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Macroeconomics versus 'Common Sense'

Author

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  • Kazimierz Laski

Abstract

The very basis of macroeconomics is the circular flow of expenditures and incomes. From this follows the conclusion that it is demand which determines supply and not vice versa. The most paradoxical result of this approach is the hypothesis that investment finances itself by quantity adjustment, if capacity and labour are not fully employed (a typical feature of a capitalist economy) or by price adjustment, i.e. by demand-pull inflation (if capacity and labour force are underemployed).

Suggested Citation

  • Kazimierz Laski, 2004. "Macroeconomics versus 'Common Sense'," wiiw Working Papers 33, The Vienna Institute for International Economic Studies, wiiw.
    • Handle: RePEc:wii:wpaper:33
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    File URL: https://wiiw.ac.at/macroeconomics-versus-common-sense-dlp-532.pdf
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    Cited by:

    1. Martin Riese, 2016. "Kazimierz Laski (1921-2015): ein engagierter Kaleckianer," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 42(1), pages 119-129.

    More about this item

    Keywords

    consumer goods surplus; income and capacity effect of investment; quantity versus price adjustment; two-sector model;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • P5 - Political Economy and Comparative Economic Systems - - Comparative Economic Systems

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