From: Gerald_A_Levy@MSN.COM
Date: Fri Feb 11 2005 - 10:15:05 EST
Jurriaan: Thanks for the thoughtful message. I only have time now to nibble on a few points. > The basic problem for Keynesian theory though is that you cannot force > private investors to invest where they don't want to invest, nor, > ultimately, prevent them from investing where they do want to invest. > There is a carrot maybe, but no stick. Well, there are steps that the state could take which could prevent investors from legally investing where they want to (that is, _if_ the state wanted such a policy and was prepared for the stiff political opposition from domestic capitalists and international capitalist institutions) but -- that aside -- Keynesians would say that a stick isn't needed. What is needed from a Keynesian perspective is, since investment demand is viewed as a derived demand, increased aggregate demand. > Total investment is not simply > investment in inventories and productive fixed assets; it also includes > financial assets and non-productive fixed assets. If ordinary consumer > demand stagnates, investment will re-orient to speculation, luxury > durables and property, military expenditure and foreign placements. Right, but I think an argument could be made that even if "ordinary" consumer demand stagnates if the level of aggregate demand increases that can lead to increasing investment, perhaps in the form of an increase in military investment and investment on luxury goods production. I wonder: has the Keynesian proposition that aggregate investment expenditures will tend to only increase after there has been an increase in aggregate demand ever been rigorously examined *empirically* to see whether this theoretical claim has been shown to be empirically and historically robust? > Additionally, Keynesian policy was based on a national framework where > state intervention aimed to stimulate job-creating investment. But in a > deregulated economy, creating a good "investment climate" is no longer > necessarily compatible with what is good for the national economy; the > international investor looks at comparative costs and financial benefits > internationally. Therefore, the competition to reduce labor-costs also > plays itself out internationally. I think that's generally a good point. > The only thing that can slow this > process is protectionism and increasing the bargaining power of labor. And, perhaps within some social formations, industrial policy. But, you might be counting industrial policy under protectionism. In solidarity, Jerry
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