[OPE-L:6792] Re: Re: Re: Paul Krugman

From: Steve Keen (s.keen@uws.edu.au)
Date: Thu Mar 21 2002 - 01:09:05 EST

Thank you Rakesh: I am genuinely touched! I would also appreciate--if you 
don't mind!--you putting that comment on the Amazon site about the book. 
The more reader feedback like that, the better the chances of the book 
having an impact. It has already sold out in the USA, and is being 
reprinted now.

As for your point, in Keynes's analysis the demand for investment goods is 
a "derived demand"--investors only want to purchase capital goods if they 
believe that there will in turn be a demand for consumer goods that these 
capital goods will help manufacture. If there is a decline in consumption 
now, capitalists can react by believing that there will be less demand for 
consumer goods in the future, and the fall in C is met by a fall in I, 
rather than the Say's Law vision of a fall in C being met by an increase in 
I, thus sustaining overall balance.

As for why, it's all in line with Marx: capitalists don't want investment 
goods for their own sake, but to make a profit. If they don't perceive a 
profit, they won't buy them, and then investment demand can collapse.

I go into this in much more detail in a paper I've written for a book on 
Say's Law (where my chapter is one of the few critical ones). Let me know 
if you'd like a copy.

At 04:23 PM 21/03/2002 Thursday, you wrote:
>re: Steve's 6785
>>It is tremendously confused Rakesh, and the critiques Sraffa made of it 
>>in the 1920s are still worth a read today.
>>The basis of it is diminishing marginal productivity, which is a simply 
>>nonsensical argument to apply to capital machinery, as Sraffa argued and 
>>as I elaborate in my Debunking Economics.
>>Keynes had pretty much abandoned the MEI arguments by 1937, but of course 
>>textbook writers kept it alive because it was such familiar marginalist stuff.
>Well between Krugman's lectures, I jumped ahead to your chapter on Keynes, 
>"The sum of the parts". And I see your attempt to redefine the term on p. 202.
>But first I think there is a contradiction.
>Well before that let me say that you write extremely well and precisely. 
>Your prose is a model of clarity and concision.
>You quote Marx's critique of that pretty conception that the basis of 
>capitalist production is the direct satisfaction of the consumption of the 
>But then you say that "a decline in spending on consumption by consumers 
>could lead to investors to also reduce their demand for investment goods, 
>so that the economy could remain in a situation of inadequate excess 
>demand." p 198
>Yet if capitalist production is not driven forward by the attempt at the 
>direct satisfaction of the consumption of the producers, then why would a 
>decline in consumption by consumers, however effected, tend to lead 
>investors to reduce their demand for investment goods?

Home Page: http://www.debunking-economics.com
Dr. Steve Keen
Associate Professor of Economics & Finance
School of Economics and Finance
Campbelltown Campus, Building 11 Room 30,
s.keen@uws.edu.au 61 2 4620-3016 Fax 61 2 4626-6683
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