Tape 179 - Crowding out effect of Deficit?
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- | Welcome once again as MIT professor Paul Samuelson | 0:02 |
discusses the current economic scene. | 0:05 | |
This series is produced | 0:07 | |
by Instructional Dynamics Incorporated. | 0:08 | |
Professor Samuelson a lot has been said and a lot | 0:11 | |
has been written about the fears | 0:13 | |
that the federal deficit will crowd out | 0:16 | |
private capital from the market, | 0:19 | |
what are your views on this? | 0:21 | |
- | We have the interesting spectacle | 0:25 |
of a Secretary of Treasury who instead of | 0:28 | |
going around the country trying to talk up | 0:31 | |
the market for government bonds has been | 0:35 | |
giving dire warnings | 0:39 | |
that the deficit may well be too large, | 0:42 | |
and that this will | 0:46 | |
be very difficult to finance and that government bonds | 0:48 | |
may therefore be falling in price. | 0:51 | |
This is not the first time, many of us will remember | 0:56 | |
that George Humphrey who, during the Eisenhower years | 0:59 | |
was Secretary of Treasury and being a forceful, | 1:04 | |
retired business man | 1:07 | |
from Ohio | 1:10 | |
he often carried the ball in the budget briefings | 1:11 | |
even though it's ordinarily | 1:15 | |
not the Secretary of Treasury's function to do that. | 1:16 | |
And we then had the spectacle of George Humphrey | 1:19 | |
often undercutting the | 1:23 | |
Presidential, that is the Eisenhower decisions | 1:26 | |
and the cabinet decisions on the size | 1:30 | |
of the expenditure budget | 1:32 | |
and the deficit. | 1:35 | |
He once spoke about deficits that would curl your hair, | 1:38 | |
well Secretary of Treasury Simon | 1:42 | |
seems to be engaged in somewhat the same type of behavior. | 1:46 | |
Why is this? | 1:53 | |
Well it could be | 1:54 | |
that we live in a pluralistic administration | 1:56 | |
and the Secretary Simon | 2:00 | |
has different views from other members of the administration | 2:01 | |
and he's just exercising his civil liberties. | 2:03 | |
A more cynical interpretation is that | 2:09 | |
Secretary Simon is going to return | 2:13 | |
to the New York community and he wishes to return | 2:16 | |
with his reputation | 2:20 | |
intact | 2:23 | |
and that he therefore | 2:24 | |
is saying the things that he's doing. | 2:27 | |
I think the more realistic interpretation is the third one | 2:30 | |
namely, that he keeps saying these things in order | 2:35 | |
to put pressure on congress and not to spend more money | 2:40 | |
than | 2:45 | |
the President has recommended. | 2:47 | |
That of course is not feasible they already | 2:50 | |
have voted to spend more money that the President | 2:55 | |
has recommended but Secretary Simon would like | 2:57 | |
to hold down | 3:01 | |
the excess. | 3:02 | |
And so we have always kept alive | 3:05 | |
the question | 3:09 | |
of crowding out | 3:10 | |
effects of the federal deficit. | 3:13 | |
I believe I've had occasion to | 3:17 | |
remark on this problem. | 3:20 | |
Where shall one begin? | 3:24 | |
Shall one begin at the most naive | 3:25 | |
level of sophistication? | 3:30 | |
Namely is the deficit too large so that | 3:33 | |
the government bonds just won't sell? | 3:35 | |
I think it would have to be a very large deficit indeed | 3:38 | |
for that to be the case, that the government bonds | 3:43 | |
could not sell at | 3:46 | |
any price. | 3:49 | |
Some economists might argue that that's really impossible | 3:51 | |
to happen, we could rephrase it, | 3:54 | |
the government bonds won't sell at any feasible price | 3:57 | |
that does not boggle the mind. | 4:02 | |
I don't think that is the problem certainly not | 4:05 | |
for the deficits that we're talking about, | 4:08 | |
I think that there's some reason to think | 4:11 | |
that the next fiscal year deficit, | 4:13 | |
that's the fiscal year coming up from | 4:15 | |
the middle of 1975 to the middle of 1976 | 4:17 | |
will be in the neighborhood of 70 billion dollars | 4:22 | |
but let's suppose that it's in the neighborhood | 4:26 | |
of eight billion which is 6% of the GNP, | 4:28 | |
or even | 4:32 | |
100 billion, | 4:35 | |
the | 4:37 | |
inability of the | 4:38 | |
Federal Treasury to sell those bonds | 4:41 | |
I don't think is a realistic apprehension | 4:44 | |
at that level of deficit spending. | 4:48 | |
The | 4:52 | |
second | 4:53 | |
degree of sophistication rewords the problem. | 4:54 | |
In order to sell | 5:01 | |
the bonds | 5:03 | |
will the Federal Reserve have to buy them? | 5:04 | |
Will the Federal Reserve have to create | 5:09 | |
and undo expansion | 5:11 | |
of the money supply | 5:14 | |
in order to support the government bond market | 5:16 | |
when there are deficits of this size? | 5:20 | |
Now of course the Federal Reserve doesn't | 5:23 | |
have to do anything if we have answered | 5:25 | |
the first question that the government | 5:28 | |
can't sell the bonds one way or another | 5:30 | |
even though it means some increase in the interest rates | 5:33 | |
and if the Federal Reserve thought that that | 5:35 | |
were the desirable thing to happen to interest rates | 5:37 | |
then it could refuse to | 5:42 | |
finance the bonds. | 5:45 | |
I don't wish to deny that | 5:47 | |
there are certain political pressures | 5:49 | |
from the administration possibly and certainly | 5:51 | |
from the congress, | 5:55 | |
but, | 5:57 | |
many people would think | 5:59 | |
that the more likely scenario | 6:00 | |
is that the Federal Reserve will be motivated | 6:03 | |
to expand the money supply to help finance the deficit | 6:07 | |
or an even larger deficit than we're talking about | 6:12 | |
at interest rates lower than the natural, | 6:14 | |
spontaneous market would create them. | 6:18 | |
Now it's not clear why this expansion | 6:23 | |
of the money supply should crowd anything out, | 6:25 | |
the argument at this point often branches off into saying | 6:29 | |
well that would be inflationary because | 6:31 | |
there is supposed to be some special connection | 6:34 | |
in one run or another, | 6:39 | |
let me for the moment talk about the short run, | 6:43 | |
between the increase in the money supply | 6:45 | |
and the price level. | 6:48 | |
Now I don't think that there is in the short run, | 6:50 | |
a special connection | 6:53 | |
between an increase in the money supply | 6:57 | |
and the price level. | 7:01 | |
Which is different from | 7:04 | |
an increase in total spending | 7:07 | |
of equivalent amount however brought about | 7:11 | |
other than by a Federal Reserve operation | 7:14 | |
of increasing the money supply. | 7:18 | |
An increase in aggregate demand and aggregate spending | 7:21 | |
is likely in the short run to be distributed between both | 7:26 | |
an expansion of real output and | 7:32 | |
some | 7:35 | |
expansion of the | 7:37 | |
rate of price increase over | 7:41 | |
what the rate of price increase would otherwise have been. | 7:43 | |
And when we're operating in an economy with a good | 7:48 | |
winter wheat crop coming up with many industries | 7:54 | |
operating now at about 70% of capacity | 7:59 | |
when the unemployment rate is 8.9% | 8:03 | |
going on lets say, | 8:08 | |
9 and a third percent before we're finished | 8:10 | |
and with some deceleration | 8:15 | |
already going on | 8:19 | |
in the rate of inflation | 8:20 | |
then I think | 8:24 | |
one would be rash to | 8:26 | |
expect the partition | 8:29 | |
of an increase in nominal or money GNP | 8:32 | |
between real output increase and price increase | 8:35 | |
to be | 8:39 | |
very much in the | 8:41 | |
price direction. | 8:43 | |
Now it could be that when we come to discuss | 8:46 | |
the intermediate run and the long run | 8:49 | |
we'll have to make some modification | 8:52 | |
in that judgment, | 8:54 | |
but let's stick with | 8:56 | |
how things are likely to be | 8:59 | |
for the next fiscal year. | 9:01 | |
Remember the steady state deficit | 9:04 | |
is not as large as the 70 or 80 billion dollars | 9:08 | |
of the fiscal | 9:12 | |
year | 9:14 | |
or not to play games | 9:16 | |
with the | 9:18 | |
actual months | 9:20 | |
of the next fiscal year | 9:22 | |
let's just take from the present moment, | 9:23 | |
talking in May of course to | 9:26 | |
May of next year | 9:29 | |
we're getting rebates | 9:32 | |
on last years taxes perhaps some of my listeners | 9:34 | |
have gotten their $100 | 9:37 | |
if you have $200 | 9:41 | |
you probably don't have enough money to spend | 9:42 | |
on this | 9:45 | |
subscription series, | 9:47 | |
that is a one shot operation and it's not going | 9:51 | |
to run into long run deficits of the same magnitude although | 9:53 | |
Mr Simon may fear | 9:59 | |
that having gone to the pump | 10:01 | |
and found it so satisfactory | 10:04 | |
this year there will be a move in congress | 10:07 | |
to have another tax rebate | 10:10 | |
next year. | 10:14 | |
Well | 10:16 | |
the | 10:18 | |
issue has shifted you see | 10:20 | |
from a crowding out effect to an inflation effect | 10:22 | |
now to the degree that an inflation effect | 10:24 | |
is | 10:28 | |
a | 10:29 | |
too much money spending, | 10:32 | |
chasing too little expansible supply of goods | 10:35 | |
that might, I guess | 10:39 | |
be legitimately deemed | 10:41 | |
to be be one aspect of a crowding out effect. | 10:44 | |
To return though to the crowding out effect as such, | 10:49 | |
it's usually what's crowded out | 10:52 | |
is private capital formation | 10:55 | |
so it is argued. | 10:57 | |
Now to the degree | 10:59 | |
that | 11:02 | |
the Federal Reserve | 11:04 | |
is doing its job, | 11:05 | |
an increase in the deficit | 11:09 | |
other things being equal, should | 11:12 | |
be met by the Federal Reserve with some increase | 11:17 | |
in the money supply probably, | 11:21 | |
but it should not increase the money supply | 11:23 | |
so much if it was already doing its job about right | 11:26 | |
that there will be no increase in the rate of interest. | 11:31 | |
There will therefore be some | 11:35 | |
crowding out of the availability of credit | 11:40 | |
to private | 11:44 | |
investment spenders. | 11:47 | |
This by the way is what would happen from any expansion | 11:51 | |
of the economy brought about | 11:57 | |
for example | 12:01 | |
by an increase in consumption spending | 12:02 | |
as I understand it and as I monitor the statements | 12:05 | |
that come out of administration economists | 12:08 | |
to say nothing of non-governmental economists, | 12:12 | |
people like | 12:15 | |
Mr Alan Greenspan | 12:17 | |
want consumption spending to increase, | 12:20 | |
they look with hope | 12:24 | |
towards a rebound | 12:26 | |
in | 12:28 | |
automobile expenditures, | 12:30 | |
for that matter, | 12:33 | |
they look with hope for a rebound on housing expenditures. | 12:34 | |
These are what are called spontaneous expansions | 12:42 | |
they are not engineered by wicked deficit financers, | 12:48 | |
by fine tuners, | 12:52 | |
but they certainly have the effect other things being equal, | 12:54 | |
of increasing interest rates | 12:58 | |
and therefore making | 13:02 | |
it more difficult for a private investor | 13:03 | |
to get the credit | 13:07 | |
to build a new machine tool | 13:10 | |
which he otherwise would not have built. | 13:12 | |
I picked machine tool because to the vulgar mind | 13:14 | |
that's the kind of capital formation which constitutes | 13:17 | |
the only really legitimate, | 13:20 | |
genuine kind of capital formation. | 13:22 | |
If you | 13:24 | |
stockpile inventories | 13:27 | |
that's kind of unnecessary or speculation | 13:28 | |
to the vulgar mind. | 13:32 | |
As a matter of fact to many vulgar minds housing | 13:34 | |
is just kind of a regretful | 13:38 | |
expenditure, housing construction expenditure | 13:42 | |
and is not legitimate capital formation | 13:44 | |
it doesn't, they say enable us to compete | 13:47 | |
with the enterprising west Germans and the Japanese | 13:50 | |
only machines tools are really productive, | 13:54 | |
now I wouldn't want to give my blessing | 13:58 | |
to such interpretation. | 14:00 | |
But the point is, and this is where | 14:01 | |
I think one should focus. | 14:05 | |
The only legitimate way to describe | 14:09 | |
the crowding out effect is to ask yourself | 14:12 | |
whether you think as a result of the deficit | 14:17 | |
there is too much consumption spending. | 14:21 | |
If there is so much consumption spending | 14:25 | |
that it takes us to full employment | 14:27 | |
and you have even more consumption spending than that | 14:30 | |
obviously it must come at the expense of private investment. | 14:34 | |
If | 14:40 | |
If one puts the matter incorrectly | 14:43 | |
one says something like the following | 14:46 | |
I couldn't even begin to sort out the number | 14:49 | |
of fallacies that are involved in an argument like this | 14:51 | |
but let me try to state it, | 14:54 | |
if you run too big a deficit that will make | 14:56 | |
the problem of financing the federal debt | 15:00 | |
so unmanageable and so difficult that | 15:04 | |
that will increase interest rates | 15:07 | |
and that will abort the boom. | 15:09 | |
Well, | 15:14 | |
if it is the | 15:18 | |
expansion | 15:20 | |
of the economy | 15:21 | |
which is creating the transaction demand for money | 15:23 | |
which pushes up the interest rates, | 15:26 | |
then all you really have to do | 15:29 | |
is to have an even bigger deficit. | 15:31 | |
And then the boom will not be aborted although | 15:34 | |
if the logic of the proposition | 15:37 | |
I stated the first time had been correct | 15:39 | |
I suppose by the same | 15:41 | |
logic or illogic | 15:44 | |
the more you expand the economy the less | 15:46 | |
you expand the economy. | 15:48 | |
So all you really have to ask yourself I think is | 15:52 | |
whether you think | 15:55 | |
that the fiscal stimulus | 15:59 | |
is creating too much | 16:00 | |
consumption spending. | 16:03 | |
We are | 16:06 | |
very near, | 16:08 | |
the experts think, to the trough of the business cycle. | 16:09 | |
We are as people say | 16:15 | |
very near to the end of the recession. | 16:18 | |
It's a very bad terminology one must say, | 16:22 | |
that we've all fallen into | 16:26 | |
because the word recession | 16:30 | |
as defined by the national bureau | 16:32 | |
is used | 16:36 | |
to | 16:38 | |
describe the decline | 16:39 | |
in the real GNP. | 16:44 | |
When you get to the end of the decline | 16:50 | |
you come to the end of the recession. | 16:53 | |
That's the language which is used. | 16:55 | |
The person who is not a tactical economist | 16:59 | |
could be forgiven for breathing a sigh of relief | 17:01 | |
and saying thank God the recession is over. | 17:04 | |
Well what it is that's over is the period | 17:08 | |
of active sliding. | 17:11 | |
The moment just before the dawn | 17:16 | |
is the darkest moment of the night. | 17:18 | |
The moment just after the dawn | 17:22 | |
is still very, very dark indeed, | 17:25 | |
according to the principle of continuity. | 17:29 | |
Now if | 17:30 | |
you don't | 17:32 | |
like a moment make it a | 17:35 | |
micro moment. | 17:37 | |
When we are at the end of the recession | 17:40 | |
we are at the trough at the very nature of prosperity | 17:45 | |
indeed with respect to the amount of unemployment | 17:50 | |
if you use that as a measure of the amount | 17:53 | |
of suffering, | 17:55 | |
or if you use as a measure | 17:57 | |
of the amount of cost of the business cycle, | 17:59 | |
the shortfall from what it is we could be producing | 18:03 | |
our high employment real income | 18:08 | |
production potential then it is sometime | 18:11 | |
after the recession ends | 18:15 | |
that the situation is still worsening. | 18:18 | |
You're not at the end of the problem, | 18:22 | |
you're not at the beginning of the end of the problem | 18:27 | |
to use the expression of Churchill and Roosevelt | 18:32 | |
during the dark days of World War II, | 18:35 | |
when the first | 18:41 | |
ray of dawn | 18:43 | |
was our successful invasion of North Africa, | 18:45 | |
I believe that Churchill | 18:49 | |
and Roosevelt said this is not the beginning of the end | 18:50 | |
it's the end of the beginning. | 18:53 | |
Well the end of the recession, when it comes, | 18:55 | |
is only the end of the beginning of our troubles. | 18:59 | |
So we should not | 19:03 | |
now in the | 19:06 | |
economic winter of our discontent, | 19:08 | |
which is still to be with us, | 19:11 | |
as I have explained it even if the optimistic consensus | 19:14 | |
forecasters are correct we should not be losing | 19:18 | |
our sense of balance between | 19:22 | |
what is too much stimulus and what is too little stimulus. | 19:25 | |
Any increase in the interest rates | 19:32 | |
which causes | 19:36 | |
there to be too little rate of expansion | 19:40 | |
of overall real demand | 19:44 | |
can be | 19:47 | |
countered and offset | 19:49 | |
by greater deficit spending and or | 19:51 | |
greater increase in the rate of growth of the money supply. | 19:56 | |
Well those are the terms | 20:02 | |
in which the crowding out effect should be analyzed. | 20:04 | |
We're still left of course, with a problem | 20:08 | |
that few people | 20:12 | |
seriously discuss | 20:14 | |
and that is whether | 20:18 | |
we have a special scarcity | 20:20 | |
of capital goods and capital formation at this time. | 20:23 | |
That issue is always begged, | 20:29 | |
it is taken for granted that for a variety | 20:32 | |
of reasons the rapid capital formation abroad | 20:35 | |
the | 20:40 | |
pollution demands upon the | 20:43 | |
system, | 20:47 | |
the ravages of inflation as it is put, | 20:48 | |
that America is especially capital short now. | 20:52 | |
What exactly is being said there? | 20:57 | |
Surely not that, | 21:01 | |
if we had more capital we would be somewhat better off, | 21:03 | |
that is always true. | 21:07 | |
The only time that wouldn't be true | 21:10 | |
would be if the | 21:12 | |
stationary economy | 21:15 | |
had brought the rate of interest down to zero, | 21:16 | |
and then any further deepening of capital any extension | 21:19 | |
of the degree of roundaboutness of production | 21:25 | |
would no longer pay. | 21:28 | |
It's a nice academic debate, | 21:31 | |
whether one could get to that state. | 21:34 | |
You can get philosophers to argue on both sides | 21:39 | |
of the proposition, and neither one can convince | 21:42 | |
the others because it's an argument about asymptotes | 21:46 | |
and about the horizon and just beyond the horizon. | 21:49 | |
But there is nobody that I know, who thinks | 21:53 | |
that we are already at that point | 21:57 | |
where the American economy could not use more capital. | 22:01 | |
But what else is new? | 22:05 | |
What are you saying when you just say | 22:07 | |
that well if you just had more capital | 22:08 | |
then the productivity of labor would be a little bit higher, | 22:10 | |
real wages would be a little bit higher | 22:14 | |
also I may add that other things being equal | 22:17 | |
the rate of profit would be a little bit lower | 22:20 | |
if you had more capital. | 22:25 | |
What is being argued by Secretary Simon | 22:27 | |
for one by many trade association groups, | 22:30 | |
in fact a whole chorus of administration economists | 22:34 | |
is that there is some | 22:38 | |
identifiable sense in which we are especially short | 22:41 | |
of capital formation and of stock of capital. | 22:45 | |
Now, I've reviewed this problem | 22:49 | |
I suppose like Halley's Comet | 22:52 | |
not at intervals of 75 years on these tapes | 22:53 | |
but at intervals of maybe every six months | 22:57 | |
and I want to assure you that if you do | 23:02 | |
a very careful analysis, double entry bookkeeping | 23:05 | |
on the one hand all the factors which can be discerned | 23:10 | |
in the situation which suggests that capital | 23:14 | |
is in some sense especially short, | 23:17 | |
and you jot those down well, for example | 23:20 | |
the five fold increase in the price of oil, | 23:23 | |
much of it coming from the Persian Gulf | 23:27 | |
obviously makes for great profit opportunities | 23:30 | |
in the exploitation of new energy sources | 23:36 | |
in North America. | 23:40 | |
The Alaska Slope is just an example offshore drilling | 23:42 | |
reactivation of | 23:47 | |
coal mines and strip mining | 23:50 | |
these are needs for capital formation. | 23:53 | |
But a notice, every survey that we have, | 23:58 | |
this is the other side of the balance sheet | 24:02 | |
shows a diminution | 24:04 | |
of the intended real | 24:06 | |
capital formation plans | 24:11 | |
of business. | 24:14 | |
And this is something that I should have mentioned | 24:16 | |
when I was talking about the crowding out effect, | 24:19 | |
the, everything which expands consumption | 24:23 | |
does it is true, | 24:26 | |
tend to raise interest rates other things being equal, | 24:30 | |
but that same expansion of consumption | 24:32 | |
also increases the motivation for investment. | 24:36 | |
It increases the degree of | 24:41 | |
fullness of capacity operations | 24:44 | |
the profitability at the margin of new capital | 24:46 | |
and the SOE's economists have known, | 24:50 | |
well since the time of Malthus and Ricardo | 24:53 | |
but more particularly I recall in 1938 | 24:56 | |
a famous | 25:00 | |
article by Oscar Lange in which he showed that | 25:01 | |
there is an optimal | 25:04 | |
configuration of investment which involves | 25:08 | |
not too much consumption spending as at full employment | 25:11 | |
and on the other hand not too little as when | 25:15 | |
there is practically no final consumption spending | 25:18 | |
and that's undermining the demand | 25:21 | |
for capital formation, this is not to deny | 25:23 | |
that something which he overlooked, | 25:25 | |
should not be overlooked namely | 25:27 | |
that you can have new capital | 25:29 | |
which | 25:32 | |
is being built for the purpose of building new capital. | 25:33 | |
People say a Ponzi game like that | 25:36 | |
cannot continue indefinitely, | 25:37 | |
well all of life is kind of | 25:39 | |
a Ponzi game | 25:42 | |
and there is no necessary | 25:44 | |
limit to that process | 25:47 | |
the overwhelming bulk of the evidence | 25:55 | |
if you do this double entry bookkeeping | 25:56 | |
is extremely mixed. | 26:00 | |
I've quoted again and again studies like that | 26:02 | |
of William Nordhaus of Yale | 26:06 | |
that appeared in The Brookings Papers | 26:08 | |
oh six months ago or nine months ago, | 26:10 | |
showing that if you correct properly, | 26:13 | |
profit figures, for under reporting of profits | 26:17 | |
and for over reporting of profits | 26:21 | |
you correct for example, for the fact | 26:24 | |
that if the firm is not using a LIFO, | 26:27 | |
the time of inflation, | 26:31 | |
the tax upon so called reportable money earnings | 26:33 | |
is really a depleting of capital kind of tax, | 26:38 | |
and also that even if you allow fast appreciation | 26:43 | |
in a time of inflation if you can only take | 26:49 | |
into appreciation your historical cost | 26:52 | |
which falls uniformly short of reproduction cost | 26:55 | |
then there is an overstatement of reported profits. | 26:59 | |
Well after somebody like Nordhaus or George Terborgh | 27:03 | |
for the Machine Tool Trade Association | 27:07 | |
make these computations you find | 27:10 | |
that the share of profits, | 27:13 | |
incorporate value added in particularly | 27:16 | |
in manufacturing and mining, | 27:19 | |
leave out the banks but there's no reason | 27:23 | |
to leave them out. | 27:25 | |
Has been a falling fractional share, | 27:27 | |
some of the increase of course has been to government but | 27:31 | |
there still is a discernible increase | 27:36 | |
in the relative share of labor | 27:38 | |
in the | 27:41 | |
corporate value added. | 27:43 | |
An even better measure of | 27:48 | |
how valuable capital is, | 27:52 | |
is to take its marginal yield | 27:53 | |
which is the rate of interest or the rate of profit | 27:56 | |
before or after taxes and whichever way you compute it | 28:00 | |
Professor Nordhaus finds it to have fallen | 28:06 | |
rather steadily these last ten, | 28:09 | |
these last 20 years, | 28:13 | |
moreover this is a world wide phenomenon | 28:16 | |
it's a phenomenon that has been going on at a rapid pace | 28:20 | |
even more rapid pace in the UK and in Italy, | 28:25 | |
it's a phenomenon that's been going on | 28:29 | |
In western Germany, it's a phenomenon that | 28:32 | |
has been going on in Japan. | 28:35 | |
People blame it on inflation but | 28:37 | |
that's just one, | 28:40 | |
new example of money illusion | 28:43 | |
because to the degree that the inflation | 28:46 | |
is unanticipated it's not likely | 28:50 | |
to be prejudicial to profits | 28:53 | |
to the degree I suppose I have to modify | 28:58 | |
that to the degree that the inflation | 29:01 | |
is due to wage push, it might be prejudicial profits | 29:02 | |
but we haven't had an inflation primarily due | 29:06 | |
to wage push, and in any case | 29:09 | |
how do the | 29:11 | |
workers successfully make their push | 29:13 | |
without causing their employment to fall off? | 29:17 | |
And | 29:22 | |
so that | 29:24 | |
it's | 29:25 | |
unlikely that | 29:27 | |
the situation with respect to the rate of profit | 29:30 | |
would be very much different. | 29:32 | |
I'm speaking of course of corrected profits, | 29:34 | |
if there had been no | 29:37 | |
inflation but a steady price level | 29:40 | |
it is in the last analysis a question | 29:43 | |
of how much capital there is around the world competing | 29:46 | |
with capital around the world | 29:48 | |
in conjunction with and against the background | 29:51 | |
the amount of labor and the skills that work with it. | 29:55 | |
And so I have to remain | 29:58 | |
an agnostic | 30:01 | |
on the need for capital, | 30:03 | |
I won't go over to the other side | 30:06 | |
and say that there is absolutely a capital glut | 30:08 | |
because it could be that there has been a capital glut | 30:13 | |
in the recent past, I mean the last decade | 30:16 | |
but we're just moving into a epoch | 30:18 | |
where the yields on capital are actually | 30:20 | |
in process of rising. | 30:23 | |
But it's when they rise and through their rising | 30:24 | |
that we will know that pollution demands | 30:27 | |
and other demands have caused capital to be short. | 30:30 | |
- | If you have any comments or questions | 30:36 |
for Professor Samuelson address them to | 30:38 | |
Instructional Dynamics Incorporated | 30:40 | |
450 East Ohio street, | 30:42 | |
Chicago Illinois 60611. | 30:44 |
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