Keynes's theory of investment and necessary compromise

Introduction. David Ricardo is a very prominent figure in the history of economic thought. He is a recognized leader in classical political economy and a reputable financier in both Britain and Europe in the first half of the XIX century. He is rightly considered one of the creators of the labor theory of value, he has brought it to its logical conclusion. The scientist made a significant contribution to the development of a scientific method for studying economic phenomena.Purpose of the research is to generalize the economic views of a prominent scientist on economic phenomena and processes, the action of economic laws that ensure the balance of a market economy and the basic principles of economic liberalism; analyze the Ricardo’s views on the laws of social wealth distribution between three classes of society and the impact of the existing distribution of income on the growth of wealth.Methods. The methodological basis of the study are such general scientific methods as analysis, synthesis, induction and deduction, which were used to assess the views, conclusions and recommendations of the scientist to ensure market equilibrium and increase the material wealth of society; historical – to understand the essence of the evolution of existing views on the labor theory of value, the theory of money and land rent; combining the abstract method with quantitative analysis to determine the quantitative characteristics of economic phenomena; positive and normative – to study the main and distinctive features in the views of representatives of classical political economy.Results. It has been researched the David Ricardo’s scientific work and it has been established that he was a prominent representative of classical political economy, a follower and at the same time an opponent of certain theoretical positions of Adam Smith. It was found that the most important ideas of economic theory have been reflected in his labor theory of value, the theory of capital and money, the theory of income distribution, tax theory and the theory of comparative advantage in international trade. It was established that the scientist had made a significant contribution to the development of the scientific method of research, in particular, by introducing the method of convergence from the abstract to the concrete and widespread use of the method of scientific deduction. According to the scientist, the subject of political economy should be the study of the laws of distribution of income between classes of society in the form of rents, profits and wages. D. Ricardo made a significant contribution to the justification of free trade policy in the international sphere, the importance and profitability of foreign trade for countries.Discussion. The prospect for further research is a deeper and more detailed analysis of the methods used by the scientist in the study of economic phenomena and processes. This will allow assessing the Ricardo’s contribution to the formation and development of economics more objective.

Keynesova předmluva k německemu vydani jeho Obecne teorie je jednou z přicin spojovani jeho jmena s totalitnim režimem. Tento text se zabýva opravněnosti spojovani Keynesovy teorie s hospodařskou politikou nacistickeho Německa. V prvni casti jsou představeny Keynesovy nazory na hospodařskou politiku a jeho vize spolecnosti. Ve druhe casti jsou pak tyto konfrontovany s realitou nacistickeho Německa (a castecně bolsevickeho Ruska) a jsou zde identifikovany shodne prvky. Zavěrem prace je, že navzdory explicitnimu odmitnuti socialismu a diktatury a snaze zachranit kapitalismus byla Keynesova představa hospodařske politiky něcim, co se hospodařske politice nacistickeho Německa podobalo a cestu k socialismu a planovani oteviralo.

This paper analyzes the effects of changes in relative commodity prices on the distribution of income among factors of production in the context of two models of a simple, two-good economy. In the first model capital is treated as a specific factor in each industry, with labor mobile between industries. The assumption of specificity determines the direction of factor income changes, with magnitudes depending on substitutability between factors and on intensities of factor use within the two industries. In the second model, capital is viewed as a quasi-fixed factor. For the short run, this model is identical to the model first considered. For the long run, this model is identical to the Stolper-Samuelson model in which the direction and magnitude of factor income changes depend solely on relative factor intensities. The difference between the short-run and long-run determinants of changes in factor incomes gives rise to a conflict between factor owners' short-run and long-run interests.

IT IS A SUPPORTED conjecture that investment, at both macroand macroeconomic levels, generates income and expands capital capacity. Therefore, the desire to augment wealth is coterminous with a propensity to invest in the short run. According to Keynes's theory of investment, the rate of interest is the only variate that governs the decision to invest. The postulate of Keynes's theory of investment is the maximum-value criterion, which implies that, given technical knowledge, an entrepreneur is actuated only by the profit-maximization objective in investment planning, if he is acting in isolation. The consequences of such an assumption are not satisfying, because it leaves unexplained some frequently noted features of the behavior of firms and their objectives in capital budgeting. Because of these goals of American enterprise, changes in the rate of interest often have very little effect on the motive to invest; and investment demand may well continue high as long as it yields any positive return, however small. Thus, on the balance of these institutional considerations, the investment decision is geared to business behavior and business objectives in the American economy rather than to the rate of interest. In investment programing, management today is confronted with a host of factors which influence investment decisions. Some of these factors which make for growth in the American economy lie deep in the American institutional structure-the characteristics of corporate enterprise and financing, business goals, and the competitive process. Empirical evidence has shown that the American economy has provided strong pressures which drive constantly for increased investment and consequently output and profits. In this study these factors were submitted to statistical test. It was found that when management and businessmen plan future investment outlays, they are moved generally by (1) sales expectations, (2) financial considerations, and (3) the size of the firm. To put the matter more

The American Economic Journal: Macro­ economics was established in 2007 along with three other field journals focusing on micro­ economics, applied economics, and economic policy. As stated in the call for papers and on the jour­ nal Web site, AEJ: Macroeconomics focuses on studies of aggregate fluctuations and growth, and the role of policy in that context. Such studies often borrow from and interact with research in other fields, such as monetary theory, industrial organization, finance, labor economics, political economy, public finance, international econom­ ics, and development economics. To the extent that they make a contribution to macroeconom­ ics, papers in these fields are also welcome. The first order of business before the jour­ nal went into operation was the recruitment of a Coeditor. I was delighted that Steve Davis (University of Chicago) agreed to join. Steve and I have worked extremely well together. The second order of business was the recruit­ ment of members of the Board of Editors. This turned out to be easier than I expected, as nearly all the researchers we approached agreed to join. The Board of Editors consists of: Mark A. Aguiar (University of Rochester), Nick Bloom (Stanford University), Pierre Cahuc (Paris Pan­ theon), John Campbell (Harvard University), Yongsung Chang (University of Rochester), John H. Cochrane (University of Chicago, GSB), William Easterly (New York University), Jordi Gali (CREI), Martin Eichenbaum (Northwestern University), Erik Hurst (University of Chicago, GSB), Charles I. Jones (University of California, Berkeley), Anil Kashyap (University of Chicago, GSB), David Laibson (Harvard University), Jonathan A. Parker (Northwestern University), Maurice Obstfeld (University of California, Berkeley), Thomas Philippon (New York Uni­ versity), Chris Pissarides (London School of Economics), Valerie A. Ramey (University of California, San Diego), Christina D. Romer (Uni­ versity of California, Berkeley), David Romer (University of California, Berkeley), Thomas J. Sargent (New York University), Mark W. Watson (Princeton University), Ivan Werning Report of the Editor

Neoclassical and Keynesian approaches to the theory of investment

In their paper "Behavioral Finance and Post Keynesian-Institutionalist Theories of Financial Markets," Raines and Leathers discuss how the theories of Keynes, Davidson, and Galbraith could explain financial bubbles and crises and show how those theories are both confirmed by actual events and supported by some findings in behavioral finance. The current paper comments on their discussion and explores the potential contributions of behavioral finance to future developments of Post Keynesian and Institutionalist theories in other fields in finance, especially portfolio theory and asset pricing theory.

Intermediation, Money Creation, and Keynesian Macrodynamics in Multi-Agent Systems

In the introductory chapter of this book, Philip Arestis maintains that throughout the course of his academic career Malcolm Sawyer has adopted an ‘open-minded’ approach to economics, which had led him first to revive and then make ground-breaking contributions to Kaleckian economics from the 1970s onwards. This chapter supports this view. In his early academic career Malcolm published important empirical papers on the nature of modern capitalist economies (see, for instance, Aaronovitch and Sawyer, 1975a, 1975b; Henry et al., 1976; and Sawyer, 1971, 1976, 1979). This empirical work soon led him to question the dominant macroeconomics theories of the time, namely the IS-LM Keynesian theory (hereafter Keynesian theory) and the monetarist theory (Sawyer, 1982). In his view, for all their differences Keynesian and monetarist theories committed the same sin. Keynesian and monetarist theories were based on ad hoc hypotheses, with very little empirical support.

Part 1 Money in the economy: the institution of money - an introduction the monetary economy money, investment and saving - Keynes' crucial distinction, Say's Law in a monetary economy. Part 2 The Keynesian revolution and its critics - Robertsonian economics: Keynes' revolution the Robertsonian critique the principle of effective demand Keynes' theory of investment and saving Robertson and Keynes or investment and saving the finance of investment the rate of interest a monetary theory of the rate of interest the conditions for money as the standard the market rate of interest and its economic significance the Keynesian economic problem and its solution. Part 3 The Keynesian revolution and its critics - monetarists and Austrians: the consequences of Mr Keynes? monetarism - the counter-revolution - Keynes and the Keynesians - rational expectations the Austrians - tenets of the faith - Hayek and the trade cycle - two routes to serfdom employment policy the Keynesian revolution in context.

Over 3,500 entriesThis authoritative and comprehensive dictionary contains clear, concise definitions of key economic terms. Covering all aspects of economics including economic theory and policy, applied microeconomics and macroeconomics, labour economics, public economics and public finance, monetary economics, and environmental economics, this is the essential reference work in this area.Entries are supplemented by entry-level web links, and useful appendices include a list of institutional acronyms and their affiliated websites, a list of Nobel prize-winners in economics, the Greek alphabet, and a list of relevant websites.This dictionary is an essential guide for students and teachers of economics, business, and finance, as well as for professional economists and anyone who has to deal with economic data.

Drivers of Consumers’ Behaviour to Recycle Smartphones

This chapter will consider Keynes’ influence on economic thinking in the USA from the publication of The General Theory of Employment, Interest and Money in 1936 to the end of the 1940s, with a focus on fiscal policy and wages. Its goals are to pinpoint the components of Keynesian economics that formed a background to the Employment Act and to compare Keynesian economics with the political economy of a living wage to examine the feasibility of bundling them together into the hybrid system of redistributive economics, as happened in the USA. To do so, I will first review what Keynes said in that classic book and set forth the initial response his ideas found among economists in the USA during the late 1930s and the 1940s.

The relationship between religion and the state has entered a new phase ever since the Iranian Revolution more than three decades ago. The recent mass uprisings against autocratic rulers in the Arab world have highlighted the potency of Islamist forces in post-revolutionary societies in the region, a force arguably unlocked first by Iran’s version of the ‘spring’ three decades ago. The economic ramifications of these uprisings are of special interest at a time when the possibility of the creation of Islamic states can have implications for their economic policy and performance again. A study of the Iranian experience in itself can offer rare insights whether for its own features and characteristics or for its possible lessons and implications for recent events in the region. This book is concerned with the economic aspects and consequences of the Iranian Revolution in general and its interaction with the international economy in particular. Many studies have to date dealt with Iran’s economic challenges, policies and performance in the post-revolutionary period but its interaction with the international economy – although of growing importance – has not received sufficient attention. The contributions in this volume by experts in the field address ways in which in the span of three decades, Iran’s economy has evolved from a strong aspiration to develop an ‘independent economy’ to grappling with debilitating international economic sanctions.

Among the areas in which the Keynesian revolution has been more unsuccessful in changing orthodox views, the relationship between savings and investment must certainly be the best known. Even today, after more than seventy years of publication of The General Theory, policy-makers are still advised to raise national savings rates in order to accelerate growth (and, more recently, end the crisis initiated in 2007 in the United States). Keynes's proposition that investment creates savings, and not the converse, seems to violate fundamental intuitions of economists as well as of the general public. In fact, investment creates savings in monetary economies, the operation of which is harder to grasp than the corn economy that inspires the opposite causality. How is the relationship between savings and investment defined in Keynesian and orthodox theories? In this paper, Keynes's views are contrasted to Wicksell's and to Wicksellian approaches embodied in loanable funds theories. In particular, one searches to clarify the theoretical relationship between the concept of aggregate savings (non-consumed output) and financial savings (net demand for assets) that should be more relevant to a discussion of investment finance. The special concept of finance employed by Keynes is used to stress the role played by banks in Keynes's theory and, in combination with his rejection of Say's law, to clarify the meaning of the »investment creates saving« proposition.