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A reply to Steve Keen's OPE-L 3583.
In OPE-L 3578, posted on Tuesday, July 11, 2000 8:28 AM, I demonstrated
that there is no such thing as the physical surplus. There are physical
surpluses of some items but physical deficits of others.
STEVE HAS ADMITTED THAT I'M RIGHT ABOUT THIS. BUT IN AN ATTEMPT TO
RESCUE PHYSICALISM (AKA "THE SURPLUS APPROACH"), HE USES A LOT OF FANCY
WORDS THAT BOIL DOWN TO ONE POINT:
YOU CAN ADD APPLES AND ORANGES.
SORRY, STEVE, YOU'RE JUST WRONG:
YOU **CANNOT** ADD APPLES AND ORANGES.
Steve's admission that I'm right is contained in the following: "If you
go for a 10,000 by 10,000 [input-output] matrix, then quite probably you
will find lots of negative surplus entries."
Then comes his attempted adding up of apples and oranges in order to
evade the problem:
"But generally, analysts work with 130 x 130 or less. At that level,
while some products may be headed for extinction, others which are
classed in the same category will be expanding. You are much less likely
to get negative entries in that instance.
"If you are working as a theoretician, and attempting to model economic
dynamics, then you are likely working with 4 or less sectors. Then you
are going to have all non-negative surpluses."
Let me point out, incidentally, that the last point isn't true.
*Aggregate* profit in the US in 1933 was negative. (But was there a
physical deficit of **every** item?)
But conceptually speaking, the real problem with what Steve has argues
here is that one cannot aggregate sectors in PHYSICAL terms; one can't
add apples and oranges. But that's precisely what his defense of
physicalism requires. He is trying to rescue the claim that "the
physical surplus" is a meaningful notion. The aggregation he proposes
must therefore be carried out in PHYSICAL terms -- by adding up apples
and oranges -- without recourse to any measure of *value*!!
I-O accounts perform no such miracle. The I-O coefficients are
constructed from *value* figures (specificially, money price figures).
An I-O coefficient is the ratio of the MONETARY VALUE of inputs purchased
from another sector (j) to the MONETARY VALUE of the gross output of this
sector (k). There is no adding up of apples and oranges. There is
therefore no construction of any meaningless "aggregate physical
surplus." Everything is constructed on the basis of actual money prices.
At different money prices the allegedly "physical" coefficients would be
different. The allegedly "physical" surplus would be different -- though
all physical quantities would be exactly the same. Go figure.
Those whose theory is so thoroughly incoherent in its fundamentals
shouldn't throw stones.
Steve Keen also writes: "As for measuring the physical surplus, I would
be quite content to measure it in terms of labor-time. I would of course
not be content to pretend that the surplus was generated entirely by the
labor input."
This sounds good at first, but it just displays a lack of understanding
of the problem. It is the own-rate problem that Keynes addressed in Ch.
17 (?) of the _General Theory_. (Keynes' excellent discussion of the
meaninglessness of physicalism -- net product, etc. -- in Ch. 4 (?) is
also worth re-reading.) Except in very rare cases, different things
(goods and services, labor, money) grow at different rates over time. To
have any *aggregate* measure of growth, one of these things *must* "rule
the roost." It is, in Marx's terminology, the value substance. The
rate of growth of this substance is the aggregate rate of growth. Thus,
except in peculiar cases -- cases in which everything grows at the same
rate -- different value measures are not just different ways of
expressing the same thing. They are not "neutral." They give different
results concerning just how big the thing is, and indeed different
results as to whether it is positive or negative.
Andrew Kliman
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