Steve wrote: If I were discussing this topic on a post keynesian list, then I could use Basil Moore's theory of endogenous money, Minsky's theory of financial instability, Wynne Godley's work on social accounting matrices, Willi Semmler's work on credit cycles, my own extended-Goodwin model of chaotic interactions in finance, Andresen's model of stock markets... There are plenty of Post Keynesian building blocks for extended analysis of complex sub-systems of capitalism. _____________ Steve, Keynesianism and especially post Keynesianism are in theoretical shambles: it cannot explain the US upcycle in conditions of fiscal austerity any more than it can explain the ineffectiveness of the ballooning Japanese deficits any more than it has an explanation for its demise into staglation 25 years ago. And post keynesianism has no influence today on the making of public policy at this time. The Maastrict criteria, the rise of the US deficit hawks, and the tightness of the Japanese central bank all spell the practical death of post Keynesianism. Post keynesianism is truly a marginal academic cult at this point with no constituency in the working class and no hold on power. ___________ But what are Marxists able to contribute on this? Of course there are some components; but the vast majority of academic output by Marxists has been about ... the transformation problem... _____________ Steve, perhaps you have not noticed that Marxists as critics of political economy have been routed from the academcy of course on the ostensible grounds of a fatal logical error in the transformation procedure. This makes difficult theoretical development. __________________ I argue that this fixation exists because the core belief that labor is the only source of value is in error, and the attempt to maintain that while developing more complex analysis results in impossible complications, which always return debate to ... the transformation problem. __________ Well Steve at least you are no longer saying that labor is the source of the surplus or wealth but recognize that it is indeed a labor theory of value. At any rate, Mattick Sr did predict the mixed economy going up in stagflationary ashes. That was a good, solid complex analysis which was not falsified. _______ Steve then says: This is the point which Rakesh cannot get. I don't require that input prices "arbitrarily" equal output prices in my analysis of Marx, or anything else for that matter (and I'm sending you my Steedman paper under separate cover to make that point: the Sraffian system is *not* my system). My expectation is that if the expanded reproduction with technical change and changing prices case were set out in full dynamic equations, then there would still be a transformation problem (but now in a dynamic guise) if you insisted that surplus value came solely from labor. _______________ I don't think so. All we have to do is allow for there to be small reasonable interperiodic changes in unit prices of production as a result of rising labor productivity for the two equalities to hold in each successive period. Paul C indicated that he had understood this by saying that it's not enough to demonstrate the transformation in the special case of extended reproduction. And I replied that this is not the special case but the typical case. And that simple reproduction or equilibrium prices are not only special cases, they are of no real theoretical interest. All the best, Rakesh However, I also cannot help but return to a crucial comment of Marx's, from which he never resiled: "To explain, therefore, *the general nature of profits*, you must start from the theorem that, on the average, commodities are *sold at their real values*, and that *profits are derived by selling them at their values*, that is, in proportion to the quantity of labour realized in them. If you cannot explain profit upon this supposition, you cannot explain it at all." (Footnote: **Marx, K.*, "Wages, price and profit"in *Marx-Engels Selected Works*, Volume I, Marx-Engels-Lenin Institute (ed.), Foreign Languages Publishing House, Moscow, 1951, p. 384.) The TSS approach appears to me to be an attempt to explain "the general nature of profits" in a situation in which values change with time, and that without that change, there would be no TSS explanation for profits. I don't see that as being in the spirit of Marx's economics, and here again I concur with Allin: >There is, however, an alternative view on which Marx's two >equalities do hold (regardless of dynamics and all that). This >is the view Andrew and Alan Freeman defend. It requires that we >conceive of the "value transferred to the product by the means >of production" not in the "standard" way, as the socially >necessary labour-time required to produce the means of >production, but rather as the price of the means of production >divided by the economy-wide MELT. (I think this claim >fundamentally breaks the labour theory of value and I can't >accept it.) >If you take this view, it simply doesn't matter whether the >means of production are assumed to be priced "at their values" >in the initial transformation tableau, or at prices of >production, or at arbitrary market prices. Marx's single-step >transformation needs no further adjustment because the value >transferred by the means of production is itself a function of >the prices of those means of production. >I think you have to choose. You've said several times that some >further adjustment is called for due to the fact that Marx's >inputs are assumed to be priced at value, but you refuse to >follow out the logic of that admission. Well then, consider the >alternative. Cheers, Steve Dr. Steve Keen Senior Lecturer Economics & Finance University of Western Sydney Macarthur Building 11 Room 30, Goldsmith Avenue, Campbelltown PO Box 555 Campbelltown NSW 2560 Australia s.keen@uws.edu.au 61 2 4620-3016 Fax 61 2 4626-6683 Home 02 9558-8018 Mobile 0409 716 088 Home Page: http://bus.macarthur.uws.edu.au/steve-keen/
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