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The Dismal World of David Ricardo and Thomas Robert Malthus

The Dismal World of David Ricardo and Thomas Robert Malthus. Diminishing Returns to Land - Intensive Margin - Extensive Margin Land Rent = Productivity Premium over Marginal Land Constant Returns to Manufacturing Iron Law of Wages … subsistence - Wage Fund

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The Dismal World of David Ricardo and Thomas Robert Malthus

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  1. The Dismal World of David Ricardo and Thomas Robert Malthus • Diminishing Returns to Land - Intensive Margin - Extensive Margin • Land Rent = Productivity Premium over Marginal Land • Constant Returns to Manufacturing • Iron Law of Wages … subsistence - Wage Fund - Malthusian Law of Population

  2. The Dismal World of David Ricardo Accumulation | Increase Wage Fund | Increased Workforce | Increased Cultivation | Increased Food Cost (Labor Theory of Value) | Increased Rent Share | Reduced Profit Share | Reduced Accumulation

  3. Ricardo’s Prescriptions • Free Trade • Import Food • Repeal “Corn Law” Tariff • Promote Colonies (J.S. Mill) • Abolish Poor Laws • Population Growth  Wage Below Subsistence • Tax Rents and Luxuries • Vs Malthus Landlords Consume “Glut”

  4. Modern Malthusians:The Limits to Growth • Lily – Pond S P R A W L • Finite Resources • Environmental Catastrophe • Why not market solution?? • Tragedy of the commons • Why not Tech – Fix ???

  5. Karl Marx:Inherent Contradictions of Capitalist Development • Accumulate, accumulate… That is Moses and the prophets.

  6. Karl Marx:Inherent Contradictions of Capitalist Development Capitalists … own means of production Workers … paid subsistence wage Exploitation  Surplus Value (Profit) Accumulation of profit  Crisis  Monopoly + Immiseration of labor Revolution  Socialism • The expropriators are expropriated

  7. Karl Marx:Contradictions of Capitalist Development Flavors of Capitalist Crisis • Falling Rate of Profit • Profit Squeeze • Disproportionality • Uncertainty  Error  Overproduction • Underconsumption Heightened accumulation  Increased Supply + Diminished Demand Crisis: Rush for Liquidity  Breakdown of Monetary Economy

  8. Karl Marx:Contradictions of Capitalist Development Falling Rate of Profit Accumulation | Increased Demand for Labor | Depletion of “Reserve Army” | Rising Wage | Profit Squeeze

  9. Profit Squeeze | Concentration | Monopoly Capitalism Profit Squeeze | Increased “Organic Composition” of Capital | Reduced Long-Run Rate of Profit Karl Marx:Contradictions of Capitalist Development

  10. Vlad LeninImperialism: The Highest Stage of Capitalism Viewed from the center, the periphery offers Untapped Markets + Cheap Food + Outlet for Investment (forestall stagnation) | International Competition for Dependencies | Capitalist Wars

  11. Libertarian / Austrian Insights Joseph Schumpeter • Entrepreneur  Progress • Creative Destruction Renews Enterprise Economy • Antidote to Marx Karl Polyani • Market Imposed by State • Substitute for Marx

  12. Karl PolanyiThe Great Transformation • Market Economy is Historically Rare • Laissez Faire is Unnatural • Enforced by Strong, Oppressive State • Resistance to Market is Natural • Reaction to Liberalism … Welfare State • Social Protection vs “Self – Regulating” Market

  13. Karl PolanyiThe Great Transformation Pre – industrial society • Reciprocity: produce & share according to social role • Redistribution via public consumption • Market economy • Behavior “guided” – directed, dictated – by prices • Resistance emerges naturally, quickly

  14. Gunnar Myrdal, 1898 - 1987 1931 Monetary Equilibrium 1933 Chair in Political Economy, University of Stockholm 1934 Elected to Swedish Senate, Social Democratic Party 1938 Carnegie Corp Grant to Study Situation of American Negro 1944 An American Dilemma 1942 Reelected to Swedish Senate: Board, Bank of Sweden/Chair, Post - War Planning Commission/1945 – 1947 Minister of Commerce 1947-57 Executive Secretary, UN Economic Commission for Europe 1957 Rich Lands and Poor 1957-61 Twentieth Century Fund An Asian Drama: An Inquiry Into the Poverty of Nations The Challenge of World Poverty: A World Antipoverty Program 1961 Professor of International Economics, University of Stockholm 1974 Bank of Sweden Prize in Economic Science in Memory of Alfred Nobel (shared with Friedrich von Hayek, opponent of planned economy) Married to Alva Myrdal, Swedish Ambassador to India and Nobel Peace Prize Laureate

  15. Gunnar MyrdalCumulative Causation Thems that gots gits. For unto everyone that hath shall be given, and he shall have in abundance; but from him that hath not shall be taken away even that which he hath. Matthew

  16. Gunnar MyrdalCumulative Causation Equilibrium Approach • “Harmony of Interests” • Laissez – faire • Free Trade Increasing Inequality

  17. Gunnar MyrdalCumulative Causation Equilibrium Approach “Harmony of Interests” Laissez – faire Free Trade Critique of Equilibrium Approach • The “other things” that are assumed to remain equal – particularly social and political relations – change with economic outcomes. • They change in ways that lead to divergence, not equilibrium. Thems that gots gits.

  18. Gunnar MyrdalCumulative Causation • “Spread Effects” • Peripheral regions supply the dynamic center • “Backwash Effects” • Dynamic regions suck the best resources from the backwater • Free trade and free migration hurt the periphery

  19. Raul Prebisch – Hans SingerUN ECLA • Primary goods trap Development  increased demand for manufactured goods • Demands for primary goods are income inelastic • Primary goods prices fall relative to manufactured goods prices over time • Terms of trade move against primary good exporters Prescription: Import Substitution Industrialization (ISI)

  20. Bolivia, 2007 … A Vicious Circle: How, for example, will the additional income provided by the new natural gas wealth be spent? … If it starts with education, it must begin by teaching at least half a million adults how to read. If it wants to develop tourism—and there is some spectacular, untouched scenery in the country—it must add to the barely four thousand kilometers of paved highway in a country twice the size of France. If poor Bolivians are to be made healthy, or provided with the barest social services—electricity, adequate schools, drinking water—an efficient delivery system must be devised for a rural population density of less than eight people per square kilometer. This would be a daunting task with the most lavish budget, even if it were possible to prevent the ingrained practice of government corruption from milking Bolivia's earnings dry. In his first six months in office, Morales has already fired a vice-minister, an ambassador, the head of the highway department, and dozens of lesser bureaucrats accused of stealing, but still I heard detailed accusations in La Paz involving huge graft at high levels. Alma Guillermoprieto The New Bolivia: II The New York Review of Books September 21, 2006

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