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I'm coming into this debate late but am I right in hearing that Andrew is
arguing that the Grossmann/Bauer model breaks down because of excess demand.
The reason it breaks down I would argue, is that demand is not modelled at
all. Instead of the bulk of capitalists' personal consumption being treated
as autonomous - Kalecki shows this empirically - it is treated as a passive
residual which shrinks to nothing. If Mattick had not persuaded most of the
hard left that Keynes and Kalecki were bourgeois apologists then the
incomplete role of demand in the Grossmann model may not have gone so
I am summarising this crudely, but I think before we get into prices
deviating from values (which Grossmann and Bauer assume away and so does
Marx in Capital vol II) there are more fundamental questions about how
demand is modelled in the Grossmann model.
> -----Original Message-----
> From: bhandari@Princeton.EDU [SMTP:bhandari@Princeton.EDU]
> Sent: 14 May 2000 16:25
> To: email@example.com
> Subject: [OPE-L:3187] Re: Accelerated ACcumulation
> Re: 3179
> Leaving aside Andrew's implicit challenge, long ago made by Sweezy, that
> capitalists would in the face of a shortage of SV simply adjust downward
> their rate of accumulation or demand as Andrew puts it to prevent
> breakdown--and there are answers to this important and difficult
> challenge-- I can safely say that Andrew's characterization of the Bauer
> scheme is exactly wrong:
> the demand for the material components of mp and lp (not c and v as Andrew
> further confuses the matter) are not in fact increasing at an accelerating
> rate in the scheme because values are held constant--an assumption
> Grossmann attacked at length.
> And it is beneath you to accuse me of "dredging" up a passage when I noted
> a major and pivotal chapter in the book.
> And for anyone who 'respects' our theoretical diversity, this chapter of
> Grossmann's work should be terribly well known; Mattick made much of it,
> and the permanent arms theory hinged on an interpretation of it.
> Grossmann located two kinds of reductions in value from which Bauer
> abstracts in his completely unrealistic model--
> a. those effected by crisis following upon overproduction and
> b. those by effected continuous technical change, which counteracts not
> only the constant rate of increase in c and v but more importantly any
> upward pressure on the OCC in the course of accumulation...
> HG focuses on the former while himself underlining--long before TSS--that
> the latter creates problems in Marxist theory which hadn't even been
> posed, much less solved. In his dynamics book he would make a further
> contribution to problem.
> In this section he deals mainly with the crisis-induced devaluation of
> already accumulated capital and the concentration and centralization to
> which that gives rise as a means by which the growth in the value elements
> is arrested.
> And most interestingly Grossmann shows that such devaluation is exactly
> equivalent to militarism.
> Here we have a criticism I would say of world historic importance of
> Schumpeter's theoretic attribution of a pacific nature to the bourgeoisie
> at a late stage of accumulation (Schumpeter himself repudiated his own
> theory and embraced Renner's theory of social imperialism in Business
> Cycles as is well known).
> By using up elements of production which had already been devalued in
> course of accumulation in orgies of militarism and war, the bourgeoisie
> actually create new scope for accumulation because a larger valorization
> base, i.e., the post war population would be greater in number despite war
> time deaths, could then confront a reduced capital in which backlogged
> technical innovations would be embodied.
> That is, Grossmann is arguing that before capital can claim the breathing
> that comes with starting with a reduced capital base, i.e, using elements
> of production which have become cheaper due to technical change, the old
> capital must be used up in material terms through militarism and war. War
> induces a paradoxical kind of full capacity utilization "scrapping" of
> devalued capital.
> We can even follow Brenner here and say that without the material using up
> of this devalued capital, there won't be sufficient breathing room for the
> new innovative capital which will be suffocated by the pricing strategies
> of the older firms.
> Moreover to the extent that the devalued capitals have become centralized
> through the absoption of other firms' excess capacity--quite a bit of this
> nowadays!--the newer capital has little chance of surviving at all without
> through wars, revolutions, habitual use without simultaneous reproduction,
> Keynes would understand all this as positive for profitability as well
> since they would tend to restore the scarcity of capital--his fetishistic
> understanding of the origins of the profit.
> On the basis of this chapter, further developed in the conclusion,
> Grossmann expected in 1927-29 that full scale world war would again be on
> the agenda.
> I just don't think it's an argument we should be forgetting about it.
> >1. To assume that the exchange values visible to capitalists are
> >constant as accumulation takes place in the fashion depicted
> >in the schemes is simply silly. In doing so, we would be insisting
> >that capitalist invest even though each and every investment from
> >period to period brings about a lower rate of profit.
> Not for the innovator who then induces similar "capital intensive"
> investment by which the general profit rate, assuming a one sector
> is reduced which induces more innovative entrepreneurial attempts to beat
> off falling profitability by an immediate advantage in reduced unit costs
> that comes from substituting less indirect for more direct labor, though
> the level of the economy as a whole this raises the OCC and thereby
> the profit rate, which sets the whole thing off again.
> Isn't this what your fellow TSSer Carchedi tries to show in his Frontiers
> of Political Economy?
> Of course to the extent that I have abstracted from cheaper, profit
> boosting inputs for other branches as a result of such technical change by
> focusing on one sector, I am not doing justice to Okishio like criticism
> Carchedi's models.
> But we can assume the same process is happening in other sectors, so that
> cheaper inputs are only slowing down upward pressure on the OCC, which is
> growing as Marx clearly predicted more slowly than the TCC.
> By the way, if you are all happy TSSers, then why don't you mention what
> Carchedi's reply to your own question would be?
> >2. As the rate of profit falls, there is technical change -- period.
> >You can't assume away changes in technique and even pretend to
> >be dealing with the Marx's notion of the falling rate of profit.
> Well let's assume for some good reason we can expect that it will tend not
> to be neutral over time, then capital saving innovation would then only
> have the effect of elongating the scheme.
> >3. As accumulation takes place, individual values are indeed falling
> >no matter what one's concept of value is.
> You think Grossmann does not make this point?
> >3. Given simply the schemes, there is no reason to believe the
> >social values would fall from period to period.
> That's Grossmann's point, not yours.
> > Is this accelerated accumulation "ludicrous"?
> Well it is not as stupid as the dogma that production is for
> Yours, Rakesh
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