Given the aggregate supply, the level of income or employment is determined by the level of aggregate demand; the greater the aggregate demand, the greater the level of income and employment and vice versa.
Paradox of thrift Higher saving rates lead to a reduction in total saving When people save, they spend less, therefore businesses realise less revenue and reduce investment. Thereby, aggregate income declines and so does total saving.
Paradox of debt Efforts to de-leverage might lead to higher leverage ratios When everybody saves more out of their income to repay debt, aggregate income declines and leverage ratios rise. Paradox of tranquility Stability is destabilizing A stable economy makes people more optimistic, leading to higher risk taking and higher gross debt-income ratios, which creates instability.
Based on Lavoiep.
Epistemology Again it must first be noted that PKE does not provide a coherent epistemology, and that individual post-Keynesians probably hold very different views about truth, knowledge and the degree to which we can obtain knowledge of economic reality.
However, there are some implicit assumptions about the relationship between reality and scientific knowledge that are typical for PKE. First, post-Keynesians share the view that it is the task of empirical science to collect and systematise statements about the world that should reflect reality as adequately as possible.
Although economic models are always a highly simplified representation of actual causal mechanisms, they should ideally capture key aspects of reality as they exist. Second, PKE seems to presuppose that it requires both logical reasoning and empirical observation to construct good economic theories.
Rather than following a pure deductive method starting from, for instance, axioms about supposedly universal rules of human choice and then logically deriving more concrete propositions about empirical phenomena, PKE bases all theoretical assumptions on empirical evidence.
However, that does not mean that in PKE all theoretical assumptions are sought to be strictly proven by inductive reasoning, i. Theoretical assumptions should be in line with basic empirical knowledge of actual economic behaviour and phenomena. On top of that, logical reasoning plays an important role.
On a very basic level, this implies a desire for internal consistency of the individual statements of a theory, but also overall coherence. An example may be the link between microeconomic assumptions like competition, pricing and firm behaviour and macroeconomic theory like the determination of functional income distribution, which is the distribution of the GDP to wages and profits.
More specifically, logical reasoning plays an important role in creating economic theories that are consistent with the practice and implications of double-entry bookkeeping and national accounting.
Theories that fail to take into account basic accounting identities and their substantive economic consequences are certainly regarded as flawed by post-Keynesians. Third, post-Keynesians seem to share a certain awareness of the limits to economic knowledge.
This is reflected in a certain caution and modesty with respect to the reliability of economic predictions about quantitative variables e. GDP growth or inflation of a dynamic economy that is subject to structural change.
In such an economy particular empirical regularities only persist temporarily. Moreover, post-Keynesians do not seek to necessarily cast every relevant assumption or hypothesis into a formal framework, which would claim the possession of a degree of precision that may simply be not attainable due to the qualitative complexity of the respective phenomenon, e.
This view can be summarised by the rule of thumb that it is better to be roughly right than precisely wrong. Predictive success and the highest possible degree of quantitative precision are not regarded as the main objectives of economic theories, as these may not be reconcilable with the qualitatively complex and changing nature of the capitalist economies.
Economists should be aware of the limits to economic knowledge and rather work to develop realistic theories that provide an adequate description of actual causal mechanisms and plausible explanations.Preliminary versions of economic research. Did Consumers Want Less Debt?
Consumer Credit Demand Versus Supply in the Wake of the Financial Crisis. Keynesian economics (/ ˈ k eɪ n z i ə n / KAYN-zee-ən; sometimes called Keynesianism) are the various macroeconomic theories about how in the short run – and especially during recessions – economic output is strongly influenced by aggregate demand (total demand in the economy).In the Keynesian view, aggregate demand does not necessarily equal the productive capacity of the economy.
Economic anthropology is the product of a juxtaposition of two academic disciplines in the twentieth century. It would be wrong to speak of the relationship between economics and anthropology as a . New Keynesian economics is a school of contemporary macroeconomics that strives to provide microeconomic foundations for Keynesian barnweddingvt.com developed partly as a response to criticisms of Keynesian macroeconomics by adherents of new classical macroeconomics..
Two main assumptions define the New Keynesian approach to macroeconomics. ADVERTISEMENTS: Consumption Function: Concept, Keynes’s Theory and Important Features!
Introduction: Given the aggregate supply, the level of income or employment is determined by the level of aggregate demand; the greater the aggregate demand, the greater the level of income and employment and vice versa. ADVERTISEMENTS: . An economy based increasingly on rent extraction by the few and debt buildup by the many is a feudal model.