ISBN 978-0-87332-782-4 Routledge www.routledge.com 9 780873 327824 The Megacorp& Macrodynamics Page Intentionally Left Blank The Megacorp& Macrodynamics Essays in Memory of Alfred Eichner Edited by William Milberg ~~ ~~o~!~~n~~:up LONDON AND NEW YORK First published 1992 by M.E. Sharpe Published 2015 by Routledge 2 Park Square, Milton Park, Abingdon, Oxon OX14 4RN 711 Third Avenue, New York, NY 10017, USA Rout/edge is an imprint of the Taylor & Francis Group, an informa business Copyright © 1992 Taylor & Francis. All rights reserved. No part of this book may be reprinted or reproduced or utilised in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. Notices No responsibility is assumed by the publisher for any injury and/or damage to persons or property as a matter of products liability, negligence or otherwise, or from any use of operation of any methods, products, instructions or ideas contained in the material herein. Practitioners and researchers must always rely on their own experience and knowledge in evaluating and using any information, methods, compounds, or experiments described herein. In using such information or methods they should be mindful of their own safety and the safety of others, including parties for whom they have a professional responsibility. Product or corporate names may be trademarks or registered trademarks, and are used only for identification and explanation without intent to infringe. Library of Congress Cataloging-in-Publication Data The Megacorp & macrodynamics : essays in memory of Alfred Eichner I [edited] by William Milberg. p. cm. Includes bib I iographical references. ISBN 0-87332-782-9 -ISBN 0-87332-783-7 (pbk.) I. Oligopolies. 2. Corporations. 3. Neoclassical school of economics. 4. Keynesian economics. 5. Eichner, Alfred S. I. Milberg, William S., 1957- II. Eichner, Alfred S. HD2757.3.M44 1991 338.8'2-dc20 90-26733 CIP ISBN 13: 9780873327831 (pbk) ISBN 13: 9780873327824 (hbk) Contents List of Figures and Tables ix List of Contributors xi Acknowledgments xiii 1. Introduction: Social Thought and Social Change-Alfred Eichner's Vision of a New Economics William Milberg 3 PART 1: THE MEGACORP 2. The "Megacorp": Eichner's Contribution to the Theory of the Firm Nina Shapiro 19 3. Demand, Pricing, and Investment Edward J. Nell 27 4. Finance and the Growth of Corporations: A Flow-of-Funds Approach Matthew V. Fung 59 PART2: PRODUCTIVITY AND TECHNICAL CHANGE 5. The Integration of Household Structure and Industrial Structure: An Extension of the Input-Output Model Eileen Appelbaum 75 6. An Evolutionary Model of Technical Change with Markup Pricing E. Ray Canterbery 87 7. Technical Change in the Corporate Economy: A Vertically Integrated Approach William Milberg and Bruce Elmslie 101 PART 3: MACRODYNAMICS 8. The Integration of Micro and Macroeconomics through Macrodynamic Megacorps J. A. Kregel 133 9. The Real Wage and Growth Trade-off in Post Keynesian Economics Brian de Uriarte 143 PART 4: MONEY 10. Macrodynamics, the Flow of Funds, and the Monetary-Financial System Andrea Terzi 157 11. The Macroeconomics of the Megacorp's Determination of the Markup Johan Deprez 169 12. Eichner's Approach to Money and Macrodynamics Paul Davidson 185 PARTS: MODELING THE POST-KEYNESIAN ALTERNATIVE 13. An Outline of a Short-period Post Keynesian Model for the Brazilian Economy F ernando J. Cardim de Carvalho and Luiz Chrysostomo de Oliveira Filho 193 14. Export-led Growth: A New Interpretation John Cornwall and Wendy Cornwall 209 15. Competing Microeconomic Theories oflndustrial Profits: An Empirical Approach Eduardo M. Ochoa and Mark Glick 225 PART6: METHODOLOGY 16. Toward a New Macroeconomic History Richard B. Du Boff 251 17. Alfred Eichner and the Revival of Empirical Economics Fritz W. Efaw 263 18. The Pervasive Proposition, "What Is, Is and Ought to Be": A Critique Warren J. Samuels 273 PART7: EUROPEAN PERSPECTIVES 19. Economic Policies in a Post-Keynesian World Philip Arestis 289 20. At the Source of Alfred Eichner's Post-Keynesian Economics: A Personal Note Luigi L. Pasinetti 307 Index 315 Page Intentionally Left Blank List of Figures and Tables Figures 3.1 Eichner's Markup Determination Model 29 3.2 Wood's "Opportunity Frontier" 31 3.3 Representative Family's Consumption Equilibrium 35 3.4 Firm Output and Pricing 37 3.5 Shift of Inelastic Market Demand Curve 39 3.6 Capacity and Price 40 3.7 Net Revenue Function 41 3.8 Equilibrium Net Revenue Determination 42 3.9 Customer Attraction Function 43 3.10 Optimal Price-Representative Firm 44 3.11 Production Possibility Frontier 47 3.12 Demand in Established and New Markets 49 3.13 Alternative Finance Functions 52 3.14 Equilibrium Degree of Leverage- Representative Firm 53 3.15 Price-Growth Frontier 54 3.16 Proportional Increase in Finance and Sales Growth 54 4.1 Sources and Uses of Funds Statement 65 4.2 The Modified Sources and Uses of Funds Statement 66 7.1 Kaldor's Technical Progress Function 102 9.1 The Factor-Price Frontier 146 9.2 Equilibrium Growth 148 X 9.3 An Increase in b 150 9.4 An increase in i 150 13.1 Post Keynesian Short-period Model 202 14.1 The Basic Model 212 14.2 Export Success 216 14.3 The Virtuous Circle 218 15.1 Short-Run Equilibrium 228 15.2 Adjustment to Long-Run Equilibrium 229 19.1 Wage-Earners' Funds 300 Tables 7.1 Correlation between Direct Labor Coefficients and Vertically Integrated Labor Coefficients 104 7.2 Correlation between the Percentage Changes in the Direct Labor Coefficients and the Vertically Integrated Labor Coefficients 106 7.3 Correlation between the Rate of Change in Investment and the Rate of Change in the Vertically Integrated Labor Coefficients 108 7.4 Correlation between the Vertically Integrated Rate of Change in Investment and the Rate of Change in the Vertically Integrated Labor Coefficients 109 A-7.1 Direct Labor Coefficients 116 A-7.2 Vertically Integrated Labor Coefficients 120 A-7.3 Percentage Change in the Direct Labor Coefficients between 1970 and 1975 124 A-7.4 Percentage Change in the Vertically Integrated Labor Coefficients from 1970 to 1975 126 15.1 Four-Digit WLS Regressions (346 Observations) 239 15.2 Four-Digit SIC Hypotheses Tests 240 15.3 Two-Digit SIC WLS Regressions Using 5-Year Average Values 242 15.4 Two-Digit SIC Hypotheses Tests 243 The Contributors Eileen Appelbaum, Economic Policy Institute and Temple University, USA Philip Arestis, Polytechnic of East London, UK E. Ray Canterbery, Florida State University, USA Femando J. Cardim de Carvalho, Universidade Federal Fluminense, Niteroi, Brazil John Cornwall, Dalhousie University, Canada Wendy Cornwall, Mount Saint Vincent University, Canada Paul Davidson, University ofTennessee-Knoxville, USA Johan Deprez, Texas Tech University, USA Brian de Uriarte, Middlesex County College, USA Richard B. Du Boff, Bryn Mawr College, USA Fritz W. Efaw, University ofTennessee-Chattanooga, USA Bruce Elmslie, University of New Hampshire, USA Luiz Chrysostomo de Oliveira Filho, Universidade Federal Fluminense, Niteroi, Brazil Matthew V. Fung, Fordham University, USA Mark Glick, The University of Utah, USA xi xii THE MEGACORP & MACRODYNAMICS J.A. Kregel, University of Bologna, Italy William Milberg, New School for Social Research, USA Edward J. Nell, New School for Social Research, USA Eduardo M. Ochoa, California State University, Los Angeles, USA Luigi L. Pasinetti, Universita Cattolica del Sacro Cuore, Milan, Italy Warren J. Samuels, Michigan State University, USA Nina Shapiro, Drexel University, USA Andrea Terzi, Franklin College, Lugano, Switzerland Acknowledgments While it is hoped that this book will contribute to the advancement of con- temporary post-Keynesian thought, it comes about thirty years too soon. Alfred Eichner died, suddenly, at the age of fifty, in February 1988. In a relatively short career, he had a tremendous impact on the economics profession. His influ- ence was both intellectual and personal, and was felt by his peers in the profes- sion, his faculty and business colleagues, and his students. His death was met with an outcry of grief around the globe. Alfred left an indelible mark on the profession. While it has been emotionally difficult for the editor to take on this proj- ect, the authors have made it an extremely rewarding experience. Only two people declined the invitation to contribute to the book-both for health reasons- and a number of unsolicited papers were left out because of space limitations. Eichner's influence was such that those willing to contribute an essay in his memory could have filled four volumes. Many of the authors, in accepting the offer to contribute, wrote to me at length about how important Alfred Eichner had been, personally and professionally, in their lives. I am grateful to all the authors for their commitment to the timeliness and success of this project. Many people and organizations have supported this project. Carol Ligienza provided careful typing assistance. Angela Piliouras and the staff at M.E. Sharpe have been extremely helpful in all phases of the work. I am grateful to Matthew Fung and Michele Naples for organizing the Eichner memorial service, held in 1988, and for transcribing that service. I would also like to thank members of the Union for Radical Political Economics and the Association for Evolutionary Economics for sponsoring sessions on Eichner's work at the 1988 and 1989 Allied Social Science Association annual meet- ings that inspired this book. Chapters 2 and 8 are reprinted from the Journal of Economic Issues 1989 ASSA Proceedings issue. Nina Shapiro and Johan Deprez propped me up whenever I faltered in my editing duties. And Hedy Kalikoff, my wife, provided her unbending support and good judgment throughout.