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Effective demand and Say’s law in Marxist theory: an evolutionary perspective

Effective demand and Say’s law in Marxist theory: an evolutionary perspective

Rotta, Tomas (2017) Effective demand and Say’s law in Marxist theory: an evolutionary perspective. [Working Paper]

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Abstract

In this paper I theorize the roles of effective demand and Say’s Law in the Marxist theory of exploitation and accumulation. I claim that an exogenous rate of exploitation, or an exogenous functional distribution of income between profits and wages, implies deploying the strongest version of Say’s law, which leads profit rates not to equalize across sectors. Marx’s own procedure in Capital III of simultaneously supposing an exogenous rate of exploitation and profit rate equalization was therefore logically inconsistent. Once Keynes’ principle of effective demand is introduced, the rate of exploitation, and hence the distribution of income between wages and profits, becomes endogenous to aggregate demand. Profit rates can then equalize across sectors and prices of production can function as gravitational centers for market prices in a competitive economy. If we aim at developing a theory that is both empirically relevant and logically consistent, Marxist scholars must drop Say’s Law. Keynes’ principle of effective demand offers a better understanding of how capital accumulation determines the rate of exploitation, the functional distribution of income, and the equalization of profit rates.

Item Type: Working Paper
Uncontrolled Keywords: Marxist accumulation theory, exploitation, income distribution, Keynes’ effective demand, Say’s law
Subjects: H Social Sciences > HB Economic Theory
Faculty / Department / Research Group: Faculty of Business
Faculty of Business > Department of International Business & Economics
Faculty of Business > Greenwich Political Economy Research Centre (GPERC)
Last Modified: 12 Sep 2017 15:48
Selected for GREAT 2016: None
Selected for GREAT 2017: None
Selected for GREAT 2018: None
URI: http://gala.gre.ac.uk/id/eprint/15511

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