Re: [OPE-L] profits

From: Gerald_A_Levy@MSN.COM
Date: Fri Feb 11 2005 - 10:15:05 EST


Thanks for the thoughtful message.  I only have time now to nibble
on a few points.

> The basic problem for Keynesian theory though is that you cannot force
> private investors to invest where they don't want to invest, nor,
> ultimately, prevent them from investing where they do want to invest.
> There  is a carrot maybe, but no stick.

Well, there are steps that the state could take which could prevent
investors from legally investing where they want to (that is, _if_ the
state wanted such a policy and was prepared for the stiff political
opposition from domestic capitalists and international capitalist
institutions) but -- that aside -- Keynesians would say that a stick
isn't needed.  What is needed from a Keynesian perspective is,
since investment demand is viewed as a derived demand, increased
aggregate demand.

> Total investment is not simply
> investment  in inventories and productive fixed assets; it also includes
> financial  assets and non-productive fixed assets. If ordinary consumer
> demand  stagnates, investment will re-orient to speculation, luxury
> durables and  property, military expenditure and foreign placements.

Right, but I think an argument could be made that even if  "ordinary"
consumer demand stagnates if the level of aggregate demand increases
that can lead to increasing investment, perhaps in the form of an
increase in military investment and investment on luxury goods

I wonder:  has the Keynesian proposition that aggregate investment
expenditures will tend to only increase after there has been an increase
in aggregate demand ever been rigorously examined *empirically* to
see whether this theoretical claim has been shown to be empirically
and historically robust?

> Additionally, Keynesian policy was based on a national framework where
> state  intervention aimed to stimulate job-creating investment. But in a
> deregulated economy, creating a good "investment climate" is no longer
> necessarily compatible with what is good for the national economy; the
> international investor looks at comparative costs and financial benefits
> internationally. Therefore, the competition to reduce labor-costs also
> plays  itself out internationally.

I think that's generally a good point.

> The only thing that can slow this
> process is  protectionism and increasing the bargaining power of labor.

And, perhaps within some social formations,  industrial policy.  But, you
might be counting industrial policy under protectionism.

In solidarity, Jerry

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