First Postulate Pilloried: Policy as Analytical Tool for Sketching a Heterodox Citadel

12th International Post Keynesian Conference
Where Do We Go From Here?
September 25, 2014
First Postulate Pilloried:
Policy as Analytical Tool for
Sketching a Heterodox Citadel
John Casey Nicolarsen
12th International Post Keynesian Conference ///// First Postulate Pilloried

Introduction
• Outline of Presentation
– Advancement of “classically”-inspired policy proposal path
for wage system (“Labor Conversion”)
– Investigate: anticipated tendencies resulting from policy
path propositions
– Further examination: current political, institutional and
historical dynamics
– Theoretical Appeal: policy evaluated from traditions of
– Keynesian / Post Keynesian
– Sraffian
– Marxian
12th International Post Keynesian Conference ///// First Postulate Pilloried 2

Introduction
• Outline of Presentation
– Analytical Pillorying: Marginal Productivity Theory with
Respect to Income (First Postulate: “the wage is equal to the marginal product of labour”)
– Implications Resulting from Policy: Epochal Adjustment?
– Where is the Citadel? It’s Located Beyond the Capitalist Epoch
– Restatement, Main Points, Conclusion

Policy Proposal Path for Wage System
• “Classically” Re-Imagined: Minimum Wage Policy
– “Labor Conversion” [not “Tax Inversion”]
• Redefined: Full-Time Employment
• Restructured: Competition
• Required: Political Organization [setting aside for the moment]

• Minimum Wage Policy: “Labor Conversion” (not ‘Tax Inversion’)
– Federal Minimum Wage set to $20.00 per hour
note: figures are purely
demonstrative
• $15.00 per hour take-home for labor
• Corporations pay $7.50 of hourly wage (roughly what is paid now)
• Government pays $12.50 (‘pass-through’ or ‘piggy-back’ on labor unit)
– $15.00 an hour purchasing power for $7.50
– $7.50 “Demand Gap” is directly in the Wage Bill
– $5.00 “Fiscal Push” to States is in the Wage Bill
– … in sum, a $12.50 Federal Government funded labor unit
“pass-through” to State, Local, and Municipal Governments
(‘back of the envelope’)

• Minimum Wage Policy: “Labor Conversion”
– Distribution of “Fiscal Push” ($5.00) …
• $2.00 to State Governments
– Education, Pension/Retirement Funds, Infrastructure
• $2.00 to Local / Municipal Government Bodies
– Education, Pension/Retirement Funds, Local Investment
• $1.00 pure “Float” component
– T.B.D.; but, perhaps per capita Federal tax credits
– $7.50 is, again, the “Demand Gap,” or localized and
domestic purchasing power

– Business Enterprises, Entrepreneurs, “Nature of the Firm”
– fundamentally altered, different tendencies, adjusted conception
– profit-seeking enterprises will tend to “place” labor and production
domestically and compete for “real” goods (infrastructure, labor)
– State and Local Governments
– will have available funds based directly on labor units for social services
– Jobs with/for State and Local governments (rebuilding, development,
green industrialization)
» a given level of socially necessary output - based on the labor unit -
is classically determined in advance [has theoretical implications]

– HYPER-INFLATION!!!
• Nope … no real limits are being crossed
• still high unemployment (“slack”), nowhere near capacity
utilization
• But … yes, the inflation that policy-makers are trying for solely
with monetary policy will occur (‘naturally’)
– $7.50 labor-cost to Firms (and non-profits) is a floor … can offer
more … and have ‘pass-through’ ($12.50) on top of a higher wage
– Firms (Business Enterprises, Entrepreneurs) will compete through
benefits, perks, paid vacation days

• Full-Time Employment
– Federal Law defining “full-time” employment as
25 hours per week
• That’s crazy! Is it?
– What do the Germans work?
• 1,397 avg. annual hours per worker = ~ 27 hour per week
(OECD figures, 2012)
– What for United States?
• 1,790 avg. annual hours per worker = ~ 34.5 hours per week
(OECD figures, 2012)

• Full-Time Employment
– Greater potential for rebuilding middle class …
– Two “full-time” jobs would be 50 hours per week
• hard, but doable
– Point: 25 hour work week is not crazy
– NOTE: Higher minimum wage ($20 here) is still not in real
terms what it was in the 1970s (would be $26 today)
• but … local production/consumption of real social goods
compensates for shortfall (education, infrastructure, retirement services)
“wealth is disposable time and nothing more”
Source: Anonymous (1821, pamphlet); cited by Marx in the Grundrisse (1857)

• Competition (at Government Level)
– A different sort of “Border War”
– States and Local/Municipal Governments will compete for
workers, not through tax breaks for Corporations
– e.g., one minimum wage job means $6,500 net local funds
• 25 hours * $20 = $26,000 (total)
• 25 hours * $15 = $19,500 (take-home / disposable)
– $6,500 annual split into …
» $5,200 (State & Local Funds)
» $1,300 (T.B.D / float) again: figures are purely
demonstrative
(‘back of the envelope’)

• Competition … some familiar objections …
– DEBT!!! How will we fund it?
• sham issue … Federal Government is the monopoly
issuer of the currency (it can be afforded)
– infrastructure / public investment determined at polity-level
… rebirth of a “political economy” (i.e., State/Local/Municipal level)
– implications for social mobility; i.e., do you like more
private enterprise, or more socialized investment?

Anticipated Tendencies
• Increased Productivity …
– due to … less hours … better pay …
• Investment decisions of Firms / Business Enterprises …
– Cost of importing demand from abroad vs. local/domestic production?
– Firms weigh $15.00 purchasing power for $7.50 … plus labor unit “pass
through” funds at State/Local level for roads, bridges, trolley cars, etc.
…
– changes structure of production … more production and consumption
goods (real goods) and less financialization (more to-the-asset-finance though)
– Environmental implications? Shipping and fuel costs?
• Rebuilds communities (polities) from the ground up …
– educational institutions, infrastructure, pension funds

Anticipated Tendencies
• Terms of Trade …
– Revealed: who owns the U.S. debt is increasingly answered
and confirmed (no more scary stories re borrowing from China)
– Reduces trade deficit, decreases imported demand from
abroad and increases exports (while providing jobs, skills, and production)
– tendency for manufacturing to “re-shore” production in a
new “style” … high tech
• potential exists for small scale, high output production … via
machine process …
• integrated and competitive production ‘cells’ for domestic
manufacturing

Political, Institutional and Historical Dynamics
• Politics …
– as of now … Austerity … Secular Stagnation
– Political Dysfunction, Deadlock
– No movement at Federal level for badly needed infrastructure and
green energy investment
• Policy Proposals … similar in ‘form’ to that here …
– Paul Ryan’s “discussion” piece for “Opportunity Grants” to States
– The Levy Institute - Jörg Bibow’s proposal for a Euro Treasury Plan
based on per capita GDP figures
• “the grants would be proportionate to member-states’ shares of eurozone GDP”
• “Labor Conversion” proposition is to push Fiscal policy and
production directly through the hourly wage …“classical determinacy”
– not denying there would be implications for salaried work; abstracting from that here

• “Labor Conversion” policy path also warranted due to …
– Failure of more evenly allocating the share of the gains made in
productivity (technological advance & stagnating real wages)
– failure of distributing gains made in production is real-world
reflection and failure of Marginal Productivity Theory with
respect to Income
– In other words: Neoclassical/Marginal Productivity is not
universal or timeless … must consider production relations
» Points to inherent conflictual nature of capitalist social arrangement
– Reflects failure to recognize ongoing “abstinence”-theoretics
of proto-Neoclassicals … i.e., N.W. Senior made “abstinence”
a factor of production
– “Abstinence” has been directed into Financial Assets
(money/equity capital) … since early 70s

• “Labor Conversion” policy path also warranted due to …
– Unequal distribution of income, wealth, and resources
– fundamentally conflictual nature of capitalism is obvious
– therefore, policy must “target” or “convert” labor unit
“commodity” directly into social production
» capitalism is not equipped to handle socialized
investment, either logically or ideologically
– the nature of Finance Capital (financialization) is to drain demand
for production and consumption goods from the future and
destroy it in the present
– “non-realized” demand in the present … that is, we have a
“glut” of non-realized demand from future being wasted today
– it’s being imported too

Theoretical Appeal: Policy Evaluation
• “Labor Conversion” policy path is supported by Labor
Unit in Keynes, Sraffa, and Marx
» provides avenue for communication between theoretical approaches
» window to new social formation (‘epoch’) and Heterodox Citadel
• Keynes … labor unit is clear measure of output which can be
aggregated and made homogeneous
• Sraffa … quantitative labor magnitude used as basis for wage
payments
• Marx … labor unit imparts quantitative information regarding
socially necessary [re-]production and social relations in
production (potential for class-informed analysis)

• Keynesian / Post Keynesian Approach
– Short-Period Effective Demand under “Labor Conversion” …
• further informed when knowing directed production by virtue of labor unit
– Uncertainty and Expectations under “Labor Conversion” …
• certainty of macro-aggregates based on labor unit
• employment figures give magnitudes of State and Local socialized investment,
consumption and development funds (“demand gap” and “fiscal push” in money values)
– for Keynes the labor unit is the …
• sole productive factor of production [labor is sole real physical input into process (w/ money)]
• provides clear measure of output
– can be reduced to homogeneous unit
– can be aggregated
– therefore, warranted in pushing Fiscal “socialization of investment” and
“Demand Gap” directly through labor unit (hourly wage)

• Sraffian Approach
– the “Labor Conversion” policy path reflects labor unit output
taken as given (datum)
• conceptually, would be “directed” labor instead of “direct” (current)
or “indirect” (past) labor in Sraffian system
– the labor unit “pass-through” is given in advance …
• therefore … potential to partially “solve” for system
– gives magnitudes for educational investment, pensions, and infrastructure
– tendencies of the system point to a ‘long period’ effective
demand of socialized investment and long-period prices of
production to move towards each other
• Post Keynesians and Sraffians can “talk” given new policy path

• Sraffian Approach
– “pass through” funds will equalize via inter-State and intra-
State Local/Municipal Government competition (“gravitate”)
– By use of standardized labor unit …
• uncertainty is mitigated and expectations are firmed up
– they become theoretically viable in Sraffian (Neo-Ricardian) system
• long-period “centers of gravitation” are more theoretically fertile
– Sraffians can “do” policy (make policy assumptions) and
solve for partial outcomes based upon labor unit ‘pass-through’
in money prices

• Marxian Approach
– “Labor Conversion” is not a revolution, but a movement
towards a fundamentally new mode of production (social formation)
– the underlying commodification and exchange of labor-power
and capital (money capital) are only being reaffirmed
in part …
» avoids Proudhon’s error
– Certain amount of socially necessary production undertaken
solely by virtue of labor unit

• Marxian Approach
– a “commons” is being created directly via the ‘property’ of
labor unit
• commons of: infrastructure, education, green investment,
retirement funds, social services, etc.
– price formation and system reproduction is founded on
“classically-determined” analytical mechanics of an
“exchange-based” system beyond supply and demand
schematics
• analytical distinction
– applies to Keynesian / Post Keynesian and Sraffian approaches too

Analytical Pillorying of Marginal Productivity
• First Postulate: “the wage is equal to the marginal product of labour”
– “Labor Conversion” policy directly socializes investment and
production based on labor unit magnitudes
– analytical and “classically-determined” maneuver whereby Marginal
Productivity is “turned on its head” and wage (labor unit) is equal to
and calls for direct socialized investment and social reproduction
– the First Postulate is “pilloried” in that it is …
• specifically addressed (Keynes accepted it for the sake of argument)
• over-written, in that Neoclassical economics has succeeded in “instilling” this
universal maxim into everyday life
• noted as being based on ideological framework from classical liberalism of John
Locke which Keynes crushed with “The End of Laissez-Faire” (1926)

Implications Resulting from Policy: Epochal Adjustment?
• A Theoretically Coherent Heterodox Citadel is …
– based on a renewed articulation of Labor’s apriority over Capital
– situated in a mode of production beyond a capitalist social formation
• Current policy proposals all call for more of the same …
– increase minimum wage
– give tax breaks
• Increasing nominal minimum wages does nothing to address
the conflicting structural features of capitalist epoch or profits as
“real” variables claiming “real wages” for capitalist class
• Failure of wage advocates and Obama Administration
– e.g., $10.10 Federal or $15.00 for fast food workers when over $26.00
is real-wage adjusted level of 1970s when a middle class ‘existed’

Restatement, Main Points, Conclusion
• “Labor Conversion” …
– Put the “Demand Gap” and a “Fiscal Push” in the wage bill
based on labor units to direct socially necessary investment:
• infrastructure
• green energy, environmental, ecological
• retirement funding, pensions, social security
• educational investments (human capital)
– Adjust ‘heat’ - economic activity - with monetary policy
– Our economies are “dry” … austerity and secular stagnation
reflect that system is at a theoretical end
– We are going the wrong way!

Restatement, Main Points, Conclusion
• Main Points to “Take Home” …
– a Heterodox Citadel exists … but … only under socio-provisioning
relations that are fundamentally altered beyond and analytically distinct
from purely capitalist social relations
– Keynesian/Post Keynesian and Sraffian and Marxian approaches can
all have simultaneous theoretical coherence under a different mode of
production
– One path to an alternative socio-provisioning framework and to a
“Heterodox Citadel” is through the labor unit as evidenced by the
“Labor Conversion” policy path advanced here
27

12th International Post Keynesian Conference
Where Do We Go From Here?
September 25, 2014
Thank You
John Casey Nicolarsen

Present Propositions for Social Revolution
• Required: Political Organization
– Are you truly being represented? (politically)
– Does anyone really believe that money is not fully king in
politics as of this point? (Citizens United / McCutcheon)
• Suggested: Coalition or Unity political party
– #1 agenda item:
• National Voting Holiday
• Mandatory voting requirement for all citizens
– a truly representative democracy requires this

First Postulate Pilloried: Policy as Analytical Tool for Sketching a Heterodox Citadel

Recommandé

Recommandé

Contenu connexe

En vedette

En vedette (19)

Similaire à First Postulate Pilloried: Policy as Analytical Tool for Sketching a Heterodox Citadel

Similaire à First Postulate Pilloried: Policy as Analytical Tool for Sketching a Heterodox Citadel (20)

Plus de pkconference

Plus de pkconference (20)

Dernier

Dernier (20)

First Postulate Pilloried: Policy as Analytical Tool for Sketching a Heterodox Citadel