An Introduction to Multiplicity in Economics

Dear readers, I have prepared a paper on an issue that I consider of primordial importance for theoretical economics. Especially important is its implication for young students of Economics who are introduced to the subject of Economics in a particular manner that systematically blurs the existence of alternative methods and schools. It juxtaposes neo-classical and Keynesian as Economics per se. Moreover, the textbooks of G.S.E.B. and C.B.S.E. do not even admit that they're teaching a particular type of Economic theory and not Economics. Ignorance of such a simple fact leads to what I call 'confusing an epistemological fact for an ontological fact'. Though this paper does not delve in detail on this issue, it still touches upon it to sensitize our young students about the controversial and pluralistic character of the subject.

Kindly find it for download here:

Click on this: Academia.edu page
If that doesn't work, click here:
https://www.academia.edu/6480773/An_Introduction_to_Multiplicity_in_Economics
Critical commentaries, Constructive criticisms, suggestions and feedbacks are open-heartedly welcomed. Do write me about your understanding- whether supportive or critical. Do provide me at least 4 days to reply.

- Warm Regards,
- Bhagirath Baria.

Simple Regression, 'I' and 'A' in the IPAT model, Indian economy

This was a regression analysis of two variables of the IPAT model of effects of human activity on environment. It was submitted as a short empirical study, as apart of my assignment in an online course offered by The University of Edinburgh in critical reasoning[informal logic]. I'll put online all the regression output in Excel soon. This short analysis showed some interesting facts about the effects of Affluence factor on Environmental degradation. I had to use proxy variables as data availability was a critical issue here. Anyway, have a look. Let me know if more detailed study interests you on this topic.

Submitted material:

Hello. The homework section gives following instructions:

"For this week's homework, we would like you to do some research for yourselves and find one or more examples, in your own global context, where the environmental impact is being (or can be) mitigated through changes in A or T. Post a brief summary of what you have found, with references (e.g. links to websites), on the Homework/Population/Case Studies forum thread. Once you have done that, read and comment on the other submissions from fellow students, and upvote the examples that you think illustrate this principle best."

I’ve tried to do the following in context of Indian Economy[my nation of residency]. Hope I got it right. I understood it as giving one's own example. A simple empirical illustration too shall be admissible is what I've assumed here.

1.    Find a numerical value of the degree of relationship between the variables I[Environmental  degradation] and A[Affluence factor].

2.    Fit a regression line through the available data and predict the future behaviour of I with reference to a particular value of ‘A’.

3.    Also find out how much part of the variation in I is explained by A with the given data set. In short calculate the r-squared measure[coefficient of determination].

4.    All this using Microsoft Excel only. No use of advanced statistical packages has been done.

Proxy variables used:

1.    For ‘I’ [Environmental degradation], I used the Annual carbon dioxide emissions in tonnes per capita as a proxy variable.

2.    For ‘A’ [Affluence factor], I used GDP per capita in India at constant price [base year 2004-05]

3.    Isolated the data analysis to a statistical relation between ‘I’ and ‘A’ because the data was readily available.

Data used:

1.    For the variable ‘I’ {year 1990 to 2010}-http://en.wikipedia.org/wiki/List_of_countries_by_carbon_dioxide_emissions_per_capita

Please look at the row showing India’s data.

2.    For the variable ‘A’ {year 1990 to 2010}, in INR-

Handbook of Statistics on Indian Economy, 2012-2013, published by RBI. The section on ‘Macroeconomic aggregates at constant prices’ includes data on GDP per capital at constant price, base year being 2004-2005. Available here: http://rbidocs.rbi.org.in/rdocs/Publications/PDFs/002T_BST130913.pdf

3.    Data series used: Year 1990-91 to 2010-2011 for both I and A as explained above.

Results:

1. Correlation between 'I' and 'A' as per the data series is 0.978224 or 0.98[approx.]. This shows a strong degree of linear relation between both the variables in context of India.

2. Regression line produced: I = 0.612619153 + 1.98157E-05[A] 

3. r-squared comes out to be 0.9569 or 0.96[approx.]. Approximately 95% of the variation in I is explained by A.'I' being Environmental degradation measured by CO2 emissions, tonnes per capita in India between 1990-91 upto 2010-2011. And 'A' being GDP per capita at constant price, base year- 2004-05, from 1990-91 to 2010-2011.2.

4. Using the above Regression line, I found the following expected level of CO2 emissions[representing 'I'] for the year 2011-12 with GDP per capital being 55054.37 INR to be 1.70355 tonnes per capita per year

Data series:

The units have been stated above already.

Regression Output has been stated already above.

> Thus, it can be seen that in India, between 1990 to 2010, there has been a high correlation between I and A as stated here. The expected amount of environmental degradation[proxy- CO2 emissions in India] based on the data available for 2011 come out to be 1.70 tonnes per capita per year in India. More interpretations can be found out here.

Limitations of this analysis:

1. Proxy variables chosen might not be sufficient to explain all that needs to be explained. Also the isolated effect of one of the variable in the IPAT model, on 'I' has been explained. This was mainly due to data inavailability.

2. p-value, standard error, etc. has been ignored here. There's no autocorrelation[Error terms lacked linear correlation].

3. Data series might not be sufficient to explain the phenomenon satisfactorily.

4. High correlation does not imply causation. Hence this remains to be explained here.
5. Y variable has repetitive[same] values. Might be an issue.

Please let me know if this short analysis gave some insights to you. Your suggestions/criticisms/feedback are always welcomed.

- Thank you.

- Bhagirath Baria, Surat, Gujarat, India.

Note on Absolutist vs. Relativist interpretation of Economic History

Two works of History of Economic Thought provide very authoritative viewpoint of looking at the History of Economic thought. They are:

1. Economic Theory in Retrospect by Mark Blaug, and;
2  History of Economic Thought by E.K. Hunt and Mark Lautsienheiser.

The fomer work classifies History of Economic thought into two competing Interpretative frameworks:

1. Absolutist interpretation.
2. Relativist interpretation.

Absolutist interpretation abstracts away from Historical conditions- primarily concerned with the development of theoretical systems of various Economists, their criticism and emergence of better theories. It is therefore, it appears, is concerned with the development of economic principles irrespective of the ideological elements affecting them. Mark Blaug also explains that it is possible to refine the various economic theories and focus on the non-ideological aspects of the theory.

Hence, each theoretical system by an Economist will have at least following two elements:

1. Ideological- reflecting the Social reality around- Politics, Culture, Science & Technology, and other such variables. Hence, the theorist would have been affected by such variables around her which her theory would inevitably express.

2. Scientific- reflecting the maxim- 'Knowledge for Knowledge's sake'. These elements of the theorist would be focused solely on developing previous theories, criticising them if required, and proposing better, much more real theories- nearer to truth. These aspects woukd be solely scientific and shall be independent of the historical conditions.

The former of the above listed works follows this methodology of interpreting Economic History.

In the next post we'll see how the latter work- by Hunt and Lautsenheiser interprets the history of economic thought.

Bajaj Chakan plant strike and Theory of Value

Recent strike at Bajaj's Auto plant at Chakan brings out the need to understand such issues through the concept of Value, distinct from that of Price. Students of Mainstream neo-classical microeconomics would not make a distinction between Value and Price. Both are used interchangeably and more often than not in very casual sense. Yet, it is possible to understand this issue through the Labour Theory of Value of Classical Economists in general and Marx's Labour Theory of value in particular.

Marx's Theory of Value has the Theory of Commodity fetishism as its foundation, without the grasp of which Marx's analysis cannot be grasped. It is very much possible to apply the Marxist LTV[Labour Theory of Value] to Bajaj Auto plant strike, which can open up newer vistas of understanding Capital-Labour relations, not as Technical means of production but as Social Production relations specific to the currently prevailing Economy: Commodity-capitalist economy.

Marx's LTV is mostly perceived as a tailor-made radical tool of revealing the inner contradictions of Capitalism. Yet, the theory is perceived in a mechanistic way, addressing the question "What is Value?" in a simplistic manner. The foundation of the theory of Commodity fetishism is generally put aside or appealed to when explaining the surface appearances of a Capitalist society.

The next post will examine How can Marxist Value theory help to understand such events as also the ways in which it can be deployed to analyze such contradictions of everyday life in Capitalism.

Expanded model of Absolute Surplus Value

Synopsis:

This post adds a given aspect to the Absolute Surplus Value{1} model of Ben Fine and Alfredo Saad-Filho, given in their book "Marx's Capital". Kindly note that the author of this post is only adding a particular aspect[already mentioned in the book] but not included in the given model[diagrammatic representation].

The Given Model:



Source courtesy: Marx's Capital, 4th ed., Fine and Filho, Page no. 41, Viva Books.



Expansion of the given model:

Adding the variable- 'Labour Intensity' to the above model refines and makes the representation much more dynamic. Hence, following analyses are possible using the expanded model.

Prepared by: Bhagirath Baria, based on the model by Fine and Silho

Absolute Value:

 

Lengthening the working day or increasing the intensity of work[measurable by productivity per hour per labourer] or both results in increased surplus value[s] accrued to the firm owner/organizer/capitalist. The given model[as in 'Marx's Capital'] focuses on the working day variable while mentions in theory about the possibility of increasing the surplus value through increased intensity of work.

 

"There are other ways of producing absolute surplus value. For example, if work becomes more intense during a given working day more labour would be performed in the same period, and absolute surplus value would be produced. The same result can be achieved through making work continuous without breaks either of limited duration or even for rest and refreshment."{2}

 

Hence, when both the possibilities are included- 1). Lengthening of the working day and 2). Increased intensity of work during given hours; 3 possible situations may arise. Note, we are not here dealing with an Equilibrium/Disequilibrium situation. This model depicts the possible changes in order to increase the production of surplus value, and hence increase the rate of exploitation.

 

Lets understand each of the three possibilities:

 

Point E0: The given state of working day and labour intensity. Following a change in any of the two variables- working day or labour intensity, surplus value increases.

 

Point E1: Labour intensity remaining constant, working day lengthens. Hence the area E0E1X1X0 represents the increased exploitation of labour by capital, hence an increase in surplus value. This increase in Working time driven.

 

Point E2: Working day remaining constant, Labour intensity increases. Hence, increased surplus value as depicted by the area RNE0E2. Here, some further modifications and debate is required.

 

Point E3: Both Working day and Labour intensity increase. Hence increase in surplus value by the sum of areas- RNE0E2 + E2E0E1E3 + EOE1X1XO = RE3X1X0E0N

Conclusion:

Thus we see that the expanded model provides a much more dynamic analysis of the capitalist reality. It does not explain abstract ideas divorced from political realities. Most of Marx's works were a part and parcel of his political project of overthrowing capitalism, hence, his works aim to explain realities of the society and economy around. This helps his analyses to be much more realistic and provides a radical alternative to all sorts of heterodoxy as well as mainstream understanding about Socio-economic reality.

Notes & References:

1). As in Marx's Capital, 4th ed., Fine and Filho, Page no. 41, Viva Books.
2). ibid.
3). 'v' refers to variable capital in Marx's terminology- the amount of money in the form of capital whose value labour transfers to finished commodities in the production activity. 's' refers to surplus value- the amount of value created by labour in excess of variable capital[raw materials, etc]. s' refers to the increased surplus value due to above explained measures.

R & E crosses the 3000 mark, thank you, again!

 

R & E crosses the 3000 mark. Just recently in April 2012, this site had crossed the 2000 mark in terms of number of visits. Within 8 months, it has seen an increase of 1000 visits, which is a commendable milestone in terms of reach of the site. Thank you dearest visitors, for your support & consistent participation on this blog. Your comments, visits and participation are the most valuable motivations for running and maintaining this site. Keep visiting.

 

--- Read. Share. Enlighten.

 

--- Bhagirath Baria.