteen decades now, why is this not taken as proof
that leveraging simply doesn't work? The fulcrum is missing! And so a
supposedly powerful industry, enjoying categorical government backing,
whose entire raison d'être is to "facilitate growth", is but a sham.
Keynesian analysis is befuddled, and Marxians don't seem to have a clear
theory of crises either. The only way out, is implementing what the
_limitation of returns_ dictates. But to do that, one first needs to
understand its profundity. Fat chance any of this is going to happen though.
However idealized the above depiction may be, it is absolute necessary
to get it clear into one's mind before deviations can be recognized
as such; and thus suggesting which ameliorative activities [??] would
likely be effective. One logical deduction would be that a build up
of "funds" can only occur at the cost of having firms perish. [??]
Inductive reasoning could momentarily enter the picture here,
concluding that some of this could even be healthy, as entrepreneurial
deadwood gets pruned and those whose output is most in demand are
allowed to expand. With deduction taking over again, by reasoning that
without such expansion, unemployment is ensured, and that a malaise
will set in regardless of apparent capital value increases by some.<
I don't understand this.
Perhaps because of this? "The ideas which are here expressed so
laboriously are extremely simple and should be obvious. The difficulty
lies, not in the new ideas, but in escaping from the old ones, which
ramify, for those brought up as most of us have been, into every corner
of our minds."
me:
Max
_owns_ stock in a company. He does not automatically owe any money to
anyone as a result (though he could have bought it on margin).
John:
Linear reasoning will get you nowhere, if your subject is structured in
a round-about way.
why do you presume that my reasoning is "linear."
Because it's everyone's default mode.
If anything, the
constant back-and-forth dialectic of inductive and deductive reason is
non-linear, while any effort to derive conclusions simply from axioms
is linear.
I read and I drew the conclusion that "owning stock" is a fait accompli
here; a function without unknowables and as such a point of departure
for extended reasoning. Where is the dialectic in this? As for the rest:
"any effort to derive conclusions simply from axioms is [_not_] linear",
when derived conclusions show the structure itself to be non-linearly
set up.
Stocks are bought with personal income.
right.
Disbursed as
corporate costs, that are passed down all the way to the retail level,
these incomes are meant to be exchanged for retail output, resolving all
those earlier corporate disbursements and turn it into living standard
enhancement. ...
"meant to be" by whom?
By us as designers of this system we call the economy. Of course this is
a general principle only, and one that can and is and sometimes should
not be followed; but if not heeded often enough the system will collapse
and thus thwart its design purpose.
Why are stocks purchased only from the payment
of corporate costs? If Max happens to be independently wealthy, he can
buy stock based on the dividends or realized capital gains received
from the stocks he already owns.
If our economic structure commands the field perspective of a subset
with open boundaries, as I maintain it does, empirical dividends and
"realized" capital gains can only be evaluated in terms of the abstract
whole. This would not only render your reasoning invalid, but also
require an investigation into the source of those proceeds, as well as
any associated asset inflation. Although nothing but logic is required,
this post is already way too long, so a full answer is best left for
some other time.
The prime goal of public corporations is to increase shareholder value.
that's the official goal, but it seems that a lot of them feather
their top executives' nests with golden feathers.
Unless it involves asset inflation, ostentatious nest feathering per se
is not economically destabilizing. Again, countervailing authoritative
measures are required to keep it in check.
Perhaps this sounds innocent enough, but it runs exactly counter to the
economy's goal of maximizing exchange value _resolution_....
the economy has a goal?
Anything human-made has a goal. If it didn't we would neither recognize
faults nor a total collapse.
If forced to name such a goal, I would say
that (a) there is no _conscious_ goal
Irrelevant to the economy's ontology.
but (b) in practice that goal
involves maximum profits and capital accumulation.
If "maximum profits and capital accumulation" is in discord with the
economy's ontology, the system will inevitably break down. Hey! it seems
I got something in common with K. Marx after all.
what is "value resolution"? do you mean realization?
Not here. The only "realization" in the above indicated process happens
in terms of exogenous use-values. When I use the term "realization", it
means reestablishing one's eligibility for the institutional requirement
to have access to the "privilege" of being indebted to a bank for the
purpose of trying to extract economic income. Just because our "fund"
lending institutions place a positive value on so-called equity, doesn't
cause this value to be positively influential with respect to the _real_
success or failure of any subsequently undertaken venture. It is nothing
more than a matter of institutional convention, that entrepreneurs have
no choice but to comply with, when seeking loans. (i.e.) It's a holdover
from: "them that have the gold get to set the rules" about what's "real"
and what isn't. The deciding factors of a new venture's success or
failure exist in terms of skills and experience of market conditions,
which will come to play out in the as yet unknown future; and thus an
evaluation in terms of those intangibles should be the foremost and
perhaps only criterion for lending.
Moreover there is a serious deflationary aspect to the reselling of
collateral, further indisposing the latter to be a fitting requirement
for lending; but a full explanation of this will have to wait for
another time too.
The above is also the reason that it differs from your understanding as
the realization of "positive capital (M)", which presupposes a positive
direct influence on future earnings. Care to point out why this kind of
inference doesn't put you on the side of the capitalists?
Value resolution is simply the process of nullifying the liability
value, that became released either as a result of any new venture's
establishment, or in the ongoing economic process of deb(i)t outlays
having to precede returns.
that's enough. John's message is too long to handle today, if ever.
Glad you called it a day. Answering the above (writing and thinking
about it) has taken me more hours than I care to recall. Hopefully at
least some of you got down this far and it hasn't been all for naught.
If forced to summarize, I'd say that John is considering an imaginary
economy with no capitalists, no capital, no accumulation, and no
profits. I think that kind of economy -- a cousin of the neoclassical
perspective -- is irrelevant to the task of understanding the real
world.
Am I wrong in sensing a bit of an agenda here? Non of your accusations
are true. I presented a coherent ideology-free economic theory, that yet
conveyed a left heterodox perspective; but without Keynesian paradoxes,
or Marxian black boxes wherein confiscated but unwanted physical surplus
somehow morphs into a highly desirable means to enrichment. So, as far
as I'm concerned, until paradoxes are explained away and black boxes
have become transparent, the jury is still out as to whether this
polemic has been relevant to the task of understanding the real world or
not.
John V
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