A Capital Controversy in Early Twentieth Century: Veblen vs. Clark

This article aims to assess the debate between John Bates Clark and the “old” institutionalist scholars — Thorstein Veblen, above all — with particular reference to the nature of capital and the functioning of the labor market. Although studies on both authors are numerous, relatively little attention has been paid to finding the crucial elements at the heart of their radical disagreement. A.J. Cohen (2014 Cohen, A.J. “Veblen Contra Clark and Fisher: Veblen-Robinson-Harcourt Lineages in Capital Controversy and Beyond.” Cambridge Journal of Economics 38, 6 (2014): 1493-1515.[Crossref], [Web of Science ®] , [Google Scholar]) convincingly argues that Veblen’s attack on Clark is in the center of the capital controversy of the 1960s and 1970s. We propose an extension of this argument, based on the idea that Veblen’s attack on Clark follows three steps. First, Veblen defined capital in money terms and, at the same time, he saw it as the accumulated technological and institutional experience of a community. Second, insofar as capital cannot be reduced to a stock of physical goods, it is logically impossible to derive a function of the marginal labor productivity from the existing stock of capital. Third, insofar as the marginal productivity of labor cannot be measured, it follows that the equality between real wage and marginal labor productivity cannot logically hold. It also follows that, since it does not exist, this equality cannot be used as a basis for establishing that the equilibrium wage is a just wage.     

Thorstein Veblen’s 1904 contributions to q and insider/outsider analysis

The early 20th century saw the first steps in a tradition of leading economists explaining the link between corporate finance, investment and capital valuation. The writings of Keynes, and Tobin deal with the development of an investment theory based on the financial structure. However there is no mention Veblen, whereas he made an early American analysis of corporate governance structure. Our work is based on a critical review of the literature, which is guilty of omissions, lack of accuracy and errors of formalization. So that, we focus on the reasons why Veblen’s corporate financial analysis should not be forgotten.     

Financialization in the American Pharmaceutical Industry: A Veblenian Approach

Thorstein Veblen’s theory of the business enterprise holds that business interests come to dominate industrial interests, with pecuniary returns being the dominant mindset under which economic activity is conducted. Under moneymanager capitalism, this is reflected in the increasing importance of profits from financial channels and the accumulation of intangible rent-generating assets to serve as the basis for capitalization — a process known as financialization. I examine this process of intangible asset accumulation within the context of the American pharmaceutical industry using Veblen’s theory of the business enterprise as a lens. I show that intangible assets have come to dominate productive capital on pharmaceutical enterprise balance sheets, suggesting that pharmaceutical profits are accumulated through rent-seeking channels rather than productive ones, in line with Veblen’s theory, and provide evidence of the financialization of this industry.     

Habit,Decision-Making,and Rationality: Comparing Thorstein Veblen and Early Herbert Simon

The article aims to contribute to the convergence between institutional and neo-Schumpeterian evolutionary economics. It intends to help unify the behavioral foundations of these two strands of thought by returning to the original views of their main historical inspirations. It thus proposes a comparative analysis of the theory of human behavior developed by Thorstein Veblen and Herbert Simon, respectively. The article notably discusses how Simon’s early work links together the notions of habit, rationality, and the decision-making process, and explores the extent to which his views are consistent with, complementary to, or divergent from Veblen’s. The article highlights several commonalities between Simon and Veblen’s views on habits. However, Simon departs from Veblen in developing a dual model of human behavior which clearly differentiates habit-based from decision-based behaviors. The article argues that neo-Schumpeterian evolutionary economists should go beyond this binary model and build on the pragmatist-Veblenian approach, in which these two dimensions are intimately entangled. This process could allow the economists in question to take advantage of the most valuable insights of institutional economics regarding the interactions between individual choices and habits and institutions.     

The Policy Ramifications of Capital as Ideas

In 1987, Baldwin Ranson wrote about capital and technology in economic growth. Ranson argued that capital should be defined as intangible ideas and technology that are not subject to supply and demand constraints. Thorstein Veblen (1908, 518) described his conception of capital as being “found in possession of something in the way of a body of technological knowledge, – knowledge serviceable and requisite to the quest of a livelihood.” John R. Commons (1934, 662) wrote in a similar vein that “capital is not an accumulation of past products of stored-up labor – these are transitory and aimless – capital is a going plant of industrial knowledge and experience.” More recently, Cesar Hidalgo (2015) and Paul Romer (1990, 1994) have also written about the idea of capital as ideas and the key to economic growth. Hidalgo (2015, 179) states that “the growth of information in the economy, which is ultimately the essence of economic growth, results from the coevolution of our species’ collective computation capacity.” The first section of this article explores the linkages between the older generation and more recent thinkers on the intersection of capital as technology and ideas. The second section explores the policy ramifications of this conceptualization of capital. Romer argues that temporary monopolies are needed to encourage investment in innovation. According to both Veblen and Ranson, these rules do not allow for the full social value of ideas to be utilized. The second part of this article also explores these differences using A. Allan Schmid’s situation-structure-performance (SSP) model.     

CAN INVESTMENT IN INTANGIBLES EXPLAIN THE SWEDISH PRODUCTIVITY BOOM IN THE 1990s?

In the early 1990s the Swedish economy experienced a severe economic and financial crisis which resulted in a substantial GDP decrease. Even though the crisis was not a complete surprise for many economists, almost no one expected that the Swedish economy would be prospering with booming productivity growth only a few years later. Economists have presented three explanations for the fast recovery and productivity growth in 1995–2006: market reforms, crisis recovery, and the impact of ICT. This paper offers an alternative view, emphasizing instead firms' substantial investment in intangible assets such as R&D, design, and advertising. Based on the growth accounting framework, intangible capital accounted for more than 30 percent of the labor productivity growth in the Swedish business sector from 1995 to 2006. Thus, Swedish TFP growth, one of the highest among OECD countries, is reduced substantially when investment in intangibles is included in the growth accounting analysis.     

Metaphors of Knowledge in Economics

"Knowledge" takes a central place in economics. This paper shows that the metaphor pervasively used in neoclassical economics to understand knowledge is that of "capital". Taking capital as a metaphor of knowledge introduces problems in neoclassical economic theory, as becomes apparent when economics addresses issues of learning and technological development. Instead, it is argued that economists could learn from what philosophers such as Gilbert Ryle and Michael Polanyi have said about how to understand knowledge.     

Toward an Evolutionary and Moral Science

Thorstein Veblen asked in 1898 why economics is not an evolutionary science; he also proposed a Darwinian paradigm shift for economics. Among the implications reviewed here was his claim that Darwinian principles applied to social entities as well as to biological phenomena. It is also argued that economists have additional reasons for taking Darwinian evolution seriously. Recent work on the evolution of altruism, cooperation and morality show that we are on the brink of developing an evolutionary-grounded theory of human motivation that breaks from the selfish utility-maximizer lambasted by Veblen. This new theory accepts a biological as well as a cultural foundation for moral dispositions. As noted here, the neglected British institutional economist John A. Hobson — who was an acquaintance of Veblen — foreshadowed this approach.     

Measuring the information age business

There are seven important characteristics of information age businesses which differ in a major way from traditional industrial age businesses. We should expect that managing this new type

of business will require different management information, knowledge and skills. But what metrics precisely should an information age business manager watch and how should they be used? Two such

metrics, structural effectiveness and knowledge productivity are proposed and discussed. In the information age business, effectiveness, a balance between doing things right (effciency) and doing the right things, is

needed, The structural effectiveness metrirs called .complexity dynamicism and intergration reduce to quanitifiable terns the degree to which the structure of the business's work processes encourage or inhibit effective business operations. Knowleage must be treated as an independent driver of the information age business, in addition to the labor, capital and raw materials which drove industrial age businesses. Managers (and owners) must have a way of measuring how well the knowladge assets of a business are being utilized. The knowledge productivity metric measure this utilization in a way analogous to how managements nurturing of capital assets is measured (i.e. return on capital).     

The impact of process innovations on firm's productivity growth: the case of Spain

The main aim of this paper is to investigate about the effect that a measure of the process innovation performance of a firm has on its labour productivity growth. This analysis is mainly a consequence of two considerations. The first one results from a clear differentiation of the role that product and process innovations have on a firm's performance. The second one is to assume that the knowledge capital of a firm is mainly composed by its successful research. The study demonstrates that process innovation has a positive and significant effect on firm's productivity growth. Moreover, this result is robust under a wide range of alternative specifications and, in any case, the variable behaves much better than R&D intensity. Following previous research, the detected quadratic relationship between vertical product differentiation and process innovation performance leads to the existence of some firms for which there exist a trade–off between quality and productivity.     

Knowledge spillovers through FDI and trade: the moderating role of quality-adjusted human capital

The paper extends the findings of the Coe and Helpman (Eur Econ Rev 39(5):859-887, 1995) model of R&D spillovers by considering foreign direct investment (FDI) as a channel for knowledge spillovers in addition to imports. Deeper insights on the issue are provided by examining the inter-relationship between knowledge spillovers from imports and inward FDI. Furthermore, human capital is added to the discussion as one of the appropriability factors for knowledge spillovers, with special focus on its quality-content, using journal publications and patent applications. Applying cointegration estimation method on 20 European countries from 1995 to 2010, the direct effects of FDI-related as well as import-related spillovers on domestic productivity are confirmed. Furthermore, a strong complementary relationship is found between knowledge spillovers through the channels of imports and inward FDI. When considering quality-adjusted human capital, countries with better human capital are found to benefit not only from direct productivity effects, but also from absorption and transmission of international knowledge spillovers through imports and inward FDI. Finally, technological distance with the frontier does not appear to play a role in the absorption of import and FDI related knowledge spillovers.     

Lagging productivity growth: Measurement,technology, and shock effects

One of the most important problems about which economists have professional knowledge is lagging productivity growth. After illustrating some significant developments this paper addresses three questions: (1) To what extent does R&;D activity drive productivity growth, (2) how do alternative measures of productivity affect the conclusions and (3) how did the oil price shocks and the increased openness of the U.S. economy affect productivity growth? After removing the influence of the extremely dynamic computer industry, average manufacturing industry productivity in the U.S. throughout the 80s grew at a disappointing pace. And it didn't improve in the most dynamic industries. But there is good news as well. First, part of the 1970s productivity slump is clearly attributable to the 1973–74 oil price shock. Second and more important, technological innovation does not appear to have lost its power in driving productivity growth forward. Indeed there is evidence of stronger and more consistent productivity effects from R&;D investment during the 1980s, although the exact channels through which R&;D enhances manufacturing sector productivity are left in doubt. Estimates of the role inter-industry technology flows play are sensitive to aggregation and the conventions used to construct the industry price deflators underlying productivity measures.     

Overhead Capital: A Study in Development Economics

Veblen's and Commons's contributions are outlined and related to the approaches to economics and political actions over the years of the author. Commons's philosophy and pragmatic contribution to economic and political institutions in order to help create decent living conditions for wage-earners within capitalism are reflected in the author's rethink in the late 1970s of what was possible for a social democratic government in Australia to achieve. The implication of John Kenneth Galbraith's example and writings on the war in Vietnam are linked to the author's actions in Australia during Australia's involvement in the war. The relevance of Veblen's damning critique of J.B. Clark's views on capital theory for the arguments of the Cambridge - Cambridge controversies in capital theory of the 1950s-1970s, first noted by Joan Robinson, are set out. Veblen's biting analyses of the nature of capitalism in his major writings are argued to be even more relevant now for the modern world of haves, have nots and have lots.     

信息化水平对生产率的直接效应和间接效应——劳动力技能结构的中介作用

构建了关于信息化水平、劳动力技能结构以及生产率的理论框架,探讨了信息化水平对生产率的直接和间接影响,以及劳动力技能结构在其中的中介作用,并利用中国省际面板数据对理论框架进行验证。结果表明:信息化水平对生产率同时具有直接影响和间接影响;信息化水平对生产率的直接影响呈现出动态的阶段性特征,两者之间存在U形关系,信息技术对生产率的促进作用只有在信息化水平达到一定程度后才能显现;信息化水平对生产率的间接影响通过劳动力技能结构的中介作用来实现:信息化水平的提升对低技能劳动者有明显的挤出效应,并带来了中、高技能劳动力需求上升,导致劳动力技能结构升级,从而促进劳动生产率以及资本生产率的提高;劳动力技能结构在信息化水平与全要素生产率之间的中介作用不显著。要使信息化更好地发挥作用,必须匹配较高水平的人力资本,劳动者需要进行持续学习与提升,以适应不断变化的社会需求。     

Early contributions to the economics of consumption as a social phenomenon

During the 1920s some American women economists developed theoretical, empirical and historical analyses that constituted a theory of consumption. The original formulations of this approach were based on the view, theorised by T. Veblen, that consuming certain goods makes it possible to identify with specific social groups. These analyses were explicitly alternative to the theories of consumption based on marginal utility. In the 1930s, however, the analyses of a second generation of women economists became exclusively empirical and the theoretical features that made the approach original and an alternative to marginalism were lost.     

Explaining Japan's Unproductive Two Decades

Using industry‐ and micro‐level data, this paper examines why Japan's productivity growth has been slow for such a long time and how it can be accelerated in the future. Japan's capital–gross domestic product ratio continued to increase after 1991, and this increase in the capital–gross domestic product ratio must have contributed to the decline in the rate of return on capital in Japan by decreasing the marginal productivity of capital. On the other hand, Japan's accumulation of information and communication technology capital and intangible investment was very slow. Compared with large firms, which enjoyed an acceleration in the total factor productivity growth in recent years, Japanese small‐ and medium‐sized enterprises were left behind in information and communication technology capital and intangible investment, and their productivity growth has been very low. Furthermore, as large firms expanded their supply chains globally and relocated their factories abroad, research and development spillovers from large firms to small‐ and medium‐sized enterprises seem to have declined.     

Joseph Schumpeter and Thorstein Veblen on technological determinism,individualism and institutions

This article investigates Joseph Schumpeter's affinities with Thorstein Veblen with respect to technological change and determinism, the future of capitalism, individualism and institutions. From a methodological point of view, a common point in their analysis is their anti-teleological view regarding economics as a discipline. Also, in the Schumpeterian system, technology is the cornerstone of economic evolution and appears as the making of new combinations. In the Veblenian theoretical framework, the bearer of change is to be found, inter alia, in technology, just like in Schumpeter's works, although not without differences. They also share the opinion that technology revolutionises capitalism and has serious implications for its future as a system. Furthermore, regarding individualism, in his work Schumpeter stresses the importance of the social milieu on individual action, a fact which bears strong resemblance to the Veblenian notion of evolution as ‘depersonalized evolution’. In this sense, Schumpeter is very close to Veblen, although Schumpeter's approach could be classified in what is called institutionalist individualism, whereas Veblen could be classified as holist. Undoubtedly, the role of institutions is of great importance in both Schumpeter and Veblen. Ιnstitutions in the Schumpeterian schema play a central role closely related to the future of capitalism. Institutional and non-institutional factors enter into complex forms of interaction just like in Veblen's approach. There, institutions are part of the social milieu and their underlying framework, much wider than mere economic and social. Of course, the theoretical analyses of Schumpeter and Veblen are not devoid of differences springing mainly from their methodological approach such as the role of the individual in the capitalist process which is probably the most significant difference regarding the importance attributed to it in Schumpeter's early works. Also, the way technical change appears constitutes another difference. However, his views are quite close to Veblen's. After all, Schumpeter began to write in a social, political, theoretical and ideological environment at a time when evolutionary ideas dominated social thought.     

"Never Intended to be a Theory Of Everything": Domestic Labor in Neoclassical and Marxian Economics

This article is a comparative study of the treatment of domestic labor by neoclassical and Marxian economists. Before 1960, mainstream economics concentrated on production for the market, with serious analysis of housework confined to a handful of economists, whose efforts in this regard were marginalized by economics departments but supported by departments of home economics. Later mainstream analyses, first in agricultural economics and then in human capital theory, culminated in Gary Becker's "new household economics." Domestic labor was also neglected by Marxist thinkers, who argued that housework was being socialized under capitalism and would disappear altogether under socialism, but it was rediscovered by Marxist-feminists in the late 1960s. Housework continues, however, to pose serious analytical difficulties for both neoclassical and Marxian economists.     

The mobility of highly skilled human capital in Taiwan

Most economists agree that a country's economic growth depends on human capital, physical capital, technology, and several other minor inputs. Human capital is the basic wealth of every country. Highly skilled workers are the most important component of human capital. Human capital can have a positive spillover effect on society. When talented young people leave their native country to work elsewhere, this brain drain inhibits the country's economic growth. Several factors contribute to brain drain. These can be classified roughly into three categories: economic, academic and personal. Economic factors play the most important role. From the early 1960s to the late 1980s, Taiwan suffered a brain drain when many people who had earned advanced degrees in western countries chose to leave Taiwan to work elsewhere. In this study's statistical analysis, I show that Taiwan's economy is based in past on an effective labour force and explain why Taiwan's economy has grown over the past 30 years. With the improved economy in the 1990s, young people are increasingly choosing to return to or remain in Taiwan to work and live. As Taiwan's economy improves, its highly skilled labour market becomes more competitive.     

Vested Interests and the Common Man as Seen Through Monetary and Fiscal Policy: Flooding Wall Street or Main Street?

There are many angles through which a critical observer can analyze the divergent class interests in most aspects of macroeconomic management. We examine the insistence of financial authorities of all major economies on reviving economic activity through monetary — and not fiscal — policy as a particularly clear example of favoring vested interests over the interests of the common man. Nearly a century after Thorstein Veblen wrote on the subject, one can find many parallel elements to the political landscape of the times. Today, the common man is often expressed by the “99%,” and many accept that the dominant vested interest is that of global banks. Unlike in Veblen’s times, economists today have many historical experiments in economic management that they can consult. By employing logic, historical experience, and an understanding of our current global finance-led capitalism, we offer a preliminary institutionalist analysis of the mechanisms of current monetary policy that “flood” Wall Street, while leaving employment, production, and investment — Main Street — all but forgotten. We then explain how vested interests have abandoned fiscal policy and left a deflationary macroeconomic environment.