Re: [OPE] estimating the severity and duration of a capitalist economic crisis

glevy@pratt.edu

Hi Dave Z:

Thanks for the reply.

> Part of
the answers depend on what one considers to be a crisis. 
>
Clearly, a 10% unemployment rate is a crisis for the working class but 
> the firms and rentiers may be doing fine. 

OK.

> The severity of a crisis could be measured by the
fraction of capital 
> (e.g. of the total fixed capital) making a
loss. Thus the evolution of 
> the distribution of profit rates
ought to be one good indicator of the 
> state of the economy.
Starting with the assumptions of the labour theory 
> of value one
can show that the long-run movements of this distribution 
> is
ultimately constrained by population growth, productivity growth and 
> the fraction of profits reinvested. 

Well,
that relates to - as you say - "long-run movements".  The
questions at hand
in an economic crisis are generally short-run: i.e.
how long will a particular crisis
last and how bad (for different
classes and groups) will it get?  I think you
need to look at
other variables to explain the short- to medium-run changes.

> Moreover, a monetary system, which enables the
operations of a 
> capitalist economy in the first place, depends
on the creation of credit 
> and debt. Therefore the inability to
pay debts should be another 
> indicator. 

True
enough, but the state and the central bank can have short- to
medium-term impacts on the levels of credit and debt.

In
solidarity, Jerry

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