underconsumption again--and Luxemburg

Hans Ehrbar ehrbar at keynes
Thu Jan 26 17:12:33 MST 1995

Here is a view on underconsumption which has not been aired yet on
this list, and it is a view which I am inclined to.  The famous
economist Duncan Foley has written a couple of highly technical pieces
in which the attempt was made to rigorously keep track of the various
stocks and flows in the economy.  The usual mathematical model of the
economy treats the interaction of these in a rather nonchalant manner.
Duncan's paradigm was volume 2 of Capital, i.e., his stocks are money
capital, productive capital, money capital, consumer debts, and debts
of the capitalists.  If I understand it right, his findings are:
*regardless of how high the wages are*, the capitalist system can only
grow if it somehow generates the additional purchasing power so that
the surplus value currently produced can be sold.  This injection will
principally take the form of bank borrowing, with the banks
anticipating the profits to be made, but it can also be gold mining
(the model Marx himself used in Capital II), or whatever.  In
subsequent papers, Foley investigated the stability of various
monetary policies in this respect.  This work puts the whole
discussion on a new footing, because this is, I repeat, a phenomenon
which has nothing to do with the level of wages.  But this dimension
of it has apparently not widely been recognized.  Due to the
mathematics involved (the keeping track of stocks and flows requires
highly unintuitive integral equations, and there are also various
little mathematical errors and typos in the published papers), these
articles are a pain to read!  One of my graduate students is writing
his dissertation on this, and I am presently refereeing a paper on it,
and one of Foley's students in the past has written an empirical
dissertation on it.

Here are the main references;

AUTHOR = "Foley, Duncan",
TITLE = "Realization and Accumulation in a {Marxian} Model of
 the Circuit of Capital",
JOURNAL = "Journal of Economic Theory",
VOLUME = "28",
YEAR = 1982,
PAGES = "300--319",

AUTHOR = "Foley, Duncan",
TITLE = "Money, Accumulation and Crisis",
SERIES = "Fundamentals of Pure and Applied Economics",
PUBLISHER = "Harwood Academic Publishers",
ADDRESS = "Chur, Switzerland",
YEAR = 1986,
ISBN = "3-7186-0280-6",

  author = 	 "Senchak, Andrew",
  title = 	 "United States Capital Accumulation: 1963--1977",
  school = 	 "Columbia University",
  year = 	 1983,
  address =	 "New York",
  type = 	 "Dissertation for the Doctor of Philosophy in the
		  Graduate School of Arts and Sciences"

Hans G. Ehrbar                                    ehrbar at econ.utah.edu
Economics Department, 308 BuC                     (801) 581 7797
University of Utah                                (801) 581 7481
Salt Lake City    UT 84112-1107                   (801) 585 5649 (FAX)
For Info about our Graduate Program Contact  program at econ.sbs.utah.edu


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