Friday, April 25, 2014

Lars P. Syll — Krugman’s gadget interpretation of economics

Where does all this leave us? Well, I for one, is not the least impressed by Krugman’s gadget interpretation of economics. Krugman — still — hasn’t come up with a tenable explanation to why mainstream economics goes on as if the capital controversy has never occurred, or why he and other leading neoclassical economists — still — treat ‘capital’ as if it was a well-defined and consistent concept — which it is not, as admitted by Samuelson et consortes almost fifty years ago.
Krugman’s gadget interpretation of economicsLars P. Syll | Professor, Malmo University


googleheim said...

Baseball, hot dogs, apple pie, and LIBOR rigging.

It's the American way.

The News outlets are controlled by advertisers such as banks.

Matt Franko said...

"Leading neoclassical economists — still — treat ‘capital’ as if it was a well-defined and consistent concept"

Here is David Harvey who has been teaching Marx's 'Kapital' for 40 Years: "Capital is not a thing but a process in which money is perpetually sent in search of more money."


Unintelligible. (after 40 years! (ie tip off!)

I dont think this is how Piketty defines it....

Unknown said...

@Matt Franko,
Pete G. Peterson was the Secretary of Commerce in the Nixon Administration.

However, I would maintain, that most current Democrats are somewhat to the right (more conservative than) of Nixon

Magpie said...

Okay, so this is unintelligible:

"Capital is not a thing but a process in which money is perpetually sent in search of more money."

Let's try with this. James K. Galbraith:

"What is 'capital'? To Karl Marx, it was a social, political, and legal category—the means of control of the means of production by the dominant class. Capital could be money, it could be machines; it could be fixed and it could be variable. But the essence of capital was neither physical nor financial. It was the power that capital gave to capitalists, namely the authority to make decisions and to extract surplus from the worker."

More "intelligible", hopefully?


Just in case, translation from Harveyese to English: "money is perpetually sent in search of more money" means money is a means of getting more money. And this is done all the time.

That's the mystery.

Tom Hickey said...

Capital is an ambiguous term in English. Technically, it means the means of production as one of the factors of production which include land (whence come materials) and labor. However, capital also means financial capital aka financial investment, which is technically saving (flow) and savings (stock). But "capital" is also applied to anything that confers power as in human capital, political capital, knowledge capital, etc.

When terms are ambiguous, they need to be defined precisely to avoid ambiguity, and the definition must be observed in all usage in this context. Most authors find this next to impossible and even if the author does, readers often don't and over time different meanings get imputed.

This is a reason that the Cambridge capital controversy is important. Presuming that K has precise meaning without defining it operationally is illogical.

As a result some are questioning the appropriateness of the traditional classification of the factors, especially since land is now often rolled into the concept of capital. What is a unit of K? Is management and organization part of labor or capital?

This is a real problem with gadget economics, as Lars points out, since it creates simple models that sound intuitive but fail in application to fact for lack of actual correspondence.

The solutions that such gadgets provide are simplistic and often misleading. And when they are used rhetorically to mislead or obfuscate, they are sophistic.