08.25.11

Barro on “Regular Economics vs Keynesian Economics”

Posted in Economics, General Musings at 8:47 am

Very odd statement:

http://uneasymoney.com/2011/08/24/barro-on-keynesian-economics-vs-regular-economics/

Barro’s “regular economics” describes a world that is always operating at 100% capacity with zero unemployed labor or idle capital.  Thus, resource and technology constraints mean that there is a real tradeoff between government spending and private spending and between current consumption and investment spending.

“Keynesian economics” describes a world that is not operating at capacity, and therefore has unemployed labor and idle capital.  In such a world, it is possible to increase government spending and private spending simultaneously, or to increase consumption and investment simultaneously.  In fact, doing so moves the operation of the economy closer to its capacity.

Which world best describes our current state of affairs?

1 Comment »

  1. Disequilibria: A Constant State Of Instability » Barro on “Regular Economics vs Keynesian Economics” said,

    08.25.11 at 6:23 pm

    [...] Permalink [...]

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