Re: [OPE-L] Grossman, Science and Society, Trigg

From: Rakesh Bhandari (bhandari@BERKELEY.EDU)
Date: Fri Aug 18 2006 - 15:41:38 EDT

>Well Rakesh you could always defend your point of view in a formally
>published article...

Does this admit that many of my  points were simply repeated?
I include some of my old posts so that you can make up your own mind.

In general, I think formally published articles should acknowledge web
sources. It's done all the time.

And the web has advantages of allowing for direct point counterpoint. So
that is why I used it in the case of Andrew's critique of Grossman.

At any rate, I could have been asked to present my criticisms of Grossman
in Science and Society if the journal was interested in the debate; wouldn't
that have been better than having many of criticisms repeated without
Assuming that is what happened.

As I do most of the child care for a soon-to-be-two-year-old, I'll speak
to your criticism later. I'm going to the park.


Here are my old posts:

In his paper on Grossmann and Kalecki Andrew Trigg wants to show no
foundering of capital accumulation on shortage of surplus value if
s/v rises.

Andrew T has the rise in s/v determined by ex ante capitalist
consumption decisions which are in turn determined by a strict rule.
The rise in s/v could be determined in other ways.

If capitalists follow this strict rule and borrow and spend ever more
on their own consumption, then (according to Andrew T) capitalist
production is possible for at least 100 periods. No forseeable
breakdown from shortage of surplus value. Capital is stable as long
as the banks are willing to advance money to
capitalists to indulge in ever greater orgies of luxury spending.

Presumably the message from Kaleckian theory to the working class is
simply this: "help the ruling class overcome any 'Protestant'
inhibitions against luxury, consumption and decadence, for the
stability of your employment depends on their use of credit lines to
finance their overconsumption."

  We can safely assume that capitalists will consume enough to realize
all of surplus value. To be sure, this puts a burden on them. Imelda
Marcos had to shop a lot and find room in her closet for new pairs of
shoes. Who cares?

Moreover since the OCC could reach a plateau much faster if Bauer's
scheme did not begin with such a low one in the first place (as Rick
Kuhn quoting Grossmann has already shown), there is no reason why the
rise in the OCC will likely be neutralized by a rise in the S/V.  So
in no way does Trigg show that it's impossible for the accumulation
of capital to founder on a shortage of surplus value. No doubt there
could be a realization crisis if the capitalists do not advance order
what will turn out be  the revenue component of surplus value. Why
Andrew T thinks that has proven to be a greater source of problems
for the capitalist system as a whole than periodic drops in
profitability from rises in the OCC I have no idea; he certainly does
not show that various phenomena can be traced to the problem that he
isolates. So his theory does not have the consilience (to mis use
Whewell's word) that Grossman's theory had.

If autonomous investment falters as a result of declining
profitability from previous overaccumulation, autonomous increases in
the other components of effective demand, e.g. luxury and state
deficit financed spending, may only weakly and temporarily boost
effective demand and therewith profitability. The restoration of
profitability may require the context of at least a recessionary
phase in the business cycle.
Or at the very least  it may require regressive tax reform,
anti-labor legislation, and control of export markets--that is, neo
mercantilism of the type that Bush has practiced.
As for military expenditures their main positive effect is not
through the increase in effective demand per se but in the
consumption of higher cost or morally depreciated capital equipment
that military spending and even more war cause. High cost capacity
used up, opportunities for investment in lower cost capital goods are
thereby widened and anticipated profitability improved: war thus
allows for the destruction of capital that depression would otherwise

At 12:19 AM +0000 11/5/04, A.B.Trigg wrote:

>  A reading of Marx in Capital, volume 3, also shows that it is
>difficult to realise such a monstrous amount of surplus value.

Difficult yes. Baran and Sweezy's difficulty of the sales effort, the
difficulty of creating ever newer Veblenian positional goods, the
Kalecki/Trigg difficulties in the financial sector subsidizing ever
more orgiastic luxury spending.

But what Grossmann's analysis predicated upon a provisional
acceptance of Say's Law uncovers is an even greater obstacle to the
realization of that monstrous amount of surplus value. As Mattick
pithily put it:"because not enough surplus value has been produced,
capital cannot expand at a rate which would allow for the full
realization of what has been produced. the relative scarcity of
surplus labour in the production process appears as an absolute
abundance of commodities in circulation."

>       I have two points to make:

Taking them in reverse order.

>       2. I cite Samuelson and Wolfson (1986) in the article as
>showing that the only dependent variable in the Bauer/Grossmann
>model is the capitalist propensity to save.

>  Hence with the OCC rising and rate of surplus value constant, the
>propensity to save must reach 100%: capitalist consumption collapses.

>In my alternative macro-monetary model capitalist consumption
>becomes an exogenous variable, part of the money cast into
>circulation by capitalists. The dependent variable is the rate of
>surplus value.

OK so in your interpretation not only do capitalists earn what they
spend but they determine the rate of s/v through their spending. But
there are constraints on the growth rate of the s/v rate. And these
you do not seem to theorize in your model.

>  Now under this alternative model there cannot be a breakdown due to
>scarcity of surplus value. With even a small rate of increase of
>capitalist consumption, a rising OCC cannot eat up all the surplus
>value - even if we start the Bauer simulation at a higher OCC. There
>is no year of precise economic breakdown due to drying up of surplus

No precise year could ever be deduced from Bauer's model anyway. Each
period could represent a month or a decade. The initial conditions
are arbitrarily postulated and a change in them would obviously
change the year of economic breakdown. This was my initial point,
drawing from Kuhn's research into Grossmann's correspondence.
Grossmann was very aware of the dangers of trying to deduce too much
from Bauer's scheme. Neither Sweezy nor Howard and King are fair to
Grossmann on this point. In G's analysis B's scheme is as much
positively used as criticized. The phrase G-B model is seriously

>  I agree that a rising s/v is unreasonable.

Well then!

>  You say that it would be so because of workers resistance.

To the extent that workers cannot live on air,the rise in s/v will
necessarily find limits that the rise in the OCC will not. Cogoy
showed this. So did Yaffe before him as you recognize in your paper.
You can only be certain that  there will be no break down from a
shortage of surplus value at even very high levels of the OCC if you
allow, consequent upon autonomous increases in luxury spending, the
S/V to rise in physically and socially impossible terms. Without
determinate parameters and limits on the growth of s/v, one counters
Grossmann only by flight from living reality.

In short, an autonomous increase in luxury spending cannot be allowed
to raise the s/v without any limits at all.

>       1. Grossmann did think that the rate of surplus value should
>rise, as does Marx, in the falling rate of profit thesis.

Yes indeed. Howard and King's argument that Grossmann neglects the
effects of a rising s/v and  relative surplus value ignores that
Grossmann saves just that effect for intensive study in his
conclusion where the political implications of his variant of
breakdown theory are drawn. The conclusion is not in the English
version; it was translated by Kenneth Lapides in History of Political
Economy as I am sure you know.  The unabridged Spanish translation is
available on the American website.

Yours, Rakesh

Setting aside my criticism that rules should not be stipulated for
the autonomous increases of luxury spending if the consequence
thereof is physically and socially impossible increases in the rate
of surplus value--that is, the putative endogeneous variable (s/v)
does limit the action of the claimed exogeneous variable (rule based
increase in autonomous luxury spending) --Andrew responds:

At 12:52 AM +0000 11/8/04, A.B.Trigg wrote:
>This passage from Mattick is familiar to me,  but not easy to
>digest. If Say's Law is provisionally accepted, then with supply
>creating its own demand how can there be realization problems?
>Andrew T.

There is indeed no reason why say before the 21st period in Bauer's
extended scheme, capitalists may not as a whole undertake the level
of investment required to realize the surplus value that has been
produced. The absolute level of effective demand could prove
insufficient; and we don't even have to consider
disproportionalities. Perhaps the banks did not create enough credit
because they had too many bad loans on their books. There could well
be a K (Kaleckian or Keynesian) crisis of effective demand. But the
methodological point is to set that aside, to assume that capitalists
are undertaking the expanded level of debt financed investment that
would allow for the realization of surplus value. This after all is
not an unreasonable assumption: capitalists are forced by competition
to increase scale and capital intensity and are rewarded with ever
larger sums of surplus value that allow for an absolute increase in
their own personal consumption. The endogeneity of credit can be
reasonably assumed.

Now imagine what happens at the level of an individual capitalist. He
had hitherto expanded investment but perhaps the absolute mass of
surplus value appropriated has begun to drop or the sum left over for
his own consumption keeps dropping after he expands his level of
investment even though he remains successful at disposing of his
product at value. There has been no break down in the autonomous
increase in investment, demand has equalled supply; but accumulation
no longer pays.

  Each now stops making the expanded level of investment necessary to
realize the surplus value of the other. Demand no longer equals
supply. The provisional acceptance of Say's Law was meant to get us
further along in the scheme, to reveal the diminishing sum of surplus
value as an objective shortage and possible cause of the weakness of
further debt financed or autonomous investment which as Keynes
realized was the most important component of effective demand.

This is what I understand Mattick to be saying here: "because not
enough surplus value has been produced, capital cannot expand at a
rate which would allow for the full realization of what has been
produced. the relative scarcity of surplus labour in the production
process appears as an absolute abundance of commodities in

With that objective possibility uncovered, one need not always
explain the weakness of effective demand  in terms of the surface
categories of finance, circulation and psychology--that is, the basic
categories of vulgar economics. Which is not to say that bourgeois
understanding may not serve perfectly well (prove pragmatic) in some
recessions. But Marxian theory is not a pragmatism. It represents (as
Althusser brilliantly understood) a Bachelardian epistemological
break with the everyday categories of the marketplace.  Keynesian and
Kaleckian theory does not. They will thus have a much easier time
colonizing even oppositional thought. The difficulties of theoretical
practice are real.

The Marxian claim is that serious and protracted depressions in
effective demand cannot ultimately be explained with the categories
of bourgeois understanding and thus the practical remedies suggested
from within that horizon are bound to fail (bank reform by writing
off bad loans, deficit spending, confidence boosting, mercantilist
trade policy through tariffs or competitive currency  devaluation,
even progressive income redistribution). Or the actual reasons for
their possible effectiveness simply not recognized. E.g. deficit
financing could increase the rate of surplus value through its
inflationary consequences; mercantilist trade policy or imperialism
could stave off the fall in the general rate of profit at the expense
of others.


I think Andrew T would agree with what Crotty says here (I quoted
this passage before); I of course disagree with the very first claim.

James Crotty has noted:
Minsky is quite emphatic...(an) investment decline can never be
initiated by a prior decline in the expected profitability of
investment; rather, it takes an initial drop in investment to induce
a subsequent  decline in profits. Investment and profits are not
mutually codetermining: investment spending calls the tune and
profits dance accordingly. As Minsky puts it: 'In the simplest
Kalecki case, where aggregate profit equals aggregate investment, the
shortfall of realized profits below anticipated profits requires a
logically prior shortfall of investment. This leaves the question
of...crises..and...depressions unexplained, for it is the decline of
investment that has to be explained.' Minsky's view on this point is
also summarized in the following quotation: 'The profitability of
existing capital--and profit expectations-can only change if
investment and expected investment [first]decline. Thus we have took
elsewhere--to arguments other than those derived from assumed
properties of production functions and hand waves with regard to
over-investment--to explain why the marginal efficiency of investment
falls. The natural place to look within the Schumpeter-Keynes-Kalecki
vision is in the impact of financing relations.' Thus, Minsky, can
find no  impediments to perpetual balanced growth in the real sector
of the economy. The roots of instability are to be found in the
financial markets.
  Journal of Post Keynesian Economics, Summer 1990, p.530

This paragraph reads to me as an admission of failure ("...can find
no the real sector...")  But in support of Crotty's
first claim, Andrew has attempted an immanent critique of Grossmann
from a Kaleckian perspective.

I would say that another problem with Keynesian or Kaleckian
framework is that it very easily lends itself to right wing
appropriation: there is no inherent reason why it could not be
deployed to justify a Bush tax regressive, militarist stimulus over a
Swedish type corporatism. In fact it leaves one defenseless if in
fact the former is more likely in a given conjuncture to be
stimulative in a formalisitc logico-positivist sense.

The problem was recognized by Paul Crosser, State Capitalism in the
Economy of the United States (New York: Bookman, 1960):

"The problem whether the flow of money for the stimulation of the
economy is to be channeled into the production of nonwar goods or war
goods does not enter the analytical pricture which Keynes offers: nor
does Keynes tackle the problem whether the money is to be spent on
labor-intensive or capital-intensive industries. Keynes's theoretical
position can therefore be invoked in regard to any  aspect of
spending which is undertaken wth the direct or implied purpose of
stimulating production and employment. Those
who prefer government spending for public works can cite Keynes in
their favor, as can those who point to the greater economic
effectiveness of government spending for war goods production.

"Keynes's analysis is a purely formalistic logico-postivistic one
which is stripped of social economic content. His analytical
framework is therefore
of little help in a tract such as this which strives to assess the
impact of government spending and the resultant changes in the
structure of the economy and society of a given country." (p.36)

In his  brilliant early reaction to Keynesian economics Erich Roll
(1938) emphasized that social democratic or corporatist, left wing or
fascist policy could be justified from within the Keynesian
framework: To Keynes and his followers "the state is a mechanism
which can be used to influence the economic system according to one's
ideals. One can readily grant that the ideals of Mr. Keynes and his
followers are noble. But can their analysis offer an effective
opposition to those whose ideals are less exalted and whose policies
are abhorrent? It is clear that they cannot. Their approach uses
abstract categories which demagogy can use and fill with its own real
content. Sismondi and Proudhon used an analysis somewhat similar to
that of Mr. Keynes for Utopian, quasi-socialist purposes. Malthus
used it to defend the remnants of feudalism against capitalist
revolution. A progressive and reactionary purpose can find
support--or at least indifference--in an economic theory that is
confined to the sphere of circulation and that operates with
psychological concepts." p. 88

Grossmann's theory on the other hand clarified that the inevitable
descent into international conflict and regression in the conditions
of work could only be prevented by a change in the relations of
production, in the emancipation from exploitation.


>The main point I'm trying to make here as regards the reproduction schemes
>is rather simple. The average industrial rate of profit is not the same as
>the average general rate of profit, and total production capital is not
>equal to the total capital stock.
>The wealthier a society is, the more capital assets exist which are neither
>current outputs or inputs to current outputs.
>Why is that important to know? You can build a model of how the profit rate
>on production capital will decline, to the point of crisis, but if you do
>not consider the circuits of capital external to production, the model is
>likely to be counterfactual, or apply only in highly special cases.

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