The Accumulation of Capital Essay
The Accumulation of Capital
Joan Robinson (1903-83) is one of the leading economists of the 20th century and the only woman among the great economists. Her writings on economic development show a strong sense of the historical context of social change and a concern with economic organization and institutions rather than resource allocation. The existence of al living beings has the character of certain economic relationships.
For example, in her work The Accumulation of Capital (1956) Robinson shows how from the economy’s point of view a human being can practice the behavior of an ordinary robin, and proceeding from this comparison she notes that economic life of humans is incomparably more complicated and needs very profound analysis. According to Robinson a group of people who specialize and co-operate are more likely to produce far greater results than the sum of their independent efforts. Basing on this simple fact, she continues, human economies develop into very intricate complexes of specialized activities.
The method of distribu¬tion of the product of interlocking activities then becomes important. After the distribution of the products the notion PROPERTY comes to light. There are a great number of societies on the planet, which live in accord with different types of economies. For example, there is slave economy, capitalist economy, socialist economy, etc. The methods of distribu¬tion of the product of interlocking activities in each of these economies are cardinally different. Robinson claims that no actual economy conforms to a pure type.
For example when she speaks about the economies, which are predominantly capitalist, she states that they contain many elements of production for home consumption, many elements of artisan production and many elements of socialism. This book deals predominantly with capitalist economy. It explicates certain capitalist rules, under which anyone who has suffi¬cient purchasing power, or finance, and knows how to set about it, can become an employer of labor or entrepreneur. Then on the explanation of what entrepreneur is and how entrepreneurship developed is provided.
For example, she compares the historical and modern notion of entrepreneur – in the early days of capitalism the typical entrepreneur was an individual who had invested his own finance in a business which he managed himself and bequeathed to his heirs as a going concern. ‘The entrepreneur’ in modern conditions is a very amorphous conception; in brief, it is decision-taking entity, embodying the policy of a firm. The capitalist rules of the economy encourage large-scale produc¬tion and the use of elaborate techniques. This raises output per man much above what an artisan can achieve.
Thus, one of the tasks of entrepreneur is, in fact, to organize his employees in such a way to reach the highest possible output. In the following chapters Robinson presents the traditional categories in which the sources of income are usually divided like wages, rent, interest and profits. She also provides very clear and complete explanation of each of these categories. According to Broadly, economic wealth is the command over goods and services that are desired, or consuming power for short. The significance of production lies in the consumption, which it makes possible.
The motive of each individual is to get command over money, and a flow of goods and services suitable to meet human wants emerges as a by¬product of their efforts to do so. Thus the purchasing power of individuals and groups is the major influence on their consuming power. The purchasing power in real terms of a sum of money consists in a list of all the possible goods and services that it might buy. Purchasing power must be examined, so to say, in two layers – the command of an individual or group over money, and the command given by a unit of money over goods and services.
She states her position that the marginal productivity theory is not appropriate to explain the distribution of the national income between capital and labor, because, as she explains it is impossible to measure capital independently of labor. When assessing purchasing power we cannot do without such notion as money. Generally, money and its function is one of the central notions of economy. The economy is monetary, because there is specialization and exchange between different groups.
Robinson underlies the importance of presenting the price level in terms of money, but she does not leave aside the importance of labor invested in the product. As she observes, many contracts besides the wage bargain are made in terms of money, and changes in the purchasing power of money bring about opposite changes in the real benefit and the real cost of the payments concerned so long as the contract holds. But in the long run all contracts are revised, so that a change in the real value of money becomes just a change in words.
Over the long run the important price level is the price level in terms of labor time, for this expresses the distribution of the total product of the economy between work and property. Robinson concludes her book with the chapter which deals with the importance of equilibrium in economic relations. She presents different models of economic cooperation and comes to conclusion that an economy, which existed in a state of tranquility, lucidity and harmony, would be devoted to the production and con¬sumption of wealth in a rational manner.
She emphasizes the necessity to describe these conditions to see how remote they are from the states in which actual economies dwell. Traditionally she resorts to the showing the real example on capitalist model, which could never have come into existence in such conditions, for the divorce between work and property, which makes large-scale enterprise possible, entails conflict; and the rules of the game have been developed precisely to make accumulation and technical progress possible in conditions of uncertainty and imperfect knowledge. Yet too much disturbance, deception and conflict would break an economy to pieces.
The persistence of capitalism till to day is evidence that certain principles of coherence are imbedded in its confusion, concludes Robinson in her work. The models of economic concepts in Joan Robinson’s The Accumulation of Capital are very easy to understand and provide insight into the fundamental elements of an extremely complex process of economies. By concentrating on the purely economic strands in the process of development we can provide a practical guide to understanding history, and indicate to people how best they might set about their task.
The Accumulation of Capital deals with money, credit, finance, interest rates, and banks. Joan Robinson exhibits her clear comprehension of the complexities of the financial world. Moreover, she appears to be able to provide a novelty of comprehensive view of the relations between the financial system and the macroeconomy. This book is a perfect source of valuable information on money, credit and finance. Reference: Robinson, Joan (1956), The Accumulation of Capital, Macmillan, London.