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Who: Kimball Corson. Text and Photos not disclaimed or that are obviously not mine are copyright (c) Kimball Corson 2004-2016
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The Schools of Economic Thought: a Hasty Overview

29 July 2016 | Pago Pago, American Samoa
Kimball Corson
Three Schools of Economic Thought: a Hasty Overview

Neo-Classical economic thought is what is taught as mainstream economics. It focuses on micro economic thought about how price theory determines quantities and prices of factor inputs and outputs through competitive markets by supply and demand.

Consumers proceed by a hypothesized maximization of utility subject to income-constraints and firms maximize profits using competitively priced factors of production, both in accordance with rational choice theory. It is called Neo-Classical because Keynes is included in a rarefied way such that interest rates adjust to equalize savings and investment and have national income become equal to GDP. It is very tidy and wrong on too much, especially its Keynesianism.

Opposed to this orthodoxy are two dominate schools of heterodox thinking, the New Keynesians and the Post Keynesians. The new Keynesians believe wage and prices are sticky and don't adjust properly so income has to instead. Because income has to adjust where wages and prices don't, markets do not yield proper competitive results and the economy often fails to attain full output and employment. Therefore, New Keynesians argue that macroeconomic stabilization by the government (using fiscal policy) and by the central bank(using monetary policy) can lead to a more efficient macroeconomic outcomes than a laissez faire policy would.

The theoretical foundation of Post-Keynesian economics, on the other hand, is the principle of aggregate demand which has less to do with the market problems envisioned by the new Keynesians and more to do with problems of income distribution, liquidity preference and hoarding so that economy has no natural or automatic tendency towards full output and employment. Contrary to the views of new Keynesians, post-Keynesians do not think the economy does not tend to full output and employment because of rigid or sticky prices and wages but because of liquidity preferences which slow or stop the velocity for some money and make saving very unequal to investment.

The contribution of Post-Keynesian economics has extended beyond the theory of aggregate demand to theories of income distribution, growth, trade and development in which money demand plays a key role, whereas in neoclassical economics these things are determined by the forces of technology, preferences and endowment.

Like the New Keynesians, Post Keynesians agree that macroeconomic stabilization by the government (using fiscal policy) and by the central bank(using monetary policy) can lead to a more efficient macroeconomic outcomes than the laissez faire policy of the Neo-Classical economics would.

Neoclassical economics lives in too much of a vacuum and is only a crude first order approximation to reality. I incline toward Post Keynesianism.
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There seems to be little interest in or understanding of economics in the media world of finance. Aside from a few, there is only a real interest in finance, as though that is the entire economy, instead of 15 percent of it (in lieu of what realistically should be about 4 % of it).

I must say in passing that economic understanding is very limited and poor in finance, and I also observe much such knowledge is displaced by financial doom and gloom and hand-wringing, and by misunderstandings about different kinds of debt and the different kinds of problems they pose or don't in conjunction with other factors.

Too many are being sucker punched by the financial media and its misunderstandings of economics. The world of economics is NOT at all just the world of finance or even close to it as this note should make clear. Indeed, much of the world of economics (mistakenly, I think) just ignores finance as a "bubble world unto itself," including too many economists.
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Vessel Name: Altaira
Vessel Make/Model: A Fair Weather Mariner 39 is a fast (PHRF 132), heavily ballasted (43%), high-aspect (6:1), stiff, comfortable, offshore performance cruiser by Bob Perry that goes to wind well (30 deg w/ good headway) and is also good up and down the Beaufort scale.
Hailing Port: Lake Pleasant, AZ
Crew: Kimball Corson. Text and Photos not disclaimed or that are obviously not mine are copyright (c) Kimball Corson 2004-2016
About:
Kimball Corson: I am a 75 year old solo sailor, by choice. However, I did take on a personable, but high maintenance female kitten, now a full grown cat, named KiKiPoo when she is sweet, or KatKatPo after she has just killed something like a bird or bat. [...]
Extra:
Although I was a lawyer and practiced law with good success for thirty years, creating significant new law, I never really believed in the law, the politics of law or in the over reaching self-interest of most lawyers I met. Too much exposure to Nietzsche and other good and seriously thoughtful [...]
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Who: Kimball Corson. Text and Photos not disclaimed or that are obviously not mine are copyright (c) Kimball Corson 2004-2016
Port: Lake Pleasant, AZ