Welcome to a blog about John R Commons and the Spartan School of Institutional Economics

Welcome to the a blog on John R.Commons and some thoughts on institutional economics as it has evolved at Michigan State University under A. Allan Schmid, Robert Solo, Warren Samuels, Sandra Batie and James Schafer. I hope to explore some of the current academic articles being written about Commons and MSU faculty who worked in this tradition to see how our understanding of this important vein of economics continues to expand and evolve.

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Commons Futurity pg. 510-526 VI. The Transactional System of Money and Value

VI. The Transactional System of Money and Value The overall objective of this section is to understand money and its role and relationship to economic value in the institutional economics of John R. Commons. Commons writes that, "It is because Value is a two-dimensional concept (omitting futurity)—with two different causations, the one being the scarcity-value, or price, determined by supply and demand, the other being the greater or smaller output of use-value which will be created in the labor process that follows the transaction. " (Commons, pg. 517, 1934). The point here is again Commons is fighting against what he observes are the limits of other definitions of economic value such as simply individual utility or the classical case of exchange value only. In this section, Commons make an important move on pages 520 and 521. He states that for a thing to be objective it needs to be independent of any objective will as opposed to other competing definitions. He will ...

Commons Futurity pg.526-528

Commons Futurity VII. The Margin for Profit pg 526-528 In this section, Commons turns to thinking about a specific aspect of modern banker capitalism addressing the question of profit's role in the economy. He starts with some terminology regarding profit share - the share of national income that goes to profit earners and the profit margin - the dynamic aspect that drives a going concern forward. We then move into another set of terms that are rate of profit and profit yield. The rate of profit is related to the par value of stock and yield is related to market value of stock or outstanding equity. The social question to Commons is what the role of profit in keeping the overall economy and does society or community pay too much or too little for this service. Economists have long thought about the role of profits in driving the economy up or down. Commons believes there are profit share theories and profit margin theories as two diction categories in economic thinking...

Common's Futurity pg. 506-510

V. Interest and Profit Discount This section starts with a well known adage, likely as well known today as hundred years ago, that risk and uncertainty drive a discounting of the future as compared to the present. Interest rates then a re a measure of that future risk but leading to a specific discount factor today. Commons gives the example of a laborer who is in essence also a creditor to a business or any going concern. The laborer is paid in arrears, but in the meantime is working and creating use value for the employer. A business is also doing the same thing on the commodity and debt markets. A business may borrow a certain amount form a bank promising to repay them in a short period of time. The business will factor in repaying the loan and also generating a profit, in essence a interest and profit discount of what they are paying for materials and labor today for use value tomorrow. The business may turn out to right or wrong but this is their best forecast at the mo...

A Discourse on John R Commons

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