September 23, 2011

When Ricardo saw profit, he called it rent: on the vice of parochial realism {18}

Working paper at SSRN

Abstract  According to Ricardo the principal problem in Political Economy is to determine the laws which regulate the distribution of profits, rents, and wages. Ricardo determined the respective shares in real terms and to this end invented an engine of analysis that became paradigmatic. The present paper applies a consistent real and monetary analysis, which is based on a set of objective structural axioms and contrasts the results with Ricardo's approach. The general result is that real analysis misses economic reality. The specific result is that rent is a misnomer for the distributed profit of the landowning firm.

September 7, 2011

Geometrical exposition of structural axiomatic economics (II): qualitative and temporal aggregation {17}

Working paper at SSRN

Abstract  Behavioral assumptions are not solid enough to be eligible as first principles of theoretical economics. Hence all endeavors to lay the formal foundation on a new site and at a deeper level actually need no further vindication. Part (I) of the structural axiomatic analysis submits three nonbehavioral axioms as groundwork and applies them to the simplest possible case of the pure consumption economy. The geometrical analysis makes the interrelations between income, profit, and employment under the conditions of market clearing and budget-balancing immediately evident. Part (II) applies the differentiated axiom set to the analysis of qualitative and temporal aggregation.

September 3, 2011

Increasing returns and stability {16}

Working paper at SSRN

Abstract  Increasing returns are an incontrovertible fact since Adam Smith hailed them as the very originators of wealth, yet they play havoc with general equilibrium. They fit, in marked contrast, nicely into the structural axiomatic framework. This indicates that it is worthwhile to replace the behavioral axioms of standard economics with objective structural axioms. These are in the present paper applied to the question of how increasing returns affect the systemic interrelations in the pure consumption economy. To invite a reality check the logical implications of the structural Employment Law are set in relation to three well-known statistical relationships.