Tuesday, April 27, 2021

Bill Mitchell — The Cambridge Controversy – a fundamental refutation of orthodox economic theory – Part 1

Some years ago, I promised to write about the – Cambridge capital controversy – which saw economists associated with Cambridge University in England and MIT in Cambridge, Massachusetts argue about the validity of neoclassical distribution theory. I never wrote the blog posts because I considered the material was a little difficult for a blog audience. Also, while of great interest to me, the topic was not necessarily compulsory reading for those trying to come to terms with Modern Monetary Theory (MMT). But today, I relent. For two reasons. First, I think my readership has reached much higher levels of economic literacy over the last 15 years and can handle a challenge. But, more importantly, there are times when the mainstream characters, who have been claiming that there is nothing new in MMT and that they knew it all along and all the important results can be explained within an orthodox New Keynesian approach, reveal their true colours. Their hubris sees them get ahead of themselves and they show they never really understood the basics that undermine their own approach. Such was the case this week when Paul Krugman declared the Controversy “a huge intellectual muddle” and “a tortured debate that illuminated nothing much”. Well, that just goes to show how the mainstream denial functions. A body of work comes along and blows the dominant paradigm out of the water, and the response is to ignore it as a meaningless muddle. Their current attacks on MMT are just another application of that approach, which I first encountered as a student while studying the capital debates. Given the complexity of this issue and the amount of material, this will be a two-part series. Today, we learn the historical context, which will convince you that this was not idle or arcane discussion. This was a debate that went to the heart of the existence of capitalism and the defenders of that system – the mainstream economists did everything they could to defend the myths that they had erected to make the system look fair. They failed but went on anyway. Here is Part 1....
Bill Mitchell – billy blog
The Cambridge Controversy – a fundamental refutation of orthodox economic theory – Part 1
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

1 comment:

Andrew Anderson said...

It is clear that the return of profits is the reward for ownership per se.

And that insight suggested that if ownership changed so would the distribution of income.
Bill Mitchell

Note then that, per the Old Testament, all agricultural land was to be equally owned by all citizens (Hebrews) with provisions in the Mosaic Law (Leviticus 25) to keep it that way. So no Hebrew normally had to work for wages just to eat, be clothed and have shelter.

Contrast that with the US which still has a large population of so-called Bible believers but has large scale rent, wage and debt slavery.

But what about non-agricultural assets such as city land, tools, livestock, etc? Those traded normally and could be permanent* possessions BUT there was no such thing as a government-privileged usury cartel whereby the public's credit could be used for private gain, as is the case today.

*Except city land had a 1 year redemption period during which the seller could buy back the property.