Re: The economic whole equals the sum of its parts.

[Bruce McFarling <ecbm@xxxxxxxxxxxxxxxxxxx>]

On Sun, 07 Apr 2002 17:16:52 +0100, Harry Veeder
<eo200@xxxxxxxxxxxxxxxxxxx> wrote:

>The 'fallacy composition' argument can even be applied to
>Keynesian macroeconomics -- It is a 'fallacy' to assume
>aggregate saving is simply sum of individual decisions to
>not spend.

This would be one of the critiques by Post Keynesians
of such neoclassical-Keynesian reasoning, wouldn't it?
By contrast the General Theory argument carefully
considers how individual decisions to spend and not
to spend add up, and by consideration of which
transactions net out on aggregation and which do
not arrives at the conclusion that the net sum of
individual decisions not to spend will always be equal
to the aggregate saving.  It is through such fallacy
of composition reasoning that you can reach a point
where politicians can laud the benefit to the economy
of policies directed to increase the savings rate
_per se_, and end up being applauded rather than
laughed off the stage by what is supposed to be the
economically educated portion of the audience.

Of course, the business audience applause is easier
to justify, since people who have money to save tend
to have more money than those who do not (JKG), so
that the same policies that are presented as efforts
to reduce demand for their product are also clearly
explained in the "personal finance" columns of the
financial news section as being effective subsidies
for wealth accumulation.

--
Dr. Bruce R. McFarling, PhD
Bus. Office 1.72 -- (02) 4348-4078
School of Business
Faculty of the Central Coast
Newcastle University, Ourimbah