Paper on Keynesian Contributions to Public Finance.
PAPER ON KEYNESIAN CONTRIBUTIONS TO PUBLIC FINANCE
1. Impact of Keynesian Revolution on Public Finance
In 1936 British economist John Maynard Keynes published The General Theory of Employment, Interest, and Money. Distressed by the failure of national governments to cope with the Great Depression, Keynes rejected many assumptions of classical economics and argued that state intervention, and in particular regulation of interest rates, could control inflation and minimize unemployment.
What however was the “Keynesian Revolution?” Perhaps we can find the answer by taking a brief glance at Keynes’s celebrated book The General Theory of Employment, Interest and Money and the “short argument” on page 63:
Equation 1: Income = value of output = consumption + investment
Equation 2: Saving = income - consumption
Equation 3 (therefore): Saving = investment.
By “income” Keynes means “national income” and by equating it to the “value of output” he shows that it is regarded as equivalent to the total price recoverable in respect of all goods and services produced by industry in a given period. “Output” must, I think, be taken to be capacity output.
Equation 2 can be written: Income = Consumption + Saving; and since income is equivalent to the total price of output, the other side may be taken to be an analysis of the costs which go to make up this price. It follows that “Consumption” comprises costs which represent payments to consumers, i.e., wages, salaries and dividends; these are usually classified as “A” payments by Social Creditors. “Saving” is defined by Keynes as “income not consumed” or, roughly speaking, as income paid out to "factors of production;" in other words, it comprises costs representing payments to other organizations for raw materials, machinery, plant, power, etc. These payments are, of course, classified as “B” payments in Social Credit theory.
Turning now to equation 1, it seems that “consumption” must mean the proportion of the total price of
1. Impact of Keynesian Revolution on Public Finance
In 1936 British economist John Maynard Keynes published The General Theory of Employment, Interest, and Money. Distressed by the failure of national governments to cope with the Great Depression, Keynes rejected many assumptions of classical economics and argued that state intervention, and in particular regulation of interest rates, could control inflation and minimize unemployment.
What however was the “Keynesian Revolution?” Perhaps we can find the answer by taking a brief glance at Keynes’s celebrated book The General Theory of Employment, Interest and Money and the “short argument” on page 63:
Equation 1: Income = value of output = consumption + investment
Equation 2: Saving = income - consumption
Equation 3 (therefore): Saving = investment.
By “income” Keynes means “national income” and by equating it to the “value of output” he shows that it is regarded as equivalent to the total price recoverable in respect of all goods and services produced by industry in a given period. “Output” must, I think, be taken to be capacity output.
Equation 2 can be written: Income = Consumption + Saving; and since income is equivalent to the total price of output, the other side may be taken to be an analysis of the costs which go to make up this price. It follows that “Consumption” comprises costs which represent payments to consumers, i.e., wages, salaries and dividends; these are usually classified as “A” payments by Social Creditors. “Saving” is defined by Keynes as “income not consumed” or, roughly speaking, as income paid out to "factors of production;" in other words, it comprises costs representing payments to other organizations for raw materials, machinery, plant, power, etc. These payments are, of course, classified as “B” payments in Social Credit theory.
Turning now to equation 1, it seems that “consumption” must mean the proportion of the total price of
References: 1. Vincent Ostrom and Elinor Ostrom (2008), “Public Goods and Public Choices,” Political Theory and Policy Analysis, Indiana University 2 3. Fletcher, Gordon (1989). "Introduction". The Keynesian Revolution and Its Critics: Issues of Theory and Policy for the Monetary Production Economy. Palgrave MacMillan. pp. xix, xx. 4 5. Keynes, J.M (1973). Donald Moggeridge. Ed. The Collected Writings of J. M. Keynes. XIV. London: Macmillan for the Royal Economic Society. pp. 492–493. 6 10. Patrick D. Larkey, Chandler Stolp, and Mark Winer (May 1981), “Theorizing About the Growth of Government: A Research Assessment,” Journal of Public Policy, Vol. 1, No. 2, p. 201. 11. P. Hansson and M. Henrekson (1994), “A New Framework for Testing the Effect of Government Spending on Growth and Productivity,” Public Choice, Vol. 81, pp. 381–401 12 13. Michael P Todaro (1989), “Economic Development in the Third World,” 4th Edition, pp. 571-572.