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Marxist Economics: How Capitalism Works, and How It Doesn't
MARXIST ECONOMICS: HOW CAPITALISM WORKS, ANO HOW IT DOESN'T 49 Another reason, however, was that he wanted to show how the appear- ance of "equal exchange" of commodities in the market camouflaged ~ , inequality and exploitation. At its most superficial level, capitalism can ' V be described as a system in which production of commodities for the market becomes the dominant form. The problem for most economic analyses is that they don't get beyond th?s level. C~apter Four Commodities, Marx argued, have a dual character, having both "use value" and "exchange value." Like all products of human labor, they have Marxist Economics: use values, that is, they possess some useful quality for the individual or society in question. The commodity could be something that could be directly consumed, like food, or it could be a tool, like a spear or a ham How Capitalism Works, mer. A commodity must be useful to some potential buyer-it must have use value-or it cannot be sold. Yet it also has an exchange value, that is, and How It Doesn't it can exchange for other commodities in particular proportions. Com modities, however, are clearly not exchanged according to their degree of usefulness. On a scale of survival, food is more important than cars, but or most people, economics is a mystery better left unsolved. Econo that's not how their relative prices are set. Nor is weight a measure. I can't mists are viewed alternatively as geniuses or snake oil salesmen. exchange a pound of wheat for a pound of silver. -
The Ricardian Law of Diminishing Returns. a Ew Interpretation
The Ricardian Law of Diminishing Returns. A ew Interpretation . Leveraging productivity to drive globalization. Lucy Badalian — Victor Krivorotov 11501 Maple Ridge Rd Reston VA 20190 Millennium Workshop, USA [email protected] Abstract . The 2009 IMF report found notable differences between the pre- and post-1985 busts in their ratios of capital/labor. According to historical trends it cited, the recent extreme financialization may cloud our mid-term recovery prospects. The Market Pendulum Model (further MPM) stresses the importance and fluidity of interrelationship between traditional factors of production: land, labor, capital and entrepreneurship. MPM shows the difference between productivity-factors during demand shocks, such as today, and supply shocks (the 1970s-80s). It traces the causal roots of the financialization in market’s compensation for failing fundamentals, the direct result of the Ricardian Law of Diminishing Returns (further RLDR). Keywords : Ricardian Law of Diminishing Returns, financialization, financial crisis, demand shocks/demand shortages, supply shocks/supply shortages, ratio of capital/labor. JEL codes: E1, E20. E5, E6. 1. Introduction. The Interrelationship between Various Factors of Production as a Potential Predictive Tool. The October 2009 report of the IMF showcased the importance of the hitherto under- researched area of the inter-relationship between factors of production, which, in its opinion, holds significant predictive power as to the length and severity of the unfolding recession. It found that the growth in productivity since 1985 was accompanied by a rapid rise in the ratios of capital to labor. Earlier research noted other specific patterns of labor productivity. Among them, the wavelike behavior of multifactor productivity growth, which peaked in 1928-50 and slowed gradually, both when moving back to 1870-91 and forth to 1972-96 (Gordon 2004). -
1- TECHNOLOGY Q L M. Muniagurria Econ 464 Microeconomics Handout
M. Muniagurria Econ 464 Microeconomics Handout (Part 1) I. TECHNOLOGY : Production Function, Marginal Productivity of Inputs, Isoquants (1) Case of One Input: L (Labor): q = f (L) • Let q equal output so the production function relates L to q. (How much output can be produced with a given amount of labor?) • Marginal productivity of labor = MPL is defined as q = Slope of prod. Function L Small changes i.e. The change in output if we change the amount of labor used by a very small amount. • How to find total output (q) if we only have information about the MPL: “In general” q is equal to the area under the MPL curve when there is only one input. Examples: (a) Linear production functions. Possible forms: q = 10 L| MPL = 10 q = ½ L| MPL = ½ q = 4 L| MPL = 4 The production function q = 4L is graphed below. -1- Notice that if we only have diagram 2, we can calculate output for different amounts of labor as the area under MPL: If L = 2 | q = Area below MPL for L Less or equal to 2 = = in Diagram 2 8 Remark: In all the examples in (a) MPL is constant. (b) Production Functions With Decreasing MPL. Remark: Often this is thought as the case of one variable input (Labor = L) and a fixed factor (land or entrepreneurial ability) (2) Case of Two Variable Inputs: q = f (L, K) L (Labor), K (Capital) • Production function relates L & K to q (total output) • Isoquant: Combinations of L & K that can achieve the same q -2- • Marginal Productivities )q MPL ' Small changes )L K constant )q MPK ' Small changes )K L constant )K • MRTS = - Slope of Isoquant = Absolute value of Along Isoquant )L Examples (a) Linear (L & K are perfect substitutes) Possible forms: q = 10 L + 5 K Y MPL = 10 MPK = 5 q = L + K Y MPL = 1 MPK = 1 q = 2L + K Y MPL = 2 MPK = 1 • The production function q = 2 L + K is graphed below. -
Dangers of Deflation Douglas H
ERD POLICY BRIEF SERIES Economics and Research Department Number 12 Dangers of Deflation Douglas H. Brooks Pilipinas F. Quising Asian Development Bank http://www.adb.org Asian Development Bank P.O. Box 789 0980 Manila Philippines 2002 by Asian Development Bank December 2002 ISSN 1655-5260 The views expressed in this paper are those of the author(s) and do not necessarily reflect the views or policies of the Asian Development Bank. The ERD Policy Brief Series is based on papers or notes prepared by ADB staff and their resource persons. The series is designed to provide concise nontechnical accounts of policy issues of topical interest to ADB management, Board of Directors, and staff. Though prepared primarily for internal readership within the ADB, the series may be accessed by interested external readers. Feedback is welcome via e-mail ([email protected]). ERD POLICY BRIEF NO. 12 Dangers of Deflation Douglas H. Brooks and Pilipinas F. Quising December 2002 ecently, there has been growing concern about deflation in some Rcountries and the possibility of deflation at the global level. Aggregate demand, output, and employment could stagnate or decline, particularly where debt levels are already high. Standard economic policy stimuli could become less effective, while few policymakers have experience in preventing or halting deflation with alternative means. Causes and Consequences of Deflation Deflation refers to a fall in prices, leading to a negative change in the price index over a sustained period. The fall in prices can result from improvements in productivity, advances in technology, changes in the policy environment (e.g., deregulation), a drop in prices of major inputs (e.g., oil), excess capacity, or weak demand. -
Economics 352: Intermediate Microeconomics
EC 352: Intermediate Microeconomics, Lecture 7 Economics 352: Intermediate Microeconomics Notes and Sample Questions Chapter 7: Production Functions This chapter will introduce the idea of a production function. A production process uses inputs such as labor, energy, raw materials and capital to produce one (or more) outputs, which may be computer software, steel, massages or anything else that can be sold. A production function is a mathematical relationship between the quantities of inputs used and the maximum quantity of output that can be produced with those quantities of inputs. For example, if the inputs are labor and capital (l and k, respectively), the maximum quantity of output that may be produced is given by: q = f(k, l) Marginal physical product The marginal physical product of a production function is the increase in output resulting from a small increase in one of the inputs, holding other inputs constant. In terms of the math, this is the partial derivative of the production function with respect to that particular input. The marginal product of capital and the marginal product of labor are: ∂q MP = = f k ∂k k ∂q MP = = f l ∂l l The usual assumption is that marginal (physical) product of an input decreases as the quantity of that input increases. This characteristic is called diminishing marginal product. For example, given a certain amount of machinery in a factory, more and more labor may be added, but as more labor is added, at some point the marginal product of labor, or the extra output gained from adding one more worker, will begin to decline. -
MARGINAL PRODUCT of LABOR and CAPITAL Assume Q = F(L, K) Is the Production Function Where the Amount Produced Is Given As a Func
MARGINAL PRODUCT OF LABOR AND CAPITAL Assume Q = f(L, K) is the production function where the amount produced is given as a function of the labor and capital used. For example, for the Cobb-Douglas production function Q = f(L, K) = ALa Kb. Q For a given amount of labor and capital, the ratio is the average amount of production for one unit of K capital. On the other hand the change in the production when the labor is fixed and the capital is changed from K to K + ∆K is ∆Q = f(L, K + ∆K) − f(L, K). Dividing this quantity by ∆K gives the change in the production per unit change in capital, ∆Q f(L, K + ∆K) − f(L, K) = . ∆K ∆K Usually, we take the limit with infinitesimal changes in capital, or taking the limit as ∆L goes to zero we get ∂Q , ∂K which is called the marginal product of capital. The term “marginal” is used because it measures the change of production with a small change of capital. In the same way, ∂Q , ∂L which is called the marginal product of labor. For the Cobb-Douglas production function ∂Q b Q = b A La Kb−1 = and ∂K K ∂Q a Q = a A La−1 Kb = . ∂L K Thus, for the Cobb-Douglas production function, the marginal product of capital (resp. labor) is a constant times the average product of capital (resp. labor). These marginal rates depend on the units used for measuring the quantities. The ratio of the amount of change to the amount held does not depend on the units, ∆Q/Q, and can be interpreted as the “percentage change” of the quantity. -
Medium-Term Determinants of Oecd Productivity
OECD Economic Studies No . 22. Spring 1994 MEDIUM-TERM DETERMINANTS OF OECD PRODUCTIVITY A . Steven Englander and Andrew Gurney TABLE OF CONTENTS Introduction ................................................ 50 1. Recent perspectives on productivity growth .................... 51 A . Investment and physical capital .......................... 52 B. Infrastructure capital .................................. 56 C . Education and human capital ........................... 57 D . Research and development (R&D) ....................... 61 E . Trade and competition ................................. 61 F. Cyclical influences on medium-term growth ................. 64 G . Energy, demography, labour market unrest. regulation ........ 66 H. Rent-seeking and structural rigidities ...................... 66 1 . Review of selected empirical work ....................... 67 II. Empirical analysis of OECD productivity growth ................. 69 A . Aggregate analysis ................................... 69 B. Industry level analysis ................................. 81 111. Policies to promote productivity growth ....................... 87 A . General considerations ................................ 87 B. Specific policy options ................................. 89 Bibliography ................................................ 95 Annex 7: Simultaneity bias in estimating the contribution of infrastructure to productivity growth ................................ 99 Annex 2: Applying new growth regressions to the OECD ............ 101 Annex 3: Industry aggregations: -
The Survival of Capitalism: Reproduction of the Relations Of
THE SURVIVAL OF CAPITALISM Henri Lefebvre THE SURVIVAL OF CAPITALISM Reproduction of the Relations of Production Translated by Frank Bryant St. Martin's Press, New York. Copyright © 1973 by Editions Anthropos Translation copyright © 1976 by Allison & Busby All rights reserved. For information, write: StMartin's Press. Inc.• 175 Fifth Avenue. New York. N.Y. 10010 Printed in Great Britain Library of Congress Catalog Card Number: 75-32932 First published in the United States of America in 1976 AFFILIATED PUBLISHERS: Macmillan Limited. London also at Bombay. Calcutta, Madras and Melbourne CONTENTS 1. The discovery 7 2. Reproduction of the relations of production 42 3. Is the working class revolutionary? 92 4. Ideologies of growth 102 5. Alternatives 120 Index 128 1 THE DISCOVERY I The reproduction of the relations of production, both as a con cept and as a reality, has not been "discovered": it has revealed itself. Neither the adventurer in knowledge nor the mere recorder of facts can sight this "continent" before actually exploring it. If it exists, it rose from the waves like a reef, together with the ocean itself and the spray. The metaphor "continent" stands for capitalism as a mode of production, a totality which has never been systematised or achieved, is never "over and done with", and is still being realised. It has taken a considerable period of work to say exactly what it is that is revealing itself. Before the question could be accurately formulated a whole constellation of concepts had to be elaborated through a series of approximations: "the everyday", "the urban", "the repetitive" and "the differential"; "strategies". -
Productivity and Costs by Industry: Manufacturing and Mining
For release 10:00 a.m. (ET) Thursday, April 29, 2021 USDL-21-0725 Technical information: (202) 691-5606 • [email protected] • www.bls.gov/lpc Media contact: (202) 691-5902 • [email protected] PRODUCTIVITY AND COSTS BY INDUSTRY MANUFACTURING AND MINING INDUSTRIES – 2020 Labor productivity rose in 41 of the 86 NAICS four-digit manufacturing industries in 2020, the U.S. Bureau of Labor Statistics reported today. The footwear industry had the largest productivity gain with an increase of 14.5 percent. (See chart 1.) Three out of the four industries in the mining sector posted productivity declines in 2020, with the greatest decline occurring in the metal ore mining industry with a decrease of 6.7 percent. Although more mining and manufacturing industries recorded productivity gains in 2020 than 2019, declines in both output and hours worked were widespread. Output fell in over 90 percent of detailed industries in 2020 and 87 percent had declines in hours worked. Seventy-two industries had declines in both output and hours worked in 2020. This was the greatest number of such industries since 2009. Within this set of industries, 35 had increasing labor productivity. Chart 1. Manufacturing and mining industries with the largest change in productivity, 2020 (NAICS 4-digit industries) Output Percent Change 15 Note: Bubble size represents industry employment. Value in the bubble Seafood product 10 indicates percent change in labor preparation and productivity. Sawmills and wood packaging preservation 10.7 5 Animal food Footwear 14.5 0 12.2 Computer and peripheral equipment -9.6 9.9 -5 Cut and sew apparel Communications equipment -9.5 12.7 Textile and fabric -10 10.4 finishing mills Turbine and power -11.0 -15 transmission equipment -10.1 -20 -9.9 Rubber products -14.7 -25 Office furniture and Motor vehicle parts fixtures -30 -30 -25 -20 -15 -10 -5 0 5 10 15 Hours Worked Percent Change Change in productivity is approximately equal to the change in output minus the change in hours worked. -
Are There Diminishing Returns to R&D?
A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Madsen, Jakob B. Working Paper Are there Diminishing Returns to R&D? EPRU Working Paper Series, No. 2006-05 Provided in Cooperation with: Economic Policy Research Unit (EPRU), University of Copenhagen Suggested Citation: Madsen, Jakob B. (2006) : Are there Diminishing Returns to R&D?, EPRU Working Paper Series, No. 2006-05, University of Copenhagen, Economic Policy Research Unit (EPRU), Copenhagen This Version is available at: http://hdl.handle.net/10419/82093 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu EPRU Working Paper Series Economic Policy Research Unit Department of Economics University of Copenhagen Studiestræde 6 DK-1455 Copenhagen K DENMARK Tel: (+45) 3532 4411 Fax: (+45) 3532 4444 Web: http://www.econ.ku.dk/epru/ Are there Diminishing Returns to R&D? Jakob B. -
Economics Students Will Know… Unit 1
Economics [email protected] Students will know… Unit 1 - Economics - Basic Economic Concepts & Our American Economic System 1. People exchange voluntarily because of the perceived benefits. 2. Scarcity causes people to make choices about how to allocate their resources. 3. The factors of production are land, labor, capital, and management. 4. Land (natural resources) is considered the natural resources used in production. 5. Labor is the human inputs used in the production process. 6. Capital is considered to be the tools used in the production process. 7. Entrepreneurship involves taking risks and combing the factors in production in the most efficient manner. 8. Management decides how to use land, labor, and capital in the production process. 9. Opportunity cost looks at decisions by analyzing costs and benefits of alternatives. 10. The basic economic question looks at the allocation of scarce resources (What should be produced? How should it be produced? How much should be produced, and Who should receive it?). 11. The three types of market systems are traditional, command, and market. 12. Traditional markets answer the basic economic question based on customs and history. 13. Command economies answer the basic economic question through a central authority. 14. Market economies are where the buyers and sellers answer the basic economic question by themselves. 15. The United States economic system is a mixed system, but is based on free market concepts. 16. The pillars of our economic system revolve around private property, limited government, market competition, and entrepreneurship. 17. Private property is the principle that individuals own the means of production. -
The Historical Role of the Production Function in Economics and Business
American Journal of Business Education – April 2011 Volume 4, Number 4 The Historical Role Of The Production Function In Economics And Business David Gordon, University of Saint Francis, USA Richard Vaughan. University of Saint Francis, USA ABSTRACT The production function explains a basic technological relationship between scarce resources, or inputs, and output. This paper offers a brief overview of the historical significance and operational role of the production function in business and economics. The origin and development of this function over time is initially explored. Several various production functions that have played an important historical role in economics are explained. These consist of some well known functions, such as the Cobb-Douglas, Constant Elasticity of Substitution (CES), and Generalized and Leontief production functions. This paper also covers some relatively newer production functions, such as the Arrow, Chenery, Minhas, and Solow (ACMS) functions, the transcendental logarithmic (translog), and other flexible forms of the production function. Several important characteristics of the production function are also explained in this paper. These would include, but are not limited to, items such as the returns to scale of the function, the separability of the function, the homogeneity of the function, the homotheticity of the function, the output elasticity of factors (inputs), and the degree of input substitutability that each function exhibits. Also explored are some of the duality issues that potentially exist between certain production and cost functions. The information contained in this paper could act as a pedagogical aide in any microeconomics-based course or in a production management class. It could also play a role in certain marketing courses, especially at the graduate level.