суббота, 2 ноября 2013 г.

Error of Keynes

If you are interested in my theory, outlined in the MANIFESTO OF THE NEW ECONOMIC THEORY then I can write a book or an article for your order to be published in your journal.
"The great mistake of modern economic theory is that consequence is taken for cause .This misconception is based on the theory of Keynes, and therefore leads to absurd conclusions.

Usually when they want to describe the principle underlying the Keynesian theory they describe a society in which all citizens produce quality and goods on demand, but everybody is in trouble, because due to the lack of money no one can buy this product .Now, if we give one of them $ 100 and he will buy  boots for it, then the GDP will increase by $ 100.Then a shoemaker will buy a tool from a blacksmith for the same money, and GDP will increase by$ 200 now. A blacksmith  will buy grain, etc..Thus, the $ 100  will not only bring happiness to all, but will also lead to an infinite growth of GDP .Absurd.

Of course, there is a confusion here .Actually a purely operational problem is described here  where you can not exchange the goods, otherwise than through cash, but nobody has the banknotes. However, this situation is a very theoretical one. If there is a highly demanded product, people will find a way to exchange it, especially in the current conditions of diversity of the payments and settlements.

To somehow mitigate the absurdity of the above situation, when $ 100 leads to an infinite increase in GDP, the followers of Keynes, suggest that this case – the ultimate case. And that in fact the GDP will not grow indefinitely because (and only because) a shoemaker and a blacksmith will not buy anything  for all the money,  and some of that money will be obligatory deposited. For these followers, "not-eating" all resources is a negative phenomenon. It is hard to imagine a more devastating statement for the economy. So it is no surprising  that the world brought up on Keynesian theory is vulnerable to economic crises.

"Eating away" money being poured into the economy leads to a temporary increase in GDP, but the entropy itself is not growing, but  it is only redistributed. And so when the economy makes sure that it is "empty" money, everything will return to even worse state, because the crisis did not stop. To prevent it, it is necessary to increase the entropy, and for this one needs  money, which society can invest, the money that the shoemaker and the blacksmith deposited . It is this money  that will bring freedom of choice and opportunity. Hence such an accumulation of funds is a positive factor . But a modern economic theory, which absorbed incorrect postulates of  Keynes, continues to lead the national economy to the wrong direction, focusing on GDP as the main criterion and flooding the economy with "empty" money.

Economic growth is accompanied by an increase in GDP, but the cause is the change in entropy, change in GDP - a consequence. An attempt to replace cause and consequence leads to a primitive fetishism. As a savage imitates thunder to cause rain, and the government stimulates the demand, hoping to trigger economic growth.
I think it would be more useful to repeat the words of Keynes's notion that in a crisis a state should behave as "the last big spender."  Not the investor, not the creator, not an entrepreneur - a spender. Maybe this phrase very clearly expressing the Keynesian approach would worry politicians and society, and would give rise to doubts about the strength of this theory."

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