Thanks Nathan, for posting the Rochon link. I find he takes seriously his role as expositor on Post-Keynesian (PK) or Kaleckian ideas. Just to build a bit on what Jim D. wrote.
1) Models based on Marxian and non-Marxian classical political economy (CPE) would mostly encompass (in a limited way) the "short run" macro models Rochon describes. No surprise here, especially for Kalecki who drew heavily on Marx and his own Marxist convictions. I haven't observed a preference among Marxists for any one flavor among these models, but this is not an area I know well. HOWEVER, as Jim points out, for advocates of CPE (marxist and non-marxist) these short run macro policies have only a limited space for maneuver (that includes the interest rate rule). Over time, the turbulent fluctuations of the short run are limited by powerful "long run" factors measured by an expected long run rate of profit (this expected rate of profit is driven by the typical CPE "big picture" issues such as technology, demography, the split between wages/profits/rents, the split between productive/unproductive labor, social organization of production, etc). So, broadly speaking, the divergence between PK and CPE comes when one starts expecting short run measures to do more than address a short run deviance from "normal" long term growth rate (the normal is established by the "big picture") -- for example if one expects the short run effects from an interest rate "rule" to have a sustainable *long term* impact on growth rates beyond the possible salutatory short term impact. 2) In a different context the interest rate does have an important impact on the long run rate of profit and, IMO, a large part of this impact is overlooked by most marxist empirical analysis. As you know, CPE focuses on the expected rate of profit that is an investment incentive to the individual capital/entrepreneur. Investment decisions will be made on that expected rate of return (not, for example, on how much will he expect to make for his banker, or for society as a whole). This investment incentive must also takes into account the alternative of leaving the money in the bank and collecting interest (the opportunity cost). This specific focus is what Marx calls the 'rate of profit on enterprise' (and, in IMO, would also need to include certain forms of business taxes, risk factors, etc). So, low interest rates raise this expected rate of profit on enterprise in a direct way if the investment is financed from borrowed money and most CPE studies account for this - for U.S. for example, they use "Net Profits" from the NIPA account. But for the U.S. most investment is self financed and if this "inside" money is used to finance the investment low interest rates also have impact on the expected rate of profit on enterprise through the "opportunity cost". Since interest rates have plunged over the last 20 years and this has to be a major factor in explaining the evolution of the effective profit rate and the economy. But most empirical work on the U.S. economy overlooks the vast bulk of this change in interest rates by leaving out the effect on investments that use "inside" money. Shaikh's last paper (in the Soc. Register) is the only work I know of that includes this and that seriously affects the results, as you would expect. 3) I would point out two provisos. You can't lower nominal interest rates past zero (Krugman and others propose policy measures that try to overcome this but it is very hard to assess the impact of real interest rates rather than nominal rates on investment and if one also adds an investment risk factor through rising inflation). In short, one needs to remember that the stimulant of the last 15- 20 years is likely to have been a one time shot and as a policy measure it is at the end of its rope. I noticed that a lot of apprehensive attention was paid to this point even at the last AEA meeting in Chicago. Also, very importantly, for exponents of CPE (marxist and non-marxist) long run interest rates will not be sustainably set exogenously by central bank policy (or not without creating all sorts of problems). Others on the list who know these issues better than me may want to elaborate, but for CPE, interest rates, as with other prices, in the long run (although not the short run) you will have to live with what the economic fundamentals produce. 4) Not much has been written in the area of CPE interest rate theory and policy, and, IMO, an enormous amount of theoretical and empirical work has to be done before there is solid ground. So, all in all, I wouldn't put too much weight on "socialist revolution" being a reason you haven't seen much about the policy measures that interest you (I realize you were probably tongue in cheek). And the CPE non-marxists who share their views on these issues include centrist and conservative types. Hope this helps. Paul A. >As for a "Marxist" or revolutionary interest-rate rule, I don't think >there is one. The theory of (real) interest rates that Marx suggests >in volume III of CAPITAL is basically one of supply and demand within >the limits set by zero and the rate of profit. One might bring in >institutions and say that the balance of power between >industrial/commercial capitalists and banking capitalists could play a >role. > >In any event, it's the rate of profit (akin to a Keynesian "average >efficiency of capital") that's dominant. If the rate of profit (as >measured at full employment, so that realization problems play no >role) is depressed, low interest rates can stimulate demand only by >encouraging faster inflation -- even if the economy has unemployment >rates above the NAIRU or "natural" rate of unemployment (i.e., where >it's frictions and mismatch problems in labor markets that limit >economic expansion). I have a paper indicating the likelihood that a >depressed profit rate makes the short-run inflation/unemployment >trade-off worse: stagflation is the capitalists' way of punishing us >for low profitability, as in the 1970s. > >The "solution" of course, would be to figure out how to raise the rate >of profit, by ending the political/economic/technical problems that >are depressing it. In response to the stagflation of the 1970s, and >starting with the ascension of Paul Volcker to the Fed's throne, the >US capitalists and their politicians smashed unions, instituted >neoliberal policies, etc. To the extent that the problem is due to the >over-accumulation of fixed capital and thus a capital overhang, a >severe recession or depression can deal with by encouraging scrapping >of existing capacity. Alternatively, war might play a role. > >Of course, neoliberal polices create new problems, e.g., the >under-consumption undertow that characterized the US economy after the >1980s. > >nathan tankus wrote: >> It occurs to me that I've never actually read any "marxist" interest >> rate rule. This makes sense when the ultimate "policy option" >> supported is "socialist revolution" (or heretically, evolution). >> Despite this, I am still interested in what people think an "optimal" >> interest rate rule would be from a Marxist perspective. >> >> Louis Philippe Rochon has a good overview of heterodox and orthodox >> interest rate policies: >> >> http://www.youtube.com/watch?v=7uBwUGbUI0I >> >> i find myself supporting what Rochon terms the "kansas city rule" >> where the nominal interest rate is "parked" at zero. What do others >> think though? > >-- >Jim Devine / _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
