[TheRedBaron]

@ MeMe
That is true, but Hilferding developed his ideas at the start of the twentieth century, and not in the sixties. And the experiences in that in-between period have not really supported his ideas. Besides, I am not a fan of Hilferding either.

However, I do believe that in the sixties several interesting left-wing text books about economics have been published. For instance, the book "Economics: an introduction to traditional and radical views" by Hunt and Sherman has gained a wide approval. Their views are more moderate than those of Baran and Sweezy, and this makes the contents solid, credible and convincing. Nevertheless, they still defend the traditional left-wing standpoint that the (American) economy is dominated by oligopolies.

In addition I can recommend "An introduction to modern economics" by Robinson and Eatwell. Note that it puts the emphasis on theoretical considerations, and this makes the book a bit difficult to access. They try to explain the economy without using the mainstream neoclassical theory, which they find controversial. Thus they present several fascinating theoretical alternatives. Joan Robinson was the Joseph Stiglitz of the sixties, and in general reasons in a convincing and credible way.

However, beware! Both "Economics: an introduction to traditional and radical views" and "An introduction to modern economics" leave out some ideas and models, that are prominently present in the mainstream textbooks. So both books may be solid, but they are also one-sided.

[MeMe]

@ TheRedBaron

However, beware! Both "Economics: an introduction to traditional and radical views" and "An introduction to modern economics" leave out some ideas and models, that are prominently present in the mainstream textbooks. So both books may be solid, but they are also one-sided.

It is true that the mainstream paradigm (firms maximize their profits and individuals maximize their utility) has always been fertile. And since it is microeconomics, the theoretical predictions can be checked by experimental studies with test persons. Nowadays this paradigm is also popular in sociology and in psychology. Thus the neoclassical theory is enriched with the effects of social interactions. I like the rational choice theory, especially its representation by J.S. Coleman (in "Foundations of social theory").

[TheRedBaron]

@ MeMe

It is true that the mainstream paradigm (firms maximize their profits and individuals maximize their utility) has always been fertile.

I agree. You should not withhold this information from the readers. And the theory of monopoly capitalism has lost her appeal as an alternative, especially as she has suffered since Baran and Sweezy wrote their book. In practice the central planning of the economy has produced bad results, with indicative planning, and even worse with command structures. And deficit spending has never lived up to the expectations. In fact this is understandable. Deficit spending tries to fool the people (business), but often these will not believe the optimism of the politicians. Why should they? For politicians the economy is less important than the table order in the White House.

[TheRedBaron]

@ Crantag

The May issue of Monthly Review arrived in my mailbox yesterday.

To my slight surprise, the lead article has to do essentially exactly with the topic of this thread.

My dissatisfaction with "Monopoly capital" is not meant to downgrade the Monthly Review. In fact I possess two of their classical books, notably "Studies in the labor theory of value" by R.L Meek (1956), and "The theory of capitalist development" by Sweezy (1942). They give a solid explanation of the theory of Marx, which remains interesting for historical reasons. Note that in the 70s of the last century a flood of similar books emerged. Worth mentioning is the work of Maurice Dobb. At the time the free west tried to initiate a dialogue with the Leninist states, and here the marxist language was instrumental. A fascinating volume in this regard as "Socialist humanism" (1965, Anchor Books), edited by Erich Fromm. Of course the scientific value of all these publications is slight.

[Crantag]

I don't know why but my browser isn't allowing me to quote.

@MeMe

You said:
"It is conceivable that capital will become increasingly abundant. This may lower the rate of interest (or profit), but it does not imply stagnation (in the sense of a steady or shrinking economy). Moreover, the financial sector has become global, so that now more opportunities for foreign investment are available. This helps the newly industrializing countries (NICs). For instance, the Japanese profit rate did not peak until 1970."


This thread is about the work of Baran and Sweezy; and in their schema profit requires investment in fresh capital, and such investment inherently involves diminishing returns. I understand that you are challenging this notion, and you post is of course very relevant, especially the part relating to the global financial system.

Indeed, as I mentioned, they included three major game-changing innovations which led to tremendous expansion of capital, those being the steam engine, the railroad, and the automobile. They couldn't anticipate what the next innovation would be, although Sweezy and Magdoff did anticipate the financialization of the global economy and reported on it in the 1980s; but were rather cynical of it.

The financial explosion and the IT boom though have certainly created tremendous expansion of capital, and it could be argued that it even fits into their schema, perhaps (John Bellamy Foster, the current editor of Monthly Review, refers to this move as "monopoly finance capital".


"Rugoz pointed out that the post-war period (in French: les Trentes Glorieuses) is exceptional, and I tend to agree with him. In the same way the later growth of the Japanese economy was exceptional. The European states disposed of well-educated workers, whereas capital was scarce. So profits could be high. America also benefitted from this period of rising prosperity."

I wasn't clear about what I meant by post-war experience, but what I meant was the war was an epoch-making incident, and I'm referring to the entire post-war history, from 1945 to the present.

It's probably because I lived in Japan for so long; and there people speak of the "pre-war" and the "post-war"; and they're only speaking of a single war of course.


"Why is an office renovation frivolous? People spend a significant part of their lives there. And advertising positions the product in society. It propagates an image, thus allowing the people to express their personal identity by means of consumption patterns. Diversity in consumption enriches the peoples' lives. I have never understood the aversion of even moderate social-democrats against marketing. It is patronizing."

Again I think my presentation isn't always entirely clear; I believe management should invest significantly in their employees, and nice offices are a great thing.

I was speaking of "luxury" spending by executives/capitalists.


"That is an interesting thought. In addition, equipment may be idle due to repair and maintainance. I do not know how these vary in the long run, and whether they are filtered out in the definition. Moreover, probably the utilization during the Trentes Glorieuses was exceptionally high. Since 100% capital utilization is normally impossible in a dynamic economy, there is no obvious optimum for the utilization. A fascinating subject, which deserves more attention."

I don't have time to look it up at the moment (I may have posted something in this thread) but capital utilization rates are tracked by the US government (I'm thinking the Fed may be who publishes it, but can't remember), and by other governments.

[noemon]

I don't know why but my browser isn't allowing me to quote.

Can you check if on the posting page not the quick reply but the proper make a post page, there is a button called Disable BBCode at the Options tab, maybe you have accidentally enabled the disable function?

[Crantag]

@TheRedBaron

Just an excellent elaboration and reply, and very much appreciated; I have nothing to add, and you opened me up to some new perspectives; and I largely agree with your logic on much there.

[quetzalcoatl]

If that is the case, that still doesn't address the problem of overaccumulation (measured by capacity underutilization).

Overaccumulation of what? Not actual goods and services, surely.

Industrial overcapacity means that there are fewer buyers than the productive capacity can accommodate. The corollaries to this are 1) persistent disinflation/deflation, 2) demand constraints fostered by persistent underemployment 3) consumers falling prey to deflationary psychology, 4) reliance on monetary 'solutions' by CBs, and 5) legislatures succumbing to deficit hysteria.

All these factors combine into a long-term low growth and high unemployment scenario. Ironically, this is very easily fixed - the impediments are political and cognitive, not economic.

[MeMe]

@ Crantag

Just an excellent elaboration and reply, and very much appreciated; I have nothing to add, and you opened me up to some new perspectives; and I largely agree with your logic on much there.

Thanks. Perhaps I should recommend once more "Industrial organization in context" by S. Martin.

[TheRedBaron]

@ MeMe
Crantag adresses me, not MeMe!

[MeMe]

@ TheRedBaron
Sorry, you are right. My mistake.

[ralfy]

Economics is generally based on credit but economies are essentially based on energy and material resources. Unfortunately, there are physical limitations to the latter while the former grows readily.

This explains why credit levels today are many times greater in notional value than the size of the global economy itself:

http://www.washingtonsblog.com/2012/05/ ... arket.html

why even with all that credit the effects of diminishing returns are taking place:

http://www.bloomberg.com/news/articles/ ... fall-ahead

and why we are now experiencing fallout from increasing debt and volatile prices in commodity markets.

[Truth To Power]

Economics is generally based on credit but economies are essentially based on energy and material resources.

Energy and raw materials are what economists call, "land." Labor and capital are also fundamental.

Unfortunately, there are physical limitations to the latter while the former grows readily.

Not so. Both are limited in similar ways: the supply of what nature provides is fixed. What we do with it can grow.

This explains why credit levels today are many times greater in notional value than the size of the global economy itself:

http://www.washingtonsblog.com/2012/05/ ... arket.html

No it doesn't. Credit levels are so high because modern monetary systems are based on debt money.

why even with all that credit the effects of diminishing returns are taking place:

http://www.bloomberg.com/news/articles/ ... fall-ahead

It's BECAUSE of all the credit that returns are diminishing: credit is not production, but merely a claim on production.

and why we are now experiencing fallout from increasing debt and volatile prices in commodity markets.

No, it's because of the positive feedback and consequent inherent instability of the debt money system.

[quetzalcoatl]

...positive feedback and consequent inherent instability of the debt money system...

Instability is an inherent feature of any debt-based money system. There is no reasonable alternative, other than strict regulation of the financial system.

[ralfy]

Energy and raw materials are what economists call, "land." Labor and capital are also fundamental.

No, those are not land.

Not so. Both are limited in similar ways: the supply of what nature provides is fixed. What we do with it can grow.

That's what "fallout" means.

[ralfy]

Not so. Both are limited in similar ways: the supply of what nature provides is fixed. What we do with it can grow.

No, you don't "grow" minerals, oil, etc.

No it doesn't. Credit levels are so high because modern monetary systems are based on debt money.

Money is debt.

It's BECAUSE of all the credit that returns are diminishing: credit is not production, but merely a claim on production.

Credit isn't diminishing. It's the resources acquired given a certain amount of energy used. Hence,

http://www.bloomberg.com/news/articles/ ... fall-ahead

No amount of credit creation will reverse that.

[Truth To Power]

Instability is an inherent feature of any debt-based money system.

Correct.

There is no reasonable alternative, other than strict regulation of the financial system.

There is a very reasonable alternative: Don't privilege private banksters to create money. Money should be issued according to a fixed mathematical formula based on a fixed commodity price index (issuing progressively more money the more commodity prices are falling, less to none when they are rising), by an independent Mint whose only mandate is price stability. The Mint would send the money to the Treasury to be spent into circulation by the national government. Problem solved. No boom-bust cycles, minimal price volatility, no capture of seigniorage by privileged private interests.

[Truth To Power]

No, those are not land.

Economics defines the entire physical universe other than people and the products of their labor as "land."

That's what "fallout" means.

Is it?

No, you don't "grow" minerals, oil, etc.

That's what I said: you grow what you do with them. In a low-productivity use, you burn oil for its energy content. A higher-productivity use turns it into plastics, chemicals, etc.

Money is debt.

Only debt money is debt. Commodity money is not debt, and fiat money is not debt. Admittedly, in almost every country these days, especially advanced capitalist ones, money is almost all debt. But it is not always debt, and it is certainly not debt by definition.

Credit isn't diminishing.

I said the RETURN is diminishing because credit is growing faster than production. Please try to read more attentively.

It's the resources acquired given a certain amount of energy used. Hence,

http://www.bloomberg.com/news/articles/ ... fall-ahead

No amount of credit creation will reverse that.

But as energy availability is not a constant, it's not particularly meaningful. At some point solar energy will become competitive with fossil fuels for general uses such as electric power production, and then energy will not be a constraint.

[ralfy]

Economics defines the entire physical universe other than people and the products of their labor as "land."

Obviously not! Economics is measured in terms of money.

Physical universe. LOL.

The rest of your post is worthless. You don't even know the basics of economics.

[ralfy]

Increasing debt coupled with increasing material resources and energy needed to back up that debt, and the latter facing diminishing returns.