Tuesday, November 13, 2018

Lars P. Syll — Kalecki on wage-led growth

Kalecki refutes Say's law, which says essentially that money is a "hot potato" and people spend or invest all of it immediately without intertemporal saving. That is to say against a strict interpretation of Say's law, choice is not anything like immediate in a modern monetary economy, and saving negatively affects consumption of consumer goods and productive investment in capital goods thereby reducing effective demand below full employment. Since private debt is a feature of a modern monetary production economic and financial system, and nominal debt does not readjust without legal restructuring, economic contraction results in non-performing loans and ultimately defaults.

"Money" is not neutral, as Say's law assumes. Wages and prices do not adjust immediately to changes in economic conditions. Adjustment can take a long time, during which further changes occur that are not conducive to adjustment in the direction of general equilibrium at optimal capacity and full employment as efficient use of resources. Of this interregnum between states, Keynes said that in the end we are all dead; instead of waiting for the market to do its magic, the intelligent way forward is to address the causes.

Say's law in its strict formulation applies only to a particular economic model that is not very representational of a modern money production economy, especially one that relies extensively on the use of credit. While this model may be useful in illustrating the operations of supply and demand in a"free market," such ideal conditions don't exist in the world owing to a variety of factors, social, political, and economic.

The classical liberal solution was to refashion the world to be closer to the ideal system, but that attempt proved itself a fool's errand socially and politically. The neoliberal solution that replaced the classical approach has been to modify the initial approach by using the power of the state domestically and in imposing international agreements in order to favor capital while mouthing the sentiments about free markets, free trade, and free capital flows. The state favoring capital and international agreements favoring capital are kept in the background as the hidden agenda while the agenda that is presented publicly is "freedom."

Lars P. Syll’s Blog
Kalecki on wage-led growth
Lars P. Syll | Professor, Malmo University

1 comment:

AXEC / E.K-H said...

Keynes, Kalecki, MMT and the invention of the perpetual profit machine
Comment on Lars Syll on ‘Kalecki on wage-led growth’

Like Keynes, Kalecki got profit wrong. Lars Syll and the rest of retarded After-Keynesians have not realized anything to this day.#1

Keynes defined the formal foundations of the General Theory as follows: “Income = value of output = consumption + investment. Saving = income − consumption. Therefore saving = investment.” (p. 63) This elementary two-liner is conceptually and logically defective because Keynes never came to grips with profit. (Tómasson et. al)

The elementary version of the axiomatically correct macroeconomic Profit Law, which is measurable with the precision of two decimal places, reads Qm=I−Sm with Qm as monetary profit and Sm as monetary saving. And this means that since Keynes/Hicks ALL I=S/IS-LM models are false.

Keynesian macroeconomics is proto-scientific garbage. Because profit theory is false, the rest is false including, of course, employment theory.#2

Kalecki’s profit theory is not any better.#3, #4 And therefore, his employment theory, too, is provably false.

The axiomatically correct employment theory tells one that overall employment INCREASES if the average wage rate W INCREASES relative to average price P and productivity R. So, there are two policy levers and what has to be done is to combine demand-led and wage-led expansion in order to get out of unemployment.

The post-Keynesian preoccupation with demand is ultimately counterproductive because each increase in deficit-spending increases macroeconomic profit. From the axiomatically correct macroeconomic Profit Law follows Public Deficit = Private Profit.#5

Keynes, Kalecki, MMTers, and Lars Syll are seen as Progressives who promote policies that benefit WeThePeople. This is just one more propaganda swindle in the long history of political economics. These fake Progressives have never done anything else than to push the agenda of WeTheOligarchy. After all, this is what all economists do since Adam Smith/Karl Marx.#6, #7

Egmont Kakarot-Handtke

#1 Demand-led and wage-led growth

#2 Keynes’ Employment Function and the Gratuitous Phillips Curve Disaster

#3Truth by definition? The Profit Theory is axiomatically false for 200+ years

#4 What is Wrong with Heterodox Economics? Kalecki’s Profit Theory as an Example

#5 Keynes, Lerner, MMT, Trump and exploding profit

#6 Mission impossible: economists join WeThePeople

#7 Why do workers not tar and feather economists?