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I will study your argument in more detail but the first part seems to be
consistent with Kalecki. Investment would be unchanged as capitalist
consumption increases but as you argue the share of profits in income would
increase. In Kalecki this should have an initial positive impact upon the
rate of profit since the total profits increase. Via his investment
equation the increase in the rate of profit would then have a positive
impact on investment which through higher capital stock could depress the
rate of profit. For Kalecki there will be a cycle because of these
mechanisms. Note, however, that there is no question of breakdown because
of a shortage of profits, which was my main point about the Bauer/Grossmann
model. Note also that there is no equation for determining investment in
the Bauer model, as there isn't in Marx. Without any shortage of profits
in the latter there is no reason for breakdown, apart from reasons of
realisation crisis. In Kalecki there is at least the possibility of
downturn because of his investment equation.
Thanks by the way Rakesh for the Galbraith reference which I haven't seen
and for your earlier email pointing out that capitalist consumption is only
passive in the Bauer/Grossmann model and not in Grossmann's writings. Maybe
you think it should only be referred to as the Bauer model - is this your
There could be an increase in the organic composition of capital as you
suggest (thanks for the Galbraith reference which I haven't looked at!).
> -----Original Message-----
> From: bhandari@Princeton.EDU [SMTP:bhandari@Princeton.EDU]
> Sent: 22 May 2000 18:29
> To: email@example.com
> Subject: [OPE-L:3284] Re: RE: Re: RE: Re: Accelerated ACcumulation
> Andrew (T),
> In his initial model, Kalecki simply assumes the value of consumer goods
> industry is set to equal wages while capitalists through investment
> decisions alone determine value of producer goods industry ("capitalists
> get what they spend").
> If you introduce an autonomous increase in capitalist consumption (or
> worker dissaving) in this setting, you may get goods producers tapping the
> financial system to advance production beyond what present profits and
> consumption allow and then through those very decisions generating the
> profit or income to retire the debt from having done so (I am going by
> James Galbraith's summary in Balancing Acts).
> But you could get the widow's cruse. Such high living by capitalists will
> raise the share of profits in income, bid real consumer goods away from
> workers who would otherwise enjoy them. Capitalists still get what they
> spend but investment may not change in this case.
> Or I could say, if I understood the theory of limit pricing, that
> goods price rise following upon autonomous increase in capitalist
> consumption could stimulate entry of a new producer with superior capital
> and lower unit costs that wipes out the old producers, thus depressing the
> average rate of profit in Div II as a whole. And in this way, I could get
> the upward pressure on the OCC in successive stages in Grossmann's model,
> which is being driven forward each period by more advanced producers whose
> superior profits are in turn whittled down by competitors until we have a
> lower average rate of profit in successive periods.
> But of course I'll need to study this. A crucial difference between
> Marxists (Mattick) and Kaleckians (Galbraith) of course is over the long
> run effects on profits and investment from government orders, whether
> financed by taxes, debt or money creation.
> Yours, Rakesh
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