Study Guide to Man, Economy, and State with Power and Market

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Chapter 11: Money and Its Purchasing Power 147 17. Further Fallacies of the Keynesian System A. Interest and Investment The interest rate has no causal relation to investment; both are determined by time preferences. B. The “Consumption Function” In contrast to investment, Keynesians consider consumption a very “stable” function of income, and find a high correlation between the two. But since consumption is a very large fraction of income, it is no wonder! If instead Keynesians had run regressions comparing income with investment, and income with saving, they would not have classified investment as “unstable.” C. The Multiplier Using the exact same logic as the Keynesians, one could “prove” that the way to boost GDP by $100,000 is to give the reader an extra dollar bill. 18. The Fallacy of the Acceleration Principle The so-called acceleration principle is best illustrated with an example: If a laundromat has ten dryers with an average life of ten years, then on average the owner will buy a new dryer every year. If his business picks up 10 percent, such that he needs to carry eleven dryers, he will have to buy two additional dryers in the first year—an increase of 100 percent. Hence the increased consumer demand has been “accelerated” by a factor of ten in the higher orders. But as Hutt first pointed out, such scenarios completely rely on the time period under consideration. If we adopt a ten-year framework, then there is no
148 Study Guide to Man, Economy, and State with Power and Market “acceleration” at all: a 10 percent increase in business translates into a 10 percent increase in sales for the producers of industrial dryers.
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STUDY GUIDE TO MAN, ECONOMY, AND ST
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STUDY GUIDE TO MAN, ECONOMY, AND ST
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CONTENTS INTRODUCTION . . . . . . .
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In June of 2004, I became convinced
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Introduction ix appropriate, I have
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Chapter Summary In a money economy,
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Chapter 4: Prices and Consumption 4
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Chapter Summary In the evenly rotat
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Chapter 6: Production: The Rate of
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Chapter Summary This chapter explai
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Chapter 7: Production: General Pric
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Chapter Summary Entrepreneurial pro
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Chapter 8: Production: Entrepreneur
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Chapter Summary Society is composed
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Chapter 4: Binary Intervention: Tax
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Chapter Summary There has been litt
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Apriorism, 1, 9 Ability-to-pay prin
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Index 251 Equilibrium, 47, 104 macr
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Index 253 Medium of exchange, 27, 3
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Index 255 See also Economy, Evenly
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