Bernard Schmitt's Quantum Macroeconomic Analysis

483 Pages·2022·5.195 MB·English

by  Alvaro Cencini

Routledge Frontiers of Political Economy
BERNARD SCHMITT’S
QUANTUM MACROECONOMIC
ANALYSIS
Alvaro Cencini
Bernard Schmitt’s Quantum
Macroeconomic Analysis
The aim of Bernard Schmitt’s analysis of the monetary economy of
production was twofold: to introduce and to explain the logical character of
the macroeconomic laws governing our economies; and to explain the origin
of the pathologies that follow if these laws are not complied with. Schmitt’s
main original contributions concern the theories of value, profit, and capital,
as well as his explanation of inflation, unemployment, and international
payments, unified as quantum macroeconomic analysis. This book expounds
on the key principles of quantum macroeconomic analysis as he conceived and
developed them.
Schmitt’s starting point was the analysis of bank money and the way it is
associated with produced output. His macroeconomics was not founded on
microeconomics nor derived from the aggregation of microeconomic variables.
Schmitt’s theory does not rely on mathematics and modelling either; instead,
it is based on logical laws derived from the nature of money and monetary
payments. Part I of this book deals with the quantum macroeconomic analysis
of capitalism and its pathologies developed by Schmitt and provides the
elements necessary to understand its ‘structural’ mechanism. Parts II and III
deal with the principles of two reforms that enable the passage from capitalism
to post-capitalism and from the present non-system of international payments
to an orderly system.
This book provides essential reading for all those interested in heterodox
approaches to macroeconomics, monetary economics, banking, international
economics, and the history of economic thought.
Alvaro Cencini is Emeritus Professor of Economics, University of Lugano
(USI), Switzerland.
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Bernard Schmitt’s Quantum
Macroeconomic Analysis
Alvaro Cencini
First published 2023
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© 2023 Alvaro Cencini
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British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
Names: Cencini, Alvaro, author.
Title: Bernard Schmitt’s quantum macroeconomic analysis /
Alvaro Cencini.
Description: 1 Edition. | New York, NY : Routledge, 2023. |
Series: Routledge frontiers of political economy | Includes bibliographical
references and index.
Identifiers: LCCN 2022021325 (print) | LCCN 2022021326 (ebook) |
ISBN 9781138576018 (hardback) | ISBN 9781032366654 (paperback) |
ISBN 9781351271325 (ebook)
Subjects: LCSH: Schmitt, Bernard. | Macroeconomics. | Money. |
Quantum logic.
Classification: LCC HB172.5 .C416 2023 (print) | LCC HB172.5 (ebook) |
DDC 339--dc23/eng/20220502
LC record available at https://lccn.loc.gov/2022021325
LC ebook record available at https://lccn.loc.gov/2022021326
ISBN: 978-1-138-57601-8 (hbk)
ISBN: 978-1-032-36665-4 (pbk)
ISBN: 978-1-351-27132-5 (ebk)
DOI: 10.4324/9781351271325
Typeset in Bembo
by Deanta Global Publishing Services, Chennai, India
Contents
List of figures x
List of tables xii
Acknowledgements xiii
Foreword: A biographical note on Bernard Schmitt xiv
Introduction 1
Schmitt’s contribution 3
The structure of the volume 7
PART I
1959–1987: The years of Schmitt’s greatest insights 23
A From money to capital 25
1 The discovery of the true nature of money and the origin
of its purchasing power 27
Schmitt’s starting point: Keynes’s equations 27
The nature of bank money and the formation of the purchasing power of
money 30
Banks’ monetary and financial intermediation 41
Money and the logical relationship between production and
consumption 44
Schmitt’s theory of bank money compared with orthodox and heterodox
analyses 47
vi C ontents
2 The building blocks of a theory of national money: From
Monnaie salaires et profits (1966) to Théorie unitaire de la
monnaie, nationale et internationale (1975) 50
The logical relationship between wages and national income 50
Schmitt’s first explanation of profit is incomplete 55
Circular flow analysis or the theory of the circuit 56
The circular flow of nominal money and income in an economy of
production 61
Schmitt’s profit and monetary circular flow analysis as compared to those of
his contemporaries 69
3 Schmitt’s critical analysis of neoclassical, Keynesian,
Marxian, and Sraffan economics from 1959 to 1988 71
Schmitt’s first critical assessment of general equilibrium analysis
(GEA) 71
The logical indeterminacy of relative prices 76
The shortcomings of Keynesian analysis 82
The critical appraisal of Marx’s analysis of value and profit 88
Critical analysis of Sraffa’s attempt at determining relative prices 92
The critique of Pasinetti’s theory of value 95
4 1979–1984: The discovery of quantum time 97
Production and time 97
Expenditure and time 103
The theory of emissions 105
The quantum analysis of profit 109
A brief comparison with orthodox economics 117
5 Quantum economics and capital 118
Ordinary versus quantum credit 118
From income to capital-time 122
The formation of fixed capital 126
The pathology of fixed capital formation 131
Classical, neoclassical, and Keynesian analyses of capital: a brief comparison
with quantum analysis 136
6 Schmitt’s 1984 explanation of infation and unemployment
and the principles of his 1984 reform 140
Inflation 140
Fixed capital amortization and inflation 146
Contents vii
Involuntary unemployment 153
Schmitt’s 1984 reform: principles and practical implications 156
Traditional and quantum analyses of inflation and unemployment: a brief
appraisal 160
B From national to international money 163
7 International payments as a cause of monetary disorders 165
The nature of international payments 165
Nominal and real international money 169
The inflationary nature of international payments 175
Schmitt’s analysis of international payments as compared to that of his
contemporaries 185
8 Schmitt’s frst proposals for a world monetary reform 188
From relative to absolute exchange rates 188
Keynes’s plan for an international clearing union revisited 194
Schmitt’s 1970s proposals for a world monetary reform 199
The precursors of Schmitt’s solution to international monetary
disorder 205
9 Schmitt’s contribution to the debate on European
monetary unifcation: 1975–1988 211
Schmitt’s alternative to the present European Monetary System 211
The advantages of Schmitt’s plan 220
Schmitt’s first proposals for a single-country reform 224
Settling a country’s net imports under Schmitt’s single-country reform 227
PART II
1987–1998: The years of further in-depth analysis 231
10 1987–1995: Schmitt’s frst extended analysis of countries’
external debt 233
International payments affect countries and their residents 233
The asymmetry characterizing the servicing of countries’ external
debts 240
The impact of external debt servicing on debt servicing countries 248
The principles of Schmitt’s solution 251
viii Contents
11 The analysis of capital and interest based on Schmitt’s
unpublished manuscripts of 1993–1996 257
Schmitt’s first explanation of non-wage income 257
Towards a new explanation of interest 264
In the present system of payments, non-wage
income is formed pathologically 267
A critical assessment of Böhm-Bawerk’s and Keynes’s analyses of capital
and interest 272
12 Schmitt’s new analysis of unemployment:
His 1998 contribution 278
Unemployment is impossible in an economy where income is made up of
wages and redistributed profits 279
Unemployment is impossible in an economy where all final expenditures are
either consumption or investment 287
Amortization is not a direct cause of unemployment, but creates the
conditions for its rise 290
Unemployment as the unavoidable consequence of capital
over-accumulation 297
13 The development of Schmitt’s criticism of general
equilibrium analysis 300
GEA on the determination of relative and monetary prices 300
Introducing the numéraire, or money, will not help GEA to determine
numerical prices 309
The crucial mistake of GEA 317
14 From capitalism to post-capitalism 322
Capitalism 322
Y = C + I + A 327
Y ≡ C 331
Post-capitalism 334
Post-capitalism: a new phase in the evolution of capitalism or an entirely
new regime? 339
Contents ix
PART III
1999–2014: The fnal years of ground-breaking analysis 343
15 Towards the ‘interest theorem’: The double cost of interest
payments 345
Presentation of the problem 345
First proofs of the double charge of the payment of interest on countries’
external debts 348
The peculiarity of interest payments 352
The Interest Theorem 355
A generalization of the interest theorem and its consequences 364
16 The fnal criticism of general equilibrium analysis 368
The logical indeterminacy of relative and numerical prices in GEA 368
The neoclassical theory of relative prices determination
is marred by a mathematical error 375
Prices and money 380
17 The discovery of the pathological nature of countries’
sovereign debt (2010–2014) 388
The problem 389
The difference between country A’s monetary outflows and inflows is the
cause of its sovereign debt 391
The ‘sovereign debt theorem’ 398
Concluding remarks 406
18 The one-country solution to the sovereign debt problem 411
The aims and principles of Schmitt’s reform 411
Before and after Schmitt’s reform: a useful comparison 415
The practical workings of Schmitt’s reform 428
Conclusion 433
Bibliography 437
Name index 444
Subject index 446