Macroeconomics Forum

Aug 17, 2016 at 9:32 AM

Abstract: this paper argues impossibility of Keynesian macroeconomic theory from the perspective of contradiction discussion over limitation on consumption between Keynes equilibrium income formulay=(α+i)/(1-β)and marginal consumption decreasing theory, and re-establishes theoretical framework of macro economics by considering four elements (production, exchange, distribution and consumption) and integrating the Law of Diminishing Marginal Propensity to Consume. 

Keynesian macroeconomic theory is wrong as it is established on a self-contradiction basis.


I. Limitation of consumption? ——Root of Keynesian theory contradiction


Keynesian theory is the foundation of modern macroeconomics theory. Equilibrium income formula y=(α+i)/(1-β)   c=α+β×y   arethe core of this theory. In theseformula, αis spontaneous consumption which is constant, marginal propensity to consume (MPC) is assumed to be constant β, i is investment and y is equilibrium income. In this formula, only equilibrium income y and investment i are variable, thus it comes to the conclusion that investment idetermines the scale of equilibrium income y.This model has a fundamental issue: as investment i increases, production scale expands, equilibrium incomey grows, can social consumption ability c increase in the same pace and absorb newly increased social wealth? According to the formula, this hypothesis is correct in theory, as consumption functionβ is a constant, in equilibrium income formula, sum of consumption demand and investment demand equals to general social income, y=c+i, but consumptionc=α+β×y,which means as income grows, so does consumption.

This conclusion is contradictory to another precondition of Keynesianism, that is, Law of Diminishing Marginal Propensity to Consume. Keynes believes that “there is a basic...

Aug 16, 2016 at 10:21 AM
Abstract. In this paper, production factor price determination theory under monotonyis employed to explain correctness of surplus value in Marxism and infer that surplus value (i.e. capital gain) depends on capital scarcity. With its scarcity, capital gets involved in labor product distribution which results in distribution imbalance. This is just the fundamental cause for capitalist economic crisis. According to Coase’s enterprise cost theory, the function of capital is to reduce social cooperation cost (i.e. transaction cost mentioned by Coase) in modern economic development. Based on this, a brand-new annotation is made for communism. 
Marxism cannot make communist society come true. Only perfect competition can eradicate capitalism.
Communism is a fatal tempt left to the world by Marx. Tens of millions of people sacrificed to realize the dream of “From each according to his ability, to each according to his need”two hundred years after birth of communism. Two great powers in the world, Russia and China, spared no effort in participate this unverified social development pattern, both paid the price. Marx was once a sage in these countries, but now controversial. As a matter of fact, Marx is only a scholar lived on relief throughout his life. His ideological value, criticism against capitalist in particular, lacks no foresight no matter at that time or in later generations. His theory is correct mostly, but is challenged by himself and his theory successors in a critical point.
I. Unbalanced distribution forces economic crisis

Marxism originated in the middle of 19th century. Capitalism was baptized by the first industrial revolution at that time and was marching toward golden age. When capitalists were determined to conquer the whole world by capitalism, the first massive world economic...

Jul 28, 2016 at 10:41 AM


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