Econ 107 final

Meaning of work (Marx)
Click the card to flip 👆
1 / 19
Terms in this set (19)
Meaning of work (Marx)
Work is the fundamental and central activity in human life and fulfilling/liberating. It can be vital to activity and fundamental for self-development/self-realization. Economic work is along the continuum with free artistic creation that gives us meaning to life
Alienation definition
Surrender of control through the separation of an agent from the conditions of meaningful agency. Underlying alienation is the separation of most of the producers from the means of production, most people don't own the means of production that are necessary to improve their lives. It's not only a subjective feeling but it's also an objective structure of experience and activity in a capitalist society. Capitalist society doesn't exist without alienation. In a capitalist society, capitalists own the means of production and workers sell their labor
Forms of alienation
The produce of the worker becomes alien to themselves, they produce something that is hostile because it's possessed by someone else which gives power to the capitalist and alienates us to what we produce. The more we produce, the more they have and the less we have
Alienation resulting from their lack of control over the labor process or production activity which means the laborer loses control over their life activity which has no relation to their desires/self-expression/the person they want to become
Alienation from our species-essence/human essence in a reduced sense. Species' essence of an individual is their innate potentials because by nature we are creative conscious beings. We are alienated from what gives us meaning
Alienation from our human nature/essence which is social. This alienation is manifested as hostility between competition between workers and members of society and among workers
Keynes Summary
Key concepts - Marginal propensity to save, consume, the marginal efficiency of capital, multiplier, Conventions, confidence, and animal spirits
Main contributions - Government spending helps combat depressions, monetary policy can be effective unless the economy is in a liquidity trap.
Legacy - Says Law (supply always creates its own demand), changed classical economics, claimed wage rate determines employment, short term disequilibrium, did a lot of work on short term solutions to get out of a depression, modeling assumptions are unrealistic
Criticisms -- underemployment equilibrium isn't accepted by all economists, Keynesian measures halted global econ downward slide but also led to large govt deficits/inflation
Deficit Spending - Keynes believed in deficit spending during a recession for short-run recovery
Rebirth of Keynesian came after the 2008 Recession when banks got bailed out
Keynes Consumption Function and savings functions
The fundamental psychological law, upon which we are entitled to depend with great confidence both a priori from our knowledge of human nature and from the detailed facts of experience, is that men are disposed of, as a rule, and on average, to increase their consumption as their income increases, but not by as much as the increase in their income.
C = a + b Y, where C is consumption, Y is income, a is an autonomous component of income and b is marginal propensity to consume
MPC (marginal propensity to consume)= dC/dY = b, where 0< dC/dY < 1
Alternatively, as in your book (Figure 21 -1) C = C (0) + c Y, where C is consumption, Y is income, C (0) is autonomous component of income and c is marginal propensity to consume MPC (marginal propensity to consume)= dC/dY = c, where 0< dC/dY < 1
Savings is a function of income with a MPC
How did Keynes define investment?
Keynes defined investment as the purchase of capital goods. In addition, unintended investment occurs when sales decline and inventories of sold goods rise.
What does the size of the income stream from investment depend upon?
The size of the expected income stream depends on two factors:
the productivity of the piece of capital,
the price at which the firm can sell the added output,
the added wage and material expense that results from using the piece of capital.
How did Keynes define marginal efficiency of capital (write the equation)
Keynes defined the marginal efficiency of capital as equal to that rate of discount that makes the present value of the series of expected returns just equal to the supply price of the capital asset. This can be expressed as:
K (s) = [R1/(1+r)] + [R2/(1+r) square].....[(Rn/(1+r) to the power n]
Where K (s) is the supply price of capital, r is the marginal efficiency of capital, and R is the expected return in a particular year.
The investment will continue?
The investment will continue to the point at which the marginal efficiency of capital is equal to the rate of interest- the cost of borrowing funds with which to invest
What does the rate of interest depend upon?
The rate of interest depends on liquidity preference, and the quantity of money, money being defined as currency plus demand deposits.
Money Market DetailsThe quantity of money supplied (M) depends on the policy of the central bank. The money supply curve is vertical, perfectly inelastic.Equilibrium Employment DetailsAE(1) consumption demand. Add investment demand to consumption demand AE (0) aggregate expenditure S=Y-C Therefore, equilibrium can also be defined as • S=I.What is a liquidity trap?Keynes suggested that liquidity preferences may become satiated in severe depression when shrinking income has reduced transactions and precautionary demand for money to hold and monetary policy has already increased the money supply. The liquidity preference schedule becomes infinitely elastic owing to the unanimous expectations of investors that the rate of interest cannot fall any further; bond prices are so high that no one expects them to rise still higher. Consequently, everyone prefers to hoard idle cash and monetary policy is put out of commission. Fiscal policy of a government increasing spending could get us out of a liquidity trapHow does depression occur?Entrepreneurs become pessimistic about future business prospects when the economy is at full employment, resulting in a downward expectation of returns on new investment. This declines in the marginal efficiency of capital. The decline in investment reduces aggregate demand. In response to declining sales and rising inventories, firms reduce their employment and production. National income declines by more than the drop in investment itself. The reason is the multiplier effect of an initial change in investment spending. A decline in aggregate expenditures from AE1 to AE2- in this case, caused by a fall of investment spending-results in a decline of income from Y1 to Y2 and a rise in unemployment. The simple Keynesian multiplier is the ratio of the change of income to the initial change in investment spending. Keynes said that the government could counter the income decline by initiating an expansionary fiscal policy that would shift the aggregate expenditure curve back to AE1.What are the policies to promote full employment and stability?Keynes proposed a large government role to stabilize the economy at a full-employment level of national income. To combat high unemployment Keynes suggested ways to increase aggregate expenditures. For example, the government should stimulate investment during a depression by forcing down the interest rate, by increasing the money supply. However, if the economy is a liquidity trap, it will not be effective. A second more effective way to overcome depression is for the government to undertake an expansionary fiscal policy. Government spending like private investment serves as a source of aggregate expenditure. Such spending could be increased thereby increasing aggregate expenditures and producing multiple increases in national income.How does an individual facing uncertainty of prospective yields of assets make an investment decision?Conventions, confidence, and animal spiritsWhat are conventions?Conventions are "rules of thumb" that are fundamental in guiding an individual investor "....to behave in a manner which saves our faces as rational economic men..." (Keynes, 1937, p. 214). The rules of thumb Keynes identifies are the following: a) Ignoring the prospects of future changes about which we know nothing, we take the present as a guide to the future. b) Our opinions do not change until some new information becomes available. c) We fall back on the judgment of the average.How is confidence defined?He defines confidence as "...how likely we rate the likelihood of our best forecast turning out quite wrong. If we expect large changes but are very uncertain as to what precise form these changes will take, then our confidence will be weak.How are animal spirits defined?Keynes defines animal spirits as "a spontaneous urge to action rather than inaction, and not as the outcome of a weighted average of quantitative benefits multiplied by quantitative probabilities