Garett Jones considers why workers might want to redistribute wealth towards capitalists. Post-Keynesians have a name for such a regime: "profit-led" (as opposed to "wage-led").
The distribution of output is the meat and potatoes of Post-Keynesian models, and for a long time profit-led growth wasn't considered to be an important phenomenon. Bhaduri and Marglin (1990) changed that, as well as work by Blecker (my macro political economy professor at AU) on open economy macroeconomics. It turns out it's in these open economy models that profit-led growth starts to become really important.
Empirically it's a mixed bag - some economies seem to be consistently profit-led, some more consistently wage-led. To a large extent, this seems to turn on the sort of trade and labor institutions in place.
UPDATE: So, just to be clear - a rational worker would still want a sort of free-rider relationship where he can take output away from capitalists while most workers distribute towards capitalists. So in terms of actual behavior you may always have this distributional conflict by rational actors. The point is, in a "profit-led" regime redistribution towards capitalists bolsters employment.
Monday, April 8, 2013
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Except your wrong on all fronts. Karl Smith (Forbes) via Cowen:
ReplyDeleteWith apologies to the less wonkish, China is using physical capital as a loss leader in order to grow cities that will produce network effects will in turn foster the human capital that really makes a country rich.
Huh? I wasn't even talking about China. I see nothing to disagree with on this (although I imagine the thinking is a little more haphazard than what Smith presents) - so how am I "wrong on all fronts"?
Delete1. China's creation of jobs is not being lead by profits and it it not being lead by wages either. They are being lead by returns to information, to network, effects, so you are wrong on both fronts.
Delete2. I agree that China is not organized in its thinking. It has discovered, by accident, something that really works to create jobs.
3. The lesson, which will also be wholly lost on you, is that answers to our problems will not come from worshiping dead men but from experimentation.
4. Smith is wrong, partially. He understands the value of the information for he doesn't also apply location theory, which really has incredible positive feedback loops.
Except your wrong on all fronts. Karl Smith (Forbes) via Cowen:
ReplyDeleteWith apologies to the less wonkish, China is using physical capital as a loss leader in order to grow cities that will produce network effects will in turn foster the human capital that really makes a country rich.