The latest Trade and Development report by the United Nations Conference on Trade and Development (UNCTAD), the economic research agency to help ‘developing countries’, is a must read. Not only is it packed with data and statistics about trends and developments in global production, trade and investment, but this 2020 issue takes a very radical position on how to get the world economy out of what the IMF calls the ‘lockdown’ slump.From the Marxian perspective, the problem is falling profit rate. Michael Roberts observes that Keynes called this "the marginal efficiency of capital."
Indeed, on occasion even Keynes recognised that profitability (which he called the ‘marginal efficiency of capital’) was an important factor in causing slumps. As he said: “Unemployment, I must repeat, exists because employers have been deprived of profit. The loss of profit may be due to all sorts of causes. But, short of going over to Communism, there is no possible means of curing unemployment except by restoring to employers a proper margin of profit.” If the marginal efficiency of capital fell below the interest cost of borrowing capital, then capitalists would have a loss of ‘animal spirits’ and stop investing and instead hoard money. But this aspect of Keynesian theory is ignored by modern Keynesians (as it was by Keynes himself).The problem is the structure of capitalism based on the relationship of profit and firm investment and and the profit rate depends on the capital/labor share. This and the following posts explore this relationship.
Michael Roberts Blog
Ending the pandemic slump – a return to Keynes?
9 comments:
https://joequinn.net/2014/01/11/were-the-boston-marathon-bombers-mind-controlled/
and
https://www.nytimes.com/2003/03/23/magazine/the-sound-of-things-to-come.html
"dubious Middle Eastern bistros, her senses inform her that she has just stepped through a discrete column of sound, a sharply demarcated beam of unexpected sound. ''Look at that,'' Norris mutters, chuckling as the lady turns around. ''She doesn't know what hit her.''
Norris is demonstrating something called HyperSonic Sound (HSS). The aluminum plate is connected to a CD player and an odd amplifier -- actually, a very odd and very new amplifier -- that directs sound much as a laser beam directs light. Over the past few years, mainly in secret, he has shown the device to more than 300 major companies, and it has slackened a lot of jaws. In December, the editors of Popular Science magazine bestowed upon HSS its grand prize for new inventions of 2002, choosing it over the ferociously hyped Segway scooter. It is no exaggeration to say that HSS represents the first revolution in acoustics since the loudspeaker was invented 78 years ago -- and perhaps only the second since pilgrims used ''whispering tubes'' to convey their dour messages."
Yo “The pandemic slump” is due to people in authority shutting everything down... It didn’t evolve from the apes by random chance....
This is like when you people are in the lab performing gene editing you go “hey! That’s Darwin!”.... When people are doing it...
“ Unemployment, I must repeat, exists because employers have been deprived of profit. ”
That’s not what MMT says.... MMT says “if someone saves, then we can’t buy all of our output”
Roberts seems to think (at least in the Brave New Europe version of his article – link below) that a lack of profitable investments will stop extra demand giving us more jobs. That’s nonsense. If there happen to be no particularly profitable investments to be made and demand rises, employers will just meet that demand by using more labour intensive methods of production than previously.
https://braveneweurope.com/michael-roberts-ending-the-pandemic-slump-a-return-to-keynes
Economists’ scientific incompetence is worse than the plague
Comment on Michael Roberts on ‘Ending the pandemic slump — a return to Keynes?’
Michael Roberts summarizes the situation: “The Great Lockdown has tipped the global economy into recession in 2020 on a scale not witnessed since the 1930s.” And “UNCTAD economists note … that the world economy was already heading for a slump before the pandemic hit.”
This leads quite naturally to the question: “What economic policies should be adopted to end this ‘lockdown slump’ and avoid or reduce the hit to the livelihoods of billions? That depends on the analysis of the causes of the slump itself.”
Right, good policy depends on true theory. The problem of economics as a science is this “In order to tell the politicians and practitioners something about causes and best means, the economist needs the true theory or else he has not much more to offer than educated common sense or his personal opinion.” (Stigum)
And here is the snag: to this day, economists do NOT have the true theory but many silly opinions. The major approaches — Walrasianism, Keynesianism, Marxianism, Austrianism, MMT, Pluralism — are mutually contradictory, axiomatically false, materially/formally inconsistent and all got the foundational economic concept of profit wrong. Economics is a failed science. As lousy scientists, economists are a hazard to their fellow citizens — not any different from quack doctors.#1
This has never hindered economists to give economic policy advice. “UNCTAD economists openly follow the Keynesian ‘explanation’ for the lost decade … since 2009. And their solution is a re-adoption of Keynesian policies to manage capitalism better. For UNCTAD, slumps start with a collapse in demand ie in investment spending and above all in household consumption.”
At this point, Michael Roberts begs to differ: “In a capitalist, profit-making, economy, it is profits and profitability that drive investment and when profitability drops, investment in the means of production and in labour will contract, leading to unemployment and loss of consumer incomes and demand.” And “Indeed, on occasion even Keynes recognised that profitability (which he called the ‘marginal efficiency of capital’) was an important factor in causing slumps.” As he said: “Unemployment … exists because employers have been deprived of profit. The loss of profit may be due to all sorts of causes. But, short of going over to Communism, there is no possible means of curing unemployment except by restoring to employers a proper margin of profit.”#2
And Michael Roberts continues: “You see, in the last 40 years, the share of profits in the national incomes of the major economies has risen at the expense of wages and so the crisis of capitalist production is ‘wage-led’ not ‘profit-led’.”
And then he finishes off UNCTAD: “There is no mention of profit or profitability in the whole of the long UNCTAD report. Instead we are asked to accept that slumps are caused by low wages and consumption and by low investment caused by a switch to financial speculation leading to ‘instability’.”
We can cut off the policy argument here because it is pointless. Obviously, there is something fatally wrong with the theoretical foundations and the concept of profit. The blunder is evident in the expression “share of profits in the national incomes”.
See part 2
Part 2
Because profit is NOT income (it is a difference of flows and not a flow like wage income) there is NO such thing as a “share of profits in the national incomes”.#3-#5
Because economists get the foundational economic concept of profit wrong the whole analytical superstructure of economics is wrong. This means that economic policy NEVER had sound scientific foundations. For 200+ years now political economics is nothing but brain-dead agenda pushing. UNCTAD and Michael Roberts are no exception. Like the rest of the profession, both have no idea what profit is.
Egmont Kakarot-Handtke
#1 Iatrogenic economics
https://axecorg.blogspot.com/2016/06/iatrogenic-economics.html
#2 Keynes, too, got profit theory badly wrong. See Ch. 13, The indelible scientific disgrace of economics, in Sovereign Economics
https://www.bod.de/buchshop/sovereign-economics-egmont-kakarot-handtke-9783751946490
#3 Profit Law for a closed economy is given by Qm≡Yd+(I−Sm)+(G−T)
#4 Wikipedia, economics, scientific knowledge, or political agenda pushing?
https://axecorg.blogspot.com/2020/06/wikipedia-economics-scientific.html
#5 Links on McKinsey’s ‘A new look at the declining labor share of income in the United States’
https://axecorg.blogspot.com/2019/05/links-on-mckinseys-new-look-at.html
“Because profit is NOT income (it is a difference of flows and not a flow like wage income) “
Yes... They have big problems recognizing Minuends, Subtrahends and Differences.... many think “the deficit!” is what government is spending...
Matt Franko
You say: “Yes... They have big problems recognizing Minuends, Subtrahends and Differences.”
Indeed, this is the flow-balance inconsistency (not to be confused with the stock-flow inconsistency). In simple terms, “they” are too stupid for the elementary algebra that underlies macroeconomics.#1
The stock-flow inconsistency makes that the whole of MMT is proto-scientific garbage. Only good for trolling and deceiving #WeThePeople.
Egmont Kakarot-Handtke
#1 Is Nick Rowe stupid or corrupt or both?
https://axecorg.blogspot.com/2018/01/is-nick-rowe-stupid-or-corrupt-or-both.html
Correction
instead of The stock-flow inconsistency makes ...
The flow-balance inconsistency makes ...
Sorry!
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