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Heterodox Perspectives on the History of Thought

Paper Session

Sunday, Jan. 7, 2024 8:00 AM - 10:00 AM (CST)

Marriott Riverwalk, Alamo Ballroom Salon A
Hosted By: Union for Radical Political Economics
  • Chair: Paul Cooney, City College

The Elements of Veblen’s q Theory and Minsky’s “Two-Price Theory of Investment” to Understand the Capital Market Route

Ivan D. Velasquez
,
Bucknell University

Abstract

This paper discusses the role of Thorstein Veblen’s q theory and Hyman Minsky’s “Two-price
theory of investment” in understanding the funcFoning of the capital market route as a crucial
transmission channel for monetary policy in developed economies. The paper offers an empirical
and theoreFcal study of Veblen’s q for the economy of the United States of America for the period
of 1970 to 2021, linking it with Minsky’s “Two-price theory of investment,” showing the
complementarity and relevance to understanding the role of the capital market route for
monetary policy. It is known that Veblen’s analysis focuses on capitalizaFon by highlighFng the
role of managers in creaFng the valuaFon of stocks or, in his terms, increasing putaFve earnings
(market value) over actual earnings (replacement cost). And Minsky’s two-price theory
emphasizes the importance of the margins of safety for firms’ investment plans. Thus, in an
uncertain world with low short-term interest rates, investment plans are affected by the
possibility of capital loss on long-term bonds if the interest rate rises in the future since an
increase in the short-term rate will translate into increases in the long-term interest rates.
Therefore, Veblen’s q theory fits Minsky’s arguments for understanding the capital route for
monetary policy. Veblen’s q raFo tells us that managers focus on the capitalizaFon of their
companies, which might impact investment by reducing long-term external financing. These
pracFces drive the economy to increase capital share while wage falls in real terms. Thus, the
economy faces a fall in the wage share due to a monetary policy decision transmiUed via the
capital market, as Minsky (1968) suggested.

A Reconsideration of 19th Century, non-Marxist Models of Socialism: The Cases of John Stuart Mill and Leon Walras

John Willoughby
,
American University

Abstract

Despite their significant theoretical differences, both Leon Walras and John Stuart Mill defined themselves as socialists. They shared similar critiques of 19th century capitalism – that the distribution of landed property was unjust and that workers need not suffer from poverty and tyrannical workplace conditions. In addition, both believed that a shifts towards an economy in which workers had ownership rights in enterprises and (in Walras' case) the state owned the nation’s natural resources would also change social norms. Vigorous market competition could be combined with more solidaristic and less individualistic behavior. Mill placed greater emphasis on the establishment of worker-owned cooperatives, while Walras – while supportive of cooperative forms of organization – stressed the importance of nationalizing the ownership of land. Both insisted that market competition was essential for a well-functioning economy, and both feared working class rebellions. While these 19th century frameworks did not inspire 20th century socialists, one can still make connections between their visions and 21st century proposals for the radical reform of capitalism.

The Rate of Profit on Capital - An Update

Michael Roberts
,
Union for Radical Political Economics

Abstract

Marx’s law of the tendency of the rate of profit to fall (LTRPF) has either been heavily criticised or ignored as being an irrelevant explanation of crises under capitalism, both theoretically and empirically. The critics are not from mainstream economics, who generally ignore the role of profit in crises altogether. They partly come from post-Keynesian economists who look to ‘aggregate demand’ as the driver of capitalist economies, not profit. But the biggest sceptics come from Marxian economists.
This paper will recount the empirical work done by various authors over the last 70 years that provide evidential support for Marx’s law. Most work has been done on the rate of profit in a single country. But Marx’s law should apply to the world economy. The extension of capital globally in the last 70 years makes it possible now to talk meaningfully of a world rate of profit. This paper will provide a new measure of such a world rate.
From this, the paper can draw important conclusions about the future of capitalism in the 21st century.

Thermodynamics and Economics: A Review of Nicholas Georgescu-Roegen’s Contribution

Paul Cooney
,
City College

Abstract

Nicholas Georgescu-Roegen is recognized as one the fathers of ecological economics and a pioneer regarding the integration of thermodynamics and economics, particularly through the concept of entropy and the second law of thermodynamics. His pursuit of an interdisciplinary approach has been a major contribution in understanding economics as a system, how it interacts with Nature and how thermodynamic laws constrain economic activities. The work of Georgescu-Roegen during the 1970s and 1980s pushed economics to address present-day environmental and ecological concerns, such as energy, conservation, recycling, as well as climate concerns, among others.

This paper begins with an evaluation of the range of definitions of entropy, including those coming from classical and statistical thermodynamics as well as from the theory of information. A presentation reviewing the different definitions is followed by an assessment of the current state of the art regarding how these definitions relate to each other and to the laws of thermodynamics.

This is followed by a synthesis of the theoretical framework proposed by Nicholas Georgescu-Roegen (entropy-matter, 4th law of thermodynamics, etc.), followed by an evaluation of the defenders and critics of NGR’s work, including authors from a range of fields, such as, physics, geology, economics and industrial ecology. In conclusion, it is evident that more work is still needed to establish a more rigorous dialog between thermodynamics, physics and economics and to continue to extend the critical advances of Nicholas Georgescu-Roegen in addressing global issues of economics and the environment in the present day.
JEL Classifications
  • B0 - General
  • B5 - Current Heterodox Approaches