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

[Harry Veeder <eo200@xxxxxxxxxxxxxxxxxxx>]

> From: Bruce McFarling <ecbm@xxxxxxxxxxxxxxxxxxx>
> Date: Wed, 10 Apr 2002 13:42:29 +1000
> To: pkt@xxxxxxxxxxxxxxxx
> Subject: Re: The economic whole equals the sum of its parts.
>
> 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.

The chain the reasoning assumes the legitimacy of the composition i.e. that
individual decisions can be "added up". If the composition is not justified
then the chain reasoning is irrelevant, even if it is logical sound.

Harry Veeder

> 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
>