"When the facts change, I alter my conclusion." as put forth by John Maynard Keynes, the man whose economic insight helped shape our modern economic landscape.
Later in time, this notion that facts change (i.e. that the economy is dynamic) was adopted widely, but oddly enough, Keynes was not the one who popularized the idea. Before the mid 1970s, Keynesian Economics was employed to supposedly steer the economy in the right direction. The practice was dominant in many of western nations (and only later on spread to the east). However, Keynesian economics (despite what Keynes famously said) treated many economic relationships like the relationship between inflation and unemployment (illustrated by the Phillips Curve) as stable/fixed.
In a way, this is no different from how Isaac Newton thought that space and time are static, that together they merely act as a stage where all the actio...
One of the bizarre things about economics is that it exists in the realm in-between know and know-not for many people. At least, that is how I used to perceive the discipline. Having spent some years in and out of formal economic training, I have come to a realization that the prior statement is not (entirely) correct after all. The subject is actually quite well-known, to the point that it is widely reported and discussed on the news every single day. And, if you frequent café as much as I do, then you are bound to encounter a round table or two with economics in the middle every so often. It turns out that my statement needs a bit of adjustment, call it semantic if you may.
Economics is one of the most well-known subjects due to it...
From Malaysian Restaurant's Menu to Great Depression (Economics from Keynes' perspective)
A long one, but worth reading.
This afternoon, I went to eat at a low-budget Malaysian restaurant, and the moment I opened the menu, it got me thinking about a famous economic phenomenon known as "Inflation".
Now, inflation is a general rise in price or decrease in purchasing power of your money. Simply put, 4% annual inflation means that the price of a $100 basket of goods this year will cost you $104 next year. Nothing too complicated.
And this is true in a real-world setting. I remember my grocery costing me less last year if compared to this year. Well, that must mean it also costs the restaurant more to buy its inputs this year (meat, eggs, veggies, spice, etc). But, what is surprising to me is that the prices on the menu are exactly t...
In our previous article, we discussed about how crucial spending is to the economy. We were talking like our life depends on spending, and that is still very true actually. Though a natural law it seems, there is more to the art of spending than how it looks at the face value. Remember, my previous article offers no false statement, but correctness/truth does not translate into completeness.
John Maynard Keynes, the world renown economist, might not have invented the so-called "Paradox of thrift", but he did re-introduce it to the world and popularized it . To recap, pretty much what he said is that being thrifty is good for yourself at first, but bad for the whole economy and ultimately bad for you because if everyone is being too economical, less money (wealth) will be circulated, and in the end, we will all have less of everything. The more you save, the less...
The True Wisdom of Economics: "A dollar spent is a dollar earned."
Image source: www.thetimes.co.uk
One of the earliest economic concepts I learnt during my first ever class of economics is none other than this very idea that spending and earning are pretty much the same thing (i.e. spending = earning) when you look at the broad picture of the whole economy. "That's crazy!" I thought. Because if it is true, then doesn't it also imply that I can earn money simply by spending it? How absurd!
Well, to an individual, spending is cash outflow, and earning is cash inflow. That is what logics and practical daily experience have taught us. Indeed, for a person, spending is the exact opposite of earning. Then how can your spending be equal to your earning? That does not sound plausible, does it?
But, let's rewire the question a little bit. How about "your spending = a...