It's that time of year again – different from last year – when the keystrokes run low and posts all but cease other than the announcement that heteconomist will be taking a holiday of indefinite duration to rejuvenate. Regulars will be accustomed to such behavior. Their patience and contributions to discussion are always appreciated. Newcomers may find it helpful to consult the pages Posts to Read First, followed either by All Posts By Category or All Posts By Date.
The news of one of neoliberalism's champions kicking the bucket has eventually trickled down to heteconomist land. Few keystrokes will be wasted here on that score other than to lament that she did not take neoliberalism with her. The truth is, she couldn't, even if she'd wanted to. Why? Because it is widely embraced, and few will let go, present company mostly excluded, of course. Is this the fault of progressives? A failure of progressive "messaging"? I say we can spare ourselves the hand-wringing. For the time being, most people, in their actions at least, are nasty pieces of work. Yes, in our society nastiness is encouraged. The problem is systemic. Is this much consolation?
In a previous post, I briefly introduced Marx's value theory. Values and prices were considered at the aggregate level without breaking the economy down into different sectors. This enabled a focus on basic macro relationships. In this post, the economy is disaggregated into several sectors. Following the 'temporal single-system interpretation' (TSSI), aggregate surplus value is taken to determine the average rate of profit in the economy, prior to the determination of individual prices. If free capital mobility is assumed, there is a tendency for rates of profit to equalize across sectors. This causes a divergence of prices from values in individual sectors. Nevertheless, key aggregate equalities continue to hold, and the divergence of prices from values occurs in a systematic way, according to the composition of capital in each sector. The exposition closely follows a 1999 paper by Andrew Kliman and Ted McGlone entitled, 'A Temporal Single-system Interpretation of Marx's Value Theory', published in the Review of Political Economy.
I've been thinking about it. Work, being a core part of life, is meant to be interesting, engaging, and meaningful. Otherwise, why are we wasting our time on this planet? Yet, for many, work is not living up to its name. Work of the good kind is less and less on offer in the jobs being created. I've been reflecting on possible reasons why, and decided it's really simple. The problem is not the jobs. It's us. Most humans are simply not the kind of people a boss would want to hire.
In a recent post focusing on inflation and distribution, I touched on the connection between the aggregate markup and income distribution. Here, I thought it might be worth demonstrating the connection explicitly, and then outlining a simple extension that brings out the impact on distribution not only of the markup but also fluctuations in the prices of raw materials. The extension is due to Kalecki, who outlines the argument in the second chapter of his Theory of Economic Dynamics: An Essay on Cyclical and Long-Run Changes in Capitalist Economy, first published in 1954.
Positive Money is a proposal put forward in the U.K. that is explained succinctly and accessibly in a free document, The Positive Money System in Plain English. The explanation is based on a book that I have not read, Modernising Money, by Andrew Jackson and Ben Dyson, which, according to the Positive Money website "in turn builds on the work of Irving Fisher in the 1930s, James Robertson and Joseph Huber in Creating New Money (2000), and a submission made to the Independent Commission on Banking by Positive Money, New Economics Foundation and Professor Richard Werner (2010)". The proposal is quite interesting and might make for a decent discussion. In an effort to get things rolling, I will summarize the key aspects of the proposal and offer brief remarks. It should be noted that banking is not my forte, so I will mainly be interested in the reactions of those with more knowledge in the area.
Cheer up. Things could be worse. We could be living in the Eurozone. Oh wait. Some of us do live there. Wonder how that austerity's been working out ...
The neoliberal policy approach in the decades leading up to the crisis basically amounted to enticing or pushing people into increasing levels of private debt. With private debt burdens mounting in relation to real GDP, we were told that consenting adults knew what they were doing. Then the crisis hit. Since then, as the private sector attempted to deleverage and get its unsustainable debt levels under control, we were told that the government's deficits, which increased as a matter of accounting, were unsustainable. The outcome, depending on which doomsayer you listened to, would supposedly be hyperinflation, escalating interest rates, sovereign default, a crippling debt burden on future generations, or some heady combination of any or all of these calamities. For governments that issue their own flexible exchange-rate nonconvertible currencies, these claims are nonsense. Even in the Eurozone the sovereign-debt crisis is a manufactured one that can be alleviated indefinitely by the ECB. So what explains the neoliberal preference for private debt and aversion to government deficits? The class-interested motivations seem crystal clear.
Neoclassical economics, which remains the prevailing orthodoxy, emerged in the late nineteenth century as apologetics in the context of rising working-class opposition to capitalism. Classical political economy had not provided defenders of the system with a comparable apologetic. Not only had it partly informed Marx's analysis of capitalism but there were socialist movements drawing on interpretations of Ricardo's labor theory of value. Class was central to the understanding of capitalism in both classical political economy and Marx, and no attempt had been made to conceal the class antagonisms inherent in the system. The neoclassical economists, with transparent intent, sought to change all this. Ever since, they have worked hard to deny or obfuscate any aspect of capitalism that might be damaging to this apologetic project. Three theoretical insights in the history of economic thought seem particularly relevant in this respect.
Expressions of anti-establishment sentiment among the poor, the disenfranchised, and the educated are generally expected by the authorities, but signs of broadly based middle-class agitation are taken more seriously. Rumor has it that after each election, wherever it is held in the world, suspicious ballot papers are kept aside by the secret services for further scrutiny in the ongoing fight against open-mindedness, independent inquiry, and critical thinking, more popularly known as the 'War on Terror'. In this way, grassroots radicalism, antisocial behavior, and even moderate disquiet in the privacy of one's home can hopefully be foiled. The ongoing commitment to austerity in many nations has opened up pockets of discontent, including but not confined to the expression of youthful exuberance on YouTube and satirical social commentary in the edgier comedy clubs. Every now and then, documentation of one of the more extreme instances of middle-class fervor leaks out. Today, sadly, is one of those days.
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