Re: The Axiom of Gross Substitution

[Harry Veeder <eo200@xxxxxx>]

Gunnar,

> Harry:
>
> Re. the following:
>
>> Another way to understand credit is to see credit as the redirection of
>> labour from the community to the entrepeneur in return for paid
> employment.
>> The interest rate on a line of credit is the cost incurred by the
> community
>> as labour stands idle waiting to be hired. Interest isn't bad per se. It
> is
>> bad when the interest income is not duly distributed.
>
> Comment:
>
> I agree that "interest isn't bad per se" - what is "bad" is the intellectual
> myopia which has prevented the vast majority of economic scholars from
> recognizing, acknowledging, and acting on Schumpeter's point that interest
> on Production Credit is a SOCIO-economic rather than a purely economic
> phenomenon.
>
> For so long as economic scholars fail/refuse to see the point at issue, they
> don't have a leg to stand on insofar as challenging the monetary policy
> prescrptions of The Washington Consensus, which holds that just as high unit
> price increases supply and reduces demand for goods and services, so high
> interest rates serve to increase the supply of and reduce the demand for
> 'saving'.
>
> Of course, once it is conceded that, "in the context of the "ideal
> conditions" involved, "net savings" and "net factor investment" in the
> economy's work in progress are ONE and the SAME thing," advocates of The
> Washington Consensus would be laughed off the world stage.
>
> Gunnar


I agree that changes in interest rates cannot change the quantity of saving
without an identical change in the  quantity of investment, but from this
alone one cannot conclude that saving and investment are one and the same
thing. To me it suggests that saving and investment are different because
they differ socio-economically.

Harry Veeder