Today’s Economics

Keynes on Saving and Investment.

Keynes on Saving and Investment. (Photo credit: Wikipedia)

I read a lot of economics: books, journals, and blogs. For me, it’s a hobby. Some days I find a bit of economic insight that is especially rewarding. Today’s is from Cafe Hayek:

Keynes implicitly assumed that all the microeconomic relationships in a slumping economy are just dandy or are insignificant and so, either way, can be ignored by manipulators of macroeconomic policy.  Relative prices; the structure of relationships between different capital goods; the time necessary for capital to be reconstituted and redeployed (history does matter); and the legal, political, and cultural underpinnings of economic activities and relationships – these are not incidental doohickies in an economy.  Nor are these phenomena ones that can be legitimately scientifically cabined off by themselves, labeled “microeconomic,” and safely ignored while “macro” economists focus on “aggregate demand” independently of these other phenomena.  But that’s what too many modern macroeconomists – especially Keynesians – do.

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