[OPE-L:3483] Re: accumulation suggestion

Steve Keen (s.keen@uws.edu.au)
Sat, 19 Oct 1996 16:03:55 -0700 (PDT)

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Re Duncan's comments:
> Comment on Steve's [OPE-L:3462]:
> (snip)
> >
> >And I've done the equations, which, putting it mildly, are a horror.
> That's one argument for approaching simplified models to get the
> methodology straight before tackling the full complications of reality.

For sure!

> >
> >The one conclusion that I can draw from it at present which might be of
> >interest here is that the money supply turned out to be endogenous. I
> >introduced moneylenders (strictly, a single moneylender), and all
> >transactions between sectors, workers & capitalists (buying/selling both
> >labor-power and subssitence commodities), and capitalists and
> >moneylenders, were carried out via the bank balances of capitalists as
> >maintained by the moneylenders.
> >
> >It turned out that bankers' "hoards", which were necessary to have them
> >undertake the role of bankers, were augmented/decremented by the
> >capitalist process, but did not directly determine anything in the
> >system.
> I'm familiar with this type of treatment of finance. You don't say so
> explicitly, but I suspect that you hold the price level constant, or
> determine it historically as part of the assumptions. I would be cautious
> in calling these features of your model "conclusions", since it sounds as
> though you've assumed an endogenous credit money system to begin with.

I have assumed a system of bank book-keeping, true. That didn't
necessarily mean assuming endogenous money: it could have been that the
banker's hoards were a determining part of the system, in which case the
hoards may have needed a commodity equivalent, etc. What interested me
is that the book-keeping approach led to endogenous credit in a
self-consistent fashion.

The price level "varies", to the extent that one exists! There are
separate prices for each sector, and these are a function of input
prices, wages, and markups. These could be weighted by quantity to
generate a price index, which I'm sure would vary over time, since the
partial models I have simulated (prices and markups mainly, plus bank
balances in one) do have varying prices.

I have to assume some preceding period prices, of course, but that's a
necessity in any difference equation work (or indeed, any historical