Free Capitalist Network - Community Archive
Mises Community Archive
An online community for fans of Austrian economics and libertarianism, featuring forums, user blogs, and more.

is Keynes' spending creates jobs theory flawed because we

rated by 0 users
Answered (Verified) This post has 1 verified answer | 3 Replies | 3 Followers

Top 500 Contributor
115 Posts
Points 5,265
inquisitiveteenager posted on Mon, Aug 17 2009 3:58 AM

 

because ultimately we produce to consume, not consume to produce.

Keynes seems to think that we consume to produce.

  • | Post Points: 50

Answered (Verified) Verified Answer

Top 50 Contributor
Male
1,687 Posts
Points 22,990
Answered (Verified) Bogart replied on Mon, Aug 17 2009 12:53 PM
Verified by nirgrahamUK

Not exactly.

We save to produce and produce to consume.  It all starts with savings.  People forgo consumption to build better ways to produce things.

  • | Post Points: 5

All Replies

Top 100 Contributor
875 Posts
Points 14,180
xahrx replied on Mon, Aug 17 2009 7:52 AM

Sounds like a chicken/egg thing.  He's wrong because he assumes what we produce or consume doesn't matter, so long as it happens.  Hence paying people to bury money and dig it up later.  Whether we consume to produce or produce to consume, the underlying point is there's no inherrent value in the act itself of buying or working.  There is a structure of demand, what people want now and what they want in the future and what they're willing to forego to make the latter happen, and whatever distorts the market away from aligning with this basic reality will inherrently cause problems down the line, because you'll either have made something no one wants or bought something you didn't really have the means to aquire.

"I was just in the bathroom getting ready to leave the house, if you must know, and a sudden wave of admiration for the cotton swab came over me." - Anonymous
  • | Post Points: 5
Top 50 Contributor
Male
1,687 Posts
Points 22,990
Answered (Verified) Bogart replied on Mon, Aug 17 2009 12:53 PM
Verified by nirgrahamUK

Not exactly.

We save to produce and produce to consume.  It all starts with savings.  People forgo consumption to build better ways to produce things.

  • | Post Points: 5
Top 10 Contributor
Male
4,985 Posts
Points 90,430

Hutt has written about this. Essentally what he says is that if there is a lack of supply or demand it can be the result of not being able or not being willing to sell or deny respectively. Hutt puts Keynes' arguments as follows, depressions occur because of insufficient aggregate demand. To put it in other words, suppliers cannot sell because they are unable to sell due to the unwillingness of consumers to demand. However, Hutt says that what in fact occurs is that because a certain group of individuals within a given economy are restricting the supply this will, as a result of Say's law, cause the ability of others to demand to decline. Now, Hutt criticizes Keynes because he says that a valuable asset will be demanded at any price, therefore it is entirely nonsensical to claim that people aren't demanding enough goods.

IOW, Keynes had it backwards.

"You don't need a weatherman to know which way the wind blows"

Bob Dylan

  • | Post Points: 5
Page 1 of 1 (4 items) | RSS