miércoles, 7 de octubre de 2009

Market evolution. Jorge de Lalama. General Theory of Employment, Interest and Money. Keynes. Chapter IV. Part VI.

The distinction between increasing returns and constant depends in part on whether workers are remunerated in strict proportion to their effectiveness. If so, we will have labor costs constant (in units of wages) when employment increases. But if the salary of a certain class of workers is constant regardless of the effectiveness of individuals, we increased labor costs, whatever the team's efficiency.

The tender price rises as the production of a particular computer is older. Thus the increased production will be followed by a price increase.

With increased production leads to a bottleneck in the supply of certain goods ceases to be elastic and their prices have to rise to the level needed, whatever, to divert demand into other directions. As soon as production has risen enough to begin to reach bottlenecks are likely to occur sharp rise in prices of certain goods.

A moderate change in effective demand that is presented in broad circumstances unemployment can influence very little in raising prices and much to increase the occupation.

When new growth in the volume of effective demand and does not produce an increase in production and only translates into higher unit costs, in exact proportion to the strengthening of effective demand, we have reached a state that could appropriately be designated as real inflation.

If the amount of money remains very low over time, the solution is normally found in the change in pattern or the monetary system, so that raises the amount of money, rather than forcing the unit wage lower and therefore increasing the burden of debts.

The duration that justifies the call cycle, mainly due to how fluctuates marginal efficiency of capital.

For cyclical movement we mean that, advancing the system, for example, in an upward direction, the forces that push upward momentum and take the top cumulative effects on each other, but gradually lose its power until, at some point, tend to be replaced by operating in the opposite direction, which in turn, drive to take some time and are mutually reinforcing so that they too, having reached its maximum development, decay and give place to their opposites.

The fact that the substitution of a drive by another ascending descending happens so often sudden and violent, whereas normally there is no such sharp turning point when the upward movement is replaced by the downward trend.

The marginal efficiency of capital depends not only on the existing abundance or scarcity of capital goods and the current cost of producing them, but also from current expectations regarding the future performance of capital goods. In the case of durable goods is natural and reasonable, therefore, that future expectations play a dominant role in determining the scale at which new investments seem advisable.

The typical explanation, and often the predominant crisis is not primarily a rise in interest rates, but a sudden collapse of the marginal efficiency of capital.

The final stages of the boom was characterized by optimistic expectations regarding future performance of capital goods, strong enough to balance its growing wealth and rising costs of production and, probably, a rise in interest rates. It is characteristic of organized investment markets, when the disappointment hangs over one too optimistic and overloaded with demand, he collapses with violent force, even catastrophic, under the influence of highly ignorant buyers what they buy and speculators, who are more interested in forecasts about the next shift of market opinion that a reasonable estimate of the future performance of capital goods. In addition, pessimism and uncertainty of the future which accompanies a collapse in the marginal efficiency of capital naturally precipitates a decisive increase in the liquidity preference - and hence a rise in interest rates. Thus, the fact that a collapse of the marginal efficiency of capital tends to be accompanied by a rise in interest rates can greatly exacerbate the declining investment.

Subsequently a decline in interest rates will help in recovery.

The collapse of the marginal efficiency of capital may be so complete that not enough any feasible reduction in the rate of interest. Only the return of confidence can restore the marginal efficiency of capital.

Must pass a time interval of a certain magnitude before the start of recovery.

NOTE: The marginal efficiency of capital is defined in terms of expectation of the likely performance and current bid price of capital good. It depends on the rate of return expected from the money if you invest in a newly produced good.

In a crisis disillusion comes because doubts suddenly arise concerning the confidence that can be taken in the likely performance, perhaps because the present sample signals as low stocks (inventories) of recently produced durable goods steadily increase . If one thinks that the current production costs are higher than they will then be another reason for the decline in the marginal efficiency of capital. Once the question arises, spreads rapidly. So at the beginning of the depression is probably much capital whose marginal efficiency has become negligible or even negative.

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