Re: [OPE] topics for summer discussion: theories of the crisis

"but the dynamic changes in the world
economy have been driven by export-led growth in japan, then korea and
taiwan, and now china. "
The model seems to work pretty well for China and Japan, it is a bit harder getting data for China since Penn World Tables do not include it, but extractind data from the China Yearbook the trajectory seems similar to that of Japan some 40 years earlier. I can post you an up to date paper with Chinese data if you want.
But you can look at the results for Japan and Korea on the interactive web implementation of the model at http://compbio.dcs.gla.ac.uk/cgi-bin/profits/index.cgi
this shows it doing a pretty good job on both those countries.
________________________________________
From: ope-bounces@lists.csuchico.edu [ope-bounces@lists.csuchico.edu] On Behalf Of Michael Webber [michaeljwebber@gmail.com]
Sent: Monday, July 26, 2010 2:46 AM
To: Outline on Political Economy mailing list
Subject: Re: [OPE] topics for summer discussion: theories of the crisis

dear dave / paul

my comment about open economies obviously stirred something up.
thanks for your comments.

let me pick up on your response, dave:
While it is true that the steady-state rate is derived in a closed model
of the economy it never the less works well empirically in real, open
economies as Paul just pointed out. It would be interested to see how
the growth rate of net exports would modify the steady-state rate. (Note
that this does not assume that wages are fixed or that there is full
employment.)

let me add this, first. from where i sit - not just in winter, but
near east asia - it may well be that steady-state, closed models
approximate what is going on in slowly, but persistently declining
economies of europe and usa. but the dynamic changes in the world
economy have been driven by export-led growth in japan, then korea and
taiwan, and now china. sure, the usa can destroy the world economy,
as it nearly did a couple of years ago; it can destroy countries, on
account of its military might; but it is irrelevant to the changes in
the global economy over the past 50 years - in the sense that it has
reacted, but hardly initiated. the real stuff has been going on in
open economies, in which the rate of growth of net exports is high and
positive.

[i know: overstated!]

so, modelling this. let me get back to you tomorrow on this - i need
to sort out some notation appropriate to an email.

now, on geographically varying values. if the standard of living - in
the sense of an average consumed bundle of commodities - differs from
place to place in a systematic way, then so does the value of labour
power and the value of commodities. now, socially average consumption
bundles presume that there is some territory over which the averaging
takes place; which presumes that place-to-place differences, like
person-to-person differences are simply random. but that ain't true:
there is systematic differences, even within a given state; think
rural-urban differences in living standards in china (urban wages are
more than 3 times rural - i know this is wages, but they do index
standards of living to some degree) or think coastal - inland
differences in wages (again, over 2 times). i hope that this explains
what i mean.

michael

On 25 July 2010 06:29, Dave Zachariah <davez@kth.se> wrote:
> Thanks for your comment Michael.
>
>> furthermore, the price and value quantities are simultaneously determined (even if estimation goes from one to the
>> other), so one does not cause the other. f& m have a very profound
>> effect on the manner in which we think about such issues.
>>
> I would disagree with this lack of causal mechanism. I think one can
> show that the statistical law of value emerges as a consequence of
> interconnected firms that operate under the constraint of meeting the
> wage bill. This issue would however take us on a separate discussion, so
> I'll leave it for now.
>
>> making such a distinction between production and exchange (including
>> finance) also enables us to do some work on Arrighi-type arguments
>> about shifts in hegemony in a global system.
>>
>>
>
> I agree with this.
>
>> 3 any serious empirical examination of average rates of profit in
>> modern economies must accept the fact that they are open. therefore
>> Dave's original statement [...] is true only of closed economies (ie, of the world as a whole). in fact, average profitability depends also on the growth rate of net
>> exports. in an even better formulation, it would also depend on
>> inter-sectoral (which might include international) unequal exchange.
>>
>>
>> 4 in a non-equilibrium, dynamic model of an open economy, it is
>> possible to demonstrate that in the short run, average profitability
>> can move in a variety of directions, depending on the above factors.
>> in the longer run, the growth rate of net exports has to be roughly
>> zero (otherwise, the areal unit would end up producing everything in
>> the world; and there are political objections to this - viz first
>> Japan, then S Korea and now China), and then, there is a knife-edge
>> solution in which average profitability is constant; otherwise, it
>> falls to some level until an adjustment in the underlying parameters
>> is made (savings, productivity, labour, etc).
>>
>>
> While it is true that the steady-state rate is derived in a closed model
> of the economy it never the less works well empirically in real, open
> economies as Paul just pointed out. It would be interested to see how
> the growth rate of net exports would modify the steady-state rate. (Note
> that this does not assume that wages are fixed or that there is full
> employment.)
>
>> 7 in general, i hate approaches in which these are seen as
>> theoretically separate approaches to the rate of profit. technical
>> change is about reducing labour's share, for example. that's what
>> it's for, as a capitalist rule of thumb. likewise underconsumption:
>> that's what we want, in a world of internationally competitive firms -
>> make our workers consume less and get the others to consume more.
>>
>
> There may still be insights gained by using 'separate approaches' to
> break down and compare the hypothesized mechanisms that affect
> profitability, so that one does not end up with a fruitless eclectic
> theory in which everything is said to affect everything.
>
> I would disagree somewhat with the idea that as a rule of thumb
> technical change is about reducing the wage share in a firm. I think
> that is a more proximate factor. Technical change is structurally set in
> the competitive forces of a capitalist market, inducing the need for
> firms to reduce costs and labour costs in particular. But in addition to
> this workers, and a militant workforce in particular, can be weakened by
> labour-saving technical change.
>
>> 8 and finally, let me make a geographical point. [permit me... it is
>> my discipline!] all of the calculations that we have been discussing,
>> all of the concepts - they all assume that there is a geographically
>> unified territory over which there is a given standard of living - a
>> wage - and a given structure of prices. [...] this implies that the value of a
>> commodity depends on where in the system it was made. it also means
>> that the value of a commodity in a national economy ought, perhaps to
>> be thought of as the average of the values of that commodity made at
>> different places?
>>
>
> I think your last point can more or less be demonstrated through the
> decomposition of prices as F&M do. However, I can't see how the real
> wage or the real price structure enters into what I've written above
> about profitability.
>
> (Sorry for being seasonally out of sync in the subject line of this thread.)
> //Dave Z
>
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--
Michael Webber
Professorial Fellow
Department of Resource Management and Geography
The University of Melbourne
Mail address: 221 Bouverie Street, Carlton, VIC 3010
Phone: 0402 421 283
Email: mjwebber@unimelb.edu.au
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