MR - Fisher 1 deepak Flashcards
(20 cards)
highlights the “Two Marshalls”
- abstract theorist through using mathematics
- practical observer (realist) through applying to real life
- Shows that practical observer take priority when clash when we burn 3 if 4 doesnt hold
Great depression of 1929 has occurred!!
This reasoning links with his recent observation of the great depression
also link that preventing bank runs can prevent financial crisis and in turn economic crisis
Financial panics in early 1900’s led to the creation of the federal reserve system
dont mention victorian era stuff
Hierarchy has low order goods on bottom!!!
“Spontaneous order” –> key social and economy institutions arose through unplanned interactions between individuals who aimed to satisfy their needs –> opposed to state intervention –> interferes with spontaneous order mechanism –> yield more development
Markets –> unregulated –> work best when individuals pursue self-interest –> danger of paternalistic state –> interfere in markets –> distort market signals –> weakens spontaneous order mechanism
Only good state intervention: focus on fiscal matters and bureaucracy: maintain social order
Europe
After WW1 Germany had to pay reparations a lot of money printed Germany has hyperinflation
U.S
comp maximises output but there is not determinate outcome for the distribution of income, hence could not be a equal distribution
as people with high cards come out on top, free markets can just worsen inequality
link marx different economic system - Marshall argues against radical economic change –> i.e., poverty
so supply and demand are inherently mathematical
sceptical about best outcome for society (talking about equitable outcome)
This is likely to occur in special markets as general markets are characterized by competitive market forces
Increasing IRS - -> occurs in long-run period as firms are able to increase size of capital stock and plant
dont mention victorian era stuff
Financial panics in early 1900’s led to the creation of the federal reserve system
Can argue that his mathematical/physics background is highlighted for him as he used graphs and graphical illustrations which you would expect to see in a physics textbook an example is his depiction of his quantity theory of money
Dont mention Victorian era stuff
USE WORD SATISFACTION
“Spontaneous order” –> key social and economy institutions arose through unplanned interactions between individuals who aimed to satisfy their needs –> opposed to state intervention –> interferes with spontaneous order mechanism –> yield more development
Markets –> unregulated –> work best when individuals pursue self-interest –> danger of paternalistic state –> interfere in markets –> distort market signals –> weakens spontaneous order mechanism
Only good state intervention: focus on fiscal matters and bureaucracy: maintain social order
Builds on thie in his economic chivalry idea, such thtat the MU of money between individuals is different, So the optimal,equiatbla allcoatoin should be at th epoint where MU for each indidival from money is the same. Hence eocnomy chivalry can provide more money to the poor, eventually achieving equality between humans.
This is how he explains the existence of the market demand curve
Significant as investment in skills and technology is a key driver of growth for Marshall (tech reduces costs by increasing productivity
could link to Marx saying that capitalism –> wages of workers subsistence –> but no Marshall sees positive
could say after critiquing Marx that he even advocates for monopolies in specific industries…
**Dont mention victorian era stuff **
Auction-like process
- auctioneer anounces prices and and then collects bids from buyers and sellers
- then creates a new set of prices and repeats process
- each set of prices are set to reduce the excess demands
- trial and error –> eventually reach equilibrium
- No actual trading occurs till we are at equilibrium
maybe dont mention interdependent markets assump
Walras belonged to the Lausanne school of thought – believed in using mathematical methods but did include some elements of logic
** (Even out of equilibrium) At the aggregate level and for each individual we assume that there cannot be excess demand/supply - only for industries can there be an excess/supply/demand - this is due to the Walras Law**
if we did have all the complete knowledge the the problem faced by the central planner is logical, however, this is not the case in reality and we do not have the means to solve this logical problem
no single mind would be able to solve the economic problem as it is too difficult to compute
Argues for a free exchange economy and that prices is the mechanism which allows the allocation of resources in the economy. Prices convery this deispersed knowledge and [rovide information.
Europe
After WW1 Germany had to pay reparations a lot of money printed Germany has hyperinflation
U.S
Critique of classical authors for their omission of numerical analysis – Specifically Ricardo’s labour theory of value
- Can also mention Jevons also introduced the unit of utils
PLEASURE AND PAIN
pleasure gains froms consuming goods from the wages earned
sceptical about best outcome for society (talking about equitable outcome)
Mention that investment is speculative - so when confidence initially drops –> results in large drop in confidence
Firms/Investors are more confident so increased investment into captial during boom.
Leads to a speculative bubble as there is overinvestement, lead to bubbles and higher prices.
Demand for loans rise, whilst savings (consumers stay the same). This will increase the interset rates.
Higher rates cause a fall in investment, firms realise their profits and less demand for loans.
this sees a fall in the price, as overinvesment reducing, people panic and all sell, crash.
real value of debt risisng, credit crunch –> why Marshall argues for full reserve bank lending
Wicksell argues there is a monetary illusion. –> because if all exchanges were not done through money but in “real” terms there would be no difference between the real and nominal interest rate
