[OPE-L:7191] [OPE-L:709] Reply on my Keynes book

Michael Perelman (michael@ecst.csuchico.edu)
Fri, 19 Mar 1999 10:03:02 -0800

John Ernst asked me to elaborate on my book: Keynes, Investment Theory and the
Economic Slowdown: The Role of Replacement Investment and q-Ratios (NY and London:
St. Martin's and Macmillan, 1989).

The relevant part for this discussion argued that Keynesianish monetary and fiscal
policies in the U. S. served to increase demand, and thereby remove the sharp edge
of competition. Protected from heavy competition during the early postwar period,
U.S. industry felt little pressure to renew capital goods. Instead, industry
widened rather than deepened its capital stock.

In the late 1960s and early '70s when imports became more competitive, U.S.
industry was saddled with great deal of obsolete plant and equipment. In effect,
I argued that a capitalist economy requires competitive forces that Keynesian
policy attempts to moderate and that recessions and depressions are necessary in a
market economy.


Michael Perelman Economics Department California State University michael@ecst.csuchico.edu Chico, CA 95929 530-898-5321 fax 530-898-5901