2013년 7월 8일 월요일

[Don Patinkin's] chapter 10_ The conceptual framework of the General Theory : I (1976)

지은이: Don Patinkin
출처: the exact title of the source not found yet

시기: 1976

※ some excerpts: 

the final page before chapter 10, p. 94:

( ... ) the price level as the economy moves along the aggregate supply function, note the similarities withㅡand differences fromㅡthe ^Treatise^. In both cases, an increase in output is associated with an increase in per-unit cost of production, and hence in per-unit price. But whereas in the ^Treatise^ the increase in cost is due to an increase in the wage rateㅡoutput per unit of labor input (i.e., efficiency ^e^ in the fundamental equations in Chapter 4 above) remaining constant, in Chapter 3 of the ^General Theory^ it is due to a decrease in the marginal product of laborㅡthe money wage rate remaining constant. This analytical difference in large part stems from the integration of monetary and value theory that Keynes undertook as one of his tasks in the ^General Theory^ㅡas contrasted with his narrow concept of monetary theory in the ^Treatise^, which caused him to declare the theory of wages to be outside his terms of reference, and which accordingly precluded his even mentioning the marginal product of labor (^TM^ I, p. 151; cf. p. 13 above).

  Second, I have already noted that Keynes accepts the "first postulate of classical economics" (^GT^ pp. 5, 17); that is, he assumes that the firms of the economy are always on their demand curve for labor as determined by the latter's diminishing marginal productivity, so that changes in the real wage rate. But, as I have agreed elsewhere, the planned labor inputs specified by this demand curve reflect the firm's profit-maximizing behavior on the assumption that at the designated real wages they will be able to sell in the market all of their correspondingly planned outputs. Why, then, should this curve continue to be relevant for a situation of disequilibrium in which, by definition, this assumption is not fulfilled? In brief, despite Keynes' declared objective of integrating monetary and value theory, he did not really develop a theory of the demand for labor consistent with the state of unemployment qua market disequilibrium that was his major concern in the ^General Theory^. [16] 
[16] The reference in this paragraph is to chap. 13 (especially pp. 319-24) of my ^Money, Interest, and Prices^. This also provides a largely intuitive and admittedly problematic attempt to make good the deficiency just noted in the text. See also my earlier article on the Keynesian supply function (1949), as well as the next chapter. In recent years, this problem of analyzing behavior in conditions of market disequilibrium has received increasing attention in the literature. See in particular the well-known contributions of Clower(1965), Leijonhufvud(1968), and Barro and Grossman (1971).

Chapter 10_ The conceptual framework of the General Theory : I [1]
[1] I shall in this and the following chapter draw freely on my "Price Flexibility and Full Employment"(1951) and ^Money, Interest, and Prices^, 1st ed.(1956) and 2nd ed.

A book, especially a great book, is far more than its component parts. It is a way of combining these parts into a conceptual frameworkㅡa vision, a way of looking at the world.[2]
[2] Cf. Schumpeter(1954), pp. 41-42, 561-62.
  What was the vision that Keynes presented in the General Theory? It started with an "antivision"ㅡa rejection of the traditional view that there existed in the capitalist world an automatic, self-adjusting mechanism that could be relied upon to maintain an acceptable state of employment.

  Some aspects of this view can already be seen in a document that Keynes prepared in 1930 for the Committee of Economists of the Economic Advisory Council. Because the relevant passage here brings out so sharply the dynamic framework within which Keynes carried out his analysis, I would like to quote it at length, even though its primary context (the balance-of-payments problem) is not that of the General Theory :
In minimising in the past the importance of the transfer problem, we have, I think, had in mind a situation which was changing only slowly. In this event, the amount of the necessary rate of change in money wages would be small, so that (assuming progress) the mere lapse of a little time during which money wages were not raised would be enough. Moreover, there would always be time for modifications to have their ultimate effect, before anything very dreadful happened.
  The trouble today is that we are violently out of equilibrium, and that we cannot wait long enough for laissez-faire remedies to bring their reward. In particular, a reduction in money wages might at long last have a very beneficial effect on the value of our total exports; but it may be quite impossible for us greatly to increase our favourable balance quickly merely by reducing money wages.
  I suspect, therefore, that the correct answer on austere lines is as follows: A reduction of money wages by 10% will ease unemployment in 5 years' term. In the meanwhile you must grin and bear it.
  But if you can't grin and bear it, and are prepared to have some abandonment of laissez-faire by tariffs, import prohibitions, subsidies, government investment and deterrents to foreign lending, then you can hope to get straight sooner. You will also be richer in the sense of owing more capital goods and foreign investments 5 years hence. You may also have got into bad habits and 10 years hence you may be a trifle worse off than if you had been able to grin and bear it.
  The worst of all, however, will be an attempt to grin and bear it which fails to last through. The risk of this is perhaps the biggest argument against the "grin and bear it" policy [ ^JMK^ Vol. 13, pp 198-99].
The theme that one cannot rely on what Keynes in the General Theory (p. 206) came to call “the self-adjusting quality of the economic system” is one that recurs throughout the process of developing that book. Thus in the 1931-32 draft, the first surviving one, we already find:
There are also, I should admit, forces which one might fairly well call "automatic" which operate under any normal monetary system in the direction of restoring a long-period equilibrium between saving and investment. The point upon which I cast doubtㅡthough the contrary is generally believedㅡis whether these "automatic" forces will, in the absence of deliberate management, tend to bring about not only an equilibrium between saving and investment but also an optimum level of production [JMK, vol. 13, p. 395]. 

 Again, in the unpublished "Historical Retrospect" that he prepared in 1932, Keynes wrote:
The orthodox equilibrium theory of economics has assumed, or at least not denied, that there are natural forces tending to bring the volume of the community's output, and hence its real income, back to the optimum level whenever temporary forces have led it to depart from this level. But we have seen in the preceding chapters that the equilibrium level towards which output tends to return after temporary disturbances is not necessarily the optimum level, but depends on the strength of the forces in the community which tend towards saving. ... it now seems to me that the economists, in their devotion to a theory of self-adjusting equilibrium, have been, on the whole, wrong in their practical advice and that the instincts of practical men have been, on the whole, the sounder. [JMK, vol. 13, p. 406]. 
And in his contribution to a BBC series in 1934, "Poverty in Plenty," Keynes gave a talk entitled "Is the Economic System Self-Adjusting?" in which he characterized as follows the differences of views that had been expressed by the various participants of the series:

I have said that we fall into two main groups. What is it that makes the cleavage which thus divide us? On the one side are those who believe that the existing economic system is, in the long run, a self-adjusting system, though with creaks and groans and jerks, and interrupted by time lags, outside interference and mistakes. ... These authorities do not, of course, believe that the system is automatically or immediately self-adjusting. But they do believe that it has an inherent tendency towards self-adjustment, if it is not interfered with and if the action of change and chance is not too rapid.

  On the other side of the gulf are those who reject the idea that the existing economic system is, in any significant sense, self-adjusting. They believe that the failure of effective demand to reach the full potentialities of supply, in spite of human psychological demand being immensely far from satisfied for the vast majority of individuals, is due to much more fundamental causes. ...

  The strength of the self-adjusting school depends on its having behind it almost the whole body of organised economic thinking and doctrine of the last hundred years. ...

  Now ^I^ range myself with the heretics. ... There is, I am convinced, a fatal flaw in that part of the orthodox reasoning which deals with the theory of what determines the level of effective demand and the volume of aggregate employment; the flaw being largely due to the failure of the classical doctrine to develop a satisfactory theory of the rate of interest.

  Now the school which believes in self-adjustment is, in fact, assuming that the rate of interest adjust itself more or less automatically, so as to encourage just the right amount of production of capital goods to keep our incomes at the maximum level which our energies and our organisation and our knowledge of how to produce efficiently are capable of providing. This is, however, pure assumption. ...

  None of this, however, will happen by itself or of its won accord. The system is not self-adjusting, and, without purposive direction, it is incapable of translating our actual poverty into our potential plenty. [JMK vol. 13, pp. 486-91; italics in original].

  What was the positive side of Keynes's vision? What was the overall conceptual framework that he constructed out of the three major analytical components that he saw in the ^General Theory^ㅡthe theory of effective demand, the theory of liquidity preference, ad the marginal efficiency of capital?

  ( ... p. 98

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