The answer to your question is: "Yes, crises tend to break out in the consumption goods sectors due to oversaturated demand." Now, economists have a wrong explanation of overproduction and demand. They think about overproduction and demand of many types of goods and productions. I think about overproduction and demand of only one type of goods or production. The following explanation is from one of my article: "Among the arguments put forward in my thesis, there is a very key one: social demand for commodities would come to saturation. Now, let me give the following example to explain this argument of mine. If there is a country with a population of ten million and every two persons need a radio, then the whole population needs five million radios, which, in fact, is just the saturation point of social demand for radios for this country. After the development of radio production, when the total number of radios in this society exceeds five million, there will appear oversaturated demand, over-production and unemployment. Somebody would try to divide radios into A type of bad quality and B type of good quality. When A type radios is saturated and excessive on the market, then the production of B type is put into practice at once, which would, in some people's opinion, cause no unemployment. But, in my opinion, unemployment has really occurred. Because the production of A type radios and that of B type, as far as I can see, are totally different vocations. When workers lose their job of producing A type radios, they quickly turn to the job of producing B type. It is only because this process of transference happens so fast that the harm of unemployment has got no chance to appear. And the demand for B type radios for the society will also reach to the saturation point someday, which is all the same as A type radios. This is my explanation for oversaturated demand, unemployment and over-production." website: <http://www.geocities.com/WallStreet/Exchange/3058/letteraa.html>
And due to these, I found my model of economic growth. website: <http://www.geocities.com/WallStreet/Exchange/3058/>
Could you tell me who is Luigi Pasinetti and what is his theory? Why do you think my model of economic growth is roughly based on the ideas of Luigi Pasinetti?
Rakesh Bhandari wrote:
>
> Charles, am I wrong to sense that this model is roughly based on the ideas
> of Luigi Pasinetti which I quote here because it speaks to this economic
> model, the concern with leisure time, and my fave topic the theory of
> economic crisis.
>
> "...in an economic system in which productivity is increasing, consumers'
> preferences evolve, and the problem of making the increments to
> production correpsond to the evolution of consumers' preferences is by no
> means a trivial one. As already discussed at length, the consumption
> decisions concerning increments to expenditure are necessarily different
> from the previous ones as they concern preferences that they have to be
> learnt, i.e., found out for the first time. But the amount that can be
> learn within each period of time is not infinte; which means that although
> the process of learning itself can go on ad infinitum, the rate at which
> it can go on is limited. And when it happens--as is periodically bound to
> happen--that a sudden jump is required in the rate of consumers' learning,
> in order to keep up with technological discoveries, there is no reason to
> expect an immediate response. In these cases, investment decisions will
> tend to be postponed, which means that the total amount of actual
> investment will drop and acause total effective demand to fall short of
> the technical possibilities of production. The economical system will
> indeed remain unable to take advantage of all its technologically possible
> production, until it succeeds in finding an appropriate structual
> re-distribution of demand, employment and productive capacity...What the
> underconsumptionists did not realize is that the difficulty o fincreasing
> total effective demand is one of finding out, and achieving at sufficient
> speed, its appropriate structural composition and not one of reaching any
> absolute level. It seems important to stree that this proposition does not
> depend on the belief that human possibilities and imagination for new
> types of consumption can increase indefinitely. Even if the absolute
> amount of consumption had a limit, the alternative would always be open of
> devoting the continually increasing productivity to reducing labour time
> (and increasing leisure time), instead of production. The point is that
> the proces is not one to be expected automatically. The learning process
> it entails can by no means be taken for granted, although there is no
> inherent impossibility in human nature of carrying it on. DIfficulties do
> arise because periodic accelerations of this process of learning are
> required. More specifically, the maintainence of full employment requires
> a speeding up periodically in the rate at which technical improvements
> are, so to seak, to be digested. But of course there is no impossibility
> in the process itself. In other words, with an appropriate structural
> dynamics, an economic system can indeed grow indefinitely, though through
> periodical difficulties. In the ed, it can indeed take advantage of
> whatever increase in potential production technical improvements may
> bring along, with per capital consumption indefinetely increasing in
> quantity and quality, or with leisure time increasing." Structural Change
> and Economic Growth, p. 242
>
> Do crises tend to break out in the consumption goods sectors due to
> oversaturated demand? I thought the consumer goods industries tend to show
> the least cyclical variation. If there is overproduction of these
> consumer goods is that because there is really no need or no demand for
> them?
>
> best, rakesh
-- Ju-chang He SHENZHEN, P.R. CHINA E-mail address: <chang at public.shenzhen.cngb.com> Welcome to visit My Home Page at <http://www.geocities.com/WallStreet/Exchange/3058/>