Graphic Explanation for Welfare Economic Foundation of Hoarding Loss

Shinji MIURA

Abstract


Abstract. Saving brings an economic loss. The author intends to publish a paper, which gives a foundation of this paradox of thrift by connecting money circulation analysis and welfare economics in the case where saving is limited to hoarding. As an introduction of the intended paper, this paper provides a simple explanation for hoarding loss using some graphs. Under certain conditions, the representative agent hoards money in order to increase utility, but the hoarding actually decreases it against agent’s rational intention. This irrationality of rationality occurs because the agent maximizes their utility while lowering the budget of the entire relevant term. This conclusion is derived from the agent making the decision with an ignorance of the whole expenditure reflux. Since the interest of a selfish agent is limited to their private range, the agent ignores the reflux despite of its objective truthfulness.

Keywords. Money Circulation, Welfare Economics, Under-Consumption, Paradox of Thrift, Intertemporal Choice.

JEL. D61, E21, E40.



Keywords


Money circulation; Welfare economics; Under-consumption; Paradox of thrift; Intertemporal choice.

Full Text:


References


Allgoewer, E. (2002). Underconsumption theories and Keynesian economics: Interpretations of the Great Depression. Discussion Paper of University of St. Gallen (No.2002-14).

Allsbrook, O.O. (1986). N.A.L.J. Johannsen: An early monetarist. Journal of Institutional and Theoretical Economics, 142, 431-437.

Ambrosi, G.M. (1996). Carl Föhl on economic activity and money. [Retrieved from].

Arrow, K. J. (1951). An extension of the basic theorems of classical welfare economics. In: J. Neyman (Ed.), Proceedings of the second Berkeley symposium on mathematical statistics and probability (pp. 507-522).University of California Press, Berkeley.

Blaug, M. (2007). The fundamental theorems of modern welfare economics, historically contemplated. History of Political Economy, 39, 185-207. doi. 10.1215/00182702-2007-001

Bleaney, M.F. (1976).Underconsumption Theories: A History of Critical Analysis, Lawrence and Wishart, London.

Boianovsky, M. (2002).Simonsen and the early history of the cash-in-advance approach. The European Journal of the History of Economic Thought, 9-1, 57-71. doi. 10.1080/09672560110103388

Brunner, K. (1951). Inconsistency and indeterminacy in classical economics. Econometrica, 19, 152-173. doi. 10.2307/1905731

Carlson, J.A. (1962). Foster and Catchings: A mathematical reappraisal. Journal of Political Economy, 70, 400-402.

Clark, D.(2008) Monetary cranks. In: S. N. Durlauf& L. E. Blume (Eds.), The new Palgrave dictionary of economics. Second Edition (Volume 5, pp. 697-699), Palgrave Macmillan, Basingstoke. doi.10.1057/9780230226203.1120

Clower, R. (1965). The Keynesian counterrevolution: A theoretical appraisal. In: F. H. Hahn&F. P. R. Brechling(Eds.), The theory of interest rates: Proceedings of a conference held by the international economic association (pp. 103-125). Macmillan, London.

Clower, R. (1967). A reconsideration of the microfoundations of monetary theory. Economic Inquiry, 6, 1-8. doi. 10.1111/j.1465-7295.1967.tb01171.x

Debreu, G. (1959). Theory of Value: An Axiomatic Analysis of Economic Equilibrium, John Wiley & Sons, Inc., New York.

Dimand, R.W. (1991). Cranks, heretics and macroeconomics in the 1930s, History of Economics Review, 16, 11-30.

Dimand, R.W. (2008a).Catchings, Wadill (1879-1967). In: S. N. Durlauf&L. E. Blume (Eds.), The new Palgrave dictionary of economics. Second Edition (Volume 1, pp. 711-712), Palgrave Macmillan, Basingstoke. doi. 10.1057/9780230226203.0206

Dimand, R.W. (2008b). Foster, William Trufant (1879-1950). In: S. N. Durlauf&L. E. Blume (Eds.), The new Palgrave dictionary of economics. Second Edition (Volume 3, pp. 471-472), Palgrave Macmillan, Basingstoke. doi. 10.1057/9780230226203.0597

Feldman, A.M. (2008). Welfare economics. In: S.N. Durlauf & L.E. Blume (Eds.), The new Palgrave dictionary of economics. Second Edition (Volume 8, pp. 721-730), Palgrave Macmillan, Basingstoke. doi.10.1057/9780230226203.1826

Gleason, A.H. (1959). Foster and Catchings: A reappraisal. Journal of Political Economy, 67, 156-172.

Gott, R. (2002).Time Travel in Einstein’s Universe: The Physical Possibilities of Travel through Time, Phoenix, London.

Haberler, G. (1964). Prosperity and Depression: A Theoretical Analysis of Cyclical Movements. Fifth Edition, George Allen & Unwin, London.

Hagemann, H. & Rühl, C. (1990). Nicholas Johannsen and Keynes's “finance motive”. Journal of Institutional and Theoretical Economics, 146, 445-469.

Hegeland, H. (1954). The Multiplier Theory, C.W.K. Gleerup, Lund.

Ikeda, Y. (2000). Hermann Heinrich Gossen: aWirkungsgeschichte of an ignored mathematical economist. Journal of Economic Studies, 27, 394-415. doi. 10.1108/01443580010342285

Ito, Z. (1952).Mr. Föhl’s theory of public investment. Bulletin of Yamagata University (Humanities), 2, 201-224 (In Japanese).

Jolink, A., & Van Daal, J. (1998).Gossen'slaws.History of Political Economy, 30, 43-50. doi. 10.1215/00182702-30-1-43

Keynes, J.M.,Hawtrey, R.G. & Robertson, D.H. (1933). Mr. Robertson on ”saving and hoarding”. The Economic Journal, 43, 699-712. doi. 10.2307/2224530

Klein, L.R. (1966). The Keynesian Revolution. Second Edition, Macmillan, New York.

Kohn, M. (1981). In defense of the finance constraint. Economic Inquiry, 19, 175-195. doi. 10.1111/j.1465-7295.1981.tb01129.x

Kohn, M. (1988). The finance constraint theory of money: A progress report. The Jerome Levy Economics Institute Working Paper (No.5). doi. 10.2139/ssrn.191371

Laidler, D. (1989). The context of S.C. Tsiang’s monetary economics. In: M. Kohn (Ed.), Finance constraints and the theory of money: Selected papers (pp. 359-375). Academic Press, San Diego.

Lossev, A., & Novikov, I.D. (1992). The jinn of the time machine: Non-trivial self-consistent solutions. Classical and Quantum Gravity, 9, 2309-2321. doi. 10.1088/0264-9381/9/10/014

Marget, A.W. (1966). The Theory of Prices: A Re-Examination of the Central Problem of Monetary Theory (Volume 1), Augustus M. Kelley Publishers, New York.

Meijer, G. & Vogal, R.F.A. (2000). The fate of new ideas: Hermann Heinrich Gossen, his life, work and influence. Journal of Economic Studies, 27, 416-420. doi. 10.1108/01443580010342348

Meijer, G. (2000). Comment on “Hermann Heinrich Gossen: a Wirkungsgeschichte of an ignored mathematical economist” by Yukihiro Ikeda. Journal of Economic Studies, 27, 421-423. doi. 10.1108/01443580010342366

Metzler, L.A. (1948). Three lags in the circular flow of income. In: Income, Employment, and Public Policy: Essays in Honor of Alvin H. Hansen (pp. 11-32). W.W. Norton Company Inc., New York.

Miura, S. (2015a).Quantification of revenue induction and expenditure reflux in a monetary economy. Advances in Linear Algebra & Matrix Theory, 5, 25-35. doi. 10.4236/alamt.2015.51003

Miura, S. (2015b). Monetary budget constraint and its missing problems. Open Journal of Optimization, 4, 87-99. doi. 10.4236/ojop.2015.43011

Miura, S. (2016).Unified money circulation equation and an analogical explanation for its solvability. Journal of Economics Bibliography, 3, 28-37. doi. 10.1453/jeb.v3i1.609

Nagasawa, K. (1968). Carl Föhl. The Hitotsubashi Review, 59, 507-527 (In Japanese).

Nash, R.T. & Gramm, W.P. (1969).A neglected early statement of the paradox of thrift. History of Political Economy, 1, 395-400. doi. 10.1215/00182702-1-2-395

Niehans, J. (2008).Gossen, Hermann Heinrich. In: S. N. Durlauf&L. E. Blume (Eds.), The new Palgrave dictionary of economics. Second Edition (Volume 3, pp. 714-717), Palgrave Macmillan, Basingstoke. doi. 10.1057/9780230226203.0660

Pedersen, J. (1954). The creation of money income. WeltwirtschaftlichesArchiv, 72, 155-178.

Pedersen, J. (1957). Remarks to Carl Föhl’s “Geldschöpfung und Wirtschaftskreislauf”. WeltwirtschaftlichesArchiv, 78, 1-10.

Robertson, D.H. (1933). Saving and hoarding. The Economic Journal, 43, 399-413. doi. 10.2307/2224283

Rothschild, K.W. (1964). The old and the new: Some recent trends in the literature of German economics. The American Economic Review, 54-2, 1-33.

Rühl, C. (2000). Nicholas August Ludwig Jacob Johannsen (1844-1928). In: P. Arestis&M. Sawyer (Eds.), A biographical dictionary of dissenting economists. Second Edition (pp. 327-335), Edward Elgar, Cheltenham.

Sasahara, S. (1981). The underconsumption theory of Foster and Catchings: Its feature and political implication. KeizaigakuRonso, 22, 1-40 (In Japanese).

Schneider, E. (1962). Money, Income and Employment, (Translated by K. Klappholz). George Allen & Unwin, London.

Schneider, M. (2008).Underconsumptionism. In: S.N. Durlauf & L.E. Blume (Eds.), The new Palgrave dictionary of economics. Second Edition (Volume 8, pp. 456-459). Palgrave Macmillan, Basingstoke. doi. 10.1057/9780230226203.1756

Stiglitz, J.E. (1991). The invisible hand and modern welfare economics. NBER Working Paper (No.3641). doi. 10.3386/w3641

Tavlas, G.S. (1976). Some further observations on the monetary economics of Chicagoans and non-Chicagoans. Southern Economic Journal, 42, 685-692. doi. 10.2307/1056261

Tsiang, S.C. (1966). Warlas’ law, Say’s law and liquidity preference in general equilibrium analysis.International Economic Review, 7, 329-345. doi. 10.2307/2525528

Van Eeghen, P.H. (2014). Why DSGE analysis cannot accurately model financial-real sector interaction. Real-World Economics Review, 17, 17-40.




DOI: http://dx.doi.org/10.1453/jeb.v3i2.763

Refbacks

  • There are currently no refbacks.


.......................................................................................................................................................................................................................................................................................................................................

Journal of Economics Bibliography - J. Econ. Bib.  - JEB - www.kspjournals.org

ISSN: 2149-2387.

Editor: [email protected]  Secretarial: [email protected]  Istanbul - Turkey.

Copyright © KSP Library