Sunday, 11 December 2011

HCJ - Year 2 - Semester 1 - Revision notes Part 2 - Keynes

The next part of this semester's revision notes brings us to the World of economics and JM Keynes. I found this topic relatively enjoyable and, not easy, but easier to understand. For my full blog on the subject visit, or for a condensed version read on.

. Money = a bartering tool
. Humans have wants and desires in life which compete with their needs
. Link to Frege and his theories on sense and reference: the word 'need' has no reference point and can therefore not be seen as a correct term. 'I need a car' - does not make sense.
. Ricardo theory of value - biro vs piano, who decides worth? £5000 for piano as it takes 5000 times more effort to make a £1 biro.
. Malthus' iron law of population - we would drain the land as the population was growing at an uncontrollable rate. Wanted 2 children to take place of the 2 parents, but on average there were 4 children households. Theory did not materialise as unforeseeable circumstances such as contraception/technology (abortion) started to reduce the number of children in the household. Also, at the time the poor law stated the price of bread against the number of children in the household was the factor considered when relief was administered.
. Ricardo + Malthus = Marx law od wages - demand for a job = high means low wages, and low demand for a job = high wages.
. Price of an apple = £3, producers need £1 profit and £2 for productions costs. Worker can only afford £2 for apple, apple price lowered, means wages of the worker are reduced, now the worker can only afford £1.
. Bonds/IOU's - Public sector jobs paid via bonds not taxes. Government gets bond from the bank, pays the lecturer who then bus a sandwich from a cafe, the cafe worker is then paid, meaning they can produce more, open new branches, and hire new staff.
. Taxation pays for the interest on the bonds.
. Keynes formula - C + I + G = Y, C household spending, I private investment, G government spending, Y money needed to give everyone a wage. If one goes, the other factor will need to pick up slack!

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