Re: [OPE-L] A class dimension of aggregate demand

From: Jerry Levy (Gerald_A_Levy@MSN.COM)
Date: Tue Dec 06 2005 - 08:46:23 EST

> One other comment about this: the notion of "aggregate demand" is actually
> more complex than it seems at first sight, if its composition is viewed
> through the prism of economic reproduction, since we then have to
> distinguish between:
> - expenditure on means of production (intermediate goods and fixed capital
> goods).
> - expenditure on financial assets and non-productive assets (including
> real estate and land).
> - expenditure on means of consumption - durables and non-durables.
> - expenditure on means of destruction - military and eco-destructive
> goods.
> - expenditure on luxury consumption.
> - liquid or hoarded potential purchasing power

Hi Jurriaan:

I think it's generally going to be the case for _any_ "aggregate" that once
you begin to disaggregate you see that it is "more complex than it seems at
first sight."  For instance, any _class_  in capitalist society could be
of as an "aggregate" (simple unity), but reflection will tell you that there
another side (diversity) and a more complex unity (unity-in-diversity).  If
were to do with class as you do above with Aggregate Demand then we
would  begin to see "the infinite fragment of interests and positions into
which the division of social labour splits not only workers but also
and landowners -- the latter, for instance, into vineyard-owners,
forest-owners, fishery-owners, etc." (last sentence of _Capital_, Volume 3).

The question, I guess, to ask is whether Aggregate Demand and Aggregate
Spending actually exist or whether those concepts  mystify and obscure
real  processes.  I am not convinced of the latter.  Take the conventional
formula for (closed economy) Aggregate Spending:

Aggregate Spending =  C  +  I  +  G

where C = consumption spending
           I  = investment spending
           G = government spending

Granted, this does not capture all of complexities associated with spending,
but is it misleading to use it to represent a "stylized" set of
It could be seen as being misleading perhaps in relation to C since the
obviously does not show a "class dimension" to Aggregate Spending, but
if one has a class perspective then one is lead to go on to investigate that

I think the larger problem with the Keynesian conception of Aggregate
Demand is that it is not integrated into a long-run theory.  (It would also
be interesting to consider the Keynesian perspective that investment
demand and labor demand are derived demands from an _empirical_
perspective.)  Saying "in the long run, we are all dead" is -- it seems
to me -- an evasion and a mystification.

A side-note:  I wonder about your categorization re "eco-destructive
goods".   While there are surely both means of consumption and means
of production (and, yes, means of destruction -- if you want to use that
term) which are eco-destructive, are these side-effects or is the _purpose_
of them to be eco-destructive rather than to be means of consumption,
means of production, etc?  This is both a theoretical question, a practical
one, and an accounting issue.  Re the latter, it seems to me that for
accounting purposes a single commodity shouldn't be listed as both e.g.
a means of production and an eco-destructive good since it would
count the same good twice. Can you think of any eco-destructive goods
which should _not_ be listed in any of the other divisions that you list?

> If you crunch the numbers you will see that workers' consumption is only
> the *minor* part of this total aggregate demand. Even so, this is only
> *monetarily effective* demand; it does not refer to needs unmet through
> lack of buying power.

Demand, like supply, requires both willingness and ability.  Thus, for
example, if homeless people want and need housing, they do not have a
demand for housing unless they have the ability -- the money with which
they can obtain housing.  So, buying power is necessarily linked to the
nature of demand: to speak of "monetarily effective demand" seems to
me to be redundant --  needs unmet through lack of buying power are
needs unmet through lack of demand which are needs unmet because
of the lack of purchasing power.

In solidarity, Jerry

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