Structural interdependence in monetary economics: theoretical assessment and policy implications

Cavalieri, Duccio (2015): Structural interdependence in monetary economics: theoretical assessment and policy implications.

Abstract

This is a theoretical analysis of structural interdependence in monetary economics. Some recent attempts to integrate money and finance in the theory of income and expenditure are initially examined. The Sraffian dichotomic interpretation of classical political economy is refused. A version of the classical surplus approach devoid of separating connotations is sketched, where flows and stocks are consistently reconciled and net financial wealth vanishes in the aggregate. Marx’s law of value is considered and set aside, as historically outdated by the advent of cognitive capitalism. New Consensus and New Neoclassical Synthesis macroeconomic models are criticized from an orthodox Keynesian point of view. Two further results emerge from the analysis: the illegitimacy of Marx’s asymmetrical treatment of constant and variable capital in the theory of value and the suggestion of a correct method for measuring the unit cost of real capital. Some reasons for reconsidering in this perspective the traditional approaches to monetary theory and policy are indicated.

• Item Type: MPRA Paper
• Language: English
• Keywords: monetary theory; monetary policy; fiscal policy; structural interdependence; Sraffian dichotomy; post-Keynesian economics; SFCA; MMT; MEV
• Subjects: B - History of Economic Thought, Methodology, and Heterodox Approaches > B2 - History of Economic Thought since 1925 > B22 - Macroeconomics; E - Macroeconomics and Monetary Economics > E1 - General Aggregative Models > E12 - Keynes ; Keynesian ; Post-Keynesian; E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit; E - Macroeconomics and Monetary Economics > E5 - Monetary Policy, Central Banking, and the Supply of Money and Credit > E52 - Monetary Policy; M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M41 - Accounting

References

ANDERSEN, L.C. and Jordan, J.L. (1968), Monetary and Fiscal Actions: A Test of Their Relative Importance in Economic Stabilization, “Federal Reserve Bank of St. Louis Review”, no. 1, pp. 11-24.

ARESTIS, P. (2009), New Consensus Macroeconomics: A Critical Appraisal, The Levy Economics Institute of Bard College, N.Y.,Working Paper, no. 564.

CAVALIERI, D. (1994), La teoria monetaria della produzione di Keynes e i teorici del circuito: a proposito di un libro di Augusto Graziani, “Studi Economici”, vol. 49, n. 54, pp. 133-52.

CAVALIERI, D. (2004), On Some Equilibrium and Disequilibrium Theories of Endogenous Money: A Structuralist View, “History of Economic Ideas”, vol. 12, no. 3, pp. 49-81.

CAVALIERI, D. (2009), Sull’inseparabilità delle strutture sintattiche nell’analisi classica del valore e della distribuzione, “Studi Economici”, no. 97/1, pp. 5-46.

CAVALIERI, D. (2013), Towards a Revision of the Theory of Capital, MPRA Papers no. 47351, Munich.

CHICK, V. and DOW, S.C. (2001), Formalism, Logic and Reality: A Keynesian Analysis, “Cambridge Journal of Economics”, vol. 25 no. 6, pp. 705-21.

DIEWERT, W.E. (1980), Aggregation Problems in the Measurement of Capital, in D. Usher, ed., The Measurement of Capital, Univ. of Chicago Press, Chicago, pp. 433-528.

DOW, S. C. (1997), Methodological Pluralism and Pluralism of Method, in A. Salanti and E. Screpanti (eds.), Pluralism in Economics: New Perspectives in History and Methodology, Elgar, Chelteham, pp. 89-99.

DOW, S.C. (2008), Plurality in Orthodox and Heterodox Economics, “Journal of Philosophical Economics”, vol. 1, no. 2, pp. 73-96.

FOLEY, D. (2005), Marx’s Theory of Money in Historical Perspective, in F. Moseley (ed.), Marx’s Theory of Money: Modern Appraisals, Palgrave, London.

FONTANA, G. (2000), Post Keynesians and Circuitists on Money and Uncertainty: An Attempt on Generality, “Journal of Post Keynesian Economics”, vol.23, no.1, pp. 27-48.

FORGES DAVANZATI, G. and PATALANO, R. (2014), The Equilibrium Problem in the Monetary Circuit Approach: A Critical Assessment, MPRA Papers, no. 20511, Munich.

FREEMAN, A. and KLIMAN, A. (2008), Simultaneous Valuation vs. the Exploitation Theory of Profit. A Summing up, “Capital & Class”, vol. 94, pp. 107-17.

GALÍ, J. and GERTLER, M. (2007), Macroeconomic Modelling for Monetary Policy Evaluation, “Journal of Economic Perspectives”, vol. 2, no. 4, pp. 25–45.

GAREGNANI, P. (1984), Value and Distribution in the Classical Economists and Marx, “Oxford Economic Papers”, vol. 36, pp. 291-325.

GAREGNANI, P. (1987-90), Surplus Approach to Value and Distribution, in Eatwell J., Milgate M. and Newman P., eds., The New Palgrave. A Dictionary of Economics, Macmillan, London, vol. 4, pp. 560-74.

GODLEY, W. and LAVOIE, M. (2007), Monetary Economics: An Integrated Approach to Credit, Money, Income, Production and Wealth, Palgrave, London.

GORZ, A. (2003), L’immatériel. Connaissance, valeur et capital, Galilée, Paris.

GRAZIANI, A. (1989), The Theory of the Monetary Circuit, “Thames Papers in Political Economy”, Thames Polytechnic, London, pp. 1-26.

HICKS, J.R. (1939), Value and Capital, Clarendon Press, Oxford, 2nd ed. 1946.

HICKS, J.R. and HOLLANDER, S. (1977), Mr. Ricardo and the Moderns, “Quarterly Journal of Economics”, vol. 91, pp. 351-69.

HODGSON, G. M. (2001), How Economics Forgot History: The Problem of Historical Specificity in Social Science, Routledge, London.

HOLLANDER, S. (1987), Classical Economics, Blackwell, Oxford.

HOLLANDER, S. (2008), The Economics of Karl Marx: Analysis and Application, Cambridge Univ. Press, Cambridge.

HUMPHREY, T.M. (1991), Nonneutrality of Money in Classical Monetary Thought, Federal Reserve Bank of Richmond “Economic Review”, no. 2, pp. 3-15.

KEEN, S. (1993), Use-value, Exchange-value, and the Demise of Marx’s Labor Theory of Value, “Journal of the History of Economic Thought”, vol. 16, pp. 1-13.

KEEN, S. (2001), Debunking Economics: The Naked Emperor of the Social Sciences, Zed Books, London, and Pluto Press, Australia.

KING P. and RIPSTEIN, A. (1987), Did Marx Hold a Labor Theory of Value?, unpublished paper, 20 pp., University of Toronto, Ca.

KIRMAN, A. (1989), The Intrinsic Limits of Modern Economic Theory: The Emperor Has No Clothes, “Economic Journal”, vol. 99, pp. 126-39.

KRISTJANSON-GURAL, D. (2008), Money Is Time: The Monetary Expression of Value in Marx’s Theory of Value, “Rethinking Marxism”, vol. 20, no. 2, pp. 257-72.

LAVOIE, M. (2004), Circuit and Coherent Stock-flow Accounting, in R. Arena and N. Salvadori (eds.), Money, Credit, and the Role of the State: essays in honour of Augusto Graziani, Ashgate, Aldershot, pp. 134-149.

LAVOIE, M. (2014), Post-Keynesian Economics: New Foundations, Elgar, Cheltenham and Northampton.

MANDEL, E. (1971), The Formation of the Economic Thought of Karl Marx, New Left Books, London.

Mc INTYRE, K. (2003), Notes on the (Non) Neutrality of Money, McDaniel College, Westminster, MD.

MEADE, J.E. and STONE, R.N. (1941), The Construction of Tables and National Income, Expenditure, Savings and Investment, “Economic Journal”, vol. 51, pp. 216-33.

MONGIOVI, G. (2002), Vulgar Economy in Marxian Garb: A Critique of Temporal Single System Marxism, “Review of Radical Political Economics”, vol. 34, no. 4, pp. 393-416.

MORISHIMA, M. (1969), Ricardo’s Economics: A General Equilibrium Theory of Distribution and Growth, Cambridge Univ. Press, Cambridge.

MOSELEY, F. (2004), The Monetary Expression of Value in the Case of Non-Commodity Money, Mount Holyoke College.

NEGRI, A. (1978), tr. Marx Beyond Marx: Lessons on the Grundrisse, Bergen and Garvey, South Hadley, Mass., 1984, repr. Autonomedia, New York, 1991.

PALLEY, T.I. (2013), Money, Fiscal Policy and Interest Rates: A Critique of Modern Monetary Theory, IMK working paper no. 109, Institute for Macroeconomics, Dusseldorf, and Washington, D.C., pp. 36.

PALLEY, T.I. (2014), Modern Monetary Theory (MMT): The Emperor Still Has No Clothes, Working Paper, Washington, D.C., pp. 26.

PATINKIN, D. (1965), Money, Interest and Prices, 2nd ed., Harper and Row, New York.

RIEU, D.M. (2006), A Reexamination of the Quantitative Issues in the New Interpretation, “Review of Radical Political Economics”, vol. 38, no. 2, pp. 258-71.

ROBINSON, J. (1961), Prelude to a Critique of Economic Theory, “Oxford Economic Papers”, vol. 13, pp. 53-58.

ROSDOLSKY, R. (1968), orig. German ed., tr. The Making of Marx’s “Capital”, Pluto Press, London, 1977.

RUBIN, I.I. (1928), Ocherki po teorii stoimosti Marxsa, Moskwa, 4th ed. 1929, tr. Essays on Marx’s Theory of Value, Black and Red, Detroit, 1972.

SARGENT, T.J. and WALLACE, N. (1975), "Rational" Expectations, the Optimal Monetary Instrument, and the Optimal Money Supply Rule, “Journal of Political Economy”, vol. 83, no. 2, pp. 241-254.

SHAIKH, A.M. and TONAK, E.A. (1994), Measuring the Wealth of Nations: The Political Economy of National Accounts, Cambridge Univ. Press, Cambridge.

SRAFFA, P. (1960), Production of Commodities by Means of Commodities: Prelude to a Critique of Economic Theory, Cambridge Univ. Press, Cambridge, and Sraffa’s Papers, Wren Library, Trinity College, Cambridge.

SHORTALL, F. C. (1994), The Incomplete Marx, Avebury, Aldershot.

TAYLOR, L. (2004), Reconstructing Macroeconomics: Structural Proposals and Critiques of the Mainstream, Harvard Univ. Press, Cambridge Mass.

WRAY, L.R. (2012), Modern Money Theory: A Primer on Macroeconomics for Sovereign Monetary Systems, Palgrave Macmillan, London.

ZEZZA, G. (2012), Godley and Graziani: Stock-Flow Consistent Monetary Circuits, in D.B. Papadimitriou and G. Zezza (eds.), Contributions in Stock-Flow Consistent Modeling: Essays in Honor of Wynne Godley, Palgrave Macmillan, Houndmills, Basingstoke, pp. 154-72.