[OPE-L:4456] Re: Mandel vs. Baran-Sweezy

A.B.Trigg -Andrew Trig (A.B.Trigg@open.ac.uk)
Thu, 20 Mar 1997 08:16:57 -0800 (PST)

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I would agree with most of your reasoning up to a point. First, as you say,
for Kalecki the output of department 3, the sector producing worker
consumption goods, falls in response to the increase in monopoly power.
There is a reduction in the real wage and resultant fall in worker
consumption. There is a redistribution of pofits from the consumption
goods sector to the investment goods and capitalist consumption goods
sectors. As you say, the output of department 3 must fall so that the same
volume of total profits is realised. Now, I suppose where I differ from you
- and it is helpful to sharpen this up - is that I don't think this is the
key to the monopoly capital view. In the monopoly capital view there is a
representative monopolist which has an increase in potential profits as it
restricts output to force up the price. Baran and Sweezy actually set
things up in this neoclassical way. For Kalecki, however, the increase in
profits is not potential for the capitalists in the investment goods and
capitalist consumption goods industries - it is realised. The potential
increase in profits is only there for capitalists in the worker consumption
goods sector.

The kernel for the monopoly capital model is then to say that since output
has fallen (i.e lower capacity utilisation) there will be less investment in
the economy, and as a result a fall in total profits and the profit rate.
This is essentially a Keynesian accelerator for investment. Kalecki
rejects this, on empirical and theoretical grounds, arguing that investment
is a function of the profit rate and not of demand.

The core of the monopoly capital model is a neoclassical representative
firm and the Keynesian accelerator model. I am not saying that some of this
doesn't come from Kalecki, but the point is that they bastardize part of
Kalecki - his scenario of the unrealised profits just for capitalists in the
worker consumption goods sector. This would in a sense be OK, using a part
of Kalecki, if they didn't then go on to directly contradict Kalecki and
replace the falling rate of profit with their law of the rising surplus.

Hope I haven't rambled on.

Andrew (Trigg)

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>From: "Michael_A._Lebowitz" <mlebowit@sfu.ca>
>To: Multiple recipients of list <ope-l@anthrax.ecst.csuchico.edu>
>Subject: [OPE-L:4448] Re: Mandel vs. Baran-Sweezy
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>X-Comment: Outline on Political Economy
>In message Wed, 19 Mar 1997 09:50:42 -0800 (PST),
> "A.B.Trigg -Andrew Trigg" <A.B.Trigg@open.ac.uk> writes:
>> On the issue of whether an increase in monopoly power increases surplus
>> value/profits, Kalecki himself does an interesting trick with the
>> departments of production. Assume that Department 1produces investment
>> goods, Department 2 consumption goods for capitalists, and Department 3
>> consumption goods for workers. Assume then that an increase in monopoly
>> power is reflected in an increase in the markup of prices over costs in
>> each department. There are two impacts:
>> (a) In Departments 1 and 2 the levels of profits increase because the
>> price-cost margin has increased.
>> (b) In Department 3 less goods are sold to the workers in the other
>> departments because the real wage has fallen. There is a reduction in
>> the level of profits.
>> The increase in profits in Depts 1 and 2 is matched by the reduction in
>> profits in Department 3. There is no overall change in the level of
>> profits in response to the increase in monopoly power.
>> Am not sure where this is leading, but thought it might be a good
>> concrete example to throw into the pot.
>> Andrew Trigg
> Would this not occur in Kalecki's model because the increase in the
>degree of monopoly power---given the level of capitalists' expenditures---
>means a reduced level of income/output/employment (which we observe in his
>department 3)? Ie., instead of there being produced but unrealised surplus
>value (at the higher rate of exploitation), the output level contracts to
>the level at which all produced surplus value can be realised. Essentially,
>this is the rational kernel in the Baran/Sweezy argument about the surplus
>whose traces can be detected in unutilised capacity, etc.
> mike
>Michael A. Lebowitz
>Economics Department, Simon Fraser University
>Burnaby, B.C. Canada V5A 1S6
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