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Fritz Helmedag

recapitulates my model () incorrectly. Above all, he mixes up exogenous with endogenous variables. Moreover, Reich's interpretation of the system's dynamics is on the one hand formally insufficient; on the other hand, matters are presented in a more complicated way than necessary.

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Fritz Helmedag

Marx's and Keynes's analyses of capitalism complement each other well. In a largely general model including the public sector and international trade it is shown that the labour theory of value provides a sound foundation to reveal the factors influencing employment. Workers buy ‘necessaries’ out of their disposable wages from an integrated basic sector, whereas the ‘luxury’ division's revenues spring from other sources of income. In order to maximize profits, the wage–good industry controls the level of unit labour costs. Ultimately, effective demand governs the volume of work. On this basis, implications for economic policy are outlined.

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Fritz Helmedag

The causal structure of capitalistic commodity production can be revealed by notionally separating total output into two categories: ›necessaries‹ bought by employees, and the rest constituting society's surplus. The rate of profit is determined in the wage good industry and becomes the system's key variable. In association with demand for ›luxuries‹ it governs the respective amount of profit accruing to the two sectors as well as the corresponding employment. The consequences for economic policy contradict predominant recipes.