Keynesian theory of error analysis

Document Sample
Keynesian theory of error analysis Powered By Docstoc
					Analysis of the Keynesian theory of errors
Keynesian theory of error analysis
   [Abstract] the emergence of Keynesian theory, for the Western capitalist countries
out of economic crisis, play a positive role in promoting economic growth.
"Stagflation" crisis generation marks the failure of the
Keynesian. In this paper, the Marxist stand, viewpoint and methods of critical errors
in their theory in order for us the ongoing construction of the socialist market
economy to provide experiences and lessons.
   [Key words] Keynesian state intervention in economic crisis
After World War II, the Western capitalist countries is mainly based on Keynesian
theory, the use of fiscal policy and monetary policy to conduct large-scale intervention
in the economy, regulating aggregate demand, and easing out of the crisis and
promoting economic growth. Adapt their common interests of the Western
bourgeoisie, they have been widely accepted in Western countries, has gradually
become popular in Western countries of "dominant" economics.
After 40 years of the 20th century, the state intervention indeed the Western capitalist
world economic recovery have a positive effect, but the 70's led to a
"stagflation" crisis is the negative consequences of it.
Keynesian theory of error
   First, the Keynesian theory is one of the preconditions with sticky prices and wages
(ie, lack of flexibility). In accordance with Marxist theory to analyze the law of value
is not hard to find, once the market equilibrium has been destroyed, wages and prices
will change, enterprise wages and prices are changing, too. If wages remain
unchanged, higher than the market wage, businesses will be hired at lower wage
another person; if less than the market wage, workers will find better paid jobs. If
prices remain unchanged, higher than the market prices can not be achieved sales;
below market prices to reduce corporate profits. Product market equilibrium point is
determined by the product determined by the average social cost of production, once
the scientific and technological progress to reduce product cost, or external shocks to
product costs, market equilibrium point will follow changes in product prices will
come down or increased. In addition, market prices affect supply and demand by the
market. Oversupply, the company cut prices to achieve sales race; in short supply,
companies have to expand the profit prices. Labor market equilibrium consumption
level is determined by the level of science and technology, raise the level of science
and technology, while reducing labor demand, wages fall; consumption standard, then
supply increases, wages rise. Science and technology to develop new products, labor
demand increases; if consumption levels increase, reducing labor demand. Meanwhile,
the market wage by the labor market impact of supply and demand, labor supply and
demand are affected by product market impact. Thus, Keynes on wage and price
inelastic in the theoretical premise is not established, the error committed incomplete.
   Second, lack of social demand Keynes attributed to the "propensity to
consume," "expected future benefits of capital" and
the currency's "liquidity preference" of these three
fundamental psychological factors. He asserted that the psychological propensity to
consume, so keep up the growth of consumer income growth, and thus lead to
insufficient consumer demand; psychological liquidity preference and the expected
future returns on capital, so that profit margins are expected to trend lower, which
with interest is not adapt, which leads to lack of investment demand; psychological
expectations of future returns on capital (ie, the marginal efficiency of capital) is
particularly important role in the crisis the main reason is that a sudden collapse of the
marginal efficiency of capital. This view is subjective and one-sided.
   In fact, the propensity to consume is the level of income, the level of the price level
and supply factors. First, the level of consumption depends on the level of income,
high-revenue, high consumption, whereas the low income consumer; Secondly, the
choice of consumer goods by the market price, prices of products to reduce
consumption, lower prices increase product consumption; third, consumption
structure by supply constraints, one can only consumption of existing products,
supply many large consumer products, supply a small amount of product consumption
less. Meanwhile, consumer spending power tend to be restricted, people with certain
products, spending power is limited. Expectations of capital gains is determined by
market prices, prices of products with high expected returns, price cuts production
expected return is low; and market price movements are determined by supply and
demand, oversupply will lower prices, are in short supply prices. That is, supply and
demand for consumption and investment psychology, not the reverse. Keynes
reversed causality.
   Third, the Keynesian theory advocated by controlling the price to adjust the
economy, advocates of inflation against deflation. Keynes did not micro-economic
point of view is indicated. That is, Keynes rejected the abstract conclusions of
microeconomics, neither system changes the theoretical system of classical economics,
but also not be analyzed on the basis of micro-economics argument. According to the
Marxist view of economics: supply and demand determine the market price. Product
oversupply, prices drop; products in short supply, prices. In fact, the price movement
has its own laws, it has always been the center around the theoretical price changes as
supply and demand fluctuations, while the theoretical price is determined by the
average social cost of production. Man-made changes in price will lead to distorted
market signals, thereby misleading the production and consumption. Keynes using
price to regulate the market, using price changes to affect the supply and demand,
stimulate market consumption. It should be said that this claim is against the law of
value movement.
   So why capitalism in 50-60 years to have the "golden period"
of the big development? We should look at the issue rationally. Here of course there is
the positive role of the Keynesian theory, but should play a major role is the second
technological revolution. This is the contradiction between productive forces and
production relations continue to develop scientific and technological revolution has
brought productivity gains. Keynesian theory of state intervention in its
implementation, did receive immediate results. From the early postwar period to the
late sixties, Keynesian widely disseminated and applied in the United States, the U.S.
economy with a heavy deficit burden, made more than 20 years of sustained growth.
Indeed, the United States and other Western capitalist countries contributed to the
economic recovery. But also potential loss of balance national economic crisis. To 70
years,       concurrent        production       of      stagnation       and      inflation,
"stagflation" crisis occurred.
Keynesian theory is "off delay" of the source
   Keynes rejected the classical economic theory system, but not create their own
micro-economics, economic theory has led to an incomplete system. In fact, this is a
macroeconomic theory and microeconomic theory inconsistent result. Keynesian
economics lacks microeconomic foundation, and micro-economic conditions of, and
ultimately can not explain the phenomenon of stagflation. In essence, the Keynesian
theory is "off delay" of the source.
   Why? We analyze the following aspects:
   First, the price control policy outcomes. Fluctuations in market prices determined
by supply and demand and supply over demand is lower prices, demand is greater
than the supply prices. Deflation is greater than the supply of most commodities
demand, if it is artificial price increase, have resulted in a further decrease in demand,
while another part of the demand is greater than supply, prices of goods further. The
result is increased surplus of products on the one hand, resulting in stagnation on the
other hand is the most commodity prices, causing inflation. Not market the product
caused a lot of excess corporate bankruptcy and unemployment. However,
unemployment is reduced to make payroll, thus further reducing demand and,
eventually, led to a surplus of products. And so it was a "lag
   Second, the result of increased public works spending. Increased investment in
public works, and the corresponding increase in wages to the total, thereby increasing
consumption, aggregate demand expansion. But this expansion is the expansion of
consumption, while the structure of the market supply and demand of goods has little
effect, the oversupply of goods are still unable to sell. The problem of excess product
not only not been resolved, but added to inflation. Wage increases to stimulate
consumption of this policy only in massive unemployment, the absolute decline in
total wages when applicable, and can only resist the economic downturn, not to
promote economic growth, will lead to inflation. The end result is still the
   Third, the monetary policy results. The additional issuance of currency to money
supply increases, however, changed the total product, thus increasing the money first
and foremost the result of inflation. Lower interest rates and lure investors to stop a
recession in the economy when only apply when the economic recession companies
will not resume production, it also caused economic stagnation.
Evaluation of Keynesian theory
   Keynesianism in order to reduce the cost of economic development indeed reduce
economic fluctuations; the cost of sacrificing efficiency did increase employment.
Keynes created the investment multiplier theory, this is a major contribution to
macroeconomics. Keynesian economic policies led to the government study, led the
government to maintain market order, intervene in the management of economic
development. Keynesian theory is a crisis of economics, in an economic crisis, its
policy can stabilize the panic, to some extent stabilize the capitalist world economy.
   Marxist political economy view is: the economic crises of capitalism is the root
cause of the socialization of capitalist production and the means of production, the
contradiction between private ownership. In fact, the economic crisis and
unemployment is the source of the capitalist system itself. Western economists
(including Keynesian) theory point of view has always been inseparable from the
capitalist system.
   Keynesian theory only in a specific historical period, the surface of the economic
crisis under control, but did not touch the fundamental essence of the capitalist
economic crisis, there is no cure symptoms. Correct approach should be to respect the
objective economic laws, timely adjustment of economic structure.
Keynesian economic system of China
   Since reform and opening, China's macroeconomic regulation and
control of economic instruments relies mainly on monetary policy to monetary
policy-oriented macroeconomic transition to a market economy in China, the process
of giving full play to its efficiency first, voluntary allocation optimization features, for
promoting economic growth played a very important role. However, this monetary
policy-oriented macro-control policy also has shortcomings and that is not visible
from the fundamental solution to the gap in agricultural issues and problems. Western
capitalist countries experience shows that fiscal policy in addressing these questions,
still have a great advantage. Keynesian monetary and fiscal policies with the use of
the experience is worth drawing.
   China's economic reform objective is to establish a socialist market
economic system, which is a pioneering undertaking in history, there is no
ready-made direct use of the experience, we can not do the Western market economy
model. Process in the Chinese market, how to choose the economic policies of
China's national conditions, we need to continue to sum up the successful
experience of China's economic policy. Must also absorb the successful
experiences of foreign economic theory, developed for China's
development policies to promote sustained, stable and healthy development. Thus,
treatment of Keynesian economic theory and policy, we can not blindly away, nor can
we copy, we must criticize the study, absorb and learn from its experiences and
lessons enabling the use of its reform and opening to speed up economic

Shared By: