Acta Oeconomica 26. (1981)

1981 / 1-2. szám - Molnár, F.: Consumers' Investment Versus Capital Investment

Acta Oeconomica, Vol 26 (1-2), pp. 133-155 (1981) F. MOLNÁR CONSUMERS’ INVESTMENT VERSUS CAPITAL INVESTMENT (A contribution to the theory of contemporary business fluctuations) “Experience alone can decide on truth” (Einstein) Developing the ideas presented in some of his earlier publications, the author analyzes the role of fixed capital investment in the development of capitalist economy, especially in business fluctuations, contrasting this role with that of consumers’ investment. As a beginning, he gives a short review of the position of marxist respective bourgeois economics, regarding the role of fixed capital investment. On the basis of statistical evidence he draws the conclusion that both in the phase of an unfolding recession and at the beginning of a recovery the main driving force of economic change is consumers’ investment and not business fixed investment. Arguing against the theses of some Hungarian economists, he states that any realistic theory of contemporary business fluctuations has to combine the decisive role of profit changes in the ups and downs of business in a capitalist economy with the facts of life. The combining link is Kalecki's profit equation in its general from. This explains how profit changes can be severed from those in fixed investment; how a recession can develop and a recovery start without a drop respectively a rise in business fixed investment. Namely: changes in profits at the turning point reflect first of all changes in overspending (saving) of wage earners on the one hand and the changes in government domestic deficit on the other hand; showing a drop at the beginning of a recession and turning upwards again at the start of a recovery. Ragnar Frisch, who shared the first Nobel Prize in economics with Jan Tinbergen, was of the opinion already half a century ago in a situation characterized by the recent foundation of the Econometric Society that economics was in some sense moving in the direction of becoming an experimental science. (See; [14]) In spite of this we meet even nowadays with widely accepted theorems which, although logical and consistent, yet, contradict our experience. I am convinced that presently economics constitutes a real-science and I agree with the opinion according to which a system of ideas can be called an economic theory explaining reality only, if it satisfies the definition of a real-science theory, according to which it is: a systematic description of the essential interrelations between the variables of reality, that is... theorems and propositions (deduced from assumptions not in Acta Oeconomica, 26, 1981

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