Economics of shortage and non-price control

The main ideas and concepts of Economics of Shortage (by János Kornai) and Non-Price Control (edited by János Kornai and Béla Martos) are summarized. Then the notion of a normal state, and the significance of quantity signals in economic control processes are discussed, along with Kornai's views about the role of prices in economic adjustment, and the nature of the budget constraints that agents face. Finally, the paper explores the relationship between Kornai's analysis and the various types of macroeconomic equilibrium recently discussed by Malinvaud.     

Labour employed in production and labour commanded: a Ricardian conjecture

This paper explains the origin of some important ambiguitiesin the analysis of value and prices put forward by Smith inhis Wealth of Nations by considering the possibility that theyreflect a previous draft of the book where the quantity of labouremployed in production was indicated as the sole determinantof real price and exchange ratios. This conjecture is evidencedindirectly by the way in which Smith presented his own analysisat the end of Book I, Chapter IV; by some passages containedin Book I and Book II which suggest that the quantity of labouremployed in production should play a crucial role within theanalysis of exchangeable value; and by the important modificationsintroduced by Smith in Book I, Chapter VI, after the first editionof the Wealth of Nations was published.     

Sraffa's path to Production of Commodities by Means of Commodities. An interpretation

The present article provides a reconstruction of the path followedby Sraffa in the long journey (begun in the late 1920s) whichbrought him to his 1960 book. The starting point of Sraffa'sresearch was the formulation of his cost-price equations, whichsurprisingly enough appear to have been derived neither fromRicardo's theory of value, nor from Marx's ‘transformationof values into prices of production’, but rather fromMarx's reproduction schemes, published in volume II of Capital,to which Sraffa was almost certainly brought by his study ofMarx's interpretation of Physiocratic theory in volume I ofTheories of Surplus Value. The main device that Sraffa usedin his attempts to bring to light the existence of solutionsto his system and their properties, which basically meant buildinga consistent wage–profit–price relationship, wasthat of somehow cutting out the prices from this relationship.The paper shows that different routes were attempted by Sraffato achieve this end, and that the main influences on these attemptswere Ricardo and Marx, in particular Ricardo's corn-ratio theoryof profits, and the related conception of a maximum rate ofprofits. In the course of his research, Sraffa was helped bysome distinguished mathematicians, in particular Frank P. Ramseyand Abram S. Besicovitch. Of Ramsey's contribution there areimportant traces, but no more than traces, while ample recordsremain of the relationship between Sraffa and Besicovitch, andthey will play an important part in the story told in this paper.     

Hollander, de Vivo and the 'further evidence' for the corn model interpretation of Ricardo: a conspiracy of silence?

This paper reconsiders the debate between de Vivo and Hollanderover the ‘further evidence’ in favour of Sraffa's‘corn model’ interpretation of Ricardo in the lightof Torrens's Letter to Lord Liverpool (1816). It is argued thatthe Letter provides unique evidence of the influence on Torrensof Ricardo's Essay on Profits (1815); and that, contrary tode Vivo, the evidence is not that of a ‘corn model’influence. It is further argued that the manner in which theLetter has been dealt with is unsatisfactory. The shortcomingsin Hollander's position are traced to peculiarities in his long-standinginterpretation of the early Ricardo.     

David Gawen Champernowne, 1912-2000: in appreciation

David Champernowne, who died in August 2000 aged 88, was notdirectly associated with the Cambridge Journal of Economics,but his major contributions belong to and serve to extend theapproach to economics which the journal wishes to preserve andadvance. This short obituary article records the journal's appreciationof his life and work.     

Some problems with the conception of the human subject in critical realism

The human subject plays a central role in the theory of socialreality developed by Tony Lawson in his book Economics and Reality.This theory relies on an account of human cognitive functioningthat distinguishes discursive from tacit knowledge. The presentpaper argues that Lawson's discussion of tacit knowledge inEconomics and Reality is underdeveloped in that it leaves unexploredthe notion of internalised knowledge. John Searle's work onmind, intentionality and the Background is reviewed and proposedas a solution to this problem.     

Keynes's Z function, heterogeneous output and marginal productivity

Keynes was adamant that the assumption of homogeneous outputand capital in macroeconomic theory is inadmissable. His aggregatesupply or Z function is a generalisation of Marshall's ordinarysupply function to take account of heterogeneous output, andis an essential element of the principle of effective demand.The ‘linear Z curve’ controversy can be attributedto Keynes's desire to demonstrate how his general monetary theoryof value and output encompasses the special case of Classicaltheory, including the marginal productivity theorem. The infamoussecond footnote on pages 55–6 of The General Theory canthereby be fully resolved.     

Hodgson on Hayek: a critique

In his book Economics and Evolution, Geoffrey Hodgson offersa detailed critique of F. A. Hayek's writings on cultural evolution.Certain aspects of Hodgson's treatment appear to be inaccurate.This paper criticises Hodgson's critique.     

The Two Kornai Effects

Kornai's theories of a “soft budget constraint” study a firm that receives state assistance when expenses exceed revenues. Such assistance is characteristic of classical socialism. It is well known that Kornai contended that a soft budget constraint increases input demands. He also predicted a second effect that has received less attention: input demands exhibit lower price responsiveness. The Second Kornai Effect may be defined in terms of slopes of input demands as Kornai did, or in terms of elasticities. A simple soft budget constraint model is used to review the First Kornai Effect and to examine the two versions of the Second Kornai Effect.     

'Let your science be human': Hume's economic methodology

This essay examines David Hume's economic methodology. The authorcharacterises Hume's understanding of human actions as interactionism.Its key point is that interactions generate the disinterestedview of ‘the spectator’ in the human mind. Humeapplies this idea of the disinterested spectator to the positionof social scientists in understanding social phenomena. ThusHume's approach to social science can be regarded as interpretive.The author also points out the difference between Hume's methodin social science and historical study. Considering this difference,the author argues that we should refer to Hume's social theoryrather than historical works in order to understand his economicmethodology.     

Harmonisation of Old-age Security Within the European Union

Not sufficiently harmonised national pension systems withinthe European Union distort the allocation of labour and endangerredistributive activities. This paper identifies the most decentralisedlevel of harmonisation which guarantees efficient allocationand enables redistribution. For this, we build on theoreticalresults from the literature to evaluate the realised distributionof the legal power between the European Union and the MemberStates and the resulting level of harmonisation. We find thatharmonisation is sub-optimally low. Binding rules guaranteedby the European Union are needed implying that the Member Stateshave to concede more fundamental responsibilities to the EuropeanUnion. (JEL F22, H55, K33, N34)     

THOMAS TOOKE AND THE INFLUENCE OF THE RATE OF INTEREST ON PRICES: IMPLICATIONS FOR DISTRIBUTION THEORY

Thomas Tooke included money interest among the determinantsof normal money production costs, together with money wagesand production techniques. This inclusion permitted him to explainthe existence, in actual fact, of a direct relationship betweenthe rate of interest and the level of prices. He did not developthe implications for distribution theory of his view of theinfluence of the rate of interest on the price level. In thepresent article it is maintained that the rate of interest emergesfrom Tooke's analysis as the regulator of the ratio of pricesto money wages, with the corollary that there is implicit init a causal relationship between money interest and normal profitthat goes from the former to the latter. This may be connectedwith Sraffa's suggestion of a determination of the rate of profitby the money rate of interest and lend it the support of Tooke'sscrupulous analysis of facts.