On 8/22/2010 5:03 PM, Jim Devine wrote:
> I had written:
>>> Rather the accumulated funds (i.e., the OASI trust fund's pile of
>>> government bonds) represents claims on the government's ability
>>> to tax, just as the savings bonds that your grandmother gives you
>>> are claims on the power to tax -- and the stock you might own in
>>> Apple Computer is based on their ability to grab a piece of
>>> society's surplus-value.<<
>
> John writes:
>> All government income, i.e taxes levied and bonds issued, is part
>> of the private sector's I [following Marx's definition?].<
>
Sorry I didn't make it clearer that I meant Econ 101 (I), investment.
Thought this would be obvious, but I guess here on pen-l, yours is a
fair enough interpretation. All I know are Marxian departments I and
II; where dept. I is that oddly conceptualized structure whose profits
are bootstrapped from dept. II, more about which later.
> This is quite confused: bonds are _not_ income, but one form of
> paper wealth (as are corporate stock). On the other hand, the
> interest paid on bonds (and dividends on stock and taxes) _are_
> income.
>
Bonds aren't income, but acquired by its holders through _received_
income. And disbursed income is an investment by capitalists who need
returns in order to stay in business. This income could have been
recently received, in which case a dynamic equilibrium would still be
maintainable (at least for a while) if those bond receipts end up being
disbursed by the government as public sector income. But to the extent
that the original income was received before the creditor-set time
frame for when to start pulling plugs, it had turned into empty claims
as the economy's output had contracted by now. The NC notion that
alternative businesses would have filled in the gap, aside from time
abstraction, isn't valid either, since a full set of claimants to that
particular output are (going to be) formed independently. Your own
"paper wealth" is a meaningless concept until you show how (S) morphs
into (M).
> I can see no reason why taxes always come from the investment
> goods-producing sector (if that's what's meant by "sector I").
>
This is still the original confusion playing on...
Whatever part of their incomes, personal income earners have to pay in
taxes, doesn't alter the employment expense to capitalists. It's always
the latter who pay it in whole (regardless the amount of taxes that's
involved) and, added to their own corporate taxes, pass it on as a cost
of doing business i.e. investment, to then seek a return.
> Why can't an increase in taxes come from the consumption
> goods-producing sector,
>
It does, _in full_; the result of having to assume it all as a cost of
doing business on the retail level. The critical part in maintaining a
dynamic equilibrium is the feasibility of having that portion of their
costs returned; which only becomes problematic to the extent it's not
being expended directly by government income recipients.
> i.e., by lowering actual real wages toward subsistence? See below.
>
Fallacy of composition. What seems to you too obvious for needing an
analysis, only holds under the same deficient micro approach you later
wrongly accuse me of using.
>> The latter [sector I output?][[see above]] are the debit
>> expenditures the capitalists need to get back in order to stay in
>> business.<
>
> Expenditure on sector I output includes not only the costs of
> reproducing depreciated means of production ("debit expenditures
> need[ed] ... to stay in business"), what Marx called constant
> capital (C) but also new investment.
>
New investments, replacing worn out means of production, buying
intermediate output, paying wages... the whole cat and caboodle of
expenditures entered on the debit side of the ledger needs to be
compensated for by entries on the credit side.
>> These [expenditures] are passed on until ending up on the retail
>> level where they finally need to be resolved (through C [constant
>> capital??]).
No; consumption.
>> Whatever portion in the meantime ended up in the coffers of
>> government, and expended as public service (private) income, is
>> now required by retailers in order to make good on their initial
>> outlays. Society's surplus value is a red herring in this process.
>> It's still a _cost_ born by retailers, who can't have the foggiest
>> idea what portion of their outlays consists of embedded higher
>> level achieved profits, interest charges, and taxes. Their only
>> concern is to get those back, as otherwise they won't be able to
>> reproduce the next time around. The latter is the mojo that keeps
>> it all going.<
>
> I have a hard time reading this; I find it incoherent. Jump to the
> "surplus-value is a red herring... It's still a cost borne by
> retailers..." This is mixing up macro-level analysis (society's
> surplus-value) with micro-level analysis (costs borne by retailers).
>
First off, don't you think it at all disconcerting that your discipline
has to make a distinction between its micro and macro approaches, just
to nominally stay half-assed coherent? I mean what other academic field
of study is forced into having to make a major distinction like that?
But just because all conventional economic approaches have long since
given up trying to establish a coherent link between micro and macro,
that doesn't mean there isn't one. My own approach has no difficulty in
doing this at all. It doesn't just pay lip service to the idea that the
whole isn't equal to the sum of its parts, but concludes that the cause
for this inequality lies in its parts' values being indeterminate (or
elastic) at any point _in_ time, and thus are unable to form a solid
footing upon which to proceed reasoning.
The "costs borne by retailers" are _expected_ values, assumed in the
hope of a later realization. *Micro determination isn't in play yet.*
Systematic determination doesn't occur until C determines the value of
I; which in practice means of course that the value of some particular
investment gets slowly determined _over_ time, through the consumption
of its booked and marketed embeddings, after the latter were sold at the
retail level because of having a use value. That this also means that
financial assets, not having use values themselves and to the extent of
not being able to be embedded in retail output, are about as valuable as
monopoly-game money is a story too broad for this post.
> Start with macro.
>
I never do anything else.
> Looking at society's gross surplus-value (GS) as a source of funds,
>
How is this different from saying: "Looking at the value of society's
education as a source of funds,"? "Looking" at it isn't an explanation
of how this transmogrification from (GS) into funds (M) occurs; either
somehow directly, or indirectly by using it as collateral for borrowing
which then has to be repaid (with interest).
> it is the total gross value-product of the capitalist or private
> sector (Y), i.e., total exchange-value (income) earned by selling
> commodities, minus the total private wage bill (V) and the total
> value of private-sector depreciation (C, where the latter include
> the using-up of raw materials). I assume that the government produces
> no surplus-value, i.e., that government-owned enterprises that act
> like capitalist ones play little role. Note that the GS corresponds
> to surplus production of goods and services, too. (Note also that
> I'm ignoring the role of effective demand, so I'm simply taking the
> level of production as given.)
>
Perhaps this is different from stating that 'supply creates its own
demand' but I fail to see why. One cannot ignore the role of effective
demand without defining away the economy's essence. What makes you think
that by constructing this totally unrealistic la-la land model, where
production takes place for the sake of production and thus is valuable
by definition, any useful information about the workings of a real-world
economy can be gleaned? This means I'm afraid that with your identities
being nonconforming to the real world, most of your model can only be
critiqued in terms of an overall perspective.
Another aspect of your approach, as I see it, is that the possibility
that _no_ aggregate supply curve exists is defined away. In an enduring
economy however, all business costs need to be passed on; so that
aggregate supply is a meaningless concept as long as businesses fail, or
are in the process of failing.
But even more critical yet, is that Marx's macro theory of surplus value
creation by itself may very well be incoherent. As I recall we went over
this quite some time ago, where you never explained how dept. II is
supposed to come up with the capability to create profits for dept. I.
The following is an excerpt of the thread "Re: Money [was: Skidelski on
Keynes]" from 2/8/2009; and while I just discovered to have been
somewhat imprecise in my C and V designations, the overall still stands
undiminished.
[[you]
> Marx showed that actual profits (M' minus M) could be realized on a
> macroeconomic level.
>
[me]
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)?...]
The curious thing is that in the reflux theory of profit (many believe
to have been invented by Marx*), KM recognizes that for capitalists to
constantly take £600 out while putting only £500 into the economy, this
has come out of some capitalist hoard directly spent. And although he is
arguing from the what I deem to be fallacious 'quantity of money'
rationale, at least here he's on the right track; profits don't become
realized until the direct spending of profit income takes place. Now
we're talking in terms of a numeraire however, while in your above
exposition you're talking about values as a _source_ of funds; thus with
values already established a priori. It may all come out in the wash,
but there's no point in repeating myself how you could do your laundry.
*) As with so many of Marx's ideas however, this one too originates with
Sismondi (reasoning dynamically btw). For a paper that takes stock of
Marx's rtop, cf: mpra.ub.uni-muenchen.de/21292/1/MPRA_paper_21292.pdf
> The GS = Y - C - V is distributed between various income receivers,
> i.e., to net surplus-value (S = profits + interest + rent) plus the
> government (corresponding to its deficit, Def).
>
GS doesn't exist, as rent and interest are straight costs of production.
(S) is the output of a growing economy at a stable remuneration level;
it is therefore deflationary if the remuneration level doesn't rise. (S)
comes into being from exogeneity: Nature, as in the case of an extra
bountiful harvest; human ingenuity, built up from experience - having
learned by doing. You seem to be either mixing up values and funds, or
talking in terms of funds all along, without having established how and
when the former morphs into the latter. In any case, the question still
remains: at what point do the values of profits, interest and rent
become determined. In other words, is it during (the disbursements of)
production (costs), or only later after distribution? All theoretical
points of departure have to be determinate in order to be valid. Yours
is a static interpretation, that hasn't yet shown its algebraic symbols
to be determinate; mine is dynamic, where, following my axioms, all
presents are incomplete and thus unable to be expressed statically.
Your GS distribution argument only holds water if capitalists were to
directly appropriate a portion of their own workers' output at source.
But capitalism doesn't work that way. No capitalist, nor a landlord, nor
bank manager is at all interested in those workers' output, not even the
workers themselves, and therefore no surplus value exists at the time
and point of production. All those economic participants know quite well
that the output, from whatever their inputs have been booked at, isn't
worth anything until it's gotten rid of. At which point the same kind of
reasoning starts to take root for those next in line toward final output
production. The process's causation lies thus neither within the supply
domain of- nor the demand domain for- production, but in the overarching
drive towards living standard maintenance and/or improvement; which also
in no way is the money, wherewith the latter is acquired.
The only ones who can't cope* with such a reality are economists and no
doubt fund fetishists. Firmly believing that they have to hang on to
determination at all cost, economists of all stripes are desperately
putting their faith in a bootstrapped reality, all of their own making.
And there happen to be two distinct methodologies whereby this occurs;
i.e. by taking the lead from Ricardo/Marx and thus holding supply-side
analysis as evidencing, or take their inspiration from Malthus/Keynes
and take having to disregard the need for underlying assumptions, as a
fair price to pay for championing the demand side. Some, by straddling
the fence between these two distinct approaches, manage to hold a foot
in both camps. To my knowledge only a single economist in history stayed
faithful to what all capitalists and workers know instinctively, and
that is Sismondi, in whose footsteps I happen to follow.
*) Accountants btw have no problem with this at all. The assumptions of
their own deductive discipline leave them enough wiggle room to do so.
In spite of your surplus value getting priced into the commodity right
away, the _determination_ of that commodity's value including embodied
profits, rents and/or interest doesn't happen until receivers of those
kinds of incomes mutually command their share at the retail level.
Before that, those costs are just being passed on; and accepted on the
basis of hope and expectation. And if property/rent/fund income earners
figure they already have enough to live on and don't purchase any final
goods and services, not only will no surplus value ever materialize, but
a lot of retailers will succumb too. In other words, that above neat
formulation of yours of an economy in equilibrium gets shot all to hell.
The determinate "rates" of profit and interest could thus be anything;
as the direct spending propensities, of those empowered to set those
rates, makes them what they are. This is also the reason why predatory
lending is such a villainous enterprise. Because with all assumed costs
needing to be resolved at the retail level, through the direct spending
of income for a dynamic equilibrium to reign; interest charges and fees
cannot possibly be resolved, even with the borrowers' best will in the
world, if the beneficiaries of those fees and charges fail to turn their
income into living-standard provision. And with the enormity of amassed
debt, the latter is clearly no longer attainable. So instead of forever
moderating claims to personal needs and wants, while leaving the rest to
be resolved by borrowers with the means left to do so, as well as others
within equilibrium conditions, an ever worsening disequilibrium with
devastating consequences is forced upon the entire economy, just for the
sake of transitory, shareholder attractive, balance sheets.
And it doesn't matter if those interest charges and fees are incurred at
the so-called personal level where passing on is out of the question.
Because everyone's personal income is a to be resolved debit entry,
those credit charges still concern the overall resolvability of deb(i)t.
Moreover, I don't think I have to do more than just mention, that this
same pursuit of surfeit interest income is at work for profit incomes
in: investment banking, insurance, big agri, pharma, ... (you name the
oligopoly of your choice), to get the idea across what's going on in our
"free" enterprise system. It's far worse than just a massive transfer of
wealth upwards by kleptocratic means; it literally is destroying peoples
lives, conducted with the full blessings of mainstream economic theory.
There is no way out of this sinkhole except by declaring a jubilee and
make the predators pay; start taxing progressively (at least as was the
norm in the '60s) and institute clearly defined pay-as-you-go policies.
Nationalizing the banking and insurance sectors, while taxing Wall St.
out of business would go far in eliminating fund fetishists. But non of
this becomes politically achievable without an alternative paradigm,
unambiguously showing the absolute vacuity of accumulated funds; and
doing this by taking the paradox out of the (net) savings debate. In
other words, move from the 90 degree Keynesian position and do a full
180. It's been the build up of all kinds of "funds", that has gotten us
into this mess; by shrinking the economy and employment opportunities,
under the guise of accumulating "wealth". Such a conclusion, I'm afraid
isn't obtainable from an approach that values funds by definition. And
the detection of emergent paradoxes, in a theory regarding a human-made
system, isn't a badge of honor to distinguish one from "the other guys"
either; but rather a warning sign that something is seriously amiss with
one's adopted theory.
> The Def is the sum of all government outlays (new goods and services
> produced and transfer payments, including the payment of interest on
> government debt) minus tax revenues.
>
So far I basically agree. The Def is the production capacity of the
public sector, the size of which being as large as legislation allows it
to be, but not endogenously constrained in any practical way; with the
addition of accounted-for transfer payments. Debt only matters as far as
it isn't redeemable into living standard improvement. This btw could
include all the charitable causes, now operating on crumbs. Government
debt isn't funded anymore than private sector growth _could_ also be,
since the unit of account becomes expanded out of thin air as required
anyway.
Instead of acknowledging this, and drawing the logical conclusion of
what this means with respect to the value of all saved funds, what we
currently have is a Schumpeterian more or less "creative" destruction,
where income withdrawn from realizing existing means of production
either becomes dedicated towards a new generation of physical capital in
the private sector, in the hope that it will exceed the productivity of
the current one; or ends up buying government bonds or some other kind
of financial asset. This is as asinine a convention as ever devised,
since common depreciation accounts will allow ever more efficient means
of production in the private sector to come about as a matter of course,
and the government certainly doesn't have a need to buy bonds from the
public. No point in just repeating my disdain for financial "assets"
here, as I'll get a bit deeper into that shortly.
> The Def is a deduction from GS because it is represents a claim on
> society's total value production that exceeds the amount the
> government pays for by taxing the private sector. There are various
> kinds of financial assets that represent claims on GS, including
> stocks, private-sector bonds, and government bonds. If these claims
> exceed actual production and production cannot be increased,
> inflation results.
>
Unlike private sector production capacity enlargement, a growth in Def
doesn't require repayments of any kind; it's a special case, since the
government can sell its debt to its own CB. But just like an expansion
in the private sector, the personal income that these new investments
allow to become available for making purchases on the retail level is
(at least potentially) prone to inflation. Even more so since enlarged
public sector output never appears on the retail market for sale, but
turns into infrastructure use-values instead. Yet, with aggregate taxes
in most OECD countries being in the 50% range, thus with the government
immediately getting back half of its investments, what happens to the
other half by enlarge will be up to retailers; i.e. whether they expand
their operation or raise prices. Price controls could be very effective
in pushing retailers into the first option however, so that government
would shortly get another 25% back. Further analysis of how to treat the
say 25% remaining (booked debt retention, versus the consequences of a
simple tax increase) will have to wait; but it's important to keep in
mind that aside from unit of account value changes, constraints are
exogenously located and attempted endogenous growth is circularly and
not linearly determined.
The determination of artificially induced private sector growth is just
as difficult to analyze and requires much more than dedicating a couple
of paragraphs to it; more or less keeping this a posted message, rather
than making it a thesis. But if there is a key to "getting" what this
alternative approach is all about, it has to be understanding how such
growth has been integrating itself over the years since the industrial
revolution took place. So all of this can't be made sensible, without at
least giving an indication of how this integration of growth came about;
however many paragraphs this is going to take.
Now, it probably won't come as a surprise that in an economic theory
wherein every parametric quantity on the supply side is indeterminate,
the values of which requiring a lagged reciprocal pulling activity in
order to become validated, that a pushing action with these unwittingly
indeterminate values is bound to have led to effects that were quite
different from expectations formed under the impression of dealing with
determinate quantities all along. The next few paragraphs will set out
to clarify the difference between a reality formed from a set of first
principles that are true (i.e. not yet contradicted) and the false
reality formed from a set of first principles that are nonconforming a
"true" reality; the latter creating a nominal representation of what
reality is thought to be.
Picking up where we left off above, to wit: the enlarged availability of
personal income for direct spending purposes after any private sector
capital investments are made; it shows empirically that financial inputs
(i.e. merely repayable debts and in conformance with a set of axioms
being of indeterminate value, unable to _cause_ positive results to come
about) instead lead to a _lessening_ value of preexisting per unit
income earnings. In other words, when there is more money being made
available than there are goods to buy, then a number of people will
have to do without those goods and the money they hold is valueless.
The latter point is the cardinal one, for aside from this worthlessness
finding its expression in useless inflation, as "saved funds" these
would be just as useless, since the personal income that is going to be
disbursed later during the time that the embedded derivative retail
output will finally hit the market, in the aggregate is sufficient by
itself to clear all such growth derived output from that market.
It has thus always been a kind of virtual sacrifice by the community at
large, unwittingly sharing their output with the newly employed who had
no hand in producing it and thereby taking a personal loss, and not at
all the "openhandedness" of the financial sector to have made those new
loans available, that got the system its uplift. A dynamic equilibrium
is therefore upheld not by induced indeterminably valued investments,
but by the postponement of determination to be carried by a bamboozled*
community until this growth in output can be integrated and determined
by becoming for sale on the retail level (whereby purchasing power now
has grown to the point of being able to satisfy everyone at a higher
level than before, if it weren't for the fact that by then an entirely
new set of induced investment growth, also in need to be integrated, has
been in the works for a while already too).
*) I used the term "bamboozled" because the general public is being made
to believe that their earnings will be buying them the same amount of
final output as before these higher level investments reduced everyone's
but the newly employeds' share of it. But perhaps this isn't quite the
right term, since the bamboozlers don't know any better themselves. Now
that we do know that financiers and the way whereby they advance their
inputs aren't causal to the process of growth determination, but only
are allowed by the equally ignorant powers that be, to play the role -
(as if) they're being causative; these conceited moneymen and their
skimmings by enlarge can be dispensed with, even though apt alternative
arrangements will still need to be further investigated.
Don't get me wrong though, non of this is meant to convey that a certain
part of the working population is being victimized for the benefit of
other workers. Just that in an exchange-valued production economy, with
a unit of account keeping track of the exchanges between producing and
reaping a reward in terms of that production; whenever material growth
enters the picture and the unit of account is expanded to accommodate
that growth, a mismatch between disbursed unit of account and rewarded
product becomes unavoidable unless producing and consuming always occurs
simultaneously. And since a time lag between producing, being rewarded
for it and consumption is inevitable, the latter has to be (temporarily)
in deficit.
This kind of reasoning doesn't originate with me, but, as should hardly
be surprising by now, with Sismondi. His theory of growth, even though
he gets to the point very differently*, concludes (paraphrased) that: in
order for growth to materialize, well spread out tiny _losses_ have to
be incurred; but that, as long as attempted growth isn't too excessive,
such losses are harmless. Over the years, Sismondi's insight has been
more or less ridiculed by many in the orthodox establishment, as an
adding up of small losses so as to produce a gain. But a few economists
like Malthus, Luxemburg, Amonn, Schumpeter, all to varying degrees left
open the possibility that even though they didn't at all understand the
dynamics of it themselves, Sismondi could be right.
*) Although Sismondi places these incurred losses at the feet of the
merchants selling living-standard provisions, the crux of the matter is
not who incurs them, but that they occur at all; and thus that reality
and the nominal representation of economic reality are _not_ ipso facto
the same. A possibility that will remain well beyond the ratiocinative
horizon of just about all economists, for as long as they aren't being
pressured into establishing a true theory of money; while in the mean
time, thanks to the support of all economic theories holding money to be
a good**, _everyone_ (including Marxians!) remains convinced of money's
might.
**) Whether money as an economic good is fully substitutable for all
other produced goods remains a heated point of contention between the
mainstream and some heterodox approaches, but no one seems to question
its nature as a good.
Now if these mostly towering figures in the history of economic thought
could muster this kind of attitude, then perhaps it's about time to give
the circular dynamic approach that Sismondi originated a new going over.
Especially given the dismal failure of comparative static, linear and
non-linear/chaotic dynamic economics to cope with and solve the problems
of the actually existing economy. And if after a further investigation
this alternative understanding of how the economy works is deemed valid
indeed, and this eventually were to lead to devastating consequences for
the current economics profession; I'd say it's long overdue that these
vain enablers lose their their ill-gotten influence, having ruined so
many people's lives. Competent economists won't find it that hard to
adjust and take over the reign.
> Assuming that GS is constant, interest on government bonds
> (including those in the social security trust fund) can be paid, but
> there is competition with the private sector, which insists on
> receiving dividends and interest (on _its_ bonds). We might say that
> the interest on government bonds can't be paid due to competition
> from the private sector, but it would be just as accurate to say
> that interest on private-sector bonds and dividends can't be paid. If
> GS is large enough, both can be paid. There's no reason why we
> should automatically treat government bonds as having less pull (a
> smaller claim on GS) than private-sector paper assets.
>
Non of this makes sense to me. After having concluded that all this
supply-side analysis is unsubstantiatable and bootstrapped, it's too far
out of my range to even start criticizing I'm afraid. All I can see is
reasoning based on a bunch of unstated assumptions such as "loanable
fund" theory. Does the latter still remain one of the tenets of Marxian
economics? With money freely creatable out of thin air, what are those
funds "really" made up from again?
> At any given time, GS represents a macro-level constraint on its
> uses, the sum of net private investment, private luxury spending, and
> the government deficit, where the first two are uses of net
> surplus-value. Assuming C constant, this says that any increase in
> government deficits -- say, due to increased interest payment on
> bonds in the OASI trust fund -- must come from (1) an increase in
> gross value produced (Y); (2) by lowering private property income
> (S); or (3) decreasing wages (V) toward subsistence. If it's #2, then
> private luxury spending and/or new investment spending must be cut.
>
Again, just like the above paragraph, unsupported supply-side analysis.
With all this emphasis on endogenous constraint, I guess you don't put
much stock in MMT? Although the latter and my own theory of money are
not quite identical, they overlap well enough for me to be confident
that the gang associated with UMKC would be able to save us from the
abyss. Obviously, I cannot feel that way about the Marxian approach as
toolkit to an end. But as far as the end itself is concerned, I don't
think we're all that far apart.
> If Y is increased, it can allow rising S and/or rising V and/or a
> rising government deficit. As mentioned in my earlier missive, the
> Def can be used in a way that raises Y, so that its not a zero-sum
> game between the government and private sectors.
>
Here we do seem to be converging quite a bit already. With Y as booked
credit entries and constraints being exogenously located natural
resources including unemployed human ones, Defs certainly are a valid
substitute for the failure of private enterprise to provide full
employment; and thus are able to move us well beyond zero-sum gain
conditions. It is this odd retro type reasoning that Defs affect the GS
negatively that I can't fathom. I thought it is now generally accepted
that government deficits mean private sector surpluses, no? Am I reading
you wrong?
> All of this is a "red herring" from the purely microeconomic
> perspective, but that perspective is wrong.
>
Just a minute here, let me try to get this straight. You _assume_ I'm
using a microeconomic perspective, and then you haul out this edifice of
Marxian thought in order to subsequently convince me and anybody else
reading this that I'm committing an error. How isn't this a strawman
argument? But imho, even more damaging to your case is that you're doing
all this after initially having defined away the influence of effective
demand. How does this kind of methodology differ from that of the
Chicago School types?
> On the micro-level, I can easily get $1 million dollars of goods and
> services by robbing a bank, but except under exceptional
> circumstances, that would not lead to the creation of $1 million
> dollars of goods and services and so the effects of my robbery would
> represent a _redistribution_ to others.
>
Strawman. I don't dispute your redistribution argument; though think
it's somewhat odd to a priori validate a wrong (bank robbery) in order
to justify that one's point of view is right.
> Macro-level constraints have an impact on micro-level activity: if
> insufficient GS is created, then the payment of either
> private-sector incomes or government incomes can be inadequate. Just
> because the owners of the assets officially claims new goods and
> services does not mean that they will automatically be produced.
>
Just more reasoning emanating from that black box of yours, containing
inanimate objects (and power-deprived subjects?), wherein values do
miraculously morph into means to pay.
> On the other hand, John's micro-level analysis assumes that all
> taxes are treated as sales taxes, so that they are passed on to
> purchases of newly-produced goods. But some of government revenue is
> based on taxes on persons or on non-reproducible natural resources,
> which _cannot_ be passed on to others.
>
Leaving your _assertion_ about my alleged micro-level analysis for what
it is, the manner by which personal taxes become paid by employers has
already been dealt with previously. Inanimate "non-reproducible natural
resources" providing the means to pay and subsequently absorb taxes???
> Sales taxes could be passed on as more expensive constant capital
> (as John seems to assume is the universal case), which lowers
> surplus-value all else constant, but it could also be passed on a
> higher consumer-goods prices, which lower real wages (if that can be
> done). Without the assumption of fixed real wages, I don't see why
> John assumes that all sales taxes come from capital's income
> (surplus-value).
>
Why do you keep harping on "sales taxes"? I never even mentioned them,
let alone single them out. And I certainly don't assume that inanimate
objects (capital) produce income. Wizardry?? All taxes provide the
means for letting the recipients of public sector income share in the
use-values produced by the private sector and vice-versa. As a rule
taxes have their source in income, originally disbursed as employer
investments that are seeking returns; while in the absence of the
latter, a breakdown occurs. The structure wherein this takes place is
thus always in a disequilibrium condition; somewhat like a bicycle
ridden on the road is falling at every moment _in_ time, yet with the
innate ability to stay rectified _over_ time. I said "somewhat", for
although both processes are dynamic; economic activity (following my
axioms) is circular, determined (or not!) by exogenously located
impulses, and bicycle riding is linear, endogenously determined.
Your deterministic c+v+s assumption defines away the dynamic nature of
our economy; which causes you to conclude that my parameters too are
statically determined. A mechanical engineer, approaching the problem of
modeling the forces at play on a moving bicycle with a set of static
equations, wouldn't be able to hold onto his/her designation for very
long. But just because economists' practices aren't scrutinized in the
same way, that doesn't make them anywhere near appropriate.
> John:
>> According to my set of first principles; reiterated once more as:
>> WHAT the economy is (a human-made system), WHY it exists (to _add_
>> a variety of use-values to humanity, that couldn't as commonly be
>> obtained in the absence of a formal economic structure), and WHO is
>> supposed to benefit from it all (everybody; as a birthright); a
>> unit of account is required in order to keep track of who is going
>> to be owed what in terms of a final restitution. This is my theory
>> of money. It designates that in those terms, the economy is a
>> circular process of debt acquisition and a subsequent redemption;
>> netting to zero in terms of exchange value and leading to
>> use-values that are beyond economics nomenclature.<
>
> The syntax is confusing. It's true that the economy is a human-made
> system. But a capitalist economy treats the production of
> use-values as merely a means to an end, i.e., the production and
> accumulation of surplus-value.
>
They (capitalists) may attempt to do that, but they cannot do so under
equilibrium conditions; as surplus value itself is _determined_ by the
_use values_ that capitalists place on final output for themselves. I
have proved this already a few times in the past by using reductio ad
absurdum argumentation, with two separate examples; neither of which you
ever bothered to respond to: 1. Where does property income come from,
when only a single capitalist owning all means of production exists? and
2. Where does property income come from when the entire working class is
being squeezed down to the condition of slavery? My syntax (using a ;
twice, to connect the first and last part of the sentence) perhaps is
confusing; but as a whole, it shows a certain logic. While the content
of the one you're using at best is "true" by definition, also known as
an article of faith; and as such it isn't good enough to prove me wrong,
since there is no logic behind it. More below, if if you can somehow
show it to be deduced, rather than being an induced notion.
> Ideally, everyone is _supposed to_ benefit, as a birthright, but in
> practice the economy does not follow normative principles of this
> sort.
>
A human-made system isn't constrained by what _is_, as opposed to by
what _ought to be_. After the latter has been settled democratically, it
now is positive and no longer just normative. I simply assume that an
economy with that birthright deserves the name economy, while one
without it doesn't, as something is missing. Would a CB full-employment
policy still be normative after having become guided by law? Or for that
matter, ELR proposals? As far as I know, the Classics always regarded
political economy as a subset of Law.
> Not all economies have a unit of account, i.e., money: some use
> barter or reciprocity of various sorts.
>
Perhaps there are still a few autonomously functioning communities
strictly using barter as a means to exchange; but they would all be very
primitive and involve a single production level. As soon as an economy
moves away from being conductible on a single level, a unit of account
becomes imperative. For a dynamic equilibrium to reign, pure reciprocity
has to underlie my model too btw.
> The idea of the economy as a circular process makes sense, but it
> doesn't always involve debt acquisition and redemption.
>
It always involves booked debit entries, which if not counteracted by
credit entries causes the production unit to cease operating. The means
to make those debit expenditures always involves a debt to: creditors
(which run their own debit and credit accounts), shareholders, the
proprietor, it doesn't matter; the latter are still separate entities
from the enterprises that make up the economy.
> Often, debts aren't really redeemed, since they are "rolled over" to
> be replaced by new debt (as with most government and corporate
> bonds).
>
"Rolled over" or not, they all seek returns and those returns are booked
debit entries; see above and below. The government runs a set of books
too. Granted, with the ability to sell its debt to a CB, the government
is a special case and, as indicated previously, a subject well worth of
further exploration. But I don't think it will come up to the level of
being antithetical.
> With a growing economy, we can and do see growing debt, without
> "netting to zero." I don't understand the last phrase at all.
>
Loans create deposits. (Redeemable) debts are assets; and the returns
that assets seek are liabilities (i.e. debit entries) to others. Is it
your belief that growth adds its influence only to one side of the
scale, or do you have a way of deducing this? Or, am I reading you
entirely wrong?
>> You are of course free to reject my assumptions and provide a set
>> of your own; like c + v + s, ...? The question now becomes, which
>> set is more comprehensive. Yours doesn't have monetary theory, and
>> any losses are ad hoc. It not only assumes that a numeraire is
>> superfluous to its essence, but also that a dynamic economy can be
>> made sense of in static terms. As I said before, it argues as if
>> capitalists are hellbent to raid the output of their own workers
>> for self-betterment. How is this not a caricature of reality?
>> Although Marxian economics might make perfect sense in a use-value
>> world, it totally loses its bearings in an exchange-value world.<
>
> Marx's political economy does have a monetary theory (one consistent
> with Keynes' later theory) and cannot be reduced to c+v+s.
>
Since eminent Keynesians conclude that according to "Keynes' later
theory", 'money is as money does', Marx must have come to that same
conclusion about 3/4 of a century earlier. Congrats!? Oops, I guess not,
since this means you don't have a _theory_ of money either. Marxian
economics, like all the other approaches, remains in the spell of the
empirical trickster, bestowing money with a power it doesn't have.
Empiricism can check for theoretical errors, but it's incapable of
settling anything when used from scratch.
> Since Marx was quite concerned with exchange-value, the last
> sentence above makes absolutely no sense.
>
I don't doubt Marx's sincerity and concern with exchange-value. But the
making of meaningful judgments about an exchange-value economy requires
having a valid theory of what its numeraire _is_; which means stating
one or more assumptions from which the the meaning of (M) is deduced.
And so, without a theory of money and his monetary _assumption_ (M) not
being reducible to his essential c+v+s assumption; then regardless of
Marx's thinking that he's describing the conditions of an exchange-value
economy, whenever he sets out to argue just in terms of c+v+s, these
cannot have any bearing on an exchange-value economy since the numeraire
of c+v+s is 'socially necessary labour time'. Now since we know of only
two types of value, use and exchange, c+v+s has to concern a use-value
world; which also makes sense from the empirical fact that snlt doesn't
buy capitalists a place in the Hamptons, i.e. (M) and not snlt is the
numeraire in an exchange-value world. But it gets worse...
> I don't understand the idea of "ad hoc losses" or the idea that a
> "numeraire" could be "superfluous to its essence" (what does "it"
> refers to?)
>
"It", refers to Marx's (exchange-value) world view, essentially c+v+s
but self-determined in terms of socially necessary labour time, where
the common numeraire of an exchange-value economy would be getting in
the way and thus is superfluous. But c+v+s not only isn't neutral with
respect to any emergent losses; since (s) cannot be negative, Marx's
primary assumption explicitly rules losses out. Then he drags out his
other assumption (M) and proceeds to argue that losses are inevitable.
So now he has got two assumptions on the same level that are directly
_contradicting_ one another! Either the c+v+s assumption _or_ the (M)
assumption could possibly hold, but together they form a nonsensical
base from which all Marxian arguments develop; which could include your
'use-value as a means to produce and accumulate surplus values'. ("Ad
hoc" means having some validity with respect to a particular part of the
whole, but losing that validity when the whole is considered as a
background.) Thus the contradiction that Marx thinks he detects as being
inherent in the capitalist system has its inception in the 'true by
definition' assumptions of his own. Unless I've made some error in logic
(quite well possible, I'm no PhD), or a critical error was made stating
Marxian identities (certainly not out of the question either) not only
is Marx's theory of surplus value incoherent (as shown before) but his
entire exchange-value-world edifice is meaningless.
This doesn't mean that the capitalist system isn't self-contradictory,
it is (as I've pointed out right from the start); only that neither Marx
nor any of his antagonists possess a theory with the required level of
generality to detect it.
> At this point, I'm too tired trying to figure out what John is
> trying to say, so I'll stop.
>
Thanks for your effort in providing me with the opportunity to engage
you in another round of sparring. Hope it was interesting enough to have
made it to the end and this is to be continued...
John V
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