Keiretsu, Proportional Representation, and Input-Output Theory

June 1, 2024 by

This is Chapter 9 in my book: Ellerman, David. 1995. Intellectual Trespassing as a Way of Life: Essays in Philosophy, Economics, and Mathematics. Lanham MD: Rowman & Littlefield.

This essay grew out of an attempt to model mathematically the possible cross-ownership arrangements that might arise between privatizing firms in the former Yugoslavia [see Ellerman 1991].  The cross-ownership arrangements resemble the groups of Japanese companies called keiretsu.  There is cross ownership between the companies in the group as well as some ownership outside the group that is traded on the stock market.  In spite of the partial outside ownership, the keiretsu often behave as “self-owning” groups.  If firm A owns shares in B, then the management in A usually signs over its proxy on shares in B to the management in firm B.  And the management in B does likewise with respect to the managers in A.  Thus within certain constraints, each firm can act like a “self-owning” firm, not totally unlike the self-managing firms of the former Yugoslavia. 

Filed Under: Math Blog, Mathematics, NeoClassical Economic Theory Tagged With: , ,

Finding the Markets in the Math: Arbitrage and Optimization Theory

June 1, 2024 by

This is Chapter 10 from my book: Ellerman, David. 1995. Intellectual Trespassing as a Way of Life: Essays in Philosophy, Economics, and Mathematics. Lanham MD: Rowman & Littlefield.

One of the fundamental insights of mainstream neoclassical economics is the connection between competitive market prices and the Lagrange multipliers of optimization theory in mathematics.  Yet this insight has not been well developed.  In the standard theory of markets, competitive prices result from the equilibrium of supply and demand schedules.  But in a constrained optimization problem, there seems to be no mathematical version of supply and demand functions so that the Lagrange multipliers would be seen as equilibrium prices.  How can one “find the markets in the math” so that Lagrange multipliers will emerge as equilibrium market prices?

Filed Under: Math Blog, Mathematics, NeoClassical Economic Theory Tagged With: ,

Are Marginal Products Created ex Nihilo?

June 1, 2024 by

This is Chapter 5 from my book: Ellerman, David. 1995. Intellectual Trespassing as a Way of Life: Essays in Philosophy, Economics, and Mathematics. Lanham MD: Rowman & Littlefield.

When an orthodox economist considers the principle of people getting the fruits of labor, he or she will invariably interpret it in terms of marginal productivity.  The orthodox claim is that under the conditions of competitive equilibrium, each unit of labor “gets what it produces.”  Well-meaning capitalist liberals emphasize that actual capitalism may be neither competitive nor in equilibrium, and in any case, there are enormous difficulties in measuring the “marginal product of each factor of production.”  In other words, they accept that interpretation of marginal productivity theory in principle but fuss about its applicability in practice.

Filed Under: Mathematics, NeoClassical Economic Theory Tagged With: , , , ,

The Libertarian Case for Slavery (A Spoof on Nozick)

June 1, 2024 by

This is Chapter 3 from my book: Ellerman, David. 1995. Intellectual Trespassing as a Way of Life: Essays in Philosophy, Economics, and Mathematics. Lanham MD: Rowman & Littlefield.

Liberalism is living a lie.  It pretends that the contract to sell all of one’s labor, the self-enslavement contract, is an invalid contract beyond the pale while the contract to sell one’s labor piecemeal (by the hour, day, month, or year) is a perfectly valid contract above reproach.  The self-enslavement contract is one of the skeletons in liberalism’s intellectual closet.  Defenders of liberal capitalism are quick to accept even the most superficial arguments against voluntary slavery just to shove the issue back in the closet—just so long as the arguments do not carry over to the current contract to rent oneself out, the employer-employee contract.  Who wants to be seen as, in effect, defending voluntary slavery by showing how most arguments against the self-sale contract are baseless (aside from one “J. Philmore”)?

Filed Under: Classical Liberalism, Inalienable Rights Tagged With: , , , , ,

Myth and Metaphor in Orthodox Economics

June 1, 2024 by

This is Chapter 2 from: Ellerman, David. 1995. Intellectual Trespassing as a Way of Life: Essays in Philosophy, Economics, and Mathematics. Lanham MD: Rowman & Littlefield.

Discussion of the fundamental questions of political economy is today almost completely clouded and distorted by a number of basic myths and metaphors.  Deconstruction is necessary before constructive discussions can begin.  The myths and metaphors are concerned with basic conceptions about property and contract, not with prices and markets.  As layer upon layer of distortions are removed, new facts and new perspectives on old facts will emerge.  These facts have fairly direct normative implications, but the disagreements and controversies are about the facts, not about norms or prescriptions.

Filed Under: Classical Liberalism, Democratic Firm, Inalienable Rights, Property Theory Tagged With: , , , , , ,

Trespassing against the Happy Consciousness of Orthodox Economics

June 1, 2024 by

This is Chapter 1 in my book: Ellerman, David. 1995. Intellectual Trespassing as a Way of Life: Essays in Philosophy, Economics, and Mathematics. Lanham MD: Rowman & Littlefield.
This first chapter addresses the problems of trespassing involved in understanding the arguments presented in the first five “controversial” chapters of the collection.  These chapters challenge the whole idea of the employer-employee relationship that is the institutional basis for our present version of a private-property market economy.  The problems of trespassing against fundamental orthodoxy in the social and moral sciences are of a completely different order of magnitude than the problems of trespassing in the natural and mathematical sciences.

Filed Under: Classical Liberalism, Democratic Firm, Inalienable Rights, Property Theory Tagged With: , , , ,

Kaldor-Hicks Petitio Principii Fallacy

October 4, 2023 by

This paper shows that implicit assumptions about the numeraire good in the Kaldor–Hicks efficiency–equity analysis involve a ‘‘same-yardstick’’ fallacy (a fallacy pointed out by Paul Samuelson in another context), a special case of the Petitio Pricipii fallacy.

Filed Under: Main Blog, Mathematics Tagged With: , , ,

Finding the Markets in the Math

January 4, 2019 by

This paper shows how to find competitive market prices in the pure mathematics of classical constrained optimization problems.

Filed Under: Math Blog, Mathematics Tagged With: ,

Alleged Problems in Labor-Managed Firms

August 6, 2018 by

This paper will discuss two problems that have plagued the literature on the Ward-Domar-Vanek labor-managed firm (LMF) model, the perverse supply response problem and the Furubotn-Pejovich horizon problem.

Filed Under: Democratic Firm, Main Blog Tagged With: ,

Panopticon vs. McGregor’s Theory Y

March 29, 2018 by

This paper is part of a larger project to better understand the limitations of the economic theory of agency and incentives. The economic approach focuses on extrinsic incentives whereas a better understanding of human organization requires an understanding of intrinsic motivation and the complementary or substitutive relationships with extrinsic motivation.

Filed Under: Democratic Firm, Development Tagged With:
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