Here’s your update on tonight’s meeting at the UoA Economics Group:
Tonight at the UoA Economics Group, we’ll be looking at a lecture provocatively titled ‘Why Your Grandfather’s Economics Was Better Than Yours’ – that is, if your grandfather had grown up and learned his economics before the 1930s.
Today it is commonly said that recessions are always caused by a deficiency of aggregate demand (including, somehow, the present global meltdown, which featured at its inception exploding consumption). Prior to Keynes however, recessions were understood not in terms of the level of demand but of the structure of demand. The difference could not be more profound.
Keynes wrote that Say’s Law meant that “supply creates its own demand”—suggesting (in his interpretation of this important classical proposition) that everything produced would automatically get a buyer. But what was it that Say actually said? Isn't it true that he actually asserted that demand springs from production? The difference could not be more important.
The Keynesian model makes the engine of growth appear to be expenditure—especially government expenditure. In contrast, however, your grandfather considered that growth and recovery relies on new production—which explicitly means production by (and recovery of) the private sector. The difference could not be more germane.
The Keynesian medicine has been tried many times such as in Japan, and also in the U.S. in the Great Depression. Did it work? How did the medicine of classical economics fare in their time? Did it succeed in lifting these economies out of recession and back into productivity? The difference was real.
In other words, what can we learn from the economics of your grandfather (or, more accurately, your great-great-grandfather)?
Date: 6 September
Location: Case Room 1, Level 0, Owen G Glenn Building, University of Auckland Business School
See you tonight