Economics Dictionary of ArgumentsHome
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| Free market: A free market in economics is a system where prices and the distribution of goods and services are determined by supply and demand, with minimal government intervention. In a free market, producers and consumers make decisions based on their self-interest, leading to competition, innovation, and efficient resource allocation. See also Markets._____________Annotation: The above characterizations of concepts are neither definitions nor exhausting presentations of problems related to them. Instead, they are intended to give a short introduction to the contributions below. – Lexicon of Arguments. | |||
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Keynesianism on Free Market - Dictionary of Arguments
Rothbard III 778 Free Market/Keynesianism/Rothbard: KeynesianismVsFree market: Therefore, the elaborate attempts of the Keynesians to demonstrate that free-market expenditures will be limited - that consumption is limited by the "function," and investment by stagnation of opportunities and "liquidity preference" - are futile. For even if they were correct (which they are not), the result would be pointless. There is nothing wrong with hoarding or dishoarding, or with "Iow" or "high" levels (whatever that may mean) of social money income. >Hoarding/Rothbard, >Consumption function/Keynesianism. Employment/unemployment: The Keynesian attempt to salvage meaning for their doctrine rests on one point and one point alone - the second major pillar of their system. This is the thesis that money social income and level of employment are correlated, and that the latter is a function of the former. This assumes that a certain "full employment" level of social income exists below which there is correspondingly greater unemployment. Rothbard III 780 The nub of the Keynesian critique of the free market economy (…) rests on the involuntary unemployment allegedly caused by too Iow a level of social expenditures and income. Problem: But how can this be, since we have previously explained that there can be no involuntary unemployment in a free market? >Free market/Rothbard, >Unemployment/Rothbard. Solution: The Keynesian "underemployment equilibrium" occurs only if money wage rates are rigid downward, i.e., if the supply curve of labor below "full employment" is infinitely elastic.(1) >Elasticity. Thus, suppose there is a "hoarding" (an increased demand for money), and social income falls. The result is a fall in the monetary demand curves for labor factors, as well as in all other monetary demand curves. >Hoarding/Rothbard. We would expect the general supply curve of labor factors to be vertical. Since only money wage rates are being changed while real wage rates (in terms of purchasing power) remain the same, there will be no shift in labor/leisure preferences, and the total stock of labor offered on the market will remain constant. At any rate, certainly no involuntary unemployment will arise. >Purchasing power/Rothbard. Rothbard III 1023 Free market/Keynesianism/Rothbard: The Keynesians depict the free market's monetary-fiscal system as minus a steering wheel, so that the economy, though readily adjustable in other ways, is constantly walking a precarious tightrope between depression and unemployment on the one side and inflation on the other. It is then necessary for the government, in its wisdom, to step in and steer the economy on an even course. RothbardVsKeynesianism: (…) it should be evident that the true picture is just about the reverse. The free market, unhampered, would not be in danger of suffering inflation, deflation, depression, or unemployment. But the intervention of government creates the tightrope for the economy and is constantly, if sometimes unwittingly, pushing the economy into these pitfalls. >Business cycles/Rothbard, >Inflation/Rothbard, >Free market/Rothbard. 1. Thus, see the revealing article by Franco Modigliani, "Liquidity Preference and the Theory of Interest and Money" in Hazlitt, Critics of Keynesian Economics, pp. 156-69. Also see the articles by Erik Lindahl, "On Keynes' Economic System - Part I," The Economic Record, May, 19 54, pp. 19-32; November, 1954, pp. 159-71; and Wassily W. Leontief, "Postulates: Keynes' General Theory and the Classicists" in S. Harris, ed., The New Economics (New York: Knopf, 1952), pp. 232-42. For an empirical critique of the assumed Keynesian correspondence between aggregate output and employment, see George W. Wilson, "The Relationship between Output and Employment," Review of Economics and Statistics, February, 1960, pp. 37-43._____________Explanation of symbols: Roman numerals indicate the source, arabic numerals indicate the page number. The corresponding books are indicated on the right hand side. ((s)…): Comment by the sender of the contribution. Translations: Dictionary of Arguments The note [Concept/Author], [Author1]Vs[Author2] or [Author]Vs[term] resp. "problem:"/"solution:", "old:"/"new:" and "thesis:" is an addition from the Dictionary of Arguments. If a German edition is specified, the page numbers refer to this edition. |
Keynesianism Rothbard II Murray N. Rothbard Classical Economics. An Austrian Perspective on the History of Economic Thought. Cheltenham, UK: Edward Elgar Publishing. Cheltenham 1995 Rothbard III Murray N. Rothbard Man, Economy and State with Power and Market. Study Edition Auburn, Alabama 1962, 1970, 2009 Rothbard IV Murray N. Rothbard The Essential von Mises Auburn, Alabama 1988 Rothbard V Murray N. Rothbard Power and Market: Government and the Economy Kansas City 1977 |
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> Counter arguments against Keynesianism
> Counter arguments in relation to Free Market
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