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Failure Of Neoclassical Economics

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Robert Vienneau

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Jan 3, 2006, 6:05:25 PM1/3/06
to
I have been updating a demonstration of the incorrectness of
neoclassical economics:

<http://www.dreamscape.com/rvien/Economics/Essays/Sraffa3.pdf>

I wanted to go more into mainstream microdynamics. I have a long
ways to go, but I thought I would make my results available as
they stand now.

Whether one thinks it worthwhile or not to use Cambridge capital-
theoretic paradoxes to explore possibilities in mainstream
dynamics, one thing should be clear. Advanced mainstream price
theory does not support the "applied" stories neoclassical
economists preach. And it has not supported such tales for
somewhere from a quarter to a half century. But, as we have seen
on Usenet newsgroups, many mainstream economists do not understand
their own theory.

Here is somebody who doesn't think Cambridge paradoxes have much
to say about stability:

"The years between 1998 and 2003 marked a number of anniversaries
related to the controversies on capital theory that climaxed with
the debate on reswitching one generation ago. There have been
meetings, collective volumes and review articles devoted to
remember, document, and assess. Yet, they have been almost
exclusively by people whose heart is still with the 'losing'
Sraffian side. What appears slightly strange is not that a few
elderly economists may be clutching to outmoded ideas. Rather, it
is the tight silence by the 'winning' mainstream side. One might
assume that after about forty years there should be a chance to
look back at those angry exchanges with some degree of detachment.
Indeed, it is hard to believe that an argument of that intensity
may have lasted for so long, involving some of the best brains of
the profession, without producing any new knowledge at all. The
question is thus not just one of historical interest. It is a matter
of understanding what exactly is wrong with the idea that reswitching
and allied issues undermine the logical consistency of orthodox
economic theory, as some still believe. There is probably nothing
essentially new to be discovered nowadays on this subject, but this
was clearly not so forty years ago, when Paul Samuelson sponsored
Levhari's non-reswitching theorem. And even today much apparent
uneasiness may be due to the fact that what has become known between
then and now has not percolated effectively outside the specialist
field."
-- Mario Ferretti (2004). "The Neo-Ricardian Critique: An
Anniversary Assessment"

And here's somebody more sympathetic to Sraffians:

"But self-absorption and consistent policy error are just two of
the endemic problems of the leading American economists, and not
even the most serious among them. The deeper problem is the nearly
complete collapse of the prevailing economic theory--of the
structure of thought that supports their policy ideas. It is a
collapse so complete, so pervasive, that the profession can only
deny it by refusing to discuss theoretical questions in the first
place."
-- James Galbraith
http://www.prospect.org/print/V11/7/galbraith-j.html

--
Mostly economics: <http://www.dreamscape.com/rvien/#PublicationsForFun>
r c
v s a Whether strength of body or of mind, or wisdom, or
i m p virtue, are found in proportion to the power or wealth
e a e of a man is a question fit perhaps to be discussed by
n e . slaves in the hearing of their masters, but highly
@ r c m unbecoming to reasonable and free men in search of
d o the truth. -- Rousseau

Hunter Watson

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Jan 5, 2006, 3:38:58 PM1/5/06
to

Thanks but it really would be better if you made your own
demonstration. We could look at the first few paragraphs and then
decide whether to read further.

Hunter Watson

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Jan 5, 2006, 3:52:47 PM1/5/06
to
BTW, Wikipedia on Sraffa is interesting. I knew little of his
biography. One thing seems certain, his geo-economic assessment of
Japan was on target:

"He became rich after a long-term investment on Japanese government
bonds, made the day after the nuclear bombing on Hiroshima and
Nagasaki; a popular story tells that he'd received a huge amount of
money which for more than a decade he'd refused to invest, waiting for
a "safe" opportunity. He correctly reasoned that Japan wouldn't remain
a poor country for long.

Robert Vienneau

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Jan 6, 2006, 4:36:26 AM1/6/06
to
In article <1136493538.2...@g49g2000cwa.googlegroups.com>,
"Hunter Watson" <coaste...@yahoo.com> wrote:

> Robert Vienneau wrote:
> > I have been updating a demonstration of the incorrectness of
> > neoclassical economics:
> >
> > <http://www.dreamscape.com/rvien/Economics/Essays/Sraffa3.pdf>
> >
> > I wanted to go more into mainstream microdynamics. I have a long
> > ways to go, but I thought I would make my results available as
> > they stand now.
> >
> > Whether one thinks it worthwhile or not to use Cambridge capital-
> > theoretic paradoxes to explore possibilities in mainstream
> > dynamics, one thing should be clear. Advanced mainstream price
> > theory does not support the "applied" stories neoclassical
> > economists preach. And it has not supported such tales for
> > somewhere from a quarter to a half century. But, as we have seen
> > on Usenet newsgroups, many mainstream economists do not understand
> > their own theory.

> [snip]

> Thanks but it really would be better if you made your own
> demonstration. We could look at the first few paragraphs and then
> decide whether to read further.

Watson the knave ought to consult a doctor about that tapeworm.

Hunter Watson

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Jan 6, 2006, 6:39:30 PM1/6/06
to

Robert Vienneau wrote:
> In article <1136493538.2...@g49g2000cwa.googlegroups.com>,
> "Hunter Watson" <coaste...@yahoo.com> wrote:
>
> > Robert Vienneau wrote:
> > > I have been updating a demonstration of the incorrectness of
> > > neoclassical economics:
> > >
> > > <http://www.dreamscape.com/rvien/Economics/Essays/Sraffa3.pdf>
> > >
> > > I wanted to go more into mainstream microdynamics. I have a long
> > > ways to go, but I thought I would make my results available as
> > > they stand now.
> > >
> > > Whether one thinks it worthwhile or not to use Cambridge capital-
> > > theoretic paradoxes to explore possibilities in mainstream
> > > dynamics, one thing should be clear. Advanced mainstream price
> > > theory does not support the "applied" stories neoclassical
> > > economists preach. And it has not supported such tales for
> > > somewhere from a quarter to a half century. But, as we have seen
> > > on Usenet newsgroups, many mainstream economists do not understand
> > > their own theory.
>
> > [snip]
>
> > Thanks but it really would be better if you made your own
> > demonstration. We could look at the first few paragraphs and then
> > decide whether to read further.
>
> Watson the knave ought to consult a doctor about that tapeworm.

As you like, Robert, but I'm on topic.

Hunter Watson

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Jan 6, 2006, 10:46:25 AM1/6/06
to

Robert Vienneau wrote:
> In article <1136493538.2...@g49g2000cwa.googlegroups.com>,
> "Hunter Watson" <coaste...@yahoo.com> wrote:
>
> > Robert Vienneau wrote:
> > > I have been updating a demonstration of the incorrectness of
> > > neoclassical economics:
> > >
> > > <http://www.dreamscape.com/rvien/Economics/Essays/Sraffa3.pdf>
> > >
> > > I wanted to go more into mainstream microdynamics. I have a long
> > > ways to go, but I thought I would make my results available as
> > > they stand now.
> > >
> > > Whether one thinks it worthwhile or not to use Cambridge capital-
> > > theoretic paradoxes to explore possibilities in mainstream
> > > dynamics, one thing should be clear. Advanced mainstream price
> > > theory does not support the "applied" stories neoclassical
> > > economists preach. And it has not supported such tales for
> > > somewhere from a quarter to a half century. But, as we have seen
> > > on Usenet newsgroups, many mainstream economists do not understand
> > > their own theory.
>
> > [snip]
>
> > Thanks but it really would be better if you made your own
> > demonstration. We could look at the first few paragraphs and then
> > decide whether to read further.
>
> Watson the knave ought to consult a doctor about that tapeworm.

In this context ideology is the all consuming disability. I don't have
one.

Dan in Philly

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Jan 8, 2006, 9:22:30 PM1/8/06
to
"Robert Vienneau" <rv...@see.sig.com> wrote in message ...

> ... Advanced mainstream price


> theory does not support the "applied" stories neoclassical
> economists preach.

It does if you assume, e.g., that reswitching is unimporant.
Assumptions are always debatable, but should be confirmed or rejected by
empirical data. AFAIK, no one has done that.

Dan in Philly


Robert Vienneau

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Jan 8, 2006, 10:49:46 PM1/8/06
to
In article <43c1c8e4$0$10305$a826...@reader.corenews.com>, "Dan in
Philly" <dj...@aol.com> wrote:

> "Robert Vienneau" <rv...@see.sig.com> wrote in message ...

> > ... Advanced mainstream price
> > theory does not support the "applied" stories neoclassical
> > economists preach.

> It does if you assume, e.g., that reswitching is unimporant.

No. First, the failure of equilibrium prices to act as scarcity
indices (given no information asymetries, sticky or rigid prices,
etc.) does not depend on the presence of reswitching.

Second, Neoclassical assumptions are supposed to be consistent
with methodological individualism. In other words, assumptions
are supposed to be on tastes, technology, or endowments. That
one isn't.

Neoclassical economists recognize that they cannot state their
assumptions:

"Imposing some set of conditions on the technology T() should
be sufficient to assure that the real Wicksell effect is always
negative. Such a conditions would be of interest - especially
if they could be empirically tested - since they would validate
the qualitative conclusions derived from the one-good models
often used in macroeconomics without any theoretical
justification for ignoring aggregation problems... Unfortunately,
no set of such sufficient conditions is known, but the literature
on capital aggregation suggests that they would impose severe
restrictions on the technology."
-- Edwin Burmeister (1987), "Wicksell Effects", _The New
Palgrave_.

(I'm published stating that more than aggregation problems are
involved here.)

> Assumptions are always debatable, but should be confirmed or rejected by
> empirical data.

Illogic cannot be changed by running a regression. And neoclassical
economics was neither induced by nor confirmed by data.

> AFAIK, no one has done that.

Certainly, nobody has presented data showing Sraffa effects are
unimportant. But I have often pointed out applied case studies,
not all of which I've read, going the other way:

Peter Albin (1975). "Reswitching: An Empirical Observation," _Kyklos_,
Number 1, 28, pp. 149-54.

Geir B. Asheim (1980). "The Occurrence of Paradoxical Behavior in a
Model where Economic Activity has Environmental Effects," Norwegian
School of Economics and Business Administration Discussion Papers.

Trevor Barnes and Eric Sheppard (1984). "Technical Choice and
Reswitching in Space Economies," _Regional Science and Urban
Economics_, V. 14, pp. 345-352.

Han, Z. and Schefold, B. (2003). "An Empirical Investigation of
Paradoxes (Reswitching and Reverse Capital Deepening) in Capital
Theory", working paper.

John Hartwick (1976). "Intermediate Goods and the Spatial Integration
of Land Use," _Regional Science and Urban Economics_, V. 6, pp.
127-145.

Adam Ozanne (1996). "Do Supply Curves Slope Up? The Empirical
Relevance of the Sraffian Critique of Neoclassical Production
Economics," _Cambridge Journal of Economics_, Volume 20, pp. 749-762.

Raymond Prince and J. Barkley Rosser, Jr., (1984). "Environment Costs
and Reswitching Between Food and Energy Production in the Western
United States," mimeo, James Madison University.

Raymond Prince and J. Barkley Rosser, Jr., (1985). "Some Implications
of Delayed Environmental Costs for Benefit Cost Analysis: A Study of
Reswitching in the Western Coal Lands, _Growth and Change_, V. 16,
18-25.

U. Schweizer and P. Varaiya (1977). "The Spatial Structure of
Production with a Leontief Technology-II: Substitute Techniques,"
_Regional Science and Urban Economics_, V. 7, pp. 293-320.

A. J. Scott (1979). "Commodity Production and the Dynamics of Land-
Use Differentiation," _Urban Studies_, V. 16, pp. 95-104.

S. Zambelli (2004). "The 40% Neoclassical Aggregate Theory of
Production: Results of a Simulation Investigation", _Cambridge
Journal of Economics_, V. 28, Iss. 1 (Jan): 99-120.

To me, an important empirical question is one of the sociology of
"knowledge": why do mainstream economists continue to teach and
apply theories known to be logical nonsense?

dr.be...@auckland.ac.nz

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Jan 9, 2006, 9:11:21 PM1/9/06
to
Because even with no clothes they live in penthouses with central
heating.

Dan in Philly

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Jan 9, 2006, 11:13:19 PM1/9/06
to
"Robert Vienneau" wrote in message ...

>> > ... Advanced mainstream price
>> > theory does not support the "applied" stories neoclassical
>> > economists preach.

>> It does if you assume, e.g., that reswitching is unimporant.

> No. First, the failure of equilibrium prices to act as scarcity
> indices (given no information asymetries, sticky or rigid prices,
> etc.) does not depend on the presence of reswitching.

But it depends on _something_. All useful models have some assumptions.

The alternative is a truly complete model: lots of consumers with
well-defined utility functions, lot of firms with well-defined production
functions, specific endowments, etc. And such a model can prove: nothing. It
yields multiple equilibriums, instability, and so forth.

So if you want to 'prove' something, you have to make simplifying
assumptions. But the final model is so simplified, that it can't be
verified empirically.

Dan in Philly


Robert Vienneau

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Jan 10, 2006, 5:26:22 AM1/10/06
to
In article <43c33459$0$10332$a826...@reader.corenews.com>, "Dan in
Philly" <dj...@aol.com> wrote:

> "Robert Vienneau" wrote in message ...

> >> > ... Advanced mainstream price
> >> > theory does not support the "applied" stories neoclassical
> >> > economists preach.

> >> It does if you assume, e.g., that reswitching is unimporant.

By the way, it would not surprise me if Dan is incapable of
defining "reswitching". He could easily prove me wrong.



> > No. First, the failure of equilibrium prices to act as scarcity
> > indices (given no information asymetries, sticky or rigid prices,
> > etc.) does not depend on the presence of reswitching.

> But it depends on _something_. All useful models have some assumptions.

The failure of equilibrium prices to act as scarcity indices is the
general case under neoclassical assumptions. Examples arise in models
in which all the assumptions are neoclassical.



> The alternative is a truly complete model: lots of consumers with
> well-defined utility functions, lot of firms with well-defined production
> functions, specific endowments, etc.

And, under such assumptions, equilibrium prices are, in the
general case, not scarcity indices. As I have shown time and time
again.

> And such a model can prove: nothing.
> It
> yields multiple equilibriums, instability, and so forth.

What has been proven is, say, that the uniqueness of equilibria
does not follow from standard neoclassical assumptions. Likewise,
equilibrium prices are not scarcity indices, under standard
neoclassical assumptions.

But this won't keep mainstream economists from teaching
outdated nonsense to their students.



> So if you want to 'prove' something, you have to make simplifying
> assumptions. But the final model is so simplified, that it can't be
> verified empirically.

If Dan wants a model to yield equilibrium prices that are scarcity
indices, he would need to introduce special case assumptions. But
he cannot and will not tell us any such assumptions. As I noted,
good neoclassical economists know they don't know what their
assumptions are (see Burmeister quote in previous post that
Dan clipped without comment).

And, it would seem that if Dan understood the logic of these models,
he would be saying above that neoclassical economics cannot be
verified empirically.

I noticed that Dan also clipped without comment my citations of
empirical evidence. Dan seems interested in neither getting his
logic correct, empirical evidence, nor how the sociology of
economics perpetuates ignorance. So I don't see his point.

By the way, suppose one found none of those empirical studies
convincing. Still...

"...the absence of empirical results either way cannot be used as
a defence of the orthodox position that the absence of reverse
capital deepening is the 'general case'. Orthodox analysis has no
a priori basis on which to presume that what it considers to be
the general case is in fact the general case. Such a defence would
require a logically coherent argument as to why one should expect
technologies admitting reverse capital deepening to be less likely
than those that do not. No such argument has been provided by
orthodox theorists."
-- Graham White (2001). "The Poverty of Conventional Economic
Wisdom and the Search for Alternative Economic and Social
Policies", _The Drawing Board: An Australian Review of
Public Affairs_, V. 2, N. 2 (Nov): 67-87. (available on
the net somewhere.)

"The critique of Robinson and Sraffa is more than forty years old.
Yet for psychological and political reasons, rather than for logical
and mathematical ones, the capital critique has not penetrated
mainstream economics. It likely never will. Today only a handful of
economists seem aware of it. Aggregate production function applications
run rampart in studies of economic growth (new growth theory),
development and convergence, and international trade (factor-price
equalization and other applications of Heckscher-Ohlin). Ostensible
liberals are not exempt; their arguments for higher public
infrastructure investment (based on its alleged marginal productivity)
are precisely of this type, as are arguments for increased investment
in education based on the higher marginal productivity of human skill.
To mainstream economics, Keynesianism has been reduced to a narrow
doctrine relating sticky wages, public spending, and employment. The
fact that there exists a Post Keynesian distribution theory, still
less the reasons for it, has been mostly forgotton."
-- James Galbraith, "The Distribution of Income". In _A New
Guide to Post Keynesian Economics_, 2001.

ruet...@outgun.com

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Jan 10, 2006, 9:39:32 AM1/10/06
to
>The alternative is a truly complete model: lots of consumers with
>well-defined utility functions, lot of firms with well-defined production
>functions, specific endowments, etc. And such a model can prove: nothing. It
>yields multiple equilibriums, instability, and so forth.

What should economic models try to "prove"? Why should they try and
prove anything rather than simply describe reality? What is the
obsession with trying to prove a unique and stable equilibrium in GE
models when such a state does not exist in the real world? Why
continue to make further unrealistic assumptions for no reason other
than to defend the conclusion the model provides?

Eventually, astronomers abandoned the epicycle, chemists abandoned the
phlogiston, and physicists abandoned the aether. It's time for
economists to abandon general equilibrium theory and probably all of
the artifices of comparative static analysis across the board.

Dan in Philly

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Jan 10, 2006, 10:18:22 AM1/10/06
to
"Robert Vienneau" <rv...@see.sig.com> wrote in message ...

>> >> It does if you assume, e.g., that reswitching is unimporant.

> By the way, it would not surprise me if Dan is incapable of
> defining "reswitching".

Something to do with the Cambridge Capital Controversy (I thought you'd
enjoy the reference). I arises when you assume multiple goods.

> The failure of equilibrium prices to act as scarcity indices is the
> general case under neoclassical assumptions. Examples arise in models
> in which all the assumptions are neoclassical.

Depends on exactly what you mean by neoclassical assumptions.
In grad school, I learned the "interest rate equals marginal productivity of
capital (minus depreciation)" result. The prof obtained that result by
analyzing a one-good model (ie the good was both a consumption good and a
capital good). If you accept that assumption - that a one-good model yields
insights about reality - then you'll accept the result. If not, then you
don't.

Dan in Philly

Dan in Philly

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Jan 10, 2006, 10:20:22 AM1/10/06
to
<ruet...@outgun.com> wrote in message ...

> >The alternative is a truly complete model: lots of consumers with
>>well-defined utility functions, lot of firms with well-defined production
>>functions, specific endowments, etc. And such a model can prove: nothing.
>>It
>>yields multiple equilibriums, instability, and so forth.

> What should economic models try to "prove"? Why should they try and
> prove anything rather than simply describe reality?

I agree. That's why I only work with macro-econometric models. They're far
from perfect, but better than the hyper-theoretic stuff.

Dan in Philly

ro...@telus.net

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Jan 10, 2006, 10:31:05 AM1/10/06
to
On Mon, 9 Jan 2006 23:13:19 -0500, "Dan in Philly" <dj...@aol.com>
wrote:

>"Robert Vienneau" wrote in message ...


>
>>> > ... Advanced mainstream price
>>> > theory does not support the "applied" stories neoclassical
>>> > economists preach.
>
>>> It does if you assume, e.g., that reswitching is unimporant.
>
>> No. First, the failure of equilibrium prices to act as scarcity
>> indices (given no information asymetries, sticky or rigid prices,
>> etc.) does not depend on the presence of reswitching.
>
>But it depends on _something_. All useful models have some assumptions.
>
>The alternative is a truly complete model: lots of consumers with
>well-defined utility functions, lot of firms with well-defined production
>functions, specific endowments, etc. And such a model can prove: nothing. It
>yields multiple equilibriums, instability, and so forth.

IOW, something similar enough to reality to be of scientific interest.

>So if you want to 'prove' something, you have to make simplifying
>assumptions. But the final model is so simplified, that it can't be
>verified empirically.

I.e., it does not describe reality, even to a useful approximation.
Right.

Proof is a mathematical concept, not a scientific one. Any
"economics" that deals in proofs is not an empirical science but a
formal exercise, like doing sudoku puzzles.

-- Roy L

ruet...@outgun.com

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Jan 10, 2006, 11:50:20 AM1/10/06
to
>In grad school, I learned the "interest rate equals marginal productivity of
>capital (minus depreciation)" result. The prof obtained that result by
>analyzing a one-good model (ie the good was both a consumption good and a
>capital good). If you accept that assumption - that a one-good model yields
>insights about reality - then you'll accept the result. If not, then you
>don't.

How can you build a distribution theory around a single factor model?
If there's only one factor by definition, then it gets everything it
produces. That's tautological.

Ron Peterson

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Jan 10, 2006, 4:50:07 PM1/10/06
to

ruet...@outgun.com wrote:

> What should economic models try to "prove"?

In any field of study, a model is an abstraction that might have
correspondence to reality. For an economic model, mathematical and
computational techniques try to show the existence of certain economic
phenomena.

> Why should they try and prove anything rather than simply describe reality?

Describing reality only consists of mountains of observations. The
purpose of a model, is to be able to describe and change a real economy
with much less information.

--
Ron

Les Cargill

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Jan 10, 2006, 8:07:58 PM1/10/06
to
ro...@telus.net wrote:

They are not totally disjoint. Various symmetries in formulae
about particles in physics suggested that some previously
unobserved particles existed. And they did.

Any
> "economics" that deals in proofs is not an empirical science but a
> formal exercise, like doing sudoku puzzles.
>
> -- Roy L


Yes, but it's possible to string together previously proven
empirical facts to arrive at another conjecture. That conjecture
has to withstand empirical testing, but it's much more likely
to be valid than random statements.

And this totally ignores Bayesian methods.

--
Les Cargill

Robert Vienneau

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Jan 10, 2006, 9:16:17 PM1/10/06
to
In article <43c3d037$0$10309$a826...@reader.corenews.com>, "Dan in
Philly" <dj...@aol.com> wrote:

> "Robert Vienneau" <rv...@see.sig.com> wrote in message ...

> >> >> It does if you assume, e.g., that reswitching is unimporant.

> > By the way, it would not surprise me if Dan is incapable of
> > defining "reswitching".

> Something to do with the Cambridge Capital Controversy (I thought you'd
> enjoy the reference). I arises when you assume multiple goods.

The above is not a definition. I don't know why Dan should think
I would enjoy evidence that he is talking shite, rather than
addressing my posts.

> > The failure of equilibrium prices to act as scarcity indices is the
> > general case under neoclassical assumptions. Examples arise in models
> > in which all the assumptions are neoclassical.

> Depends on exactly what you mean by neoclassical assumptions.
> In grad school, I learned the "interest rate equals marginal productivity
> of
> capital (minus depreciation)" result. The prof obtained that result by
> analyzing a one-good model (ie the good was both a consumption good and a
> capital good). If you accept that assumption - that a one-good model
> yields
> insights about reality - then you'll accept the result. If not, then you
> don't.

I would expect those teaching introductory students would introduce
heuristic assumptions that simplify their teaching, for example,
differentiability. If teachers were honest, they would not use
these simple models to prove results that are known not to
generalize, in some sense or another, when those heuristic
assumptions are relaxed without pointing out this failure to
generalize.

These are not assumptions of an economic theory or model:

o "A one-good model yields insights about reality"
o "Reswitching is unimporant"

These are examples of assumptions of canonical neoclassical models:

o Preference relations are transitive.
o The production set representing the technology is convex.

Mainstream price theory does not support the "applied" stories
neoclassical economists preach. In general, equilibrium prices
are not scarcity indices, and Marshall's principle of
substitution does not apply.

In stating the above, I am not challenging the "realism" of
neoclassical assumptions, but simply pointing out the widespread
adoption of mathematical error by neoclassical economists.

Hunter Watson

unread,
Jan 10, 2006, 10:50:40 PM1/10/06
to

Robert Vienneau wrote:
> In article <43c3d037$0$10309$a826...@reader.corenews.com>, "Dan in
> Philly" <dj...@aol.com> wrote:
>
> > "Robert Vienneau" <rv...@see.sig.com> wrote in message ...
>
> > >> >> It does if you assume, e.g., that reswitching is unimporant.
>
> > > By the way, it would not surprise me if Dan is incapable of
> > > defining "reswitching".
>
> > Something to do with the Cambridge Capital Controversy (I thought you'd
> > enjoy the reference). I arises when you assume multiple goods.
>
> The above is not a definition. I don't know why Dan should think
> I would enjoy evidence that he is talking shit, rather than
> addressing my posts.

Behave yourself, Robert. I've just finished an analysis of your entire
usenet career. Sooner or later you insult every person you speak
to---it makes no difference how civil he or she has been. You need to
recognize this pattern as pathological.


>
> > > The failure of equilibrium prices to act as scarcity indices is the
> > > general case under neoclassical assumptions. Examples arise in models
> > > in which all the assumptions are neoclassical.
>
> > Depends on exactly what you mean by neoclassical assumptions.
> > In grad school, I learned the "interest rate equals marginal productivity
> > of
> > capital (minus depreciation)" result. The prof obtained that result by
> > analyzing a one-good model (ie the good was both a consumption good and a
> > capital good). If you accept that assumption - that a one-good model
> > yields
> > insights about reality - then you'll accept the result. If not, then you
> > don't.
>
> I would expect those teaching introductory students would introduce
> heuristic assumptions that simplify their teaching, for example,
> differentiability. If teachers were honest, they would not use
> these simple models to prove results that are known not to
> generalize, in some sense or another, when those heuristic
> assumptions are relaxed without pointing out this failure to
> generalize.

More of the same, Robert: "You, Dan, were an "introductory" student
back then in graduate school and your prof was, therefore, required to
use "heuristic" assumptions because "simplification" was needed for
such simpletons as you. Your teacher was dishonest to boot because he
didn't have the prescience to agree with me."


>
> These are not assumptions of an economic theory or model:
>
> o "A one-good model yields insights about reality"
> o "Reswitching is unimporant"
>
> These are examples of assumptions of canonical neoclassical models:
>
> o Preference relations are transitive.
> o The production set representing the technology is convex.
>
> Mainstream price theory does not support the "applied" stories
> neoclassical economists preach. In general, equilibrium prices
> are not scarcity indices, and Marshall's principle of
> substitution does not apply.
>
> In stating the above, I am not challenging the "realism" of
> neoclassical assumptions, but simply pointing out the widespread
> adoption of mathematical error by neoclassical economists.

Mere assertions, the sort of thing you absolutely never support in the
here and now.

william...@hotmail.com

unread,
Jan 11, 2006, 11:21:20 AM1/11/06
to
Robert, elsewhere you wrote:

"I have already shown, repetitively, how Marx can claim that the source
of profits is in the exploitation of workers while correctly
maintaining that prices are not proportional to labor values."

It appears that the purpose of your repeated attack on neo-classic
theory is to lend credence to Marxian theory. Is that not correct?

And would it not follow that if the "source of profits" is the
"exploitation of workers," then it would be necessary to confiscate or
prohibit profits? And if that is the case, would that not require a
command economy with bureaucrats setting prices "proportional to" the
"labor values" that they judge is necessary for the production of the
various goods and services. In other words, you are decidedly
anti-market, are you not?

If so, I will have to conclude that you are not aware that
neo-classical theory is not the only theoretical (certainly it is far
from the best) justification for the system of free enterprise as
opposed to the (been there done that) alternative that you prefer?
-

Hunter Watson

unread,
Jan 11, 2006, 3:42:00 PM1/11/06
to

william...@hotmail.com wrote:
> Robert, elsewhere you wrote:
>
> "I have already shown, repetitively, how Marx can claim that the source
> of profits is in the exploitation of workers while correctly
> maintaining that prices are not proportional to labor values."

He is certainly repetitive but it's limited to mere assertions. He
commits himself to nothing beyond the making of a few citations which
often turn out to bear no resemblance the assertions.

> It appears that the purpose of your repeated attack on neo-classic
> theory is to lend credence to Marxian theory. Is that not correct?

He won't answer that candidly so I'll do it for him: yes, obviously,
Robert's purpose is to lend credence to Marxian theory. This is shown
clearly by his vague yet persistent attacks on the arguments of all
critics of Marxist theory. It is also shown by the verbal violence and
ad hominem arguments he directs at everyone who displayes the most mild
disagreement with him on these subjects. He's done it again in this
thread.


>
> And would it not follow that if the "source of profits" is the
> "exploitation of workers," then it would be necessary to confiscate or
> prohibit profits?

Which is precisely what was done in practice during the been there done
that period.

And if that is the case, would that not require a
> command economy with bureaucrats setting prices "proportional to" the
> "labor values" that they judge is necessary for the production of the
> various goods and services. In other words, you are decidedly
> anti-market, are you not?

He certainly won't admit this. He works at ITT. The mavens of corporate
culture would be aghast.

>
> If so, I will have to conclude that you are not aware that
> neo-classical theory is not the only theoretical (certainly it is far
> from the best) justification for the system of free enterprise as
> opposed to the (been there done that) alternative that you prefer?

All Marxists seem to believe that they belong to a superior generation,
that the theory is not in need of reconsideratiion, that the mistakes
made by previous generations won't be repeated and that the bright,
shining city on the hill is still just around the next corner.

Robert Vienneau

unread,
Jan 11, 2006, 3:40:21 PM1/11/06
to
In article <1136996480.8...@g43g2000cwa.googlegroups.com>,
"william...@hotmail.com" <william...@hotmail.com> wrote:

> Robert, elsewhere you wrote:
>
> "I have already shown, repetitively, how Marx can claim that the source
> of profits is in the exploitation of workers while correctly
> maintaining that prices are not proportional to labor values."
>
> It appears that the purpose of your repeated attack on neo-classic
> theory is to lend credence to Marxian theory. Is that not correct?

Incorrect and irrelevant to the validity of anything I have had
to say on this thread.

> [More ignorant strawpersons - deleted.]

Hunter Watson

unread,
Jan 11, 2006, 4:28:13 PM1/11/06
to

Robert Vienneau wrote:
> In article <1136996480.8...@g43g2000cwa.googlegroups.com>,
> "william...@hotmail.com" <william...@hotmail.com> wrote:
>
> > Robert, elsewhere you wrote:
> >
> > "I have already shown, repetitively, how Marx can claim that the source
> > of profits is in the exploitation of workers while correctly
> > maintaining that prices are not proportional to labor values."
> >
> > It appears that the purpose of your repeated attack on neo-classic
> > theory is to lend credence to Marxian theory. Is that not correct?
>
> Incorrect and irrelevant to the validity of anything I have had
> to say on this thread.
>
> > [More ignorant strawpersons - deleted.]

Delightful. As I was in the act of writing my post, you were hard at
work confirming it.

Ron Peterson

unread,
Jan 11, 2006, 4:44:27 PM1/11/06
to

Robert Vienneau wrote:

> Neoclassical economists recognize that they cannot state their
> assumptions:

Wikipedia states that Weintraub says that neoclassical economics rests
on three assumptions:
People have rational preferences among outcomes that can be identified
and associated with a value.
Individuals maximize utility and firms maximize profits.
People act independently on the basis of full and relevant information.


Are those assumptions inadequate to create an economic model and
theory? Or, do those assumptions conflict with reality?

--
Ron

Robert Vienneau

unread,
Jan 11, 2006, 8:19:57 PM1/11/06
to
In article <1137015867.4...@g44g2000cwa.googlegroups.com>,
"Ron Peterson" <r...@shell.core.com> wrote:

Ron comments often seem to me to have a weird twist. (Sometimes
I think he is quite correct.) For an example of a twist, "H.
Economus" wrote:

"A number of proofs are normative in nature (e.g. the welfare
Theorems regarding the efficiency of markets) and have a dubious
relationship to any kind of 'reality'..."

Ron's response:

"I don't see any problem in creating a model for markets and
determining what are the tradeoffs of various market strategies..."

This response shows that Ron did not take Economus's point. I'd be
interested in whether Ron thinks the Wikipedia entry on "General
Equilibrium" helps him out. (That entry is linked to from the
Wikipedia entry on "Neoclassical economics.")

That set of questions I find weird. I wouldn't use a term like
"conflict with reality". Whether or not a supposed theory is
empirically false is totally independent of the question of
whether or not some set of assumptions is sufficient to derive
a theory. The latter question is more one of logical validity.

(Anyways, mainstream theorists have tried to relax some of those
assumptions. In some theories, agents "satisfice", not maximize.
And then whole bodies of literature treat incomplete information
and information asymmettries. The distinction between those theories
and "neoclassical economics" is independent of my point".)

I like Roy Weintraub, and don't have too much of a problem with
his popularization. I might later quote a Frank Hahn summary
which is more directed towards this thread topic.

One should recognize that neoclassical economics is associated
with mathematical formalism. So neoclassical economists speaking
among the clergy would prefer the language of topology and the
algebra of relations for stating their assumptions.

The point of neoclassical economics is to build a theory on
those assumptions which emphasizes equilibrium, characterizes
economics as the allocation of scarce resources, and justifies
supply and demand reasoning. I have already refered to this
point in this thread when I have raised the issues of whether
or not:

o Equilibrium prices are scarcity indices
o Marshall's principle of substitution is generally applicable

Neoclassical economists ARE UNABLE TO STATE ASSUMPTIONS THAT
JUSTIFY SUCH REASONING. Weintraub's assumptions, suitably
formalized, don't succeed.

Just to show you that others characterize neoclassical economics
in the same way as I do:

"The [Demand-and-Supply-based Equilibrium] theory visualizes
the economy as an aggregate of atomistic individuals (producers
and consumers) making their decisions autonomously, with no
interference from the influence of 'externalities'. Relative
prices and quantities are determined simultaneously in equilibrium
as an outcome of the interplay of 'forces of demand and supply',
generated by the optimizing behavior of individuals subject to
their resource constraints. A certain symmetry characterizes the
behaviour of producers and consumers. Each producer, given the
technological possibilities, chooses the profit-maximizing
activities and outputs, at the going prices; each consumer, given
his budget constraints and scales of preferences, maximizes
satisfaction at the going prices. It is through the operation of
the 'fundamental' and 'universal' principle of substitution that
individuals adjust their chosen quantities in response to the
parametrically given prices...

Further, the notion of 'change' in the DSE theory gets restrictively
predetermined by the theory in the following ways. First, all changes
in quantities within the system are seen as the outcome of the
ever-active principle of substitution. Thus the changes are primarily
in relative quantities involving allocational variations. The role of
prices as a scarce-resource allocator, given the resources, dominates
the theory as contrasted with the resource-creational role of
prices in classical theory... Secondly, all changes are explained as
induced by changes in relative prices and operate through the
decisions of individuals who are only 'quantity adjusters'; that is,
all influences affecting quantities have to be necessarily mediated
through relative prices or changes on the market and are outcomes of
the atomistic responses of individuals. The relative prices acquire
the all-powerful role of resource-allocation and the 'market' becomes
the 'arena' of action."
-- Krishna Bharadwaj (1989). _Themes in Value and Distribution:
Classical Theory Reappraised_, London: Unwin-Hyman.

Here's a couple of examples of the incorrect reasoning to which I
object:

"It is indeed the great contribution of the Pure Logic of Choice
that it has demonstrated conclusively that even such a single mind
could solve this kind of problem only by constructing and constantly
using rates of equivalence (or 'values' or 'marginal rates of
substitution'), that is, by attaching to each kind of scarce resource
a numerical index which cannot be derived from any property possessed
by that particular thing, but which reflects, or in which is
condensed, its significance in view of the whole means-end
structure...

Fundamentally, in a system in which the knowledge of the relevant
facts is dispersed among many people, prices can act to co-ordinate
the separate actions of different people in the same way as
subjective values help the individual to co-ordinate the parts of a
plan. It is worth contemplating for a moment a very simple and
commonplace instance of the action of the price system to see what
precisely it accomplishes. Assume that somewhere in the world a new
opportunity for the use of some raw material, say, tin has arisen,
or that one of the sources of tin has been eliminated. It does not
matter for our purpose ­ and it is significant that it does not
matter ­ which of these two causes has made tin more scarce. All that
the users of tin now need to know is that some of the tin they used
to consume is now more profitably employed elsewhere and that, in
consequence, they must economize tin. There is no need for the great
majority of them even to know where the more urgent need has arisen,
or in favor of what other needs they ought to husband the supply...
The whole acts as one market, not because any of its members survey
the whole field, but because their limited individual fields of
vision sufficiently overlap so that through many intermediaries the
relevant information is communicated to all. The mere fact that there
is one price for any commodity ­ or rather the local prices are
connected in a manner determined by the cost of transport, etc. -
brings about the solution which (it is just conceptually possible)
might have been arrived at by one single mind possessing all the
information which is in fact dispersed among all the people involved
in the process."
-- F. A. Hayek (1945). "The Use of Knowledge in Society", _American
Economic Review_, V. 35, N. 5 (Sep): 519-530.

"Let us then suppose that... there is a strike on the part of one
group of workers, say the plasterers, or that there is some other
disturbance to the supply of plasterers' labour... The rise in
plasterers' wages would be checked if it were possible either to
avoid the use of plaster, or to get the work done tolerably well
and at a moderate price by people outside the plasterers' trade: the
tyranny, which one factor of production of a commodity might in some
cases exercise over the other factors through the action of derived
demand, is tempered by the principle of substitution."
-- Alfred Marshall (1920). _Principles of Economics: An
Introductory Volume_, Eighth edition.

Hayek and Marshall were writing before it was known that the
assumptions of neoclassical economics could not justify their
reasoning.

Here is an ignorant neoclassical economist perpetuating ignorance
to another generation:

"Suppose the number of carpenters suddenly increases, due to the
immigration of thousands of new carpenters from Mexico. Both before
and after the change, carpenters receive their marginal revenue
product... But the wage after the migration is lower than the wage
before. Since the supply of carpenters is higher than before, the
equilibrium wage is lower.

...an increase in the supply of an input I own drives down its price
(and marginal revenue product) and so decreases my income. The same
is true for an increase in the supply of an input that is a close
substitute for an input I own. If I happen to own an oil well, I will
regard someone else's discovery of a new field of natural gas--or a
process for producing power by thermonuclear fusion--as bad news."
-- David D. Friedman (1990). _Price Theory: An Intermediate
Text_, Second Edition.

David cannot state his assumptions. Here is a quote from a refereed
paper:

"This note considers a linear programming (LP) formulation of the
theory of the firm. A neoclassical non-increasing labour demand
function is derived from the solution of the LP. It is argued that
only a small number of points on this curve, one or two in the
examples provided, are equilibria of the firm. Equilibria are
characterized by decisions of the managers of the firms that
allow the same decisions to be made in successive periods. Hence,
one can explain the quantity of labour that firms desire to hire
either by a traditional neoclassical labour demand function or by
an analysis of equilibria of the firm, but generally not both.
Explaining wages and employment by well-behaved supply and demand
functions for labour is of doubtful logic."
-- R. L. Vienneau (2005). "On Labour Demand and Equilibria of
the Firm", _Manchester School_, V. 73, N. 5 (Sep): 612-619.

I once had that article publicly available. Copyright restrictions
later constrained me into taking it down. But not before "Dan in
Philly" revealed his inability to discuss the issues. See:

<http://www.dreamscape.com/rvien/Fumbles/AssumptionsYouUsed.html>

Ron Peterson

unread,
Jan 12, 2006, 1:26:16 AM1/12/06
to

Robert Vienneau wrote:
> In article <1137015867.4...@g44g2000cwa.googlegroups.com>,
> "Ron Peterson" <r...@shell.core.com> wrote:

> Ron comments often seem to me to have a weird twist. (Sometimes
> I think he is quite correct.) For an example of a twist, "H.
> Economus" wrote:

> "A number of proofs are normative in nature (e.g. the welfare
> Theorems regarding the efficiency of markets) and have a dubious
> relationship to any kind of 'reality'..."

> Ron's response:

> "I don't see any problem in creating a model for markets and
> determining what are the tradeoffs of various market strategies..."

> This response shows that Ron did not take Economus's point. I'd be
> interested in whether Ron thinks the Wikipedia entry on "General
> Equilibrium" helps him out. (That entry is linked to from the
> Wikipedia entry on "Neoclassical economics.")

My point was that the market is one aspect of economics, and as long as
the model is addressing that aspect, it is useful for solving those
types of problems.

The Wikipedia article helps me to understand the "politics" of the
various models.

> > Robert Vienneau wrote:

> > > Neoclassical economists recognize that they cannot state their
> > > assumptions:

> > Wikipedia states that Weintraub says that neoclassical economics rests
> > on three assumptions:
> > People have rational preferences among outcomes that can be identified
> > and associated with a value.
> > Individuals maximize utility and firms maximize profits.
> > People act independently on the basis of full and relevant information.

> > Are those assumptions inadequate to create an economic model and
> > theory? Or, do those assumptions conflict with reality?

> That set of questions I find weird. I wouldn't use a term like
> "conflict with reality". Whether or not a supposed theory is
> empirically false is totally independent of the question of
> whether or not some set of assumptions is sufficient to derive
> a theory. The latter question is more one of logical validity.

I don't think that a theory can be judged to be empirically false
because it depends on the scope of the theory. Newton's theory of
gravitation isn't 100% accurate, but it was adequate for most uses of
the time.

> The point of neoclassical economics is to build a theory on
> those assumptions which emphasizes equilibrium, characterizes
> economics as the allocation of scarce resources, and justifies
> supply and demand reasoning. I have already refered to this
> point in this thread when I have raised the issues of whether
> or not:

> o Equilibrium prices are scarcity indices
> o Marshall's principle of substitution is generally applicable

I am not inclined to believe that a complex system is about to have any
equilibrium.

In order for substitution to take place, there has to be an implied
change in technology where a new product is found or created for a
particular use and that would disrupt any equilibrium that may occur.

> Neoclassical economists ARE UNABLE TO STATE ASSUMPTIONS THAT
> JUSTIFY SUCH REASONING. Weintraub's assumptions, suitably
> formalized, don't succeed.

Why don't Weintraub's assumptions succeed? Can they be modified to get
a reasonable theory?

Sorry, I don't have time to comment on the quotes you made of other
writers.

--
Ron

con...@email.rahul.net

unread,
Jan 12, 2006, 2:07:54 AM1/12/06
to
Robert Vienneau writes:
>
> Neoclassical economists ARE UNABLE TO STATE ASSUMPTIONS THAT
> JUSTIFY SUCH REASONING. Weintraub's assumptions, suitably
> formalized, don't succeed.
>
> Just to show you that others characterize neoclassical economics
> in the same way as I do:
>
> "The [Demand-and-Supply-based Equilibrium] theory visualizes
> the economy as an aggregate of atomistic individuals (producers
> and consumers) making their decisions autonomously, with no
> interference from the influence of 'externalities'. Relative
> prices and quantities are determined simultaneously in equilibrium
> as an outcome of the interplay of 'forces of demand and supply',
> generated by the optimizing behavior of individuals subject to
> their resource constraints. A certain symmetry characterizes the
> behaviour of producers and consumers. Each producer, given the
> technological possibilities, chooses the profit-maximizing
> activities and outputs, at the going prices; each consumer, given
> his budget constraints and scales of preferences, maximizes
> satisfaction at the going prices. It is through the operation of
> the 'fundamental' and 'universal' principle of substitution that
> individuals adjust their chosen quantities in response to the
> parametrically given prices...
> -- Krishna Bharadwaj (1989). _Themes in Value and Distribution:
> Classical Theory Reappraised_, London: Unwin-Hyman.

Deja Vu:

http://groups.google.com/group/sci.econ/browse_thread/thread/b054809b9831e890/f2567ff20248f680?q=%22Sonnenschein-Mantel-Debreu%22&rnum=1#f2567ff20248f680

is a discussion on the lack of uniqueness, (or instability of,)
general equilibrium of the aggregate from this news group in 1999-and
its implications on modern economics. The entire diatribe, (in all its
heated detail,) can be found by searching Google's news groups for
"Sonnenschein-Mantel-Debreu", including the double quotes.

At best, the neoclassical economic philosophies have an empirical
problem, and at worst, an intellectual catastrophe, on their hands.

Depending on who is telling the story, of course.

John

--

John Conover, con...@email.rahul.net, http://www.johncon.com/

Robert Vienneau

unread,
Jan 13, 2006, 5:19:04 AM1/13/06
to
In article <1137047176.5...@z14g2000cwz.googlegroups.com>,
"Ron Peterson" <r...@shell.core.com> wrote:

> > > Wikipedia states that Weintraub says that neoclassical economics
> > > rests
> > > on three assumptions:
> > > People have rational preferences among outcomes that can be
> > > identified
> > > and associated with a value.
> > > Individuals maximize utility and firms maximize profits.
> > > People act independently on the basis of full and relevant
> > > information.

> > The point of neoclassical economics is to build a theory on


> > those assumptions which emphasizes equilibrium, characterizes
> > economics as the allocation of scarce resources, and justifies
> > supply and demand reasoning. I have already refered to this
> > point in this thread when I have raised the issues of whether
> > or not:
>
> > o Equilibrium prices are scarcity indices
> > o Marshall's principle of substitution is generally applicable

> [snip]

> > Neoclassical economists ARE UNABLE TO STATE ASSUMPTIONS THAT
> > JUSTIFY SUCH REASONING. Weintraub's assumptions, suitably
> > formalized, don't succeed.

> Why don't Weintraub's assumptions succeed?

Because one can construct examples with these assumptions in
which the negation of neoclassical claims hold. I and others
have done this. This is a matter of logic.

You also have "H. Economus"'s explanation of some difficulties.

ro...@telus.net

unread,
Jan 14, 2006, 12:00:24 AM1/14/06
to
On 11 Jan 2006 13:44:27 -0800, "Ron Peterson" <r...@shell.core.com>
wrote:

All are known to be false.

-- Roy L

daveb...@yahoo.com

unread,
Jan 14, 2006, 6:08:59 AM1/14/06
to
How tedious. This is after all a Trotskyist group. Wouldn't it be
surprising for those here not to think marxism superior to
neo-classical economics? The anti-marxists on this discussion group
thrash around with ideological models of the capitalist economy as it
appears at the level of exchange, or even more simply at the level of
distribution. It was not incidental that Marx talked about this
inverted perception of capitalism in religious terms - The Holy
Trinity.

But all of this presupposes capitalist production of value discovered
by Marx. Marx proved in the 1840s in the case of Wakefield's 'Modern
Theory of Colonisation' that capital and modern landed property cannot
generate value let alone a profit without the existence of wage labour.
These conditions did not arise ready made from the market, but had to
be created by primitive accumulation. The market accounts for the
exchange of commodities but not their production.

Nothing that history has thrown up has disproved Marx's theory. Trotsky
didnt think so before he was killed, and there is all th more reason
not to think so now.

Nor does it follow that socialists rely on a command economy to
redistribute the social product. The type of economy that resulted in
the SU, China etc was not socialist, but an economy distorted and
deformed by backwardness and isolation and by the consequent attempts
of the state bureaucracy to transcend this backwardness and isolation
by command planning. This failed as Trotsky foresaw very early on.

Capitalism has proven itself resilient, forceful and highly destructive
in its drive to survive, but the signs of the end are looming.
Increasingly the US ruling class is thrashing out at home and abroad to
maintain its competitive advantage against a rampant China and against
a hostile world proletariat.

At home the patriotic front that sustained US imperialism for over a
century is in decline now that US bosses are forced to steal back the
privileges of middle class US workers won over generations of struggle.
US workers are not only turning against Bush invading other countries
to steal their resources, but at home, like the auto-workers or NY
transit workers, they are fed up with the joint corporate/union pillage
of their wages and conditions.

It is class struggle that determines the relative disequilibrium of the
capitalist economy, the onset of crisis and overproduction of capital.
Unless you can talk about this with some modicum of intelligence or
interest you should fuck off this list.

Dan in Philly

unread,
Jan 14, 2006, 10:08:55 AM1/14/06
to
"Robert Vienneau" wrote in message ...

<snip>

What we have here is a failure to communicate.
Seriously. I looked at
<http://www.dreamscape.com/rvien/Fumbles/AssumptionsYouUsed.html>
and couldn't figure out what Robert objected to.

Beyond that: I can't understand why Robert can't understand what the rest of
us do understand: that the results of a model depend on the assumptions.
IIRC, Robert made a 3-good model that, by imposing a certain structure,
yielded multiple equilibriums, one of which featured a higher wage and
higher employment. That's fine. And different models will yield different
results.

Robert claims that 'neoclassical' models don't necessarily deliver
neoclassical results. But again, this depends on those 'neoclassical'
assumptions. Anyone can make a simple model in which prices do reflect
scarcity, or the interest rate equals the MPK.

Lastly, the claim that pro-neoclassical-results people are somehow
lying/dishonest/misinformed is just wrong. E.g. when economists say that i =
MPK, they are assuming that reswitching, corporate power, etc, have no
significant effect.
I guess Robert assumes these things _do_ have serious effects. Fine again.
But it's just opinion, since AFAIK there has been no empirical verification
or rejection of models with these assumptions.

Regarding that last point, here's what Stiglitz said in 1974 regarding the
Cambridge UK position in the CCC:
"There has been a remarkable absence of an attempt at empirical verification
of any of the underlying hypotheses at any but the most casual level by
advocates of the Cambridge (U.K.) approach."
http://cowles.econ.yale.edu/P/cp/p04a/p0410.pdf


Dan in Philly


rab

unread,
Jan 14, 2006, 10:36:29 AM1/14/06
to

daveb...@yahoo.com wrote:

I have to agree with the gist of this but with the proviso that
Trotskyists would do well also to study Marx's 'Capital' in detail
together with other writings on political economy. Whilst the
bourgeois economists are stuck in a timewarp where history and
development (and decline) are not part of their model most Trotskyists
major in politics and are thus stuck in an empirical version of current
events. Marx considered 'Capital' his most important work whilst
latter day 'Marxists' pay little regard to Marx's own estimation of
these things, mainly because they do not understand it. And if 'it is
the class struggle that determines the relative disequilibrium of the
capitalist economy', what then determines the class struggle itself?
There is so much that is plainly wrong in the last paragraph that it
would take a whole article to disentangle. Dave Brown would do well to
read what Marx actually says about these things rather than to base
himself upon the political gossip of this or that group.

Roger

daveb...@yahoo.com

unread,
Jan 14, 2006, 5:37:45 PM1/14/06
to
Come on Roger you know that 'class struggle' is the motor of history.
You seem to be wanting to read something else into what I said. I
already said that capitalist social relations are ignored by the
anti-Marxists. This is what causes class struggle between labour and
capital at the point of production (don't think I'm talking about
distributional class struggle). The bosses struggle to take all the
surplus and eat into the value of socially necessary labour time, while
the workers do the opposite. Because the bosses cannot exploit workers
sufficiently to return a profit over rising organic composition, they
face necessary overproduction crisis and devaluation. Where's the
critical bit from Capital missing?

Hunter Watson

unread,
Jan 15, 2006, 12:01:44 AM1/15/06
to

daveb...@yahoo.com wrote:
> How tedious. This is after all a Trotskyist group. Wouldn't it be
> surprising for those here not to think marxism superior to
> neo-classical economics?

But the subject was Robert Vienneau who vehemently denies being a
Marxist.

Robert Vienneau

unread,
Jan 15, 2006, 3:52:20 AM1/15/06
to
In article <43c91400$0$19351$a826...@reader.corenews.com>, "Dan in
Philly" <dj...@aol.com> wrote:

> "Robert Vienneau" wrote in message ...

> <snip>

> What we have here is a failure to communicate.
> Seriously.

I'm not going to change my opinion until I find an informed
counter-argument. Dan is illogical, and he simply refuses to
address arguments, including those by, say, "H. Economus".

> I looked at
> <http://www.dreamscape.com/rvien/Fumbles/AssumptionsYouUsed.html>
> and couldn't figure out what Robert objected to.
>
> Beyond that: I can't understand why Robert can't understand what the rest
> of
> us do understand: that the results of a model depend on the assumptions.
> IIRC, Robert made a 3-good model that, by imposing a certain structure,
> yielded multiple equilibriums, one of which featured a higher wage and
> higher employment. That's fine. And different models will yield different
> results.

It's not as if there's just a non-neoclassical special case and
another neoclassical special case. There are certain general assumptions
of neoclassical models. These assumptions do not yield neoclassical
conclusions. I, like so many others, have proven this by constructing
numerical examples conforming to the assumptions, but with the
negation of the conclusions.

Dan's response is to note that these examples have two, three, (or
infinite?) goods and other assumptions. He simply gets
his sums incorrect when he states that one of the assumptions
is that of "fixed factor proportions". He furthermore is simply in
error when he states that the negation of neoclassical conclusions
depends on these misstated assumptions. He doesn't even make a
pretense of a ghost of an argument for his rejection of claims
long accepted in the literature.

If Dan were logical, he would accept that neoclassical conclusions
do not obtain in the general case. If he still wanted a model
with those conclusions, he would then try to specify additional
special case assumptions - an endeavor that others have failed
at (outside a one-good model). By the way, this is not an
assumption: "reswitching has no significant effect."



> Robert claims that 'neoclassical' models don't necessarily deliver
> neoclassical results. But again, this depends on those 'neoclassical'
> assumptions. Anyone can make a simple model in which prices do reflect
> scarcity, or the interest rate equals the MPK.
>
> Lastly, the claim that pro-neoclassical-results people are somehow
> lying/dishonest/misinformed is just wrong. E.g. when economists say that
> i =
> MPK, they are assuming that reswitching, corporate power, etc, have no
> significant effect.
> I guess Robert assumes these things _do_ have serious effects. Fine
> again.

Dan has already implicity admitted that, to him, "reswitching" is
just mumbo-jumbo. He just does not know what he is talking about.

So it's no surprise that his claimed "assumptions" do not
deliver his conclusions. In particular, the interest rate is
not equal in equilibrium to the marginal product of value capital
in plenty of examples with perfect competition and no reswitching.
Dan is just misinformed on the logic of neoclassical economics.

It has already been explained to Dan in this very thread that
he is wrong. He simply ignores, for example, that Edwin
Burmeister (a defender of neoclassical economics against the
Cambridge critics) agrees that economists do not know how
to specify assumptions on technology in multigood models to
deliver neoclassical results:

"Imposing some set of conditions on the technology T() should
be sufficient to assure that the real Wicksell effect is always
negative. Such a conditions would be of interest - especially
if they could be empirically tested - since they would validate
the qualitative conclusions derived from the one-good models
often used in macroeconomics without any theoretical
justification for ignoring aggregation problems... Unfortunately,
no set of such sufficient conditions is known, but the literature
on capital aggregation suggests that they would impose severe
restrictions on the technology."
-- Edwin Burmeister (1987), "Wicksell Effects", _The New
Palgrave_.

As for reswitching, Ian Steedman explained how it can arise in a
one-good model in some Cambridge Journal of Economics article. The
good functions as both a consumption and capital good, but lasts
several periods as a capital good. He doesn't assume radioactive
depreciation, but correctly analyzes it as joint production. I
don't know a full citation for this decade(?) old article.

And, by the way, my focus in this thread and in my latest
on-topic publication has not been on how to aggregate "capital"
or on the supposed equality between the interest rate in
equilibrium and the marginal product of capital.

> But it's just opinion, since AFAIK there has been no empirical
> verification
> or rejection of models with these assumptions.
>
> Regarding that last point, here's what Stiglitz said in 1974 regarding
> the
> Cambridge UK position in the CCC:
> "There has been a remarkable absence of an attempt at empirical
> verification
> of any of the underlying hypotheses at any but the most casual level by
> advocates of the Cambridge (U.K.) approach."
> http://cowles.econ.yale.edu/P/cp/p04a/p0410.pdf

One might also look at Stiglitz's December 1975 JEL review of a
Pasinetti book and the controversy in later issues about that review.
The quote that Dan picked out does not refer exclusively to
reswitching (or, more generally, Sraffa effects), but also takes
in the Post Keynesian theory of distribution. I found Stiglitz weak
in his 1974 JPE article with his comments about the rental price of
individual capital goods and the marginal product of their
individual services. When households buy stocks in an Initial Public
Offering, they are providing financial capital, not loaning blast
furnaces. Shouldn't economists develop models with capitalist
economies in their scope?

I wonder what Stiglitz would say about that today, especially since
so many mainstream economists ignore the points of theory that
Stiglitz in 1974 says are accepted. My notes that I referenced in
my original post on this thread certainly support the idea that
disagreements in capital theory may reflect the difficulties of
the subject. But the behavior of so many mainstream economists
in ignoring that their results have already been discredited makes
a case for the claim that the mainstream is engaged in dishonest
ideological posturing.

As for a direct econometric contrast of, say, Post Keynesian and
other theories of distribution, I can cite:

Marglin, S. A. (1984). _Growth, Distribution, and Prices_,
Cambridge: Harvard University Press.

Neoclassical economists have also long ignored all those findings,
from Hall and Hitch on, of administrative, full cost, or markup
pricing. Both Fred Lee and A. Blinder are good to read here.
Kalecki long ago showed a direction for incorporating these
results into macroeconomics. Paul Davidson likes to cite empirical
work on the savings behavior of retired persons; it is inconsistent
with the lifecycle savings hypothesis.

And Dan has already been directed to this literature on Sraffa
effects:

Peter Albin (1975). "Reswitching: An Empirical Observation," _Kyklos_,
Number 1, 28, pp. 149-54.

Geir B. Asheim (1980). "The Occurrence of Paradoxical Behavior in a
Model where Economic Activity has Environmental Effects," Norwegian
School of Economics and Business Administration Discussion Papers.

Trevor Barnes and Eric Sheppard (1984). "Technical Choice and
Reswitching in Space Economies," _Regional Science and Urban
Economics_, V. 14, pp. 345-352.

Han, Z. and Schefold, B. (2003). "An Empirical Investigation of
Paradoxes (Reswitching and Reverse Capital Deepening) in Capital
Theory", working paper.

John Hartwick (1976). "Intermediate Goods and the Spatial Integration
of Land Use," _Regional Science and Urban Economics_, V. 6, pp.
127-145.

Adam Ozanne (1996). "Do Supply Curves Slope Up? The Empirical
Relevance of the Sraffian Critique of Neoclassical Production
Economics," _Cambridge Journal of Economics_, Volume 20, pp. 749-762.

Raymond Prince and J. Barkley Rosser, Jr., (1984). "Environment Costs
and Reswitching Between Food and Energy Production in the Western
United States," mimeo, James Madison University.

Raymond Prince and J. Barkley Rosser, Jr., (1985). "Some Implications
of Delayed Environmental Costs for Benefit Cost Analysis: A Study of
Reswitching in the Western Coal Lands, _Growth and Change_, V. 16,
18-25.

U. Schweizer and P. Varaiya (1977). "The Spatial Structure of
Production with a Leontief Technology-II: Substitute Techniques,"
_Regional Science and Urban Economics_, V. 7, pp. 293-320.

A. J. Scott (1979). "Commodity Production and the Dynamics of Land-
Use Differentiation," _Urban Studies_, V. 16, pp. 95-104.

S. Zambelli (2004). "The 40% Neoclassical Aggregate Theory of
Production: Results of a Simulation Investigation", _Cambridge
Journal of Economics_, V. 28, Iss. 1 (Jan): 99-120.

Dan must find it hard to walk around Philly with no clothes in
this season.

Dan in Philly

unread,
Jan 15, 2006, 9:18:11 AM1/15/06
to
"H. Economus" wrote in message ...
<discussion of the shortcomings of simple models..>
..with which I agree. As I mentioned in another thread, a truly general
models can't be used to prove anything. To generate conclusions, you have to
make simplifying assumptions. The validity of these assumptions needs to be
verified empirically.

> An empirical justification seems to be weak,

Probably true (though that depends on how well you want the data to fit the
model; even a simple exponential growth model will 'fit' GDP pretty well).
Econometricians need to try some other assumptions. If the models' fit
doesn't improve, we may have to conclude that the economy is too
complicated, or the data insufficient, to ever be modeled.

"Robert Vienneau" wrote in message ...

<snip long post>
I feel guilty that Robert spent so much time on his post. I'm just trying to
find where he got his _official_ definition of 'neoclassical assumptions'
(which he in turn claims generates models without neclassical results).
IIRC, the simple one-good model (which yielded i=MPK) was referred to as a
neoclassical model by my prof.


Dan in Philly


H. Economus

unread,
Jan 15, 2006, 1:39:26 PM1/15/06
to
On Sun, 15 Jan 2006 09:18:11 -0500, "Dan in Philly" <dj...@aol.com>
wrote:

>"H. Economus" wrote in message ...


><discussion of the shortcomings of simple models..>
>..with which I agree. As I mentioned in another thread, a truly general
>models can't be used to prove anything. To generate conclusions, you have to
>make simplifying assumptions. The validity of these assumptions needs to be
>verified empirically.

I'm inclined to disagree with your terminology. What you are
referring to seem to be restrictions rather than assumptions.
Neoclassical assumptions would include statements about behaviour such
as (i) consumers maximize utility, (ii) firms maximize profits, and
(iii) markets clear. Imposing structure on utilty functions,
production functions, etc. amounts to introducing a series of
additional restrictions on the general model. In any case, how do you
empirically "verify" a one good model, when simple observation shows
that there are multiple goods? On the basis of the empirical
predictions? While the supply in a single good model can be defined
in terms of a physical quantity, how does one even meaningfully talk
about a single measure of supply in a multiple good world? The common
approach (a constant dollar valuation) is suspect, in so far as that
it involves prices, which are presumably jointly determined with the
interest rate, at least in the reference year. In any case,
macroeconomists seem to prefer to ignore the findings of either the
aggregation literature or the outcomes of the Cambridge Controversies,
as these findings generate serious objections to substantial portions
of the existing research agenda.

>
>> An empirical justification seems to be weak,
>
>Probably true (though that depends on how well you want the data to fit the
>model; even a simple exponential growth model will 'fit' GDP pretty well).
>Econometricians need to try some other assumptions. If the models' fit
>doesn't improve, we may have to conclude that the economy is too
>complicated, or the data insufficient, to ever be modeled.
>

My sense is that you are working in time series modeling, where the
emphasis seems to be on arriving at a generating process that mimicks
the properties of existing time series, rather than on arriving at a
deeper understanding of the economy. My impression is that using
microfoundations amounts to little more than an elaborate
justification for using certain functional forms and relationships.
Why are microfoundations, which do not follow from advanced theory,
given preference over other ad hoc approaches that do not follow from
stories about individual optimizaiton?

>
>
>>"Robert Vienneau" wrote in message ...

{snipped}

Dan in Philly wrote:

>I feel guilty that Robert spent so much time on his post.

I wouldn't worry. He's been doing this for ten years or so. I
suspect a lot of his content is of the cut and paste variety

rab

unread,
Jan 15, 2006, 2:48:47 PM1/15/06
to

daveb...@yahoo.com wrote:

Pretty much most of the 3 volumes, but I don't have the time to
paraphrase 'Capital' for those who can't be bothered to study (yes
study) it. (But there are some excellent books that have been written
as introductions to this). I have to say that this lack of study
causes me a certain amount of pessimism about current day Trotskyists.

Roger

daveb...@yahoo.com

unread,
Jan 15, 2006, 11:36:13 PM1/15/06
to
Well part 1 of Vol 1 is the key. What am I missing from this section?

Robert Vienneau

unread,
Jan 16, 2006, 3:28:10 AM1/16/06
to
In article <43ca5998$0$25222$a826...@reader.corenews.com>, "Dan in
Philly" <dj...@aol.com> wrote:

> [snip]

Dan just fails to show up.


"On occasion when complacent incumbents in US state gubernatorial
and senatorial elections have refused to meet their opponents in
debate, the challengers have resorted to the dramatic tactic of
debating an empty chair. Although neither labor nor capital may
ultimately be scarce for the capitalist economy, the revival of
classical political economy faces a definite scarcity of scholarly
opponents willing to show up for debate...

...This volume is a Festschrift for Pierangelo Garegnani.
Garegnani's fate has been to carry on the heterodox tradition of
economics in a period when it has suffered relative decline in the
face of a habitually complacent, increasingly powerful, and
unremittingly hostile hegemonic orthodoxy based on discredited but
uncritically accepted neoclassical doctrines. The papers in this
book testify to the intelligence, critical honesty, and tenacity
with which Garegnani and his associates have faced this thankless
duty. The futures of economics (if it has one in its present
disciplinary form) and, more importantly, of our understanding of
the deep and inward processes that shape capitalist economic
development, are much brighter for their efforts."
-- Duncan K. Foley (2001). "Value, Distribution and Capital: A
Review Essay", _Review Of Political Economy_, V. 13, N. 3:
365-381.

rab

unread,
Jan 16, 2006, 4:47:31 PM1/16/06
to

daveb...@yahoo.com wrote:

> Well part 1 of Vol 1 is the key. What am I missing from this section?

You'll have to read more than just key parts I'm afraid. Marx didn't
spend years of research just for people to pick out small parts that
they could just generalise to encompass the whole of capitalist
society. The problem is in looking for keys or what Marx actually said
' a royal road to science'. There isn't one just patience and
persistance.

Roger

daveb...@yahoo.com

unread,
Jan 16, 2006, 5:06:53 PM1/16/06
to
Ive read Capital that's why I understand the significance of vol 1 pt
1.
What exactly is you point?

Ron Peterson

unread,
Jan 16, 2006, 7:48:04 PM1/16/06
to

daveb...@yahoo.com wrote:
> How tedious. This is after all a Trotskyist group.

This thread is also being posted to sci.econ.

> Wouldn't it be surprising for those here not to think marxism
> superior to neo-classical economics?

Apparently neoclassical economics is supported by those in power in the
US because it does a better job of justifying the status quo.

> Nothing that history has thrown up has disproved Marx's theory. Trotsky
> didnt think so before he was killed, and there is all th more reason
> not to think so now.

Perhaps a more heterodox view is possible with different economic
theories describing different economic aspects.

> Capitalism has proven itself resilient, forceful and highly destructive
> in its drive to survive, but the signs of the end are looming.
> Increasingly the US ruling class is thrashing out at home and abroad to
> maintain its competitive advantage against a rampant China and against
> a hostile world proletariat.

The holders of wealth have hired managers (CEOs, CFOs, etc) to make
decisions on how to maximize profit. Capital can move from country to
country and the holders of wealth don't need to care about competitive
advantage.

--
Ron

Dan in Philly

unread,
Jan 17, 2006, 8:26:12 AM1/17/06
to
"H. Economus" wrote in message ...

> I'm inclined to disagree with your terminology. What you are


> referring to seem to be restrictions rather than assumptions.

True. I just wasn't sure how to separately identify the initial
'assumptions' of a model from the subsuequent 'restrictions,' when I didn't
have a good definition of neoclassical.

> Neoclassical assumptions would include statements about behaviour such
> as (i) consumers maximize utility, (ii) firms maximize profits, and
> (iii) markets clear.

That sounds like a good definition of neoclassical. thanks.

> My sense is that you are working in time series modeling

Yes. My main interest is in business cycles.

> Imposing structure on utilty functions,
> production functions, etc. amounts to introducing a series of
> additional restrictions on the general model.

True. I wonder: after imposing restrictions (e.g. one good, or maybe a dozen
goods, instead of thousands of goods) would the model still be called
'neoclassical?'
(this may be another terminology issue)

> In any case, how do you
> empirically "verify" a one good model

I guess if it could predict a recession (perhaps taking monetary and fiscal
policy as exogenous) that would be pretty good.

Dan in Philly

PS: thanks for this reference
http://dept.econ.yorku.ca/~avicohen/Linked_Documents/JEP_Cohen_Harcourt.pdf


daveb...@yahoo.com

unread,
Jan 18, 2006, 3:47:32 AM1/18/06
to
I was using 'competitive advantage' ironically to suggest that
competition has ceased to be economic and has become political and
military i.e. class struggle. We are talking of the epoch of
imperialism where the market is overdetermined by state power backing
finance capital.

Ron Peterson

unread,
Jan 18, 2006, 9:33:03 AM1/18/06
to

daveb...@yahoo.com wrote:
> I was using 'competitive advantage' ironically to suggest that
> competition has ceased to be economic and has become political and
> military i.e. class struggle.

OK. I am not sure that economic competition has disappeared in that the
geopolitical and military actions of the US and UK aren't simply
counterproductive because of the drain on their respective economies.

> We are talking of the epoch of imperialism where the market
> is overdetermined by state power backing finance capital.

I am not sure what you mean by saying the market is overdetermined.

--
Ron

daveb...@yahoo.com

unread,
Jan 18, 2006, 1:59:04 PM1/18/06
to
I agree that politics and war are driven by value accumulation and
there is little stricltly economic competition (meaning actual cost
competition) since costs are subsidised by the state. Overdetermined
used to mean that that political competition repaces market competition
as the allocator of value. As, for instance, when the US ruling class
uses its state to rip off value from workers (eg Chapter 11
Bankruptcies) and from other ruling classes (WTO forces free trade on
the weak but protects the strong).
When you use the term heterodox are you saying that marxism needs to be
augmented by other theories because it cannot be developed to explain
certain phenomenon?

Ron Peterson

unread,
Jan 18, 2006, 3:29:03 PM1/18/06
to

daveb...@yahoo.com wrote:

> When you use the term heterodox are you saying that marxism needs to be
> augmented by other theories because it cannot be developed to explain
> certain phenomenon?

Paraphrasing Marx, economics needs to do more than explain. Yes, Marx
needs to be augmented because there isn't an adequate theory of
exchange prices, and to be fair, Marx doesn't make that claim.
Secondly, if capital is no longer in the driver's seat, there needs to
be an alternative way of making economic decisions.

--
Ron

daveb...@yahoo.com

unread,
Jan 18, 2006, 10:28:30 PM1/18/06
to
So the theory that the sum of prices equals the sum of values is not
adequate?
I agree explanation may be irrelevant when you are shopping. But in
what way are prices not 'explained' by Marx?
Second, capital is a social relation, if capital is not in the drivers
seat then wage labour must be.

Robert Vienneau

unread,
Jan 18, 2006, 11:02:01 PM1/18/06
to
In article <1137641310.6...@g47g2000cwa.googlegroups.com>,
daveb...@yahoo.com wrote:

> Second, capital is a social relation, if capital is not in the drivers
> seat then wage labour must be.

Perhaps the data presented here refracts the changing balance of class
forces:

<http://emlab.berkeley.edu/users/saez/piketty-saezAEA06.pdf>

Ron Peterson

unread,
Jan 18, 2006, 11:28:28 PM1/18/06
to

davebro...@yahoo.com wrote:
> So the theory that the sum of prices equals the sum of values is not
> adequate?

That relationship doesn't determine the price of any particular
commodity because it ignores supply and demand and use value.

> I agree explanation may be irrelevant when you are shopping. But in
> what way are prices not 'explained' by Marx?

Only the aggregate relation is explained.

> Second, capital is a social relation, if capital is not in the drivers
> seat then wage labour must be.

No, a country may be be controlled by a religious sect that prefers to
spend its resources on war rather than helping its people.

If capital (economic ownership) is no longer in control, some
bureaucracy needs to be set up that will allocate capital (resources)
in the best way. And, economic theory needs to show what that best way
is.

--
Ron

daveb...@yahoo.com

unread,
Jan 19, 2006, 6:35:36 AM1/19/06
to
If capital is in control then if we can afford it we go shopping to
find out what individual prices are. No theory can beat shopping
around.

If it is not, and some social force has overthrown capital, Marxists
would hope it is the working class. In which case no theory devised in
relation to capital will be of use. We devise a new system of
allocation of use-values. This would not involve a bureacracy, except
in Lenin's sense that we are all bureaucrats.

If a fhird class is in control then we will have to figure that one out
when it happens.

daveb...@yahoo.com

unread,
Jan 19, 2006, 6:50:48 AM1/19/06
to
A quick skim suggests that the personal incomes of the very rich in the
US have declined due to rising taxes between 1914 and 1970 but that the
rich have regained a bigger share since then only they tend now to be
top managers rather than owners. I am always very suspicious of such
figures as (a) 'declared' personal income (b) does not count corporate
and other assets (I am assuming). Are you suggesting that this can be
read as evidence for a swing in economic power away from capital to
labor?

Ron Peterson

unread,
Jan 19, 2006, 10:04:43 AM1/19/06
to

daveb...@yahoo.com wrote:
> If capital is in control then ...

> If it is not, and some social force has overthrown capital, Marxists
> would hope it is the working class. In which case no theory devised in
> relation to capital will be of use.

Do you have an actual plan of how society will be structured?

> We devise a new system of allocation of use-values. This
> would not involve a bureacracy, except in Lenin's sense that
> we are all bureaucrats.

What system do you want to devise? What theory will back up the
rationality of that system?

> If a fhird class is in control then we will have to figure that one out
> when it happens.

It already does occur in some countries.

--
Ron

ro...@telus.net

unread,
Jan 19, 2006, 2:08:22 PM1/19/06
to
On 18 Jan 2006 19:28:30 -0800, daveb...@yahoo.com wrote:

>So the theory that the sum of prices equals the sum of values is not
>adequate?

Right.

>I agree explanation may be irrelevant when you are shopping. But in
>what way are prices not 'explained' by Marx?

How does Marx explain the prices of collectibles, or of the labor of
corporate CEOS, professional athletes, and other entertainers?

>Second, capital is a social relation,

No. A hermit can employ capital.

>if capital is not in the drivers
>seat then wage labour must be.

No. Landowners have typically been in the driver's seat. Land is not
capital.

-- Roy L

Quirk

unread,
Jan 19, 2006, 3:23:28 PM1/19/06
to

ro...@telus.net wrote:
> On 18 Jan 2006 19:28:30 -0800, daveb...@yahoo.com wrote:
>
> >So the theory that the sum of prices equals the sum of values is not
> >adequate?
>
> Right.
>
> >I agree explanation may be irrelevant when you are shopping. But in
> >what way are prices not 'explained' by Marx?
>
> How does Marx explain the prices of collectibles, or of the labor of
> corporate CEOS, professional athletes, and other entertainers?

Collectibles are simply rent, the others, beyond the actual difference
caused by the skill of these labourers over simple labour, these are
all various forms of rent, no?

Marx understood rent.

Excerpt from Capital, Volume III, Part VI, Chapter XLVI by Karl Marx:

Wherever natural forces can be monopolized and thereby guarantee a
surplus profit to the industrial capitalist using these forces, whether
it be waterfalls, or rich mines, or waters teeming with fish, or a
favorably located building lot, there the person who by his or her
title to a portion of the globe has been privileged to own these things
will capture a part of the surplus profit of the active capital by
means of rent.

rab

unread,
Jan 19, 2006, 3:46:55 PM1/19/06
to

daveb...@yahoo.com wrote:

The word 'understand' can be used in many different ways. I think
Marx's 'Capital' needs to be understood within its historical context
as well as being understood theoretically etc. Then there is the
question of what generalisations can be drawn in the present day from
Marx's work. Certainly Marx's method and his discoveries remain valid
for all stages of capitalism but this does not absolve the present day
Marxist of detailed work on the current world economy. Very few
Marxists are in a position to spend the required time to study all the
data and trends involved and many will undoubtedly have to piggyback on
the work of others at least close to Marxism. I think that you are
treating 'Capital' almost as a 'theory of everything' and that is the
opposite of Marx's own method.

Roger

Ron Peterson

unread,
Jan 19, 2006, 4:01:01 PM1/19/06
to

What evidence do you have that landowners are dominant?

Land may not be capital, but improvements are. And since improved land
may be indistinguishable from unimproved land, there is no problem as
treating it as equivalent to capital.

--
Ron

Ron Peterson

unread,
Jan 19, 2006, 4:26:28 PM1/19/06
to

Quirk wrote:

> Collectibles are simply rent, the others, beyond the actual difference
> caused by the skill of these labourers over simple labour, these are
> all various forms of rent, no?

Some skills are due to extensive training, which is an expense to the
the laborer and needs to be compensated for.

--
Ron

Quirk

unread,
Jan 19, 2006, 6:15:29 PM1/19/06
to

Yes, I meant the earnings //beyond// that which can explained by the
difference in exchange value created by skilled labour over simple
labour, is rent.

The Trucker

unread,
Jan 19, 2006, 10:11:26 PM1/19/06
to
"Quirk" <qu...@syntac.net> wrote in message
news:1137712529....@g43g2000cwa.googlegroups.com...


http://en.wikipedia.org/wiki/Economic_rent_%28economics%29

--
"I know no safe depository of the ultimate powers
of society but the people themselves; and
if we think them not enlightened enough to
exercise their control with a wholesome
discretion, the remedy is not to take it from
them, but to inform their discretion by
education." - Thomas Jefferson
http://GreaterVoice.org


ro...@telus.net

unread,
Jan 20, 2006, 12:38:21 AM1/20/06
to
On 19 Jan 2006 13:01:01 -0800, "Ron Peterson" <r...@shell.core.com>
wrote:

>ro...@telus.net wrote:
>> On 18 Jan 2006 19:28:30 -0800, daveb...@yahoo.com wrote:
>
>> >if capital is not in the drivers
>> >seat then wage labour must be.
>
>> No. Landowners have typically been in the driver's seat. Land is not
>> capital.
>
>What evidence do you have that landowners are dominant?

Look at who benefits most from virtually every government policy and
program, and who is most consistently exempted from having to pay for
them. Or just look at where the campaign donations come from.

>Land may not be capital, but improvements are. And since improved land
>may be indistinguishable from unimproved land,

?? No, of course it is distinguishable. What are you talking about?
Are you claiming that improvements are not land, but you are unable to
tell the difference? ROTFL!! Nice try, though.

>there is no problem as
>treating it as equivalent to capital.

ROTFL!! You mean, aside from all the resulting conclusions being the
diametric opposite of the truth?

Treating land as equivalent to capital is what made the XSSR even
poorer under capitalism than it was under socialism.

-- Roy L

ro...@telus.net

unread,
Jan 20, 2006, 12:42:17 AM1/20/06
to
On 19 Jan 2006 12:23:28 -0800, "Quirk" <qu...@syntac.net> wrote:

>ro...@telus.net wrote:
>> On 18 Jan 2006 19:28:30 -0800, daveb...@yahoo.com wrote:
>>
>> >So the theory that the sum of prices equals the sum of values is not
>> >adequate?
>>
>> Right.
>>
>> >I agree explanation may be irrelevant when you are shopping. But in
>> >what way are prices not 'explained' by Marx?
>>
>> How does Marx explain the prices of collectibles, or of the labor of
>> corporate CEOS, professional athletes, and other entertainers?
>
>Collectibles are simply rent, the others, beyond the actual difference
>caused by the skill of these labourers over simple labour, these are
>all various forms of rent, no?

Of course. But knowing _what_ the price comes from is not the same as
explaining _why_ it is at the level it is. Collectibles prices can
vary greatly for no apparent reason. The items themselves are
completely changeless, only the amount people are willing to pay for
them changes. How does Marx explain this?

-- Roy L

Robert Vienneau

unread,
Jan 20, 2006, 4:50:26 AM1/20/06
to
In article <1137671448.8...@f14g2000cwb.googlegroups.com>,
daveb...@yahoo.com wrote:

I just looked at the pictures at the end. I see a rise in working
class power at towards the end of the Great Depression and during
the second World War. I see a decrease in such power in the U.S. around
the end of the Vietnam war, the end of Bretton Woods, the Arab oil
embargo, etc.

I don't think it's obvious that the increase in the pay of CEOs, CFOs,
CIOs, etc. is not the result of increased economic power for "capital",
but is the result of increased economic power for "labor". The salaries
of such people still seem to me to have something to do with control
over the means of production.

By the way, this paper also shows that the great contraction was not
overcome or attacked in France and Japan.

Quirk

unread,
Jan 20, 2006, 7:30:21 AM1/20/06
to
ro...@telus.net wrote:

> Of course. But knowing _what_ the price comes from is not the same as
> explaining _why_ it is at the level it is. Collectibles prices can
> vary greatly for no apparent reason. The items themselves are
> completely changeless, only the amount people are willing to pay for
> them changes. How does Marx explain this?

"By the competition between buyers and sellers, by the relation of the
demand to the supply, of the call to the offer. " -- Karl Marx, By what
is the price of a commodity determined?

I'm not a Marxist scholar, but as I understand it Marx is pretty close
to Smith and Ricardo here.

My own dilettantian understanding of this is at any given point money
price is determined by the volume of money demand that encounters the
volume of supply, from here, where new supply can be added by the
application of labour, price is driven toward labour cost by
competition, where new supply can not be created without privileged
legal or natural access, price is driven toward utility.

Rent is therefore the difference between cost and price, with rent
theoretically being able to capture the entire marginal utility, minus
cost, when supply can be controlled.

Utility is of course subjective, what the utility of a collectible
baseball card or the labour of a totalitarian CEO to it's buyers is not
an objective measure.

Marx perhaps would also use the word "fetish" here.

Part of the Utility of a corporate CEO to the propertied owning class
could also be the role his wealth and status has in enabling him to
embody the authority of the propertied class.

Certainly the "conspicuous consumption" of the "lifestyles of the rich
and famous" is a factor in the market value of their labour and the
demand for entertainment products, and although this idea is associated
more with Veblan than Marx, I have no reason to believe that anything
Marx has said disputes or is incompatible with this idea.

Ron Peterson

unread,
Jan 20, 2006, 9:21:48 AM1/20/06
to

ro...@telus.net wrote:
> On 19 Jan 2006 13:01:01 -0800, "Ron Peterson" <r...@shell.core.com>
> wrote:

> >Land may not be capital, but improvements are. And since improved land
> >may be indistinguishable from unimproved land,

> ?? No, of course it is distinguishable. What are you talking about?

If rocks are removed from tillable soil to make it capable of growing
crops, it has been improved at the cost of human labor. But that soil
will be indistinguishable from soil that didn't have rocks in the first
place.

--
Ron

ro...@telus.net

unread,
Jan 20, 2006, 1:24:47 PM1/20/06
to
On 20 Jan 2006 06:21:48 -0800, "Ron Peterson" <r...@shell.core.com>
wrote:

>ro...@telus.net wrote:
>> On 19 Jan 2006 13:01:01 -0800, "Ron Peterson" <r...@shell.core.com>
>> wrote:
>
>> >Land may not be capital, but improvements are. And since improved land
>> >may be indistinguishable from unimproved land,
>
>> ?? No, of course it is distinguishable. What are you talking about?
>
>If rocks are removed from tillable soil to make it capable of growing
>crops, it has been improved at the cost of human labor. But that soil
>will be indistinguishable from soil that didn't have rocks in the first
>place.

So? It will be distinguishable from soil in the same area that did
not have the rocks removed.

-- Roy L

ro...@telus.net

unread,
Jan 20, 2006, 1:35:01 PM1/20/06
to
On 20 Jan 2006 04:30:21 -0800, "Quirk" <qu...@syntac.net> wrote:

>ro...@telus.net wrote:
>
>> Of course. But knowing _what_ the price comes from is not the same as
>> explaining _why_ it is at the level it is. Collectibles prices can
>> vary greatly for no apparent reason. The items themselves are
>> completely changeless, only the amount people are willing to pay for
>> them changes. How does Marx explain this?
>
>"By the competition between buyers and sellers, by the relation of the
>demand to the supply, of the call to the offer. " -- Karl Marx, By what
>is the price of a commodity determined?
>
>I'm not a Marxist scholar, but as I understand it Marx is pretty close
>to Smith and Ricardo here.

IOW, he offers no explanation that connects with his labor theory of
value.

>Marx perhaps would also use the word "fetish" here.

IOW, he can't explain it.

-- Roy L

Quirk

unread,
Jan 20, 2006, 2:24:46 PM1/20/06
to
r...@telus.net wrote:

> >I'm not a Marxist scholar, but as I understand it Marx is pretty close
> >to Smith and Ricardo here.

> IOW, he offers no explanation that connects with his labor theory of
> value.

OK, let's try this the other way around, what is your explanation for
collectibles, CEO salaries, and the earnings of professional athletes
and entertainers and in what way do you feel that a Marxist
understanding would be different or lacking?

And what do you mean by "his" labour theory of value, as I said I am no
Marx scholar, how is a Marxist LTV different from that of Classical
Economics?

Cheers.

Ron Peterson

unread,
Jan 20, 2006, 4:59:21 PM1/20/06
to

That's my point. One field contains capital and the other doesn't.

--
Ron

ro...@telus.net

unread,
Jan 21, 2006, 3:51:29 PM1/21/06
to
On 20 Jan 2006 13:59:21 -0800, "Ron Peterson" <r...@shell.core.com>
wrote:

>ro...@telus.net wrote:
>> On 20 Jan 2006 06:21:48 -0800, "Ron Peterson" <r...@shell.core.com>
>> wrote:
>
>> >If rocks are removed from tillable soil to make it capable of growing
>> >crops, it has been improved at the cost of human labor. But that soil
>> >will be indistinguishable from soil that didn't have rocks in the first
>> >place.
>
>> So? It will be distinguishable from soil in the same area that did
>> not have the rocks removed.
>
>That's my point. One field contains capital and the other doesn't.

And they are distinguishable, which is my point.

-- Roy L

Ron Peterson

unread,
Jan 21, 2006, 8:19:51 PM1/21/06
to

ro...@telus.net wrote:
> On 20 Jan 2006 13:59:21 -0800, "Ron Peterson" <r...@shell.core.com>
> wrote:
>
> >ro...@telus.net wrote:
> >> On 20 Jan 2006 06:21:48 -0800, "Ron Peterson" <r...@shell.core.com>
> >> wrote:

> >> >If rocks are removed from tillable soil to make it capable of growing
> >> >crops, it has been improved at the cost of human labor. But that soil
> >> >will be indistinguishable from soil that didn't have rocks in the first
> >> >place.

> >> So? It will be distinguishable from soil in the same area that did
> >> not have the rocks removed.

> >That's my point. One field contains capital and the other doesn't.

> And they are distinguishable, which is my point.

How are they distinguishable other than having different histories?

--
Ron

ro...@telus.net

unread,
Jan 21, 2006, 9:07:38 PM1/21/06
to
On 20 Jan 2006 11:24:46 -0800, "Quirk" <qu...@syntac.net> wrote:

>r...@telus.net wrote:
>
>> >I'm not a Marxist scholar, but as I understand it Marx is pretty close
>> >to Smith and Ricardo here.
>
>> IOW, he offers no explanation that connects with his labor theory of
>> value.
>
>OK, let's try this the other way around, what is your explanation for
>collectibles, CEO salaries, and the earnings of professional athletes
>and entertainers and in what way do you feel that a Marxist
>understanding would be different or lacking?

My explanation is that neither labor content nor production cost are
inputs in deciding market value. The actual relationship is vice
versa.

>And what do you mean by "his" labour theory of value, as I said I am no
>Marx scholar, how is a Marxist LTV different from that of Classical
>Economics?

Marx introduced the distinction between labor and "labor power."

-- Roy L

ro...@telus.net

unread,
Jan 22, 2006, 1:28:47 AM1/22/06
to
On 21 Jan 2006 17:19:51 -0800, "Ron Peterson" <r...@shell.core.com>
wrote:

?? One has more rocks than the other. Duh.

-- Roy L

Robert Vienneau

unread,
Jan 22, 2006, 1:55:41 AM1/22/06
to
In article <43ccf06e$0$25239$a826...@reader.corenews.com>, "Dan in
Philly" <dj...@aol.com> wrote:

> "H. Economus" wrote in message ...
>
> > I'm inclined to disagree with your terminology. What you are
> > referring to seem to be restrictions rather than assumptions.

> True. I just wasn't sure how to separately identify the initial
> 'assumptions' of a model from the subsuequent 'restrictions,' when I
> didn't
> have a good definition of neoclassical.

> > Neoclassical assumptions would include statements about behaviour such
> > as (i) consumers maximize utility, (ii) firms maximize profits, and
> > (iii) markets clear.

> That sounds like a good definition of neoclassical. thanks.

Some readers might read Dan as suggesting a definition of
"neoclassical economics", such as a paraphrase of E. Roy Weintraub's,
hadn't previously been put forth on this thread prior to the post to
which Dan is responding. If so, they would be misled by Dan.

> > My sense is that you are working in time series modeling

> Yes. My main interest is in business cycles.

H. Economus continued that sentence:

"...where the
emphasis seems to be on arriving at a generating process that mimicks
the properties of existing time series, rather than on arriving at a
deeper understanding of the economy. My impression is that using
microfoundations amounts to little more than an elaborate
justification for using certain functional forms and relationships.
Why are microfoundations, which do not follow from advanced theory,
given preference over other ad hoc approaches that do not follow from
stories about individual optimization?"

For some reason, Dan deleted these questions directed his way. Nor
can his post be said to have addressed them.

> > Imposing structure on utilty functions,
> > production functions, etc. amounts to introducing a series of
> > additional restrictions on the general model.

> True. I wonder: after imposing restrictions (e.g. one good, or maybe a
> dozen
> goods, instead of thousands of goods) would the model still be called
> 'neoclassical?'
> (this may be another terminology issue)

Why would a special case of a neoclassical model not be called
"neoclassical"?

> > In any case, how do you
> > empirically "verify" a one good model

> I guess if it could predict a recession (perhaps taking monetary and
> fiscal
> policy as exogenous) that would be pretty good.

H. Economus continued that sentence:

"... when simple observation shows
that there are multiple goods? On the basis of the empirical
predictions? While the supply in a single good model can be defined
in terms of a physical quantity, how does one even meaningfully talk
about a single measure of supply in a multiple good world? The common
approach (a constant dollar valuation) is suspect, in so far as that
it involves prices, which are presumably jointly determined with the
interest rate, at least in the reference year. In any case,
macroeconomists seem to prefer to ignore the findings of either the
aggregation literature or the outcomes of the Cambridge Controversies,
as these findings generate serious objections to substantial portions
of the existing research agenda."

For some reason, Dan deleted these questions directed his way. Nor
can his post be said to have addressed them.

> PS: thanks for this reference
> http://dept.econ.yorku.ca/~avicohen/Linked_Documents/JEP_Cohen_Harcourt.pd
> f
-----------------------------------------------
On 10 Jan, Dan from Philly wrote:

"That's why I only work with macro-econometric models. They're far
from perfect, but better than the hyper-theoretic stuff."

H. Economus responded:

"I don't see why. Are macro-econometric models with so-called
microfoundations an attempt to explain what causes a business cycle
or simply an attempt to construct a data generating process that
matches the various moments of time series of macro-variables? If
the later is true, why are techniques based on models of optimization
to preferred to more ad hoc methods, say based on genetic algorithms
and the like? If the concept of a quantity of capital is not
well-defined, is a model where the interest rate depend on marginal
product of capital justifiable?"

Dan, of course, did not respond to these questions directed his way.

H. Economus also wrote in that post:

"I think the real point is that the existence of multiple equilibria,
etc., imply that the most general microeconomic model does not impose
any testable restrictions on the relationships between various
economic variables. Applied models with sharp predictions are only
obtained by imposing further restrictions to the structure of the
model; exactly what is being imposed is often not explicity stated.
Economists will often construct models ex post to explain some
"stylized fact"', which generally requires choosing specific forms of
various functions (production, utility, etc.) to match the
relationship implied by the "fact". The circumstances that would give
rise to these more restrictive forms are not outlined."

Dan, of course, did not respond.
-----------------------------------------------------
On 11 Jan, H. Economus wrote:

"One of the papers that Robert has cited in the past that (I think)
is worth a read is:

Kirman, Alan, 1989. "The Intrinsic Limits of Modern Economic Theory:
The Emperor Has No Clothes," Economic Journal, Royal Economic Society,
vol. 99(395), pages 126-39.

The point, as I understand it, is that the most general model (with
multiple goods and agents and a minimum of restrictions on
preferences, technology, etc.) has no empirical implications, as the
structure is insufficient to impose restrictions on the relationships
between endogenous variables. Applied economists work with more
restrictive models that yield sharp predictions. However, the
restrictions often involve reducing the dimensionality of the model
(agents are homogenous, there are only two factors of production,
etc.) without explaining what assumptions could be applied to the
general model that would be sufficient to arrive at the restricted
model. A number of ad hoc restrictions can be made to account for
any observable phenomena with a "neoclassical" model. However,
justification for the restrictions does not follow from the general
theory; in fact there are a number of "negative" results in the theory
literature that suggest that aggregate production functions,
representative agents, etc., cannot be justifed unless incredibly
stringent restrictions are placed on the general model (assuming
capital to labour ratios are the same for all sectors, etc.)."

Dan, of course, did not respond.
-------------------------------------
On 14 Jan, Dan in Philly wrote:

"Robert claims that 'neoclassical' models don't necessarily deliver
neoclassical results. But again, this depends on those 'neoclassical'
assumptions. Anyone can make a simple model in which prices do reflect
scarcity, or the interest rate equals the MPK."

H. Economus responded:

"The problem is that such models only have a single capital good,
implying that the capital stock is a physical quantity with a unit
of measurement that is invariant to endogenous variables in the model
(the wage and interest rate). Once a physical quantity is replaced by
a value measure (which is what is done empirically), the logic
collapses; the capital stock as a value is no longer an exogenous
variable in any meaningful sense. Economists talk about a unit of
capital, but they are vague about what the unit *is*, to the point
that if you pin them down on the matter, they don't seem to have an
answer. (See Landsburg's surreal discussion about the number of power
tools.) The key, though, is that the unit has to be invariant to the
endogenous variables for the exercises in trade and macroeconomic
models to be logically coherent."

Dan, of course, did not respond to these observations directed his way.

-------------------------------------
On 14 Jan, Dan in Philly wrote:

"Lastly, the claim that pro-neoclassical-results people are somehow
lying/dishonest/misinformed is just wrong."

Quirk

unread,
Jan 22, 2006, 1:01:49 PM1/22/06
to
Robert Vienneau wrote:

> H. Economus responded:

[...]

> Economists talk about a unit of
> capital, but they are vague about what the unit *is*, to the point
> that if you pin them down on the matter, they don't seem to have an
> answer.

This capital aggregation stuff is over my head, if it's a money value
unit could, it be defined as follows:

money value = market price for rental of the capital divided by the the
rate of interest.

Or even simply the current market resale value of the item? Or am I
missing the point? I'm not realy clear on what this unit is needed to
measure.

h. economicus

unread,
Jan 22, 2006, 3:51:44 PM1/22/06
to

The neoclassical theory of distribution asserts that the interest rate
is related to the supply of capital. The more "capital" there is,
however this is to be measured, the lower will the interest rate be.
The theory only makes sense if one can refer to a measure of the
supply that does not in turn depend on the variable being determined.

Now consider the problem with using a money value as a measure of
supply. Given income paid out to capital, you can imput a money
(market) value to the capital stock, using the interest rate as you
outline above:

Capital stock ($) = income paid to capital ($)/interest rate

However, your measure of supply can only be calculated once you know
the interest rate. The problem is the measure of supply can only be
calculated once the variable that is being explained (the interest
rate) is known. In a number of models used by economists, such as the
Heckscher-Ohlin model of international trade, the presentation implies
that countries have endowments of "capital" that are measurable and
can compared without any reference to the rental rate of capital or
the interest rate.

Ron Peterson

unread,
Jan 22, 2006, 5:18:41 PM1/22/06
to

Not after the rocks have been removed. I was comparing two fields where
one originally had rocks and the other didn't. After the rocks were
removed from the rocky field, neither field had rocks. Capital was
added to the rocky field, but not the one that didn't have rocks.

--
Ron

ro...@telus.net

unread,
Jan 23, 2006, 2:13:08 AM1/23/06
to
On 22 Jan 2006 14:18:41 -0800, "Ron Peterson" <r...@shell.core.com>
wrote:

>ro...@telus.net wrote:
>> On 21 Jan 2006 17:19:51 -0800, "Ron Peterson" <r...@shell.core.com>
>> wrote:
>
>> >How are they distinguishable other than having different histories?
>
>> ?? One has more rocks than the other. Duh.
>
>Not after the rocks have been removed. I was comparing two fields where
>one originally had rocks and the other didn't. After the rocks were
>removed from the rocky field, neither field had rocks. Capital was
>added to the rocky field, but not the one that didn't have rocks.

<sigh> There is a natural background level of rockiness in any given
area, which typically does not vary much from field to field. Whether
a particular neighboring field has already been picked of rocks or not
is irrelevant to the fact that any given field's rockiness can be
compared to the area's background level of rockiness to distinguish
the picked fields from unpicked ones. Even if a particular field had
more rocks than is typical for the area, the normal practice is to
just pile the picked rocks in a convenient place nearby, so it is
still easy to say, "OK, picking those 20 tons of rocks would cost
about $1K, so that much capital has been invested in improving this
field."

Things only get complicated when e.g., rocks have been moved from one
field to another in the past, and capital must be invested just to
bring the rock dump field down to the background level of rockiness.
But in principle, close examination can always distinguish capital
improvements from natural qualities of the land. It just may not be
worthwhile in any given instance to make that determination.

-- Roy L

Quirk

unread,
Jan 23, 2006, 4:05:42 PM1/23/06
to
> The neoclassical theory of distribution asserts that the interest rate
> is related to the supply of capital.

Being a dilettante, my understanding tends to be somewhat diverse and
not relating to any one specific school of thought, so I make no claims
of understanding let alone supporting the neoclassical theory. Thanks
for explaining this to me. This reply will not be well formed, as I'm
still grasping the concept being discussed here, so please forgive my
random thoughts and some more questions.

It seems to be that free market Interest would be dependent on the
ratio of the supply of surplus production (savings), versus the demand
for credit, Capital formation being only one basis for this demand.
However, given that Credit creation does not operate in a free market
but rather is a factor of banking, fiscal and monetary policy, Interest
is not a measurement that results from the free market, but a
policy-determined mechanism of control in a non-free market. Currently,
Interest is a dictum not a datum.

It seems to me that If interest rate and capital are "related" this
would be an asynchronous relationship, political control of the
interest rate could affect the supply of Capital by encouraging or
discouraging borrowing for Capital formation, however, I don't
understand how the supply of Capital can impact the interest rate, only
how it can effect the price of Capital.

> The more "capital" there is,
> however this is to be measured, the lower will the interest rate be.

But regardless of how I measure Capital, even if I measure it by mass,
I fail to see what logical basis there is for the stock of capital to
impact the time value of money (interest in a free market) or the
current policy-set interest rate. Even without the capital aggregation
controversy, what is the logic behind the neoclassical argument? How
can the stock of Capital change either liquidity preference or
banking/monetary policy?

> Now consider the problem with using a money value as a measure of
> supply. Given income paid out to capital, you can imput a money
> (market) value to the capital stock, using the interest rate as you
> outline above:
>
> Capital stock ($) = income paid to capital ($)/interest rate
>
> However, your measure of supply can only be calculated once you know
> the interest rate. The problem is the measure of supply can only be
> calculated once the variable that is being explained (the interest
> rate) is known. In a number of models used by economists, such as the
> Heckscher-Ohlin model of international trade, the presentation implies
> that countries have endowments of "capital" that are measurable and
> can compared without any reference to the rental rate of capital or
> the interest rate.

In this discussion I have taken it to mean that we are discusing
Interest in the financial sense, the discount rate of debt, one of the
confounding things about discussing Interest is that it appears to have
two separate definitions, economic interest, which is actually the
yield of Capital, literally the amount of extra product that results
from adding given Capital to production, then their is financial
Interest, the time value of money, the rate at which money is lent. The
stock (measurable or not) of Capital clearly affects the former, but
does not directly affect that later.

So, is this discussion regarding whether economic interest affects
financial interest?

Thank you for your patience, I am not an Economist, so I may be missing
the point.

I've never understood why the same word, "Intetest," is used for such
apparently separate phenomenon, capital yield and liquidity preference.
Seems to lead to much confusion.

Does the theory presume that if you have more Capital that you
therefore have more surplus product, and thus more savings, thus
reducing liquidity preference?

daveb...@yahoo.com

unread,
Jan 29, 2006, 9:07:09 AM1/29/06
to
ro...@telus.net wrote:
> On 22 Jan 2006 14:18:41 -0800, "Ron Peterson" <r...@shell.core.com>
> wrote:
>
> >ro...@telus.net wrote:
> >> On 21 Jan 2006 17:19:51 -0800, "Ron Peterson" <r...@shell.core.com>
> >> wrote:
> >
> >> >How are they distinguishable other than having different histories?
> >> >> ?? One has more rocks than the other. Duh.
> >
> >Not after the rocks have been removed. I was comparing two fields where
> >one originally had rocks and the other didn't. After the rocks were
> >removed from the rocky field, neither field had rocks. Capital was
> >added to the rocky field, but not the one that didn't have rocks.
>
> <sigh> There is a natural background level of rockiness in any given
> area, which typically does not vary much from field to field. Whether
and/> a particular neighboring field has already been picked of rocks

or not
> is irrelevant to the fact that any given field's rockiness can be
> compared to the area's background level of rockiness to distinguish
> the picked fields from unpicked ones. Even if a particular field had
> more rocks than is typical for the area, the normal practice is to
> just pile the picked rocks in a convenient place nearby, so it is
> still easy to say, "OK, picking those 20 tons of rocks would cost
> about $1K, so that much capital has been invested in improving this
> field."
>
> Things only get complicated when e.g., rocks have been moved from one
> field to another in the past, and capital must be invested just to
> bring the rock dump field down to the background level of rockiness.
> But in principle, close examination can always distinguish capital
> improvements from natural qualities of the land. It just may not be
> worthwhile in any given instance to make that determination.
>
> -- Roy L


How does this example of rocks in fields demonstrate anything?
What is the capital value of land which has had some labor expended on
removing rocks? This labor may turn out to be worthless if what is
wanted is a rock garden. The value of modern landed property is the
'capitalised' value of the commodities calculated to be produced on it.


If the price of a commodity is determined by its value, plus or minus
the value that is redistributed to other commodity sellers whose cost
of production differs, then in the case of land the value of the
commodity is determined by socially necessary labor time (SNLT)
required to produce it, plus or minus the fertility of the land and its
proximity to market.

Neo-classicals will always determine the price of a commodity by its
supply and demand curves. This does not explain very much.

In the first place explaining price by supply and demand ignores the
social relations that determine supply and demand. Under capitalism the
use-value of commodities can only be consumed if their exchange value
is realised (food stamps and soup kitchens are not typical). Demand
for wage goods is determined by the value of labor power itself as a
commodity. Supply of wage goods is determined by the realisation of
surplus-value since no capitalist will invest capital willingly unless
s/he can make a profit.

The idea advanced on this thread that actors in the market can
monopolise land or other value creating elements like knowledge to
derive a rent from other producers, is for Marx always a secondary
feature of capitalism since it involves a redistribution of surplus
value already created according to its own laws of motion.

Lenin seemed to give monopoly a larger role in recognising that large
firms formed blocs to control the market against their rivals. What's
more their governments went to war over scarce resouces like land and
oil. However, the monopolies of his day, the Rockefellers, Carnegies,
Krupps, etc even backed by their powerful states, could not monopolise
industries for more than a decade or two before being displaced by
rivals. Ford, GM etc are today being displaced by Toyota, and tomorrow
Toyota will be displaced by Korean or more likely Chinese auto makers.
In other words monopoly tries but cut throat competition replies.

While real monopolies of land, oil and other scarce resources will
always be a source of differential rent plundered by political
manipulation and war, they do not drive the development of capitalism.
They may be necessary but they are not sufficient.

What drives capitalism is the SNLT required to produce the most
hightech consumer durables like computers and autos. The global
division of labor that has developed as the result includes a breaking
down of borders so that the US has a large migrant reserve army living
in places like downtown New Orleans along with a high paid
professional, technical and administrative work-force (PTA) living in
'middle class' suburbs.

Some of these are high level managers. Some Marxists think that
managers are defined by their role in the division of labor in
performing tasks formerly done by the capitalists.This makes them
functionally capitalists. For example CEOs. But this is to reduce class
to questions of power rather than of relations to production. Where to
stop? Supervisors or low level workteam bosses are also organising the
workplace on behalf of capital. Individual workers who perform tasks
according to the bosses requirements are also serving the boss. Such
arguments are not Marxist but bourgeois sociology.

What if the level of the wage is so high that it clearly comes from the
redistribution of the surplus-value of wage labor? No again, because
that is also the case with un-productive workers who are paid fully out
of capitalist revenue. The definition that CEOs have to meet to be
capitalists is that they do not have to work for a salary and are
independently wealthy from shares, land, bank accounts etc. But then
they wouldnt be CEOs. Technically, if they are rich enough to live off
their capital but choose to be CEOs because the rate of return on their
knowledge exceeds that of their capital, then they could be thought of
(bizarrely) as very high paid workers. If this is a sign as Robert
suggests of a power shift to labor in the US, then it is a very elitist
(or more properly lumpen) shift that does not include any power sharing
with the rest of the working class.

What about the layers of PTA workers who often command high salaries
for their skills? Do they reflect a power shift to workers or a change
in capitalist social relations? An obvious point would be that layers
of high paid workers are not new in the US. A labor aristocracy of male
industrial workers in the steel and auto industries existed for much of
the 20th century commonly referred to a 'middle class workers'. They
are now facing a rapid decline from the 'middle class' into the 'lower
working class' of K-Mart 'associates'. In other words their historic
'power' was determined ultimately by capital.

Other sectors of PTA workers have replaced them as the aristocracy but
for how long? US imperialism is losing its ability to protect its
middle classes. Even IT workers are looking at shifting to India if
that's where the jobs are. Maybe such workers will discover their real
power and actively oppose US imperialists goals. Is this likely?

If PTA workers wages represent the value of their labor power (its cost
of production and reproduction) then they are still workers. They may
be the most highly exploited workers if the value of the labor-power is
relatively small compared to the surplus-value they produce. There may
be some 'social capital' involved in getting places in good schools etc
but this is hardly exacting rent or power from the capitalist.

In fact as as footnote, Marx already anticipated a wide division of
labor including the 'scientist' and the 'street sweeper' all combining
as the 'general laborer' (to Marx this question was so obvious or
simple it his best treatment of it did not appear in the first editions
of Capital and was not available in English until the Penguin edition
came out with the Resultat in 1976) and the fact that 'social classes'
distinguished by their 'revenue' were a relatively minor distributional
feature of capitalism (which is why he wrote a small fragment,
published at the end of Volume 3 precisely at the level of abstraction
where the introduction of the distribution of revenue was appropriate).


DB

Hunter Watson

unread,
Jan 29, 2006, 2:27:24 PM1/29/06
to

daveb...@yahoo.com wrote:

Dave is obviously an amateur and I'm even more so, rejecting as I have
the utility of reading much Marx. But this response to Grundrisse bears
at least indirectly on what Dave is arguing. I'm in the parentheses.

The Grundrisse

NOTEBOOK III
29 November - c. mid-December 1857, continued

Surplus value and productive force. Relation when these
increase.-Result.-Productive force of labour is productive force of
capital.-In proportion as necessary labour is already diminished, the
realization of capital becomes more difficult

------------------------------------------------------------------------

We have seen:

(But Hunter is not willing to presume that, )

The worker needs to work only e.g. half a working day in order to live
a whole one; and hence to be able to begin the same process again the
next day.

(Hunter is not willing to presume that workers in the West are paid for
only half a day's work as they tend to go to work in expensive,
insured, well maintained pick-up trucks with good paint and sexy motor
sports decals and are frequently well dressed too so long as we make no
provision for taste.They also frequently stop at the pub for a couple
of pints with their mates before going home to the wife, a practice
manifestly impossilbe on a subsistence income. No theoretical proof
from 1857 can undo these realities of western life. Accordingly there
must be something wrong with the proof when applied to the present
day.)

Only half a day's work is objectified in his labouring capacity-to
the extent that it exists in him as someone alive, or as a living
instrument of labour. The worker's entire living day (day of life) is
the static result, the objectification of half a day's work.

(But no, the *entire* day's work is objectified in his labouring
capacity in the sense that 100% of it was in fact delivered and that
whole benefits not only the worker in the form of wages but as it also
benefits the entire enterprise including owners, managers and other
laborers in both direct and indirect ways. It is really a capitalist
commune in which everyone contributes to the success of everyone else.)

By appropriating the entire day's work and then consuming it in the
production process with the materials of which his capital consists,
but by giving in exchange only the labour objectified in the
worker-i.e. half a day's work-the capitalist creates the surplus
value of his capital; in this case, half a day of objectified labour.

("By contracting for the entire day's work..." would be a more
accurate phrase. Politics enters even here.... And there is here as of
yet no basis for the conclusion that "unobjectified labor" is the
only source of enhancement of capital. The factory laborer can not be
said to create such a surplus any more than anyone else who contributes
to the success of the business including the owner who may well be
working a lot harder and more intelligently than the laborer.)

Now suppose that the productive powers of labour double, i.e. that the
same labour creates double the use value in the same time.

(He apologises, but Hunter can't accept "use value" as the bench
mark as market forces consist of many more variables, some of them
psychological, ethnic, cultural, panic-driven, etc.)

Marx continues: (For the moment, use value is defined in the present
relation as only that which the worker consumes in order to stay alive
as a worker; the quantity of the means of life for which, through the
mediation of money, he exchanges the labour objectified in his living
labouring capacity.)

(But Hunter will not accept anything for the moment as Marx might well
slip in an unwarrented presumption or suppressed premise.)

The worker would then have to work only 1/4 day in order to live a
full day; the capitalist then needs to give the worker only 1/4 day's
objectified labour in exchange, in order to increase his surplus value
in the production process from 1/2 to 3/4; so that he would gain 3/4
day's objectified labour instead of 1/2.

(Quite fascile this. First is the supressed premise that regardless of
increased productivity and regardless of anything else whatever, "the
capitalist then needs to give the worker only 1/4 days
"objectified" labor instead of 1/2." This presumes the owner to
be absolute master of all variables in the system relating to the labor
sector of his business. I don't believe that to be accurate today and
don't even believe it was accurate across the board in 1860s Brittain
and Germany.)

At the end of the production process, the value of the capital would
have risen by 3/4 instead of by 2/4.

(This presumes a direct correlation between the value of capital and
increased productivity which sometimes actually drives marketplace
prices down. Hunter doesn't believe that's how businesses are
valued either, especially when an entire sector succeeds in improving
worker efficiency.)

Thus the capitalist would have to make the workers work only 3/4 day,
in order to add the same surplus value-that of 1/2 or 2/4 objectified
labour-to his capital. However, as representative of the general form
of wealth-money-capital is the endless and limitless drive to go
beyond its limiting barrier.

(Money is inanimate. It has no drive. Humans do. Marx subtly demonizes
the entire economic process here.)

Every boundary [Grenze] is and has to be a barrier [Schranke] for it.
[48] Else it would cease to be capital-money as self-reproductive. If
ever it perceived a certain boundary not as a barrier, but became
comfortable within it as a boundary, it would itself have declined from
exchange value to use value, from the general form of wealth to a
specific, substantial mode of the same. Capital as such creates a
specific surplus value because it cannot create an infinite one all at
once; but it is the constant movement to create more of the same. The
quantitative boundary of the surplus value appears to it as a mere
natural barrier, as a necessity which it constantly tries to violate
and beyond which it constantly seeks to go. [*] Therefore (quite apart
from the factors entering in later, competition, prices etc.) the
capitalist will make the worker work not only 3/4 day, because the 3/4
day bring him the same surplus value as the whole day did before, but
rather he will make him work the full day; and the increase in the
productive force which allows the worker to work for 1/4 day and live a
whole day now expresses itself simply in that he now has to work 3/4
day for capital, whereas before he worked for it only 2/4 day.

(I repeat my objection to the picture of the employer as omnipotent and
absolutely amoral with no interest in workplace morale, inclined to
determine everything as to hours and conditions of labor without taking
anything else into consideration except short term advantage. That
certainly is not even remotely true in the West today even if it might
have been for relatively fleeting periods in the 18th or 19th Century.
Today workers are unionized or at least have allies in government
bureaucracies which control hours, minimum rates of pay, working
conditions, sexual harrassment, etc.)

The increased productive force of his labour, to the extent that it is
a shortening of the time required to replace the labour objectified in
him (for use value, subsistence), appears as a lengthening of the time
he labours for the realization of capital (for exchange value). From
the worker's standpoint, he now has to do a surplus labour of 3/4 day
in order to live a full day, while before he only had to do a surplus
labour of 2/4 day. The increase, the doubling of the productive force,
has increased his surplus labour by 1/4 [day].

(Even if Hunter were to agree with the suppressed premises here which
if I recall correctly are dealt with in Capital, he can't swallow the
obvious premise that the worker owns the increased product of his labor
even after having contracted to part with it in full in exchange for a
given wage. Marx is turning the world upside down for political
reasons.)

One remark here: the productive force has doubled, the surplus labour
the worker has to do has not doubled, but has only grown by 1/4 [day];
nor has capital's surplus value doubled; but it, too, has grown by only
1/4 [day]. This shows, then, that surplus labour (from the worker's
standpoint) or surplus value (from capital's standpoint) does not grow
in the same numerical proportion as the productive force. Why? The
doubling in the productive force is the reduction of necessary labour
(for the worker) by 1/4 [day], hence also the [increase of the]
production of surplus value by 1/4, because the original relation was
posited as 1/2. If the worker had to work, originally, 2/3 day in order
to live one full day, then the surplus value would have been 1/3, and
the surplus labour the same. The doubling in the productive force of
labour would then have enabled the worker to restrict his necessary
labour to half of 2/3 or 2 ÷ (3 Å~ 2), 2/6 or 1/3 day, and the
capitalist would have gained 1/3 [day] of value. But the total surplus
labour would have become 2/3 [day]. The doubling of the productive
force, which resulted in 1/4 [day] surplus value and surplus labour in
the first example, would now result in 1/3 [day] surplus value or
surplus labour. The multiplier of the productive force-the number by
which it is multiplied-is therefore not the multiplier of surplus
labour or of surplus value; but rather, if the original relation of the
labour objectified in the labour price was 1/2 of the labour
objectified in 1 working day, which always appears as the limit, [**]
then the doubling is equal to the division of 1/2 by 2 (in the original
relation), i.e. 1/4. If the original relation was 2/3, then the
doubling equals the division of 2/3 by 2 = 2/6 or 1/3. The multiplier
of the productive force is thus never the multiplier but always the
divisor of the original relation, not the multiplier of its numerator
but of its denominator. If it were the former, then the multiplication
of the productive force would correspond to the multiplication of the
surplus value. Instead, the surplus value is always equal to the
division of the original relation by the multiplier of the productive
force. If the original relation was 8/9, i.e. the worker needs 8/9 of a
working day to live, so that capital gains only 1/9 in its exchange
with living labour, if surplus labour equals 1/9, then the worker can
now live from half of 8/9 of a working day, i.e. with 8/18 = 4/9
(whether we divide the numerator or multiply the denominator the same
thing), and the capitalist, who orders a full day's work, would have a
total surplus value of 4/9 working day; subtracting the original
surplus value of 1/9 from this leaves 3/9 or 1/3. The doubling of the
productive force therefore = here an increase in surplus value or
surplus time by 1/3. This is simply because the surplus value is always
equal to the relation between the whole working day and that part of
the working day necessary to keep the worker alive. The unit in which
surplus value is calculated is always a fraction, i.e. the given part
of a day which exactly represents.the price of labour. If that is =
1/2, then the increase in the productive force = the reduction of
necessary labour to 1/4; if it is = 1/3, then reduction of necessary
labour to 1/6; hence in the first, the total surplus value = 3/4; in
the second = 5/6; the relative surplus value, i.e. relative to that
present before, in the first case = 1/4, in the second = 2/6 or 1/3.
Therefore the value of capital does not grow in the same proportion as
the productive force increases, but in the proportion in which the
increase in the productive force, the multiplier of productive force,
divides the fraction of the working day which expresses the part of the
day belonging to the worker. The extent to which the productive force
of labour increases the value of capital thus depends on the original
relation between the portion of labour objectified in the worker and
his living labour. This portion is always expressed as a fractional
part of the whole working day, 1/3, 2/3, etc. The increase in
productive force, i.e. its multiplication by a given amount, is equal
to a division of the numerator or the multiplication of the denominator
of this fraction by the same amount. Thus the largeness or smallness of
the increase of value depends not only on the number which expresses
the multiplication of the productive force, but equally on the
previously given relation which makes up the part of the work day
belonging to the price of labour. If this relation is 1/3, then the
doubling of the productive force of the working day = a reduction of
the same to 1/6; if it is 2/3, then reduction to 2/6. The objectified
labour contained in the price of labour is always equal to a fractional
part of the whole day; always arithmetically expressed as a fraction;
always a relation between numbers, never a simple number. If the
productive force doubles, multiplies by 2, then the worker has to work
only 1/2 of the previous time in order to get the price of labour out
of it; but how much labour time he still needs for this purpose depends
on the first, given relation, namely on the time which was required
before the increase in productive force. The multiplier of the
productive force is the divisor of this original fraction. Value or
surplus labour therefore does not increase in the same numerical
relation as productive force. If the original relation is 1/2 and the
productive force is doubled, then the necessary (for the worker) labour
time reduces itself to 1/4 and the surplus value grows by only 1/4. If
the productive force is quadrupled, then the original relation becomes
1/8 and the value grows by only 1/8. The value can never be equal to
the entire working day; i.e. a certain part of the working day must
always be exchanged for the labour objectified in the worker. Surplus
value in general is only the relation of living labour to that
objectified in the worker; one member of the relation must therefore
always remain. A certain relation between increase in productive force
and increase of value is already given in the fact that the relation is
constant as a relation, although its factors vary. We see therefore, on
one side, that relative surplus value is exactly equal to relative
surplus labour; if the working day was 1/2 and the productive force
doubles, then the part belonging to the worker, necessary labour,
reduces itself to 1/4 and the new value is also exactly 1/4; but the
total value is now 3/4. While surplus value rose by 1/4, i.e. in the
relation of 1:4, the total surplus value = 3/4 = 3:4. Now if we assume
that 1/4 was the original necessary working day, and a doubling in
productive force took place, then necessary labour is reduced to 1/8
and surplus labour or surplus value exactly = 1/8 = 1:8. The total
surplus value by contrast = 7:8. In the first example the original
total surplus value = 1:2 (1/2) and then rose to 3:4; in the second
case the original total surplus value was 3/4 and has now risen to 7:8
(7/8). In the first case it has grown from 1/2 or 2/4 to 3/4; in the
second from 3/4 or 6/8 to 7/8; in the first case by 1/4, in the second
by 1/8; i.e. in the first case it rose twice as much as in the second:
but in the first case the total surplus value is only 3/4 or 6/8 while
it is 7/8 in the second, i.e. 1/8 more.

Let necessary labour be 1/16, then total surplus value = 15/16; which
was 5/8 = 10/16 in the previous relation; thus the total surplus value
presupposed is by 5/16 higher than in the previous case. [50] Now let
the productive force double, then necessary labour = 1/32; which was
previously = 2/32 (1/16); hence surplus time has risen by 1/32, surplus
value by the same proportion. As regards the total surplus value, which
was 15/16 or 30/32, this is now 31/32. Compared to the earlier relation
(where necessary labour was 1/4 or 8/32), the total surplus value is
now 31/32, whereas it was only 30/32 earlier, hence grew by 1/32. But
regarded relatively, the doubling of production increased it in the
first case by 1/8 or 4/32, while it has now increased by only 1/32,
i.e. by 3/32 less.

If necessary labour had already been reduced to 1/1,000, then the total
surplus value would be = 999/1,000. Now if the productive force
increased a thousandfold, then necessary labour would decline to
1/1,000,000 working day and the total surplus value would amount to
999,999/1,000,000 of a working day; whereas before this increase in
productive force it amounted to only 999/1,000 or 999,000/1,000,000; it
would thus have grown by 999/1,000,000 = 1/11 (with the addition of 1
÷ (11 + 1/999 ), [51] i.e. the thousandfold increase in productive
force would have increased the total surplus by not even 1/11, i.e. not
even by 3/33, whereas in the previous case it rose by 1/32 owing to a
mere doubling of the productive force. If necessary labour falls from
1/1,000 to 1/1,000,000, then it falls by exactly 999/1,000,000 (for
1/1,000 = 1,000/1,000,000), i.e. by the surplus value.

(The premise that the owner is an absolute omnipotent beast and that
the worker will always be paid only subsistence wages no matter what,
does not change here. Nevertheless, against my better judgment I have
followed this fractionating quite carefully. Throughout I was thinking,
error in, error out. The system is mechanistic and its *formal*
validity is tied cheek by jowel directly to its presumptions.
Accordingly, I ask what would be the impact on these calculations for
the real present world if it were to be found that as a matter of fact
workers' wages and living standards and benefits rose steadily
overall for the next century and a half, and throughout most of that
time were well above subsistence standards? American workers were
buying Model Ts and As by the early 1920s, only something over 60 years
later.)

If we summarize this, we find:
Firstly: The increase in the productive force of living
labour increases the value of capital (or diminishes the value of the
worker) not because it increases the quantity of products or use values
created by the same labour-the productive force of labour is its
natural force-but rather because it diminishes necessary labour,
hence, in the same relation as it diminishes the former, it creates
surplus labour or, what amounts to the same thing, surplus value;
because the surplus value which capital obtains through the production
process consists only of the excess of surplus labour over necessary
labour. The increase in productive force can increase surplus
labour-i.e. the excess of labour objectified in capital as product
over the labour objectified in the exchange value of the working
day-only to the extent that it diminishes the relation of necessary
labour to surplus labour, and only in the proportion in which it
diminishes this relation. Surplus value is exactly equal to surplus
labour; the increase of the one [is] exactly measured by the diminution
of necessary labour.

Secondly: The surplus value of capital does not increase as
does the multiplier of the productive force, i.e. the amount to which
the productive force (posited as unity, as multiplicand) increases; but
by the surplus of the fraction of the living work day which originally
represents necessary labour, in excess over this same fraction divided
by the multiplier of the productive force. Thus if necessary labour =
1/4 of the living work day and the productive force doubles, then the
value of capital does not double, but grows by 1/8; which is equal to
1/4 or 2/8 (the original fraction of the work day which represents
necessary labour) - 1/4 divided by 2, or = 2/8 minus 1/8 = 1/8. (That
value doubles itself can also be expressed, it grows 4/2 [-fold] or
16/8 [-fold]. Its growth would relate to that of the productive force
by 1:16. (That is it!) [52] If the fraction was 1/1,000 and the
productive force increases a thousandfold, then the value of capital
does not grow a thousandfold, but rather by far less than 1/11; it
grows by 1/1,000 - 1/1,000,000, i.e. by 1,000/1,000,000 - 1/1,000,000 =
999/1,000,000.)

Thus the absolute sum by which capital increases its value through a
given increase of the productive force depends on the given fractional
part of the working day, on the fractional part of the working day
which represents necessary labour, and which therefore expresses the
original relation of necessary labour to the living work day. The
increase in productive force in a given relation can therefore increase
the value of capital differently e.g. in the different countries. A
general increase of productive force in a given relation can increase
the value of capital differently in the different branches of industry,
and will do so, depending on the different relation of necessary labour
to the living work day in these branches. This relation would naturally
be the same in all branches of business in a system of free
competition, if labour were simple labour everywhere, hence necessary
labour the same. (If it represented the same amount of objectified
labour.)

(Part of the illusion here is found in this term "objectified
labor". Once laborers were in fact paid more than subsistence it lost
all meaning. That happened very quickly after Marx wrote this stuff. In
an age where a blue collar essentially unskilled auto worker can make
$60,000 USD per year, does it retain any significance at all? In any
event as a result of these brilliant insights, these brilliant
theoretical rigidities, what Marx has given us is tailor-made for
ideologues, a closed system incapable of adjustment to present
reality.)

Thirdly: The larger the surplus value of capital before the
increase of productive force, the larger the amount of presupposed
surplus labour or surplus value of capital; or, the smaller the
fractional part of the working day which forms the equivalent of the
worker, which expresses necessary labour, the smaller is the increase
in surplus value which capital obtains from the increase of productive
force. Its surplus value rises, but in an ever smaller relation to the
development of the productive force. Thus the more developed capital
already is, the more surplus labour it has created, the more terribly
must it develop the productive force in order to realize itself in only
smaller proportion, i.e. to add surplus value-because its barrier
always remains the relation between the fractional part of the day
which expresses necessary labour, and the entire working day. It can
move only within these boundaries. The smaller already the fractional
part falling to necessary labour, the greater the surplus labour, the
less can any increase in productive force perceptibly diminish
necessary labour; since the denominator has grown enormously. The
self-realization of capital becomes more difficult to the extent that
it has already been realized. The increase of productive force would
become irrelevant to capital; realization itself would become
irrelevant, because its proportions have become minimal, and it would
have ceased to be capital. If necessary labour were 1/1,000 and the
productive force tripled, then it would fall to only 1/3,000 or surplus
labour would have increased by only 2/3,000. But this happens not
because wages have increased or the share of labour in the product, but
because it has already fallen so low, regarded in its relation to the
product of labour or to the living work day. [***]

(Whatever imputs mandated the rise in worker's real pay in the late
19th Century, they had not been anticipated by Karl Marx. His closed
system contained flaws which became more obviously fatal as time
passed, as the distance between his presumptions, his premises, and
subsequent reality became greater. But this has been the fate of closed
systems crafted by secular utopians for 2,500 years. One can only
respect the audacity and sheer intellectual power it took to design it,
even though he could not summon up the self-discipline to keep his
political world out of his professional work.)

(All these statements correct only in this abstraction for the relation
from the present standpoint. Additional relations will enter which
modify them significantly. The whole, to the extent that it proceeds
entirely in generalities, actually already belongs in the doctrine of
profit.)

So much in general for the time being: the development of the
productive force of labour-first the positing of surplus labour-is
a necessary condition for the growth of value or the realization of
capital.

(But, Karl, it was only one of many variables and should not have even
been given such a name. And you did not take into account either the
power of labor, even unorganized, and of government and, yes, even of
employers, to change the equation. And change it they did.)

As the infinite urge to wealth, it strives consistently towards
infinite increase of the productive forces of labour and calls them
into being. But on the other hand, every increase in the productive
force of labour-leaving aside the fact that it increases the use
values for the capitalist-is an increase in the productive force of
capital and, from the present standpoint, is a productive force of
labour only in so far as it is a productive force of capital.

(Nothing human is infinite.)

Hunter Watson

Ron Peterson

unread,
Jan 29, 2006, 6:43:45 PM1/29/06
to

daveb...@yahoo.com wrote:
> ro...@telus.net wrote:
> > On 22 Jan 2006 14:18:41 -0800, "Ron Peterson" <r...@shell.core.com>
> > wrote:

> > >Not after the rocks have been removed. I was comparing two fields where
> > >one originally had rocks and the other didn't. After the rocks were
> > >removed from the rocky field, neither field had rocks. Capital was
> > >added to the rocky field, but not the one that didn't have rocks.

> > Things only get complicated when e.g., rocks have been moved from one


> > field to another in the past, and capital must be invested just to
> > bring the rock dump field down to the background level of rockiness.
> > But in principle, close examination can always distinguish capital
> > improvements from natural qualities of the land. It just may not be
> > worthwhile in any given instance to make that determination.

> How does this example of rocks in fields demonstrate anything?

Henry George has the idea of a single tax which only applies to land
and that single tax will optimize the economy. My question is how does
one determine the appropriate value of the land? If a building is added
to the land, the value of the building isn't added to the original
value of the land to determine the tax rate. I find that there is some
ambiguity in determining the value of the land because removing rocks
is a capital expenditure and therefore shouldn't be taxed, but there is
no visible evidence that the capital expenditure was made.

> What is the capital value of land which has had some labor expended on
> removing rocks? This labor may turn out to be worthless if what is
> wanted is a rock garden. The value of modern landed property is the
> 'capitalised' value of the commodities calculated to be produced on it.

The capital invested would correspond to the labor-time that it takes
to clear the field of rocks, say $1,000/acre and the agricultural
production may imply a cleared land value of $2,000 per acre giving the
uncleared land a value of $1,000 per acre. Land that didn't need to be
cleared would have a value of $2,000 per acre.

> While real monopolies of land, oil and other scarce resources will
> always be a source of differential rent plundered by political
> manipulation and war, they do not drive the development of capitalism.
> They may be necessary but they are not sufficient.

OK, but how can the domination of a capitalist economy be shown to by
capital instead of land? Can it be shown that the value of unimproved
land exceeds that of the improvements?

--
Ron

w_b_...@yahoo.com

unread,
Jan 30, 2006, 2:02:22 PM1/30/06
to
Michael Hudson's parents were Trokskyist,
he earned a Ph.D. in economics, and was
funded for several years by the
Georgists. The following is excerpted
from gang8 discussions:-
-----------------------------

From: Hudsonmi@...
Date: Sat Aug 5, 2000 12:40 am
Subject: Re: [gang8] Land

The answer is because for georgists there
is only one dimension -- land. They have
no theory of capital, none of interest.
They don't understand capital gains. When
I tried to statistically illustrate what
you just wrote, Gunnar, they immediately
stopped funding my research and destroyed
all computer records, on the grounds that
such thoughts could only disturb their
neat summary of what Henry George himself
wrote. (He was no economist, believe me,
but an angry Christian ranter who wanted
to be president, but didn't even know how
to go about organizing a support group.)
Best never even to ask why the georgists
don't do something obvious and simple. I
guess I'm sounding like one who's gone
through the meat grinder of trying to
explain something to someone who doesn't
want to learn, eh? Well, think of them as
monetarists.

Michael
---

From: Hudsonmi@...
Date: Mon Aug 28, 2000 1:57 pm
Subject: My little joke

Dear Gang8sters,

Chris asked why I e-mailed some "posers"
to Mason Gaffney and the other nutters.
Geoffrey got close to the answer by
calling me Machaevellian. But it was more
surrealistic than that, more like poking
them in the eye. I hoped they might wake
up in the middle of the night with a
nightmare at the way I'd posed the
questions, realizing they were trapped.
Yes, Norway IS said to be taxing 80% of
its oil wealth (a figure I doubt). But
that's just the BEGINNING of its
problems! What does it do NOW? (They have
no answer. But I'll probably ask for
funding from them to come up with it!) We
all have a rather limited scope, being
from planet earth. We couldn't have
possibly imagined the "answer from Mars"
I got from Cliff Cobb. I enclose it for
your reading amusement. Could any of you
have come up with so imaginative -- and
utterly unworkable and alien -- a
suggestion? Great artists and poets are
chosen for their ability to think on such
lines that one must ask, "What planet did
this idea come from?":

Michael, In contrast to Mason, I can see
the merit in a policy similar to what you
propose. I would not make reference to
negative rent, however. That is a
function of productivity. If national
policy requires getting people to live in
places where no one would live without
subsidy, the simplest way to find out
what people would accept would be to
create some sort of bidding system. A
person might say, I'll live at that
latitude (or some other method of
defining a region) if the government pays
me 10,000 kroner a year. Someone else
might require 50,000. Thus, the low bid
wins and then *must* agree to live in
that region for a specified number of
years. This avoids complexity of trying
to ascertain the negative value from
production costs and so on. It's actually
a bit like bribing medical doctors to
spend some time in remote areas in return
for providing them with free schooling.
Cliff

Enough said . . . I have NO interest in
George, except as an example of how NOT
to institutionalize a doctrine. By seeing
what problems to avoid, I think I've been
able to spell out just what we need --
and it seems to be what now may be
opening up in Norway. As Chris says,
quite rightly, there's no point in
talking to academics as such. They won't
jump on our ideas until there's "money"
in them, in the form of promotions or
consulting work. The way to get them is
to talk to people who live in the real
world, not on Mars. The university
scribblers will then rush to try and be
among the first to "translate" our
English into academic-ese, replete no
doubt with the 50-page bibliographies
that we have little time to compile.
However, I do think that if something
positive happens in Oslo, Arno and I
should establish positions at the
university there, if possible. (But what
will we call our subject? It's not
economics, I guess.) The fact is that
universities ARE power houses -- that's
WHY Kaldor got in to "do his stuff" with
the odious Mr. Wilson. That's also why
I've done my archaeology (sorry Cornelia
-- Assyriology) publications to give us
the "historical" approach. And that's why
Chris's work is equally important, as it
gives us the long view that is lacking in
monetarist economics. We take a "genetic"
view of credit, not an abstract "view
from Mars."

Michael
---

From: Hudsonmi@...
Date: Mon Aug 28, 2000 2:48 pm
Subject: The FIRE sector and creditary
economics

Dear Gang8sters,

Now that I have duly made clear to Chris
(I hope) my disgust with georgism, I want
to acknowledge one area of my research
they have funded, whose charts most of
you have seen: the tendency for the
economy's "surplus credit" to be funneled
into land-price gains (and more recently,
stock market gains). I have used the
term, "Land is the economy's liquidity
sink." I might have said, "creditary
sink," but Arno found both terms
confusing. Yet they need to be made non-
confusing, and this happens to be the
single point on which one-note-George
harped. Yet it is not acknowledged by
monetarist theory, largely because both
the financial sector and the real estate
interests are not eager for the public at
large to realize that most "capital
gains" are banal, low-tech real estate
gains, not a "reward for enterprise" by
mom-and-pop high-technology start-ups. I
want this point made to the Norwegians so
that they can avoid the distortions
created by Anglo-American merchant-
mortgage banking, i.e., so that they can
take care to channel credit productively
into industry (and duly cut taxes
thereon). The juxtaposition I want to
emphasize is not only between industrial
credit and "consumer credit" (although I
grant Geoffrey's points on this, of
course), but the classical contrast
between productive credit that brings new
means of production or wealth-creation
into being, and unproductive credit that
merely bids up the price of existing
property (asset-price inflation, of which
the major element is land-price inflation
as a real estate bubble is funded by the
economy's growth in savings and credit).
Monetarists ignore this distinction. They
present their theories and compile their
crypto-statistics as if all investment
were industrial, in a world devoid of
real estate bubble-pyramiding and
securities trading (such as the
"financial engineering" or "zaitech" in
which companies engage when they buy up
their own stock, much to the benefit of
the CEO who promptly cashes in his stock
options). The upshot is a travesty of the
idea of "wealth creation" used as a
euphemism for simply bidding up stock
market prices. In sum, I want to point up
the Listian distinction that Arno
emphasizes between "national economies"
and "business economics" or "mercantile-
financial" economics. It took me about a
year to compile my statistics to
demonstrate how this perversion of credit
has unfolded in the U.S. economy and
Japan. The upshot was my charts (which
the georgists stopped funding, fearing
that their publication would turn
"georgist" economics into "hudsonian"
economics). What we ourselves say about
creditary economists is controversial
enough to shock people used to the usual
monetarist rhetoric. I want to minimize
the shock of ancillary ideas - and also
to show that there is a "right wing
libertarian" version (georgism, which in
this country has become the servants'
entrance to the Ayn Rand movement) so as
to counter Arno's fear that our economics
might be viewed as left-wing inasmuch as
we are not exactly value-free when it
comes to how we think credit creation
should be shaped and institutionalized.
My working plan is to include (at his own
expense, not our budget) Ted Gwartney, a
professor of real estate appraisal,
former land appraiser for British
Columbia, etc. to work with his
colleagues (and perhaps me) to summarize
the "bad credit" phenomenon. He may ask
Cornelia to present his points orally,
and I hope pay her fare to wherever we're
going to hold our meeting. Perhaps his
foundation also may fund the updating of
my statistical charts. In any case, if
there is any criticism of this point by
the Norwegians, Ted will serve as the
lightning rod. That's his job - until any
of you guys will do the grunt-work of
preparing the relevant empirical
statistical documentation. (Joe Hyde of
course would be the perfect person to do
this, if he has the time and inclination.
I can assure you that he is as disgusted
with the georgist institutions as I am,
as you can see from our joint article in
the present just-published Land and
Liberty, edited by Geoffrey's friend Fred
Harrison. We're now on the outside of the
georgist tent pissing in, not inside
pissing out.) So c'mon, Chris. You're
publishing your own pamphlet through SES,
a nominally georgist institution. We're
both pragmatic people, and neither of us
are cultists (well, I won't speak for Joe
on this).

Michael
---

From: Hudsonmi@...
Date: Thu Sep 7, 2000 1:32 pm
Subject: Newcomb

Dear Stephen,

The name is Simon Newcomb, to whom Milton
Friedman dedicated his own monetary book.
I've written much about Newcomb in my
monetary essays, e.g. my Goodhardt essay,
if you have it. Newcomb wrote the first
financial "monetarist" analysis of the
greenbacks, much better than any modern
monetarist could do. You may read my
summary of his work in my book on
American economics in the 19th century. I
devote a chapter to him. Perhaps I-L loan
has that.

I guess you've never visited the Henry
George School in New York. The Ayn Rand
mob has taken it over, led by the
"Frangmants" crowd: Oscar Johannsen, Jack
Schwartzman, little Sid Meyer, etc. they
are as despicable and crooked a bunch as
I've ever met. They're largely the reason
why I refuse to say anything good about
Henry George, becuase that would be
endorsing these rotten loners. I think
they entered georgism only to scuttle it.
To promote George today is to lead people
into their poisonous funnel. That being
said, there ARE some decent people who
came there from the Randites (e.g., Lynn
Yost, and of course also Robin). But most
of these decent people were shunned as
not being suitably cultish. I reject them
precisely because they claim to have a
"moral" view of economic activity. In
their personal behavior I have found them
uniformly to be self-dealing, unethical,
dishonest and immoral, in proportion to
the extent to which they mouth "moral"
values as a kind of symbiotic cover. It's
all hypocrisy. (Stalin mouthed moral
judgments too.) The Mt. Pelerin
connection is through Lowell Harriss.
I've asked Arno to look through the
histories of that organization to tell me
its membership, etc. It is extremely
libertarian and censorial of all other
ideas.

Michael
---

From: Hudsonmi@...
Date: Mon Oct 2, 2000 2:37 pm
Subject: From Ideological Rags to Rags in
3 generations

Chris asks: So can you give please me a
brief RUN DOWN on what Henry Georgism
consists of in the US - is it a
university, in which case is it a large
one or a small one? Is it a whopping
great fund somewhere? if so, how much?
What else?

Well Chris, you yourself got the key in
your weekend note of "from rags to rags
in three generations." In the first place
came a Celebrity Journalist whose book
sold well and made him money. Politicians
of various stripes selected him as their
front man. But he was a writer, not a
talker; a loner, not somebody who worked
with others. He was the Mary Baker Eddy
of American economics in the 1890s -
neither Christian nor Scientist, but
founding a hybrid movement that centered
around his (rather dysfunctional)
personality. In America, you always have
a few rich nuts who do nothing but fight
with their children and relatives all
their life, and use their vindictiveness
by bequeathing their fortunes in a bid
for immortality by leaving it to a cult.
A few rich right-wingers in the 1920s or
so funded a movement in memory of George,
who had died over a generation earlier.
Under such circumstances that "movement"
was a funerary cult from the outset. (Ask
Joe for details on this.) So they had an
endowment, but nothing to spend their
money on, as they were anti-intellectual,
misanthropic loners, and above all much
too mediocre to have enough social scope
to see how to promote a doctrine.
(Otherwise they would have joined the
Technocrats, Socialist Workers Party or
Vegetarians.) By not finding anything -
or anyone - to spend money on, their
endowment grew and grew, largely through
property values (in the case of the Henry
George School, which supplemented its
support by working for Nazi Intelligence
and becoming a center for anti-Semitism
in America down through the 1950s,
recruiting in particular anti-Semitic
self-hating Jews - the same group that
Lyndon LaRouche was able to tap in the
1970s). So the money grew until finally
it attracted people with little interest
in Single Tax, but various other quirky
things. That's where it now stands. The
bottom line is that every idea and
ideology that can be thought up actually
IS developed by someone and takes a life
of its own. Nature continues to
spontaneously mutate. Then, there is a
struggle for existence. The georgists
help explain what part of the DNA is
missing for a viable political movement.
They are now a geriatric cult with money
to be grabbed. Their demographic and
educational profile is the same as the
Christian Scientists, except that they
have few blacks. No credentials, inward-
looking - about to lose their money and
return to rags. So, Chris, why don't you
apply your law of business families to
the law of political subcultures?

More specifically, Georgism does not
exist in any university. It is anti-
academic. I don't think most HGS board
members even have a college education.
Their long-time head, a virulently anti-
white, anti-feminist misanthropic Negro
(George Collins) didn't even have a high-
school education, I think. They speak
about God a lot. At meals, they act just
like socialists -- each pays his own
money down to the penny. I've never seen
anyone pick up a check -- they don't
trust each other to reciprocate.
Schalkenbach has $18 million in a fund,
as does the School. Lincoln has $100
million, but hates Henry George and is
being sued by Schalkenbach seeking to
raid it. The School of Practical
Philosophy is a branch of England's SES
with $40 million, in real estate. Like
other sectarians, georgists are always
suing each other. Lawyers get rich off
them -- part of your rags to rags story.
There is no intellectual capital left to
run down. It is "running on empty," which
is why the interesting story now begins:
what other nut-group will take over the
movement? There are sects here that look
to other well-endowed sects to loot just
as corporations seek M&A targets. The
prime suspects to end up in control of
georgism are Scientology, the Moonies,
the KKK, bulgarian intelligence and the
anti-drug movement (of a sort funded by
drug dealers no doubt). But at present,
the movement has been taken over by the
Mont Pelerin Society and the Ayn Rand
group, so georgism has become the
servants entrance to the Objectivist
movement (known above all for its
subjectivism, naturally). I hope this
nonsense helps.

Michael
---

From: Hudsonmi@...
Date: Tue Oct 3, 2000 4:26 pm
Subject: Where Randy and I agree

Dear Randy,

OK, you're right on your three points of
agreement. So we'll let people argue over
WHICH of us is more accurate within the
framework of these three points. But
remember, I outrank you when it comes to
dealing with assyriology, having
published five books and a dozen essays
on the topic and having Harvard faculty
status in the sphere of Babylonian
economic relations since 1994. (I will
not bother to cite my remarkable
telepathic ability to transport myself
back into the early Neolithic.) Tell your
friend to make an FOI request for FBI
surveillance on the Henry George School,
and to read Keynes's Essays in Persuasion
about the vicious nasty Columbia georgist
who scuttled the British World Economic
Conference at Roosevelt's direction.
(I've blocked out his name right now. He
wrote a book on the Lincoln foundation,
which bankrolled the Georgists, him
included - an anti-labor bastard). My
observations are based on oral
communications from georgists over the
years. As Research Director of the Henry
George School during 1994-95, when its
Exec. Dir. George Collins oversaw the
destruction of all correspondence and
records, my testimony has some weight.
Further information can be obtained from
Ed Dodson, president of that institution
at that time (who resigned in protest
against its corruption, not its Nazism,
but who knows the story). These guys are
really vicious. Their long-term director
in the 1940s and '50s was the Nazi
"libertarian" Frank Chororov, one of the
founders of Spotlight. They gave courses
in how the Holocaust never happened and
other "Revisionist History." The FBI
files will have all this, and probably
are the only remaining documentary source
now that the School has destroyed its
entire history down to its Nazi
eugenicist roots.

Michael
-

Robert Vienneau

unread,
Jan 30, 2006, 3:53:01 PM1/30/06
to
I have updated my demonstration of the subject topic. My newest notes
are at:

<www.dreamscape.com/rvien/Economics/Essays/ProblemStatementPaper.pdf>

This is written as a paper. But there's lots more I want to add.

ro...@telus.net

unread,
Jan 31, 2006, 10:48:25 PM1/31/06
to
On 29 Jan 2006 15:43:45 -0800, "Ron Peterson" <r...@shell.core.com>
wrote:

>My question is how does


>one determine the appropriate value of the land?

The same way real estate appraisers do it every day.

>If a building is added
>to the land, the value of the building isn't added to the original
>value of the land to determine the tax rate. I find that there is some
>ambiguity in determining the value of the land because removing rocks
>is a capital expenditure and therefore shouldn't be taxed, but there is
>no visible evidence that the capital expenditure was made.

Of course there is: the reduced rockiness of the land compared to
neighboring land. If picking rocks increases the land value, there
has to be some way of knowing that the rocks have been picked.

>> While real monopolies of land, oil and other scarce resources will
>> always be a source of differential rent plundered by political
>> manipulation and war, they do not drive the development of capitalism.
>> They may be necessary but they are not sufficient.
>
>OK, but how can the domination of a capitalist economy be shown to by
>capital instead of land? Can it be shown that the value of unimproved
>land exceeds that of the improvements?

It's easy to see it if you understand compound interest. Average
improvement value is the area under the improvement depreciation
curve. Average land value is the area under the land appreciation
curve. It almost doesn't matter what the initial ratio of improvement
value to land value is (although I can tell you that 2:1 is typical
and more than 3:1 is rare), because land appreciates about twice as
fast as improvements depreciate. So the mathematics of compounding
totally dominates the curves. Improvements spend most of their
lifetimes near zero value, while land value rockets to the
stratosphere exponentially. Aggregate land value is therefore about
double or triple aggregate improvement value, and this ratio does not
vary much over time or from place to place.

-- Roy L

ro...@telus.net

unread,
Jan 31, 2006, 10:55:20 PM1/31/06
to

>How does this example of rocks in fields demonstrate anything?

It demonstrates that the capital investment is not lost to view.

>What is the capital value of land which has had some labor expended on
>removing rocks?

?? Which land? Ask a local real estate appraiser.

>This labor may turn out to be worthless if what is
>wanted is a rock garden. The value of modern landed property is the
>'capitalised' value of the commodities calculated to be produced on it.

No.

>If the price of a commodity is determined by its value, plus or minus
>the value that is redistributed to other commodity sellers whose cost
>of production differs, then in the case of land the value of the
>commodity is determined by socially necessary labor time (SNLT)
>required to produce it, plus or minus the fertility of the land and its
>proximity to market.

?? But land is not produced, and thus has no cost of production.

>Neo-classicals will always determine the price of a commodity by its
>supply and demand curves. This does not explain very much.

True.

-- Roy L

w_b_...@yahoo.com

unread,
Feb 3, 2006, 10:51:19 AM2/3/06
to
Some authentic quotes from Michael Hudson:-

"I guess you've never visited the Henry George
School in New York. The Ayn Rand mob has taken it
over, led by the "Frangmants" crowd: Oscar
Johannsen, Jack Schwartzman, little Sid Meyer,
etc. they are as despicable and crooked a bunch as
I've ever met. They're largely the reason why I
refuse to say anything good about Henry George,
becuase that would be endorsing these rotten
loners. I think they entered georgism only to
scuttle it. To promote George today is to lead
people into their poisonous funnel. That being
said, there ARE some decent people who came there
from the Randites (e.g., Lynn Yost, and of course
also Robin). But most of these decent people were
shunned as not being suitably cultish. I reject

them precisely because they claim to have a


"moral" view of economic activity. In their
personal behavior I have found them uniformly to
be self-dealing, unethical, dishonest and immoral,
in proportion to the extent to which they mouth
"moral" values as a kind of symbiotic cover. It's
all hypocrisy. (Stalin mouthed moral judgments
too.) The Mt. Pelerin connection is through Lowell
Harriss.

"In the first place came a Celebrity Journalist

"Tell your friend to make an FOI request for FBI


surveillance on the Henry George School, and to
read Keynes's Essays in Persuasion about the
vicious nasty Columbia georgist who scuttled the
British World Economic Conference at Roosevelt's
direction. (I've blocked out his name right now.
He wrote a book on the Lincoln foundation, which
bankrolled the Georgists, him included - an anti-
labor bastard). My observations are based on oral
communications from georgists over the years. As
Research Director of the Henry George School
during 1994-95, when its Exec. Dir. George Collins
oversaw the destruction of all correspondence and
records, my testimony has some weight.

"These guys are really vicious. Their long-term


director in the 1940s and '50s was the Nazi

"libertarian" Frank Chodorov, one of the founders


of Spotlight. They gave courses in how the
Holocaust never happened and other "Revisionist
History." The FBI files will have all this, and
probably are the only remaining documentary source
now that the School has destroyed its entire
history down to its Nazi eugenicist roots."

-

ro...@telus.net

unread,
Feb 3, 2006, 3:33:41 PM2/3/06
to

Etc.

So? Free money attracts vermin, whether it's land rent or the
endowments and incomes of institutions that lack accountability.

BTW, I'd like to thank you for posting these Hudson quotes. He seems
to be a very bright, honest and courageous guy, and of course a strong
supporter of land rent recovery for public purposes. IOW, your
diametric opposite on all counts.

-- Roy L

w_b_...@yahoo.com

unread,
Feb 3, 2006, 8:20:00 PM2/3/06
to

"In the first place came a Celebrity Journalist

w_b_...@yahoo.com

unread,
Feb 6, 2006, 11:18:16 AM2/6/06
to
"For Georgists there is only one dimension -- land.

They have no theory of capital, none of interest.
They don't understand capital gains."
Michael Hudson

ro...@telus.net

unread,
Feb 6, 2006, 10:38:19 PM2/6/06
to

At least Turmel doesn't post the exact same quotes over and over and
over again.

-- Roy L

w_b_...@yahoo.com

unread,
Feb 7, 2006, 9:51:26 AM2/7/06
to
"When a bunch of cranks began to fund the
publication of George's books in the 1920s, they put
forth his theories not as the starting point for an
objective study of how the world economy was
unfolding, but as a terminus, a stopping-point.
Students were expected to look BACK at George, not
to use his ideas as a means of looking FORWARD,
except for his one idea of a land-tax. All his
verbose volumes were boiled down into a single
paragraph: 'tax the land, not capital.' Then, 80
years of glosses have interpreted this one-paragraph
dumming down to read, 'if you must reduce taxes on
the land, shift them onto labor, not capital - oh,
and by the way, the more you cut back government,
the more you will be able to reduce taxes and
promote a libertarian society.'"
Michael Hudson

w_b_...@yahoo.com

unread,
Feb 7, 2006, 9:51:53 AM2/7/06
to

ro...@telus.net

unread,
Feb 7, 2006, 9:09:42 PM2/7/06
to
On 7 Feb 2006 06:51:53 -0800, w_b_...@yahoo.com wrote:

>"When a bunch of cranks began to fund the
>publication of George's books in the 1920s, they put
>forth his theories not as the starting point for an
>objective study of how the world economy was
>unfolding, but as a terminus, a stopping-point.
>Students were expected to look BACK at George, not
>to use his ideas as a means of looking FORWARD,
>except for his one idea of a land-tax. All his
>verbose volumes were boiled down into a single
>paragraph: 'tax the land, not capital.'

Nor labor.

>Then, 80
>years of glosses have interpreted this one-paragraph
>dumming down to read, 'if you must reduce taxes on
>the land, shift them onto labor, not capital - oh,
>and by the way, the more you cut back government,
>the more you will be able to reduce taxes and
>promote a libertarian society.'"

But of course, no one here has been arguing any such thing, AFAIK.
Ryan believes that if he calls somebody a "Georgist," that makes them
into a proponent of every anti-Georgist perversion that Michael Hudson
rightly criticizes in the those who falsely call themselves
"Georgists."

He's right about one thing, though: what a tangled web.

-- Roy L

w_b_...@yahoo.com

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Feb 8, 2006, 6:06:25 AM2/8/06
to
"Remember also what I relayed to you recently. In
most of the world, interests in property are so ill-
defined there is no concrete value either to tax or
mortgage. Henry George knew only one real property
system and probably knew that badly. I do not
suppose for a moment that he knew what the following
are: perpetual yearly rentcharges, fee farm rents,
chief rents, freehold groundrents, leasehold
groundrents, estate contracts, advowsons,
encumbrances, enfranchised copyholds, grand-
serjeanty, petty-serjeanty, knights-service,
lordship of the manor, restrictive covenants, feu-
duties, turbary, piscary, equitable liens, general
equitable charges, easements, wayleaves, shaftage
rents &c. I believe that American Law does not
encompass the concept of 'common land,' a notable
feature of the English countryside. How would you
value common land and whom would you tax? The
commoners or the Lord of the Manor?"
Geoffrey Gardiner

ro...@telus.net

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Feb 8, 2006, 10:18:09 AM2/8/06
to
On 8 Feb 2006 03:06:25 -0800, w_b_...@yahoo.com wrote:

>"In most of the world, interests in property are so ill-
>defined there is no concrete value either to tax or
>mortgage.

Most of the world's land area is sub-marginal, thus no one is
interested in using it, thus it has no value. So?

In many poor countries, government is so primitive, incompetent and
corrupt that secure land tenure is all but unknown. However, the
ability of many of these governments to enrich idle landholders for
doing nothing does not seem to be notably impaired.

>Henry George knew only one real property
>system and probably knew that badly. I do not
>suppose for a moment that he knew what the following
>are: perpetual yearly rentcharges, fee farm rents,
>chief rents, freehold groundrents, leasehold
>groundrents, estate contracts, advowsons,
>encumbrances, enfranchised copyholds, grand-
>serjeanty, petty-serjeanty, knights-service,
>lordship of the manor, restrictive covenants, feu-
>duties, turbary, piscary, equitable liens, general
>equitable charges, easements, wayleaves, shaftage
>rents &c.

Yes, well, he was probably not familiar with the landholding
arrangements of the ancient Mayans, either. So? All the obscure
legal arrangements and even more obscure legal terminology in the
world cannot change the fundamental facts of economics.

>I believe that American Law does not
>encompass the concept of 'common land,' a notable
>feature of the English countryside. How would you
>value common land and whom would you tax? The
>commoners or the Lord of the Manor?"

You would value its use by the rent prospective users were willing to
pay, and tax those who prevented others from using it. Simple -- if
you are willing to know solutions, and not just to fabricate problems.

-- Roy L

w_b_...@yahoo.com

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Feb 8, 2006, 11:04:14 AM2/8/06
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"In saner days, i.e. long before Henry George
polluted the intellectual air of New York, indeed at
least as long ago as 1327, legislators of a cleverer
breed, i.e. Scots, saw that one can only tax an
occupier, not an owner, and one taxes on the annual
value, not the capital value. I told you before that
the English Act of 1835 which established the rating
system did that too for good sound practical
reasons. Even now that rates on houses are levied on
the capital value of the house, the charge is still
on the occupier, even if he is only a tenant-at-
will, not the owner. It is all good 19th century
commonsense, for it was realised that occupiers can
usually be found; owners maybe across the world."
Geoffrey Gardiner

ro...@telus.net

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Feb 9, 2006, 3:07:00 PM2/9/06
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On 8 Feb 2006 08:04:14 -0800, w_b_...@yahoo.com wrote:

>"In saner days, i.e. long before Henry George
>polluted the intellectual air of New York,

I see. You've found an anti-Georgist hate propagandist to quote.

>indeed at
>least as long ago as 1327, legislators of a cleverer
>breed, i.e. Scots, saw that one can only tax an
>occupier, not an owner, and one taxes on the annual
>value, not the capital value.

All of which is of course flat false.

>I told you before that
>the English Act of 1835 which established the rating
>system did that too for good sound practical
>reasons.

I.e., political reasons.

>Even now that rates on houses are levied on
>the capital value of the house, the charge is still
>on the occupier, even if he is only a tenant-at-
>will, not the owner. It is all good 19th century
>commonsense, for it was realised that occupiers can
>usually be found; owners maybe across the world."
> Geoffrey Gardiner

ROTFL!! So the owners of vacant properties cannot be assessed a
property tax? That will be news to all the local governments.

Geoffrey Gardiner appears to be another of these economic illiterates
whose preferred and only real form of argument is to deny the most
self-evident and indisputable facts of objective reality.

-- Roy L

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