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Read “General Economics Course” in one article

The book “General Courses of Economics” is like the history of economic development. It introduces the development and evolution of economics in the order of topics. Even the long-term schools are active in today’s social life in peculiar ways. This article will The themes that have an impact on current economic policies are selected and introduced one by one. The themes include: neoclassicism, free trade and trade protection, Keynesian ism, creative destruction, Hayek, planned economy, big promotion, public choice theory, currency illusion, Rational expectations, Minsky moments.

Neoclassicism

The first cup of Coke under the scorching sun is better than the second cup. The economics of considering marginal utility was further deepened by Marshall. On this basis, he added demand and supply, and began to consider the impact of price on consumer demand and enterprise output. When the price rises, demand falls and supply rises. Price links demand and supply to achieve market equilibrium. In Marshall’s neoclassical economics, neither buyers nor sellers can manipulate the market, and value means the price of transactions in the relationship between supply and demand. This is an important theory that many students find difficult to understand and has to engage a good economics tuition teacher to help explain further.

Free trade and trade protection

British economist Ricardo perfected the concept of free trade after Adam Smith. The economist and congressman discovered that the landlord demanded expensive rents by means of the high price of grains, and that the farmers would bid for each other to make the landlord profit. Therefore, the landlord should import grains and reduce the price of grains to reduce the landlord’s rent. His theory believes that each country should focus on using local resources to produce cheaper products for trading, so that the world can achieve a win-win situation. This makes him regarded as a supporter of free trade.

The German economist Liszt put forward the discussion of national trade separately. He believes that different countries have different stages of development. If you want to copy the development path of developed countries, you cannot establish free trade. Because a successful economy can only develop on the basis of relying on industrial development rather than other industries. When foreign competitors are more developed, Germany needs to protect its own industries in order to develop its industries. Free trade can only bring a win-win situation between the two countries with equal development stages.

Keynesian

Keynes found that the problem of the economic crisis is not scarcity of resources, but that existing resources are not being used rationally. He opposes “supply creates demand” and believes that the source of the crisis lies in savings. The surplus income is transformed into rusty coins in the piggy bank, rather than the investment of a new enterprise, which causes a part of the money to disappear in economic activities, making the economy unable to recover itself.

Creative destruction

Austrian economist Schumpeter believes that innovation is a necessary condition for economic development. The so-called capitalism means that new technology eliminates old technology, and “creative destruction” brings continuous changes in social life. Schumpeter believes that monopoly is beneficial to economic development, because the emergence of monopoly enterprises has a huge driving force for innovation, and the monopoly brought about by innovation will bring excessive returns to enterprises. Without a monopoly, innovation will become more difficult, technological progress will be slower, and only innovation can significantly improve living standards.

In Marshall’s economics, manufacturers compete with each other on the price of oil lamps; in Schumpeter’s theory, winners use light bulbs to defeat oil lamps to win.

Hayek

After the end of World War II, the “capitalism” described by Marx no longer existed. The “mixed economy” adopted by various countries after the war was a model with both socialism and capitalism. Hayek believes that government control of enterprises violates personal freedom and is a road to slavery.

It is not enough to fight against Nazis, but also against Nazi ideas. Hayek believes that an economically free country defeats a government-controlled country because people have different desires and cannot agree on the most important things, and the government’s plan cannot satisfy everyone. In this way, personal economic freedom is trampled on, and political freedom is lost.

Planning error

Since the beginning of neoclassical economics, the meaning of price has been mentioned. Market transactions generate prices and connect consumer demand with factory production. Price and market enable the most effective satisfaction of demand and the fullest use of raw materials. Austrian economist Moses believes that when a regulator replaces the market, he needs to consider all the minutiae issues, which not only brings excess information, but also makes it The Soviet Union’s failure was precisely because its economic model violated logic.

The price calculated with paper and pen is not true, and only when everyone fully considers how to consume the money in their pockets, people will be cautious, and the market has become the only reasonable way to solve the problem.

Big push

Ghanaian economist Lewis discovered that there are a large number of redundant labourers in a large number of traditional economies (such as agriculture) in backward countries. People share profits and maintain low incomes. Industries that pursue maximum profits can expand at a high speed. Therefore, industries should be developed to improve the economy. Level. British economist Rodin found that the market cannot function normally in backward countries, so the process of lobar from agriculture to industry cannot be completed spontaneously. The profitability of a factory depends on the development of other industries, and its products need workers in other factories for consumption. Rodin’s conclusion is that if a developing country wants to become a developed country, it must go from nothing to everything, and the government will seize the moment of take-off to achieve a “big push.”

South Korea’s “Han River Miracle” is a typical example of great progress, which successfully realised the country’s industrialisation. While granting preferential loans to enterprises, the South Korean government maintains a good exit mechanism, that is, cancelling preferential loans when enterprises lose their overseas competitiveness. This not only promotes the development of enterprises, but also prevents emerging industries from lobbying the government for continued investment and harming the economy.

Public choice

American economist Buchanan pointed out that government expansion is the result of bureaucrats taking actions out of their own considerations, and that government intervention in the market does not come from helping the market function better (avoiding negative effects such as externalises). The most important task of politicians is to keep their position. In order to do this, they will give their supporters an excess of revenue that far exceeds the market, which creates a “rent seeking” behaviour. For example, companies set up manufacturers’ associations to formulate industry norms that benefit members of the association through high-priced banquets for politicians. Rent seekers consume resources that could have been invested in other areas, reducing the overall efficiency of society and harming consumers.

Buchanan believes that the behaviour of corporate groups to protect their own interests is understandable. The problem is that a government that is strong enough to make troubles in the economy is manipulating the economy selfishly in order to win elections. What can be done to transform the quality of politicians is extremely limited, and politicians always hope to run larger organisations, obtain more budgets, and improve their status. Voters also expect to see a large amount of government investment, which will bring a lot of jobs to the local area and improve the living environment. So the key is to legislate to require the government to balance the budget and eliminate the deficit.

Currency illusion

“Stagflation” (high unemployment, low growth, high inflation) is an economic situation beyond the reach of Keynesian ism. Someone once attributed it to high oil prices, and some people pushed it to excessive wages. The American economist Friedman proposed an explanation of the money supply theory. Since then, the Chicago School of Economics has replaced Keynesian ism in the field of economics, and government interventionism has given way to an economy tuition in Singapore.

Keynes believed that the speed of money flow is changing, so money and national income are not closely related, while Friedman believes that the speed of money flow is stable and the amount of money will affect national income. A short-term increase in the money supply can encourage consumption and increase output, but as prices slowly rise, the real purchasing power of wages no longer rises. This is called a “money illusion.” Once people realize that wage increases cannot improve living standards, economic growth will stagnate and unemployment will increase, leading to higher inflation. This is a hangover caused by economic stimulus. The unemployment rate will not be reduced, and the economy will not be able to continue rapid growth. The only thing that can ensure the arrival is high inflation.

When it takes effect, economic trends have already changed, and the government cannot predict the future, so it is unable to adopt appropriate policies to regulate the economy. The best thing the government can do is to promise a low and stable currency growth rate and achieve low inflation and stable growth, just as the Reagan administration overcame high inflation by tightening the currency. Economists believe that what the government should do is to abolish corporate taxes and fees, relax market controls, and tightly control the money supply, thereby encouraging the economy to “depart from the virtual to the real”. This is called “supply economics.”

Rational expectations

The American Economist Moose put forward the theory of “rational expectations”, which means using all currently available information to make predictions. Economist Fame believes that the prices of all financial markets already contain all the information, making the remaining market fluctuations unpredictable. On the coffin of Keynesian ism, the first nail is Friedman’s “money illusion”, and the second nail is Moose’s theory of “rational expectations”. American economist Lucas pointed out that the government’s ability to stimulate the economy depends on deceiving the public. Once they understand the result of the government’s stimulus to the economy, they will gradually lose their motivation and spirit of struggle without increasing the purchasing power of wages. Make the final economic growth stalled.

The free market will adjust itself through price changes, and there will rarely be too little demand or supply of goods. This is called “market clearing.” The same is true for the lobar market, which means that people who are unemployed do not accept low wages and become unemployed voluntarily. The “rational expectations” theory also tells us that the government should not do anything to increase employment at this time. Neoclassical economics denies Keynesian ism through these two concepts, because people do not want to work because they cannot find a job and the economy stagnates, but because wages cannot beat inflation. After the government withdraws, the economy can quickly adjust itself, clear the market through corporate bankruptcy and unemployment, and adjust the economic structure. During this period, the government does not need to stimulate the economy.

Minsky moment

The American Minsky emphasised part of Keynes’s view that investment is carried out under a background of deep uncertainty. Keynes believes that since no one can judge accurately and deeply uncertain things, investment depends on people’s optimism (or confidence), rather than mathematical calculations of future profitability. When people lose their optimism, investment will decline and the economy will be depressed.

The development of capitalism will become more and more reckless with a certain common belief in asset price trends. When the loan trend is that house prices will not fall and interest rates will not rise, this type of loan is Minsky’s “speculative borrowing”. When economic tuition development accelerates and both borrowers and lenders hope to profit from rising housing prices, investment and housing loans form a self-fulfilling price spiral, and the “Ponzi Finance” system is formed. An important driving force for the emergence of “speculative lending” and “Ponzi Finance” is “secularisation”, that is, housing loans are packaged into wealth management products and sold on the market, while giving high rates of return. This kind of packaging has led to the lack of information about the subject of the transaction in the financial market, and there must be a problem of mispricing in the lost information market. The flow of funds in the entire financial system stopped abruptly after incapable borrowers overdue, banks stopped lending to capable borrowers, asset prices collapsed without credit support, and the “Minsky moment” came.

 

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