From: Anders Ekeland (anders.ekeland@ONLINE.NO)
Date: Mon Mar 14 2005 - 02:46:14 EST
Dear David L, - look forward to read the paper, but are these thoughts/models formulated mathematically as difference or differential equations, i.e. a real dynamic model, or is this traditional curve-shift analysis? The latter is IMHO inadequate for real analysis of stability, robustness of results etc. So if static - did you check stability etc. with a "larger" dynamic model? Just curious. Regards Anders Norway At 19:10 13.03.2005, dlaibman@JJAY.CUNY.EDU wrote: >Gerry (and OPE), > This discussion might work better if OPE listmembers had copies of the > paper, or knew its argument. I would be happy to attach the paper, but > the diagrams -- which are essential to the argument -- are not (yet) in > electronic form, and I have not gotten enough specific and operational > advice on how to get them there. > In the meantime, the essential point of the paper is this. New > classical macroeconomics (the vertical long-run aggregate supply curve) > assumes money wages are flexible, and the real supply of labor -- the > labor supply curve, drawn against the *real* wage rate -- is fixed. I > propose a "dual": the money wage rate is fixed, but the supply of labor, > based on the real conditions facing workers as determined by the recent > history of wage bargains, is variable. I call this latter the "Dobb > Effect," for Dobb's 1929 article (which, incidentally, is clearly a > development from Sraffa's much better known 1926 piece). The the real > wage rate, w, is pushed below a customary or standard level, w*, the > workers' social condition deteriorates and they have no choice but to > offer more labor at every wage: the supply curve of labor shifts outward. > Under these circumstances, a demand expansion that raises the price > level in the goods market will push w below w*, the Dobb Effect will kick > in, and AS will shift to the *right*: as workers offer more labor > (overtime, multiple jobs, etc.), output rises and the price level *falls* > to accommodate this. The new equilibrium is established at the old price > level (which I call P*), and a new level of output consistent with AD at > that price level. The long-run aggregate supply curve is *horizontal*, > and Keynes is vindicated. > The paper also sketches a synthesis of the two models (New Classical; > New Critical). Preliminary result is that the synthesis multiplier is > positive. Policy has real effects, even with full price flexibility and > rational expectations, etc. etc. This is not a return to "fine-tuning," > of course: the social cost of the real effect of the demand expansion is > deterioration in the social position of the working class, with the > attendant disequilibrating effects. (Note that this implies a full > measure of exploitation that goes beyong the usual rate of exploitation > or wage share.) > This may be too condensed a statement to be fully useful to anyone who > hasn't read the paper, and/or is not already steeped in the fashions of > present-day macroeconomics. > In response to (a few of) Jerry's points: > First, my argument uses the tautology, real wage rate = money wage > rate divided by price level. So does the New Classical story. I think > no one will dispute the fact that if the price level increases while the > money wage rate is constant, the real wage rate falls. The *story* takes > off from there; the Dobb Effect is the effect of the fall in w (below w*) > on the real supply of labor. That is not a tautology. In fact, it may > not even be true! If it is true, it may take effect in too long a time > frame for it to serve as the basis for a policy impact in the short > run. And empirical evidence is not too clear on it (of course, empirical > evidence is not clear on the New Classical story either). All economic > models use some combination of behavioral assumptions, definitions > (tautologies), and (where appropriate) equilibrium conditions. > Second, OPE folks need to be clear: this is an attempt at *immanent > critique* of mainstream macroeconomics -- to get under their skin, in > their own terms, and upset the dogma of policy ineffectiveness -- the > main conclusion of the free-market hegemony. For this purpose, I use > *their* tools. I use, yes, diagrams. You need to answer one > diagrammatic argument with another one, not with something that could be > taken to be a mooshy evasion. I simply assume, in this paper, the usual > downward sloping AD curve. *Of course* all of this needs to be > questioned in the full light of Marxist categories. But the limited > purpose of this one paper needs to be borne in mind. If we can provide a > simple, compelling case that makes the AS curve not vertical after all, > and opens up a discussion of the wider social effects of fiscal and > monetary policy, is that not something worth doing? > On a more theoretically rigorous terrain, we will then need to ask: > is there a Marxist analysis of the capitalist short run? In other words, > should we even bother to try to construct a theory of capitalist behavior > in a period in which productivity, population, and physical capital > stocks in place are all constant? This behavior would then be the basis > for a theory of how the capitalist economy responds in the short run to > (capitalist) government policy moves. Is this a useful inquiry, or > should we simply assume that it is submerged in the dynamics of > accumulation, crisis, etc.? I am not sure, but I do think the immanent > critical strategy is important to develop in the meantime. > In solidarity, > David >David Laibman >dlaibman@jjay.cuny.edu > > >----- Original Message ----- >From: Gerald_A_Levy@MSN.COM >Date: Saturday, March 12, 2005 7:01 pm >Subject: [OPE-L] Teaching Tautologies : a response to David L > > > I also attended the EEA session last week chaired by David L. > > Besides David, Ingrid Rima and Mary C. Cleveland presented > > papers. Cleveland is a modern-day disciple of Henry George > > and there were a number of other people at the session who > > also admired George. In a throw-back to the period before > > George, she presented a *corn model* in her paper on "Inequality > > and Macroeconomic Instability". When Rima emphasized in > > her presentation that "money matters", I thought there would be > > a discussion of the failings of the moneyless corn model but no > > one picked-up on that issue. Interestingly, David suggested that > > a Marxian response to the writings of Henry George could be > > found in Blake's _An American Looks at Karl Marx_. Yet, > > when I reexamined my copy later I couldn't find a whole lot in > > Blake on George. > > > > Now I turn to David's paper and the main concern of this post. > > > > You might recall that David told us about his paper presenting a > > "new critical" macro proposal some time ago: > > > > > I call it the "Dobb Effect," linking Maurice Dobb's 1929 > > article, "A > > > Skeptical View of the Theory of Wages," to macro policy issues > > (which he > > > did not do). Macro policy moves a) influence the *balance of class > > > forces* (a term that does *not* appear in the paper!); and b) > > flatten> out the AS curve (even in the presence of full price > > flexibility and > > > rational expectations). > > > > The context of David's paper is that it addressed a point related to > > the _teaching_ of (undergraduate) intermediate macroeconomics. > > This is an important point to remember -- which I will return to > > later in the post. > > > > Employing the well-known graphics of an aggregate supply and aggregate > > demand curve graph, David sought to demonstrate the consequences of > > increasing aggregate demand (under a condition I am about to mention) > > on the working class. > > > > In listening to David's presentation, I realized that the point of his > > formalism could be made even more simply without equations and > > graphs. > > > > Start by assuming a fixed money wage rate. > > > > Then, suppose that aggregate demand grows. > > > > Consequence: the working class is hurt. > > > > I can hear you say: could you run that by me one time again? > > > > Sure. I'll change the words a little. > > > > a) Start (as before) by assuming that there is a fixed money wage > > rate. > > b) Then, suppose that there is a general rise in prices > > (inflation) caused > > by an increase in aggregate demand. > > > > c) Real wages for workers decline. > > > > From the foregoing, David was able to further hypothesize (in my view, > > quite reasonably) that under these conditions workers will often > > attempt to maintain their real wage by taking a 2nd and/or possibly > > a 3rd job. > > > > What became obvious to me is that -- despite the elegant graphics > > and formal equations -- c) was simply, under the conditions of a) > > and b), > > a *tautology*. I thought ... well ... yeah ... of course ... > > if money > > wages > > are fixed and there is inflation then real wages will decline *by > > definition*. > > So, in the discussion that ensued, I called this to the attn. of > > DL and > > asked > > him why his proposition wasn't a tautology. > > > > I don't recall his exact response, but it seemed to me to make > > two points: > > > > i) it was more than a _simple_ tautology in the sense that it > > embodied particular historical and conceptual understandings about > > the wage. For example, the proposition that the money wage > > rate was, especially in the short-run, fixed was based on the > > Keynesian idea that money wages are "sticky." > > > > ii) it _was_ a tautology but tautologies have legitimate uses in > > political economy. > > > > I'll grant him i). > > > > ---------------------------- > > > > *FIRST SET OF QUESTIONS* > > > > I'm wondering if we could have a discussion on *what, if any, are > > the legitimate uses of tautologies in political economy?* > > > > Can any of you, including David, explain _when_ it is appropriate > > to base theoretical understandings on tautologies and _when_ it is > > inappropriate? > > > > --------------------------- > > > > Now, I return to the context that this issue came up for David > > in *teaching* intermediate macroeconomics. > > > > I'll grant that it is a legitimate and important point to make in the > > classroom in order to explain the meaning of inflation for workers > > under varying conditions. I'll even grant that David's paper > > describeswhat I take to be a *historical pattern*. I think it's > > especially true > > during high inflationary periods -- e.g. his graphs could be used > > to suggest why in the US in the 1970's, more and more working > > class families had two income earners rather than one. (Of course > > it's not the whole explanation. I'm sure DL would agree. But, it > > is a large part of the story.) > > > > What really confuses me, though, is that David said that when > > he presented his graphs in the classroom to make this point, > > his students really *appreciated* the graphs. This made me think: > > what kind of students does DL teach? > > > > I can tell you that my students *strongly* prefer that I keep > > the graphs presented in the classroom to a minimum. Indeed, > > when graphs are drawn -- no matter how well explained by the > > instructor -- there are always some students whose eyes > > glaze over. They can think logically, no doubt. But they are > > not used to and don't generally like graphs. > > > > Well, of course, you have to have _some_ graphs when teaching > > economics, but were equations and graphs really needed for > > DL to forcefully make the point in the classroom that he wanted > > to make? I don't see why. After all, any relationship that can > > be expressed graphically can also be expressed orally and verbally. > > And, in this case, I think that his point could have been made > > easier *without* graphs. > > > > So, it makes me wonder: is there something wrong with his > > students or mine; is his teaching too graph-intensive or is my > > teachingnot graph-intensive enough? > > > > ------------------------------ > > > > *SECOND SET OF QUESTIONS* > > > > Are elegant graphics really needed to explain tautologies? > > > > What other tautologies are *taught* in the economics classroom? > > > > What are examples of legitimate tautologies advanced by Marx > > in his presentation in _Capital_? > > > > What are examples of legitimate tautologies advanced by Marxians > > in the presentation of political economy? > > > > Do we all teach what a tautology is in the classroom? What do we > > say? In particular, what do we tell students about the legitimate > > (?) *uses of* tautologies in economic theory? > > > > In solidarity, Jerry > > > > > > ----------------------------------------------------- > > This email has been automatically scanned for viruses. > > However, it might still contain undetectable virus(es). > > Addressee should take precautions in opening any unsolicited emails. > > -- DoIT, John Jay College of Criminal Justice -1- > > > >
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