Heterodox
1.0 Introduction Broadly speaking, the history of political economy contains two approaches to value and distribution. For purposes of this post, I do not distinguish between classical and Marx's political economy. Institutionalists and those who know about German historical schools, for example, might have a complaint about being ignored. This post is quite unoriginal. I thought I would just record these properties of two approaches. 2.0 Marginalism Marginalist economics is about the allocation of given resources among alternatives. In marginalism, the theory of value and distribution is almost co-extensive with economic theory. The givens, for the theory of value and distribution, are: Endowments, including distribution of endowments among households. Tastes or preferences of
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Broadly speaking, the history of political economy contains two approaches to value and distribution. For purposes of this post, I do not distinguish between classical and Marx's political economy. Institutionalists and those who know about German historical schools, for example, might have a complaint about being ignored.
This post is quite unoriginal. I thought I would just record these properties of two approaches.
2.0 MarginalismMarginalist economics is about the allocation of given resources among alternatives. In marginalism, the theory of value and distribution is almost co-extensive with economic theory. The givens, for the theory of value and distribution, are:
- Endowments, including distribution of endowments among households.
- Tastes or preferences of each agent.
- Technology.
How to take capital as a given endowment is a difficulty with this approach. It can hardly be taken as a given quantity of value. The theory is supposed to explain prices, including the prices of capital goods. This problem is not just with aggregate theory. It is also a problem with microeconomic theory.
Another approach is to take initial quantities of individual capital goods as given. The neo-walrasian approach abandons the long run and the equalization of the rate of profits among industries. Conceptually, some expectations and plans must have been mistaken before the initial point in time. Yet the theory does not seem to accomodate such mistakes at the given time or into the future. Furthermore, debts and entitlements to future income streams do not seem possible to include among the givens. Disequilibrium processes that change the initial endowments and their distribution do not seem possible to include in the theory either.
3.0 Classical Political EconomyClassical political economics analyzes the conditions needed to ensure the reproduction of society. For the theory of value and distribution, the givens are:
- Technology.
- Requirements for use, which I take as net output.
- Wage or the rate of profits.
The theory of value can be combined with other elements of political economy. The classicals had various theories of wages, combined with demographics. Marx rejected Malthus and developed his theory of the reserve army of labor for similar purposes. The theory is compatible with a rejection of Say's law and enduring unemployment. Many have argued for combining this theory with a long-period interpretation of Keynes' general theory. A theory of growth and the dynamics of technical change can be built upon this theory of value and distribution.