Re: Stiglitz on Soros--question for Leigh

[Bruce McFarling <ecbm@xxxxxxxxxxxxxxxxxxx>]

On Fri, 24 May 2002 21:04:38 +1000, Leigh Harkness
<Leigh@xxxxxxxxxxxxxxxxxxxx> wrote:

>I have responded to your questions below.

>You may find it useful to distinguish between monetary issues and
>real issues in the economy.  I recollect that even Keynes confused
>himself on this matter, mixing up monetary investment with real
>investment.

When was it he was supposedly doing this?  The GT is as
clear on this as it is on anything: for modification of
effective demand (which is a monetary aggregate), the key
is what monetary result in expenditures on newly produced
goods and services, thereby entering the income/expenditure
loop as effective demand.  Monetary investment that does
not do this is buying an existing financial or real asset
and is normally offset by the matching monetary disinvestment
by the seller of the asset.  The new creation of effective
demand is a monetary operation typically requiring the
creation of a new financial asset.  Among the incentives for
engaging in this process is the need by an entrepreneurial
organisation to acquire productive equipment, materials
used in process, or finance payroll in advance of the
proceeds of a sale.

Of course, Samulesonian economics tends to get confused
on the point by dropping the ball on the monetary side and
sometimes conflating the acquisition of the productive
equipment with the net new monetary investment that was
required to purchase that equipment.


Virtually,

Bruce McFarling, New Lambton, NSW
ecbm@xxxxxxxxxxxxxxxxxxx