Classical Theories of Accumulation and Growth

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Classical Theories of Accumulation and Growth

• Smith specialization ? virtuous circle
• Ricardo diminishing returns ? misery
• Mill enlightened intervention ? progress
• Marx contradictions ? crises
• ? revolution
• Accumulate, accumulate!
• This is Moses and the Prophets.
• Capitalist must continuously expand his
  capital in order to preserve it.

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St. Joans Put-downs

• Cambridge England v. Cambridge Massachusetts
• their habits of thought are alien to a
  generation brought up to inquire into the meaning
  of meaning.
• the questions Marx posed are still relevant
  today, while the academics continue to erect
  elegant elaborations on trivial topicsThe
  development of abstract argument has run far
  ahead of any possibility of empirical
  verification.
• The orthodox economists, on the whole,
  identified themselves with the system and assumed
  the role of its apologists, while Marx set out to
  understand the working of capitalism in order to
  hasten its overthrow.
• they preach only the gloomy doctrine that all is
  for the best in the best of all possible worlds.

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Manchester's Factory Children Committee,
1836 Campaign for the Ten-Hour Day
http//www.rhapsody.com/peteseeger/greatesthits/ta
lkingunion/lyrics.html
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• 
  
• Karl Marx, 1818 1883
• Workers of the world unite!
• You have nothing to lose but your chains.
• Manifesto of the Communist Party, 1848
• Das Kapital, volume 1, 1868
• Das Kapital, volumes 2 and 3, 1893, 1894
• Theories of Surplus Value, 1905 - 1910

Karl Kautsky, 1854 1938
The boss wont listen if one guy squaws, But
hes gotta listen if the union talks.
Frederick Engels, 1820 1895
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Marxs Biography

• Law ? Philosophy Ph.D. (Jena by mail) ? Hegelian
  Left
• Unemployed ? Editor, Rheinische Zeitung ?
  Unemployed
• Marrried Jenny von Westphalen ? 7 children/3 1
  survived
• Paris/Brussels revolutionary ? 1848 Communist
  Manifesto
• 1849 London exile
• British Museum Library/Das Kapital
• Engels collaboration and support
• Communist politics/feuds
• In the Communist Manifesto, Marx and Engels put
  forth a bold proposition about the inexorable
  collapse of capitalism. As ideology, the
  Manifesto was brilliant. As economics, it fell
  far short of scientific analysis. Marx needed to
  provide a scientific proof for what he and Engels
  had so boldly proclaimed. His response was Das
  Kapital (3 volumes, 2,100 pages).
• Jürg Niehans, A History of Economic Theory

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The Communist Manifesto, 1848

• A spectre is haunting Europe the spectre of
  communism.
• The history of all hitherto existing society is
  the history of class struggles. Freeman and
  slave, patrician and plebeian, lord and serf,
  guild-master and journeyman, in a word, oppressor
  and oppressed, stood in constant opposition to
  one another
• The bourgeoisie, historically, has played a most
  revolutionary part The bourgeoisie cannot exist
  without constantly revolutionising the
  instruments of production The need of a
  constantly expanding market for its products
  chases the bourgeoisie over the entire surface of
  the globe The bourgeoisie, by the rapid
  improvement of all instruments of production, by
  the immensely facilitated means of communication,
  draws all, even the most barbarian, nations into
  civilisation The bourgeoisie has subjected the
  country to the rule of the towns. It has created
  enormous cities It has agglomerated population,
  centralised the means of production, and has
  concentrated property in a few hands.

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• The bourgeoisie, during its rule of scarce one
  hundred years, has created more massive and more
  colossal productive forces than have all
  preceding generations together. Subjection of
  Natures forces to man, machinery, application of
  chemistry to industry and agriculture,
  steam-navigation, railways, electric telegraphs,
  clearing of whole continents for cultivation,
  canalisation of rivers, whole populations
  conjured out of the ground what earlier century
  had even a presentiment that such productive
  forces slumbered in the lap of social labour?
• Modern bourgeois societyis like the sorcerer who
  is no longer able to control the powers of the
  nether world whom he has called up by his spells.
  
• The essential conditions for the existence and
  for the sway of the bourgeois class is the
  formation and augmentation of capital the
  condition for capital is wage-labour. The advance
  of industryreplaces the isolation of the
  labourers What the bourgeoisie therefore
  produces are its own grave-diggers.

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Some Marxian Vocabulary

• Historical materialism
• Dialectic thesis, antithesis, synthesis
• Productive forces
• Mode of production
• Ideological superstructure
• Inherent contradictions

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Historical Materialism Progress and Revolution

• Tension and Revolution
• Schumpeter Innovation
• Olson Vested Interests
• Kuhn Scientific Revolution

• Productive Forces
• Technology, Resources

Revolution!

• Ideological Superstructure
• Government, Laws
• Religion
• Culture

Perpetuates ruling class dominance.

• Economic System
• Class structure
• Property rights
• Distribution of income
• Ownership of capital

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Some Marxian Vocabulary

• Historical materialism
• Dialectic thesis, antithesis, synthesis
• Productive forces
• Mode of production
• Ideological superstructure
• Inherent contradictions
• Class struggle
• Bourgeoisie
• Proletariat
• Capitalism M C M

• Surplus value
• Rate of exploitation
• Rate of profit
• Reserve army of unemployed
• Accumulation
• Underconsumption crisis
• Overproduction crisis

• Debts to
• Quesnay
• Smith
• Ricardo

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Flavors of Crisis
Invention
Investment
Capital Widening
Capital Deepening
Increased Organic Composition
Reserve
Increased Employment
Decreased Employment
Army
Falling Rate of Profit
Rising Wages
Decreased Wage Bill
Expropriators are expropriated
Profit Squeeze
Decreased Demand
Overproduction Crisis
Underconsumption Crisis
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A Summation (Niehans)

• As a prophet, Marx was a failureThe predictions
  of the immiserization of the working class, of
  the progressive deepening of economic crises (?),
  and of the imminent collapse of capitalism were
  patently falsified by eventscapitalism appears
  to be capable of virtually infinite development,
  transformation, and variation without a
  revolutionary collapse. The dialectic model of
  history has failed.
• Marx did make a contribution to economic
  science that was mediocre. His most fundamental
  contribution was the clear formulation of the
  question of how political and social institutions
  interact with economic processes.
• For example, how does legislation affect income
  distribution and how do the consequent changes in
  income distribution, in turn, affect legislation?
• This is a profound question, but what Marx could
  provide by way of an answer fell far short
• Marxs foremost contribution to economic theory
  was his model of (balanced) growthHis exposition
  was clumsy, fragmentary, and almost
  unintelligible but the basic notions are there.
• The sad truth was that his training had not
  equipped him for effective scientific research
  and he was constantly frustrated by his
  propensity to pose ambitious problems that he
  could not solve.