Re: "Infinite Wants"

[larson@xxxxxxxxxxx (S R Larsson)]

Greg Nowell:
>2.  One of the major themes in the General Theory is the
>reverse of that thesis.  It is phrased thus: "the decreasing
>marginal propensity to consume."  What that means is that
>wants DO get fulfilled (for individuals) and that they
>cut consumption accordingly (resulting in "savings").

S R Larsson:
This is true for single types of wants, such as the want for food. However,
this is not true for human needs in total. Once we have satisfied the need
for food (or cheese or beef, if we have that preference) we move on to the
next unsatisfied need, such as the intellectual want for stimulus. After a
good T-bone we thus turn on TV and watch The Good, The Bad, The Ugly. On a
macro level, stable and sustainable societies first satisfy their needs for
food, then erect health care, education and entertainment industries in
order of appearance. Those needs are unlimited - look e.g. at what needs
they were capable of satisfying in Europe some 1,000 years ago and compare
that to what we have accomplished today.

Greg Nowell:
>3.  The decrease in consumption (caused by the
>decreasing marginal propensity to consume) causes producers
>to perceive a decrease in "aggregate demand."  In response
>to that, they cut back in investment.

S R Larsson:
In the wrong hands (not in Nowell's) this argument could be used to
advocate macroeconomic thriftiness. The line of argument among
environmentalists is often that man must curb his needs to reduce his
vicious impact upon nature. Consequently, a fall in investment is viewed as
something good. Any argument asserting that needs are not infinite should
safeguard against being merged with such semi-religious attitudes. Again -
this point is not directed towards Nowell.

Greg Nowell:
>4.  When they cut back in investment, as a response to
>the decrease in aggregate demand, unemployment rises.
>This leads to "unnecessary scarcity."  The GT mounts
>a sophisticated attack on major capitalist investment
>institutions precisely with the intent of demonstrating
>that because human consumption is not infinite (the
>decreasing marginal propensity to consume) and because
>distribution (given the state of our society) depends
>primarily on jobs,  that
>something needs to be done to prevent a crisis in
>access to resources (food is one, but Keynes more often
>talks about housing, since even in the 1930s the
>masses of indigent were more often fed than housed).

S R Larsson:
I believe this is a misinterpretation of the core of General Theory.
Keynes's argument is that because it is uncertain what shape human needs
will take in the future, investment is partly unstable. What matters is not
to bring investment down on some level defined by finite wants, but to
stabilize it over time.



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Sven Robert Larsson
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