The Economic Surplus, the Baran Ratio, and Long Wave Cycles

Lambert, Thomas (2023): The Economic Surplus, the Baran Ratio, and Long Wave Cycles.

Abstract

This paper briefly outlines the idea and development of the economic surplus concept at the macroeconomic level as opposed to the one in microeconomics often labeled as a Marshallian surplus. Of special interest and focus is the concept as developed and used by heterodox economists. The notion of a residual amount of output or income over and above what is necessary for a society’s consumption (education, housing, food, clothing, health care, transportation, and other necessities of life) that can be used either for further consumption by an elite class, used for reinvestment in productive activities, and/or wasted on unproductive efforts is one that has been and continues to be taught and used in heterodox and neo-Marxian economics. The relevancy of the economic surplus view to modern and recent US economic growth is examined especially in light of new ways that have been created to apply the economic surplus concept. Applications using the Baran Ratio and long wave cycles theory are demonstrated, and it appears that the Baran Ratio is a useful concept to help predict long wave movements that are based on the economic surplus.

• Item Type: MPRA Paper
• Language: English
• Keywords: Baran Ratio, economic surplus, investment, Kondratiev waves, monopoly capital
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B22 - Macroeconomics; B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B24 - Socialist ; Marxist ; Sraffian; B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches > B51 - Socialist ; Marxian ; Sraffian; B - History of Economic Thought, Methodology, and Heterodox Approaches > B5 - Current Heterodox Approaches > B52 - Institutional ; Evolutionary

References

Baran, Paul A. and Paul M. Sweezy. (1966). Monopoly Capital: An Essay on the American Economic and Social Order. New York, NY: Monthly Review Press.

Baran, Nicholas and John Bellamy Foster (Eds.). (2017). The Age of Monopoly Capital: Selected Correspondence of Paul A.

Baran and Paul M. Sweezy, 1949-1964. NYU Press. https://doi.org/10.2307/j.ctt1ht4vvp .

Bernard, Lucas, Aleksandr V. Gevorkyan, Thomas I. Palley, and Willi Semmler. (2013). “Time Scales and Mechanisms of Economic Cycles: A Review of Theories of Long Waves.” Political Economy Research Institute (PERI), University of Massachusetts-Amherst, Working Paper Series Number 337. https://ideas.repec.org/a/elg/rokejn/v2y2014i1p87-107.html . Accessed on June 2, 2023.

Berry, Brian J. L. (1991). Long Wave Rhythms in Economic Development and Political Behavior. Baltimore, MD and London, UK: The John Hopkins University Press.

Berry, Brian J. L. and Denis J. Dean. (2012). “Long Wave Rhythms: A Pictorial Guide to 220 Years of US History, with Forecasts,” pages 107-119. In Eds. Leonid Grinin, Tessaleno Devezas, and Andrey Korotayev, Kondratieff Waves: Dimensions and Prospects at the Dawn of the 21st Century. Volgograd, Russia: ‘Uchitel’ Publishing House, 2012.

Blaug, Mark. (1997). Economic Theory in Retrospect, Fifth Edition. Cambridge, UK: Cambridge University Press.

Chantrill, Chrisopher. 2023. US Direct Revenues. https://www.usgovernmentrevenue.com/revenue_chart_1920_2021USb_24s1li011mcny_F1t . Accessed on May 24, 2023.

Delucchi, Michael, Richard B. Dadzie, Erik Dean and Xuan Pham. (2021). “What’s that smell? Bullshit jobs in higher education,” Review of Social Economy, DOI: 10.1080/00346764.2021.1940255 .

Foster, J. B. 2014. The Theory of Monopoly Capitalism: An Elaboration of Marxian Political Economy, New Ed., New York, Monthly Review Press.

Foster, John Bellamy and Chowdhury, Farooque. 2019. “The Rise of the Right.” Monthly Review. October 1, 2019. Graeber David. (2018). Bullshit jobs: a theory. London, UK: Allen Lane.

Grullon, G., Larkin, Y. and Michaely, R. 2015. Are US Industries Becoming More Concentrated? SSRN, 23 April, available at https://ssrn.com/abstract=2612047 or http://dx.doi.org/10.2139/ssrn.2612047 . Accessed March 18, 2023.

Henry, John F. ; Jo, Tae-Hee & Lee, Frederic S. (eds.) (2015). Marx, Veblen, and the foundations of heterodox economics: essays in honor of John F. Henry. New York, NY: Routledge.

Husson, Michel and Franciso Louca. (2012). “Late Capitalism and Neo-Liberalism—A Perspective on the Current Phase of the Long Wave of Capitalist Development,” pages 176 to 186. In Eds. Leonid Grinin, Tessaleno Devezas, and Andrey Korotayev, Kondratieff Waves: Dimensions and Prospects at the Dawn of the 21st Century. Volgograd, Russia: ‘Uchitel’ Publishing House, 2012.

Keynes, John Maynard. (1964). The General Theory of Employment, Interest, and Money. New York, NY: Harvest/Harcourt Brace and Company. Originally published in 1936 by Macmillan (London, UK).

Klienknecht, Alfred, Ernest Mandel, and Immanuel Wallersten, eds. (1992). New findings in long-wave research. London, UK: Palgrave Macmillen.

Kondratieff, N. D. (1984). The long wave cycle. New York, NY: Richardson & Snyder.

Kuczynski, Thomas. (1992). “Great Depressions as Transitional Phases within the Capitalist Mode of Production,” in Alfred Klienknecht, Ernest Mandel, and Immanuel Wallersten, eds. 1992, pages 257-275. New findings in long-wave research. London, UK: Palgrave Macmillen.

Juglar, Clement. (1862). Des Crises commerciales et leur retour periodique en France, en Angleterre, et aux Etats-Unis. Paris: Guillaumin.

Lambert, Thomas E. 2019. “Monopoly Capital and Entrepreneurship: Whither Small Business?” Cambridge Journal of Economics, 43(6): 1577-1595.

Lambert, Thomas E. (2020a). Monopoly Capital and Management: Too Many Bosses and Too Much Pay?, Journal of Economic Issues, 54:3, 644-666, DOI: 10.1080/00213624.2020.1778971.

Lambert, Thomas E. (2020b). “Paul Baran’s Economic Surplus Concept, the Baran Ratio, and the Decline of Feudalism.” Monthly Review, 72(7). December 1, 2020. https://monthlyreview.org/2020/12/01/paul-barans-economic-surplus-concept-the-baran-ratio-and-the-decline-of-feudalism/ . Accessed on March 28, 2023.

Lambert, Thomas E. (2020c). “Monopoly capital and innovation: an exploratory assessment of R&D effectiveness,” International Review of Applied Economics, 34:1, 36-49, DOI: 10.1080/02692171.2019.1620703 . Accessed on June 3, 2023.

Lambert, Thomas E. (2023). “The Baran Ratio, investment, and British economic growth and development,” Journal of Post Keynesian Economics, 46:1, 142-172, DOI: 10.1080/01603477.2022.2134034 .

Lawson, Tony. (2003). Reorienting Economics, London and New York: Routledge.

Lee, Frederic S. (1998). Post Keynesian Price Theory. Cambridge, UK: Cambridge University Press.

Lee, Frederic S. and Tae-Hee Jo. (2011). “Social Surplus Approach and Heterodox Economics.” Journal of Economic Issues, 45(4): 857-875.

Mandel, Ernest. 1995. Long Waves of Capitalist Development: A Marxist Interpretation. London, UK: Verso Books.

Martins, Nuno Ornelas. (2016). “Advancing Heterodox Economics in the Tradition of the Surplus Approach,” in Tae Hee Jo and Zdravka Todorova (eds.), Advancing the Frontiers of Heterodox Economics: Essays in Honor of Frederic S. Lee. London, UK: Routledge: 213-229.

Martins, Nuno Ornelas. (2022). “Cambridge Social Ontology and the Reconstruction of Economic Theory,” in Lynne Chester and Tae-Hee Jo (eds.), Heterodox Economics: Legacy and Perspectives. Bristol, UK: World Economics Association.

Mattei, Clara. (2022). The Capital Order: How Economists Invented Austerity and Paved the Way to Fascism. Chicago, IL: University of Chicago Press.

Menshikov, Stanislav. (1992). “The Long Wave as an Endogenous Mechanism,” in Alfred Klienknecht, Ernest Mandel, and Immanuel Wallersten, eds., pages 233-256. New findings in long-wave research. London, UK: Palgrave Macmillen.

National Bureau of Economic Research. 2023. US Business Cycle Expansions and Contractions. National Bureau of Economic Research, Inc. 1050 Massachusetts Avenue Cambridge MA 02138 617-588-0316https://www.nber.org/research/data/us-business-cycle-expansions-and-contractions . Accessed on March 15, 2023.

O’Hara, Philip Anthony and Howard Jay Sherman (2004). “Veblen and Sweezy on Monopoly Capital, Crises, Conflict, and the State”, Journal of Economic Issues, 38:4, 969-987, DOI: 10.1080/00213624.2004.11506752 .

Rostow, Walter W. (1978). The World Economy: History and Prospect,. Austin, TX: University of Texas Press. Schumpeter, Joseph A. (1939). Business Cycles: A Theoretical, Historical, and Statistical Analysis of the Capitalist Process. McGraw-Hill, New York.

Shaik, Anwar. (1992). “The Falling Rate of Profit as the Cause of Long Waves: Theory and Empirical Evidence” in Alfred Klienknecht, Ernest Mandel, and Immanuel Wallersten, eds. 1992. New findings in long-wave research. London, UK: Palgrave Macmillen.

Shiller, Robert. No Date. Online Data. http://www.econ.yale.edu/~shiller/data.htm . Accessed on March 15, 2023.

Silver, Beverly. (1992). “Class Struggle and Kondratiev Waves, 1870 to the Present,” in Alfred Klienknecht, Ernest Mandel, and Immanuel Wallersten, eds., pages 279-296. 1992. New findings in long-wave research. London, UK: Palgrave Macmillen.

Stooq.com. No Date. Historical data: S&P 500 - U.S. (^SPX). https://stooq.com/q/d/?s=^spx&i=y&l=6 . Accessed on March 15, 2023.

Sweezy. Paul M. (1942). The Theory of Capitalist Development. New York, NY: Monthly Review Press.

The Economist. 2016. Daily Chart, Corporate Concentration: The Creep of Consolidation Across America’s Corporate Landscape, available at https://www.economist.com/blogs/graphicdetail/ 2016/03/daily-chart-13 . Accessed on March 18, 2023.

U.S. Bureau of Economic Analysis. (1929 to 2021a). “Table 1.10. Gross Domestic Income by Type of Income” (accessed Sunday, May 14, 2023). https://apps.bea.gov/iTable/?reqid=19&step=3&isuri=1&nipa_table_list=51&categories=survey#eyJhcHBpZCI6MTksInN0ZXBzIjpbMSwyLDMsM10sImRhdGEiOltbIm5pcGFfdGFibGVfbGlzdCIsIjUxIl0sWyJjYXRlZ29yaWVzIiwiU3VydmV5Il0sWyJGaXJzdF9ZZWFyIiwiMTkyOSJdLFsiTGFzdF9ZZWFyIiwiMjAyMyJdLFsiU2NhbGUiLCItOSJdLFsiU2VyaWVzIiwiQSJdXX0=

U.S. Bureau of Economic Analysis. (1929 to 2021a). Real net domestic investment (chain-type quantity index) [W171RA3A086NBEA], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/W171RA3A086NBEA , May 15, 2023.

U.S. Bureau of Economic Analysis. (1929 to 2021b). "Table 5.2.5. Gross and Net Domestic Investment by Major Type" (accessed Sunday, May 14, 2023).

U.S. Bureau of Economic Analysis. (1929 to 2021d). Real Gross Domestic Product [GDPC1], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/GDPC1 , May 14, 2023.

U.S. Bureau of Economic Analysis. (1982-2021). "Balance of Payments and Direct Investment Position Data" (accessed Monday, May 15, 2023).

U.S. Bureau of Labor Statistics. (1932 to 1936). Employment, earnings, production and prices, 1932 to January 1936. Washington, DC: US Government Printing Office. https://babel.hathitrust.org/cgi/pt?id=uiug.30112062748212&view=1up&seq=22 . Accessed on May 31, 2023.

U.S. Bureau of Labor Statistics, (1939-2021). “Average Hourly Earnings of Production and Nonsupervisory Employees, Manufacturing” [CES3000000008], retrieved from FRED, Federal Reserve Bank of St. Louis; https://fred.stlouisfed.org/series/CES3000000008 , May 31, 2023.

Veblen, Thorstein. (1899). The theory of the leisure class. New York, NY: Macmillan.

Veblen, Thorstein. (1904). The Theory of Business Enterprise. New York, NY: Scribner’s.

Veblen, Thorstein. (1923). Absentee-Ownership and Business Enterprise in Recent Times: The Case of America. New York, NY: Huebsch.

Wolman, Leo. (1933). “Wages during the Depression.” NBER Bulletin No. 46. New York, NY: National Bureau of Economic Research. https://www.nber.org/books-and-chapters/wages-during-depression/wages-during-depression . Accessed on June 2, 2023.

Xu, Zhun. 2019. “Economic Surplus, the Baran Ratio, and Capital Accumulation.” Monthly Review, 70(10). March 2019. https://monthlyreview.org/2019/03/01/economic-surplus-the-baran-ratio-and-capital-accumulation/ . Accessed on May 14, 2023.