Wednesday, December 12, 2012

Krugman notes that marginalism doesn't work

This is great, like in his book (homonymous to his blog) Krugman has noted that the idea that technology (the marginal productivity of labor) determines distribution (real wages) is bogus. He says so clearly:
"if you want to understand what’s happening to income distribution in the 21st century economy, you need to stop talking so much about skills, and start talking much more about profits and who owns the capital. Mea culpa: I myself didn’t grasp this until recently. But it’s really crucial."
Kudos for the mea culpa. Now notice that he says that who owns capital is important. In other words, power and conflict are central for the determination of income distribution. This dude is becoming a surplus approach author (next thing he will be reading Sraffa!). Okay, so can you now drop the production function, the assumption of full employment and the natural rate hypothesis. I mean, it would only make the whole thing coherent.

PS1: Note that in the post I criticized here from this week (two days ago) he said that productivity was determined by technology (skills), that is the inclination of the marginal productivity curve, depending on the production function. Today he says: stop talking about skills!

PS2: My review of his book is here, by the way.

2 comments:

  1. I am starting to think that Mr. Krugman has been inspired by some of your posts...

    ReplyDelete
    Replies
    1. Check this one http://nakedkeynesianism.blogspot.com/2012/07/spot-difference.html

      Delete