Thursday, December 29, 2016

Lars P. Syll — New study shows marginal productivity theory has a ‘negligible’ link to reality

Those damn empirics keep getting in the way of theory. 
Mainstream economics, with its technologically determined marginal productivity theory, seems to be difficult to reconcile with reality. Although card-carrying neoclassical apologetics like Greg Mankiw want to recall John Bates Clark’s (1899) argument that marginal productivity results in an ethically just distribution, that is not something – even if it were true – we could confirm empirically, since it is impossible realiter to separate out what is the marginal contribution of any factor of production. The hypothetical ceteris paribus addition of only one factor in a production process is often heard of in textbooks, but never seen in reality.
When reading mainstream economists like Mankiw who argue for the ‘just desert’ of the 0.1 %, one gets a strong feeling that they are ultimately trying to argue that a market economy is some kind of moral free zone where, if left undisturbed, people get what they ‘deserve.’ To most social scientists that probably smacks more of being an evasive action trying to explain away a very disturbing structural ‘regime shift’ that has taken place in our societies. A shift that has very little to do with ‘stochastic returns to education.’ Those were in place also 30 or 40 years ago. At that time they meant that perhaps a top corporate manager earned 10–20 times more than ‘ordinary’ people earned. Today it means that they earn 100–200 times more than ‘ordinary’ people earn. A question of education? Hardly. It is probably more a question of greed and a lost sense of a common project of building a sustainable society.
Conventional economics as apologetics for ideology.

New study shows marginal productivity theory has a ‘negligible’ link to reality
Lars P. Syll | Professor, Malmo University

1 comment:

AXEC / E.K-H said...

The distribution theory is false because the profit theory is false
Comment on Lars Syll on ‘New study shows marginal productivity theory has only a “negligible” link to reality’

Every economist can know from the Palgrave Dictionary that the profit theory is false (Desai, 2008). Or, as Mirowski put it, “... one of the most convoluted and muddled areas in economic theory: the theory of profit.” In other words: the confused confusers of economics have NO idea what the pivot of their subject matter is. In still other words, this bunch of scientific deplorables does not know how the market economy works and is talking nonsense since Adam Smith.

It is pretty obvious that without the true profit theory there is no true distribution theory.#1 So everybody can know without bothering much about the insane behavioral assumptions of utility and profit maximization that the marginal theory of income distribution must be dead wrong.

The trouble with distribution theory started with Ricardo who got the distinction between wage, profit, and rent wrong.#2 Then Marx got the class theory of profit wrong.#3 Neoclassical marginal distribution theory, of course, is unsurpassable idiocy, but Keynesianism did not perform much better, and Heterodoxy has actually multiple profit theories that do not fit together.#4

Distribution theory has always been the deepest morass of economics. Do not expect that the brotherhood of orthodox and heterodox muddleheads will find a way out any time soon.

Egmont Kakarot-Handtke

#1 See ‘Essentials of Constructive Heterodoxy: Profit’
#2 See ‘When Ricardo Saw Profit, He Called It Rent: On the Vice of Parochial Realism’
#3 See ‘Profit for Marxists’
#4 See ‘Heterodoxy, too, is scientific junk’