Re: Savings fallacy redux (was Re: Method)

[Bruce McFarling <ecbm@xxxxxxxxxxxxxxxxxxx>]

>What does it mean in the real-world? where as a rule of doing
>business the retail sector has to assume all disbursements made,
>both higher up in the economy and on their own level, and depends
>on a return for survival.

>The real-world economy, while producing real wealth, is thus always
>out on a limb.  It's both in disequilibrium and in debt (regardless
>of outstanding loans!); and equilibration and the resolvability of
>debt are only a potential ongoing possibility in a dynamic sense.
>Is this the world of the GT?

Yes, that is the world of the GT.  Growth in GDP occurs as a result
of the creation of new financial assets, which ARE assets because
they are obligations.  It is because businesses are out on a limb
that they must judge their expected effective demand, and make their
short period plans accordingly, and respond if their plans are not
realised.  This even goes beyond the GT into Post Keynesian theory
such as PK price theory ... it is because businesses are out on a
limb that large firms administer their prices to the extent that
they can, and attempt to ensure that they can cover their variable
costs on an ongoing basis.

That is, indeed, why I prefer the GT model to mechanistic models
such as the neoKeynesian model. The false certainty of the
neoKeynesian model may be reassuring, but falls short of being fully
informative.

Cutting that "being out on a limb" out of the Keynesian model cut
the heart out, which is why proponents of the Cambridge UK approach
called the Cambridge Mass approach "bastard Keynesian" analysis: the
implication being that if Keynes had been alive, he would have pointed
out that it is not a legitimate expression of Keynes model, no matter
how much parentage it might owe to Keynes model.




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