In this past few months, I affiliated with some of finance folks and
was able to learn a very basic, yet very very interesting topic, about economics.
I admit that my division of knowledge is limited, and therefore I may overly generalize some of key
things. But I try. Yes, I try.
For those who have graduated from college or same degree of academic institutions (of maybe less)
must have heard of Keynes. A great economist who had helped the government to restructure
the great depression in 1920s. However, unless you are really really smart, or unless you are from the department of economics, I suppose only few know exactly what the idea of his was.
Of course, some of you may be familiar with beauty contest, new deal, or "general theory~".
But it is hard to know what the Keynes thoughts were only by themselves.
And here is the counter part, Neoclassical, comes in.
Neoclassical economics is sometimes argued "laissez faire" economics, since
it is based on the perfect rationality of market. That means the price of product is at any time,
at any give circumstances, is just right because the market is complete.
Market is complete when demand and supply are even out. In addition, neoclassical economics
is based on the Say's law which is often summarized as "supply would create demand" as long as the price has variations. However, Say's law does not include "time constraints" and accepts the long turn
equilibrium.
Keynes argued that this is not all right. First, he stated "in the long run, we are all dead" as to oppose
Say's law. It is to say, "the long run equilibrium" is like waiting for something that is going to happen,
but now sure when and how long it takes. That is not very cool for folks that deal with money.
Secondly, Keynes exclaims that the market is not perfect. He explained this by underemployment
equilibrium (not going to details here). Thus laissez faire policy does not work here, according to
the theory.
ok, I will stop embarrassing myself for talking about something I am not fully aware.
But will continue to study and will post it up later!
is based on the Say's law which is often summarized as "supply would create demand" as long as the price has variations. However, Say's law does not include "time constraints" and accepts the long turn
equilibrium.
Keynes argued that this is not all right. First, he stated "in the long run, we are all dead" as to oppose
Say's law. It is to say, "the long run equilibrium" is like waiting for something that is going to happen,
but now sure when and how long it takes. That is not very cool for folks that deal with money.
Secondly, Keynes exclaims that the market is not perfect. He explained this by underemployment
equilibrium (not going to details here). Thus laissez faire policy does not work here, according to
the theory.
ok, I will stop embarrassing myself for talking about something I am not fully aware.
But will continue to study and will post it up later!