Re: US Trade Deficit As 'World Engine Of Growth'?

[pdavidso <pdavidso@xxxxxxx>]

>===== Original Message From Robert Williams <vic93@xxxxxxxxxxxx> =====
>Paul
>
>>As I explain in my book FINANCIAL MARKETS, MONEY AND THE REAL WORLD,
>>
>Is this a quote?

No -- it is a description.
>
>> Keynes
>>deflated all nominal values by the money wage unit in order to use
Marshall's
>>scissor analogue of supply and demand -- where demand is one blde of a
scissor
>>and supply is the other blade.  Marshall then noted thast if we keep one
blade
>>of the scissor constant (by construction) then we can say that the other
blade
>>did all the cutting.
>>
>I'm not clear on what you are saying here or its implications.  I am
>aware that Marshal reversed the dependent asnd independent variables

[I
>find changing them back more useful] in order to develop his "Scissor"
>analogy and Keyenes followed in his footsteps.  I've never learned why
>he (Marshal) did this or why Keynes and everyone else followed suit and
>still use the analogy to this day.


The scissor analogy has nothing to do with reversing P and Q as idependent and
dependent variables-- The reversible thing you mention merely im plies that
the Marshallian cross should have Q on the vertical axis and P on the
horizontal axis.




>
>I also wonder at the validity of the "scissor" analogy as a fair
>representation of "the economy as a whole" it may address to some degree
>Keynes' concern for full employment [though I tend to think it doesn't]


Please read my book on FINANCIAL MARKETS, MONEY AND THE REAL WORLD --
ESPECIALLY CHAPTER 2 -- where I show how Keynes aggregated Marsdhallian
microsupply and demand curves for every fim in the economy to an aggregate
demand and supply functions.  It was these functions that underlay his
"principle of effective demand". Then, as Keynes wrote to Dennis Robertson,
Keynes was ewilling to accept the classical analysis of supply functions in
Marshall---

but nevertheless, by deflating these two aggregate functions by the money-wage
unit -- demonstrate that any exogeneous change in aggregate demand that moved
the economy away from full employment could NOT be automatically offset by
freely fluctuating money wages (the classical solution underlying Say's Law);

Instead Keynes's Marshallian micro to macro economics  required showing that a
return to full employment must show how a mechanism that shifts the aggregate
demand function (scissor blade) back to intersecting the aggregate supply
(fixed, by construction, scissor blade ) function at the point of full
employment.


>but it can in no way that I can envisage his concern for the fair and
>equitable distribution of the output of the economy.
If you read the first sentences of the last chapter of the GT, you will note
that Keynes indicated that the two major faults of the entrepreneurial
economics system was its inability to maintain full employment and its
inequitgable and arbitrary distribution of income and wealth.  The GT was
aimed at directly fixing the first fault -- and only indirectly toward
ameliorating fault two.



>>
>I have a number of thoughts on this matter. 1)  it may not be AG that
>needs managing at all if higher levels  of employment are the target.

What is AG?

>2) the use of the DD-SS analogy (scissors) returns a solution that is a
>point of intersection [the result of the reversal of the dependent and
>independent variables]  when a broader vista is needed [ that would
>return a solution of areas under the curve.]

Not if you are interested in curing involun tary unemployment -- as Keynes was
-- and with doubler digit uneployment in Euroland and significant unemployment
in most of the rest of the world (e.g., Japan) including most LDCs  -- I do
not think  a "broader vista" is needed.  Lets get to global full employment
first -- then we will have enugh goods and services available to worry about
"broader vistas".


Paul

Paul Davidson
Editor, Journal of Post Keynesian Economics
University of Tennessee
SMC 503
Knoxville, Tennessee 37996-0550
office phone #;(865)974-4221; office fax# (865)974-1686 or (865)974-4601
home phone and fax # (865)692-0802
email pdavidson@xxxxxxx
http://econ.bus.utk.edu/davidsonextra/Davidson.html