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They seem to deny that there is anything called malinvestment. All that matters is aggregate demand.
by jstalin 11y ago
They seem to deny that there is anything called malinvestment. All that matters is aggregate demand.
- JamesBarney 11y agoKeynesians believe that there is malinvestment. They just believe that malinvestment has a direct impact on per capita efficiency but doesn't have an impact on labor utilization except through aggregate demand. Basically there is a difference between 1. 10 people growing bananas when the economy would be better off with 7 people growing bananas and 3 people growing apples. 2. 9 people growing bananas and 1 person sitting on his butt doing nothing because he can't find a banana growing job. Even though the economy would be better off with 10 banana growers then none. The problem with recessions is that per person productivity usually goes up but less people are employed. This phenomenon is hard to explain without referencing aggregate demand.
- marcosdumay 11y agoIf you read Keynes, you'll see that capital ROI is the inverse (1/x) of the share of their income that the population invests. Yep, that simple. That's called investment multiplier, and economists were discussing at the late 00's how it could vary from one company to the other given the Keynes' identities.