Thursday, February 21, 2013

Subtle distinctions in simple things

In an old post at Naked Capitalism, Steve Keen writes:

Firstly, and contrary to the neoclassical model, a capitalist economy is characterized by excess supply at virtually all times: there is normally excess labor and excess productive capacity, even during booms. This is not per se a bad thing but merely an inherent characteristic of capitalism—and it is one of the reasons that capitalist economies generate a much higher rate of innovation than did socialist economies (Janos Kornai, 1980). The main constraint facing capitalist economies is therefore not supply, but demand.

Not supply, but demand. Yes.

And really not demand, but cost. Cost is always the limiting factor. It is always cost that cuts short demand.

It seems Steve Keen agrees:

Secondly, all demand is monetary...

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