Capitalist consumption: Grossmann

The Bauer/Grossmann interpretation of Marx s reproduction schema can be contrasted with our alternative perspective in which the role of money provides the focus of analysis. For Kalecki (1991c 241), it is capitalist investment and consumption decisions which determine profits, and not vice versa . In the Grossmann approach, however, capitalist consumption is a residual left over once capitalists have decided their production of surplus value, out of which new constant and variable capital are allocated. The capitalist consumption portion of surplus value is not determined by the amount of money advanced at the start of the production period, but by the portion left once production has been completed. 

To explore how the Kalecki principle can be applied to Grossmann s numerical simulation, we can first show how equation (7.1) relates to Table 7.1. In year 1, total profits of 100,000 consist of 75,000 units of capitalist consumption together with 20,000 constant capital and 5,000 variable capital 25,000 units of investment in total. Hence the identity... 

The Kalecki modified schema retains the key characteristics of the Grossmann model. Constant capital still grows at 10 per cent each year compared to 5 per cent for variable capital, and this requires a steady increase in the proportion of profits saved, from 25 per cent in year 1 to 65.4 per cent in year 35. Also in keeping with the Grossmann model, the rate of profit steadily falls over time, from 33.3 per cent in year 1 to 14.6 per cent in year 35. The difference, however, is that capitalist consumption is not treated as a residual, dependent upon the amount of profits that happen to remain after the prior commitments of capital accumulation. In Table 7.2, capitalist consumption is modelled as an active component in the model, providing an important driver in the generation of profits, as capitalists cast money into circulation. 

Comparison ofTables 7.1 and 7.2 shows that autonomous capitalist consumption, in the latter, leads to a lower productivity of labour (W/S+V). For example, in year 31a unit of labour in the Grossmann schema produces 5.05 units of output, compared to only 4.38 in the Kalecki modified schema. Capitalist consumption provides a drag on labour productivity, since more workers are hired to produce... 

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