Re: zero average profit

From: Ian Wright (ian_paul_wright@HOTMAIL.COM)
Date: Fri Jun 06 2003 - 19:24:00 EDT

Hello Rakesh,

>While Kalecki establishes some interesting accounting identities and shows
>that investment determines savings rather than vice versa, the analysis
>leaves open too many questions.

An analysis solely at the level of money quantities certainly does leave a
lot out.
But I wonder whether more can be deduced from "pure money" models than
might first seem apparent. This was the interest behind my original
For example, I like very much the paper "Statistical Mechanics of Money"
by two physicists working in the field of econophysics:
Their model is extremely simple: N agents, M money, random encounters of
pairs of agents who randomly transfer an amount of money between them.
That's it. It turns out that the statistical equilibrium of the system
an exponential income distribution (lots of agents with not much money,
and a decreasing number of agents with a great deal). This distribution is
in empirical agreement with a large section of the income distribution in
US, as measured from tax returns (the model breaks down for capitalist
incomes, which are better fitted by a power law, not an exponential law,
which is interesting in itself). Their model is exactly analoguous to a
gas, in which elastic collisions between molecules transfer energy between
them. So this work is very much in the tradition of Farjoun and Machover,
who also apply statistical mechanics to political economy. I wonder
why the physicists' very simple model is able to capture something essential
about the economy, and whether this kind of modelling approach can be
extended. Maybe Kalecki's "accounting identities" are deterministic versions
of the same approach of rigorously applying the principle of conservation of
money. There's a lot of sense in applying this principle because it is a
behavioural invariant, unlike preferences which in aggregate are random.
Only the insane destroy money. (Actually, two UK avant-garde artists once
burnt a million pounds in front of the gathered press to protest the
commodification of art, but these events have very low probability!)


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