Economics of Michal Kalecki, Part One by John Harvey（Tcherneva 2012）

Economics of Michal Kalecki, Part1,2,3,4
https://youtu.be/73gWjTXd-ts
https://youtu.be/B4wMDW-kKSM
 

https://youtu.be/SZpHgufGxEg
https://youtu.be/CEzQnPQArC4

 

Tcherneva 2012

investment goods production. If we assume that workers spend their entire income, while firms do not consume out of profits (two assumptions that will be relaxed later), we can develop the following relationships: 

PCQC = WCNC + WINI (1) 

The wage bill generated in the C- and I-sectors is spent on consumer goods produced. Therefore, the profit generated in the C-sector is equal to the wage bill in the I-sector: 

πC = PCQC - WCNC = WINI (2) 

Separately, investment goods output sold must pay for the wage bill in the I-sector (i.e., the cost of production) and generate profit. 

I = PIQI = WINI + πI (3) 

or 

πI = I - WINI (4) 

Combining (2) and (4): 

πC + πI = WINI + I - WINI (5) 

or 

π = I (6)

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1 Aggregate profits add up to total investment, producing the famous Kaleckian result that consumers spend what they get, while investors get what they spend. In a capitalist/investing economy investment determines aggregate profits and prices must carry profits (Minsky 1986, 142). 

Notation:

 WC and WI – wages in the C- and I-sectors, respectively; 

NC and NI – the number of employed in each sector; 

WCNC and WINI – the wage bills in the C- and I-sectors, respectively; 

πC+πI = π are the profits generated in each sector, which add up to total profit in the economy. 

From the above relationships, it is clear that πC would be zero if only workers in Csector were to demand consumer goods (i.e., if PCQC = WCNC), but since I-sector workers also consume, the C-sector must produce surplus, which will be rationed by the price system between the two sources of demand. Another way to look at this relationship is to consider the Keynesian insight that in a monetary production economy, all production takes place in the pursuit of monetary profit. In other words, even if all workers were employed in the Csector and consumed all the goods and services which they produced (i.e., if PCQC = WCNC), there will be no incentive to produce because there would be no profits generated from consumption goods production. The system simply cannot reproduce itself. Therefore, all Csector workers must produce more than they consume, in order for the C-sector to generate profit—an impossible outcome if all output is only produced by and sold to C-sector workers. Additionally, because firms operate on the basi

 

John Harvey

http://personal.tcu.edu/jharvey/30233/30233StdQ_Su2019.pdf  

THE ECONOMICS OF MICHAEL KALECKI (1899-1970) 

Tcherneva, Pavlina (February 2012). “Inflationary and Distributional Effects of AlternativeFiscal Policies: An Augmented Minskyan-Kaleckian Model,” Working Paper No.706, LevyEconomics Institute. http://personal.tcu.edu/jharvey/30233/Tcherneva.pdf Reading92.For Keynes, the very existence of fiscal policy was to correct what two outstanding faultsof society?[17 words]

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Lecture2. Basic Two-Sector Model93.Show how, starting with PCQC = WCNC+ WINI in the basic two-sector model, consumersspend what they get and investors get what they spend.[sixequations and some notes] 

94.Derive the price equation for the basic two-sector model starting with PCQC = WCNC +WINI. Clearly indicate which portion is the markup over cost in the C sector. [6 equationsplus show which part is markup)Reading 

95.Write the Kaleckian price equation and use it to explain why an investment-led expansionis more likely to cause inflation than a consumption-led one. [61 words–I will help withthis one in class] 

96.The basic two-sector model describes earlier (pre-WWI) market economies wheregovernments and trade contributed little to output and in which what is the normalcondition and it is prone to what forces? [13 words]

 97.The relatively large share of government spending in GDP in the post-WWII periodmeans what (and what sort of bias does this introduce)? [17 words] 

3.2 Government Spending on Transfer Payments to Firms in the form of Investment Subsidies:TRISReading 

98.Government stimulus programs typically end up as investment subsidies (i.e., money forincreases in investment spending that then, hopefully, generate sufficient demand toinduce the private sector to hire the unemployed). Tcherneva argues that this is a problembecause a) it might not be very effective in spurring new investment and b) money spentin this way tends to go to profits (rather than to the unemployed workers). Something shedoesn’t discuss but is also true is that a side effect might be the lowering of the incomemultiplier. Why is that (Tcherneva does not explain this, you’ll have to figure it out)? [24words] 

3.3 Government as Employer via Indirect Job CreationReading 

99.What kind of unemployment can never be addressed bygovernment policesunemployment insurance, investment subsidies, or indirect job creation?[one word]

 3.4 Government Direct Job Creation via the Employer of Last Resort ProgramReading

 100.Tcherneva argues that, under an employer of last resort program, even the most unskilledperson can do something in the public sector that does what? [39 words] 

101.How high is the ELR wage relative to that in the consumption and private sectors? [5words]12

POLICYLecture 

102.Draw the chart that compares traditional deficit spending with an ELR regarding thefollowing: deliberation, size, flexibility, policy entry point, unemployment reductionmethod, primary beneficiary, efficiency, and abuse. [93words]FYI: In 2010, unemployment was 9.6%. Social safety net spending (discounting theelderly) was around $421 billion, while paying every single unemployed person $10/hourfor 40 hours for 50 weeks (+25% for miscellaneous costs) would have been $366 billionand it would have created 0% unemployment. Meanwhile, the fiscal stimulus packagepassed in response to the Great Recession (the American Recovery and Reinvestment Actof 2009) spent around $185 billion in 2009, $400 billion in 2010, and $135 billion in2011. Over the ten years of planned spending from the act, $250 billion in total wasearmarked for health care, unemployment, and housing. Unemployment was 9.35%,9.6%, and 8.9%.103.Draw the diagram that shows how the entry points and means by which unemployment isreduced for both traditional deficit spending and an ELR. Tcherneva, Pavlina (February 2012). Unemployment:The Silent Epidemic,” Working PaperNo.895, Levy Economics Institute.http://www.levyinstitute.org/pubs/wp_895.pdf 

104.Tcherneva argues that unemployment behaves more like what than a random shockevent? She later adds that says the “success” of the current fall in unemployment islargely due to what? [14 words] 

105.To make matters worse, unemployment breeds unemployability. Employers view ninemonths of unemployment as the equivalent of what? [9 words] 

106.A metadata analysis of 63 countries revealed that how many suicides are due tounemployment? [5 words]107.Tcherneva talks at length about the connection between unemployment and the lives ofchildren and youths. Pick out the two or three things you found most significant and listthem. [indeterminate] 

108.Tcherneva says that, “When it comes to epidemics, preparedness and prevention areessential.” In terms of preparedness, by design, the job guarantee will maintain what? Interms of prevention, what are the two preventative features of the job guarantee? [94words] 

109.In her section on Paying for Goods, Not Bads, Tcherneva says that unemployment isalready “paid for” how?[25 words]13 

ECONOMIC POLICY SUMMARY:•Unemployment: Jobs Program.•Inflation: Determine the beneficiary of the redistribution and addressdirectly.•Financial Sector: Steve Keen’s argument that, “The essential policymessage is that we should avoid crises inthefirst place, developingandmaintaining institutions and policies that enforce a good financialsociety in which the tendency bybusinesses and bankers to engage inspeculative finance is constrained. The institutional arrangementsincludecloseand discretionary supervision of financial institutions andfinancial arrangements and a bias toward income equity rather thaninequality.”14