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Comment on Professor Lerner’s Paper: A Marxist View

  • Joseph Halevi
Chapter

Abstract

Lerner’s argument can be divided into two parts, one dealing with the asymmetrical working of the price mechanism in the Keynesian system and one dealing with the measures necessary to keep the wage/productivity relation constant. The latter part is essentially dynamic in character and it ends with the proposal of issuing wage permits as a means to curb cost-push inflation. I shall not discuss the practical validity of the above suggestion but shall confine myself to the theoretical content of Lerner’s argument. The Keynesian multiplier in its simplest form asserts that it is possible to move from a given degree of unused capacity output to full capacity (when the latter is supposed to coincide with full employment) without any major change in the cost-price relations. When the full-employment level of output is reached, any further increase in money income will be reflected in prices, since the existing level of capacity cannot accommodate the additional demand in real terms. The above mechanism suggests that prices do not regulate supply and demand, but the level of profits and the distribution of income instead. This is possible only because spare capacity exists; otherwise any adjustment must be brought via movements in prices. In an economy where prices have lost the role of equilibrating supply and demand, inflation cannot be curbed by curtailing the level of monetary expenditure, since to a reduction in spending there will be a corresponding fall in output and employment.

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Notes

  1. 1.
    Cf. A. G. Hines, “The (Neo)-Classical Resurgence and the Reappraisal of Keynes’ Theory of Employment,” in T. M. Havrilesky and J. T. Boorman, eds., Current Issues in Monetary Theory and Policy (Arlington Heights, Ill.: AHM Publishing Corporation, 1976), pp. 29–39.Google Scholar
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    Cf. Paolo Sylos-Labini, Trade Unions, Inflation, and Productivity (Lexington, Mass.: Saxon House/Lexington Books, 1974), pp. 65–86;Google Scholar
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    Cf. Nicholas Kaldor, “Stability and Full Employment,” in his Essays on Economic Stability and Growth (London: Duckworth, 1960), pp. 103–119;Google Scholar
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    Cf. Michał Kalecki, “Full Employment by Stimulating Private Investment?”, Oxford Economic Papers 7 (March 1945): 83–92.CrossRefGoogle Scholar
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    For an empirical analysis, see J. C. R. Dow, The Management of the British Economy 1945–60 (Cambridge: Cambridge University Press, 1964), particularly Part IV.Google Scholar
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    Cf. Michał Kalecki, “Theory of Growth in Different Social Systems,” Scientia, May/June 1970.Google Scholar
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    Paul Baran, The Political Economy of Growth (New York: Monthly Review, 1957).Google Scholar
  10. 9.
    J. M. Keynes, The General Theory of Employment, Interest and Money (London: Macmillan, 1936), p. 157.Google Scholar
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    Ibid., p. 379.Google Scholar
  12. 11.
    Cf. Michał Kalecki, Selected Essays on the Dynamics of the Capital Economy (Cambridge: Cambridge University Press, 1971), p. 86.Google Scholar
  13. 12.
    Cf. D. M. Nuti, “On Incomes Policy,” Science and Society 33 (Fall 1969): 415–425; R. Heidner, Lontagarfonder (Stockholm, 1975).Google Scholar
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    J. Robinson and F. Wilkinson, “What Has Become of Employment Policy?”, Cambridge Journal of Economics, March 1977, pp. 5–14.Google Scholar
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    Cf. Robert Bacon and Walter Eltis, Britain’s Economic Problem: Too Few Producers (London: Macmillan, 1976), pp. 117–158.Google Scholar
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    Cf. B. Rowthorn and D. M. Nuti, “Politica commerciale attiva non é sinonimo di autarchia,” Rinascita (Rome), no. 30 (July 1977): 20–22.Google Scholar

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© Joseph Halevi, G. C. Harcourt, Peter Kriesler and J. W. Nevile 2016

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  • Joseph Halevi

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