Thursday, March 07, 2013

The Trickle-Up Theory

The Nonsense of Austerity | The Business Desk with Paul Solman | PBS NewsHour | PBS
...In other words, once money becomes commonplace and banks exist to collect savings, there is no essential law of markets. Economic equilibrium becomes an accident, not a natural state -- it becomes a social construct that requires planning. Not central planning, mind you. Just some kind of public, purposeful, collective action that acknowledges the social purpose of economic growth.

At that point, I would suggest that you try to figure out what drives growth. But you don't base your decision on a theory from the 19th century, whether devised by Jean-Baptiste Say or Karl Marx. Instead, you might study more recent history. If it turns out that consumer spending rather than investment seems to be the key to growth, you should act accordingly. You should probably not resort to citing Say's Law.

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