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An Introduction to ProCapitalist “Macroeconomics”

George Reisman

Presented at: TJS 1985

Date: Jul 28, 1985

NOTE: Titles may not reflect the exact titles or content of the conference talks - secondary sources.

1. Production Versus Consumption. The fundamental problem of economic life is how to increase human productive ability so that more wealth can be produced by limited labor. It is not how to increase the need for wealth or to create employment. The contrasting implications of these conflicting premises for the assessment of the economic effects of machinery, war, government spending, population growth, and advertising.

2. Say's Law. Purchasing power—real demand—is created by supply. And on a gold standard, so too is monetary demand—the ability to spend money. A general overproduction is impossible and can never be the cause of depressions. No matter how much production increases, overproduction can at most be a phenomenon confined to just part of the economic system and is always accompanied by a precisely equivalent underproduction elsewhere. When it does occur, it can usually be eliminated by an increase in production in other industries. Falling prices caused by rising production do not represent deflation.

3. Government Intervention as the Cause of Unemployment. Unemployment is not caused by any lack of need or desire for wealth or for the labor to produce it, but by wages and prices that are held too high relative to the quantity of money and the volume of spending that the quantity of money can support. Government intervention is responsible for the creation and perpetuation of the imbalance. Why World War II was accompanied by full employment and why such full employment represented a major economic loss for the great majority of American workers.

4. The Productivity Theory of Wages. A critique of the exploitation theory: why both workers' needs and employers' “greed” are irrelevant to the wages workers actually have to accept. Money wages are determined mainly by the relationship between the quantity of money and the supply of labor. Real wages are determined mainly by the productivity of labor.

5. The Role of Businessmen and Capitalists in Raising Real Wages. Real wages as the product of the productivity of labor and of wage payments relative to consumption spending. How the saving and productive expenditure of businessmen and capitalists increase the economic system's concentration on the production of capital goods, which in turn raises the productivity of labor. How their competitive quest for profits achieves the same result. How their saving and productive expenditure raises wages relative to consumption spending. How the activities of businessmen and capitalists, in turn, depend on the existence of a free and rational society.

6. Application of the Productivity Theory of Wages to the Interpretation of Modern Economic History. The low standard of living of the early years of capitalism was the result of a low productivity of labor, inherited from centuries of stagnation under feudalism. The rise in the standard of living, increasingly evident as the nineteenth century wore on, was the result of a rising productivity of labor achieved by the activities of businessmen and capitalists. The higher real wages brought about in this way were responsible for the elimination of child labor, the shortening of the working day, and the improvement in working conditions. Government intervention, far from being the cause of the average person's economic gains, as is usually believed, necessarily operated to hold down the rise in real wages and the benefits resulting from it.


Parts: 9

Handout: none


  • CD, 2018 (En)