Essay of Macro Economics
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- Category: Politics: Economics
- Date Submitted: 07/23/2010 11:51 PM
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ECO 260
Booms and Busts
In this video Men where out of work. So they asked the question what makes economy so
unstable. Before WWII they had no ideal. The first theory was that the system was self-correcting.
In the early 20th century businessmen still clung to a theory called Says Law which said that
when they produced a commodity they automatically created a demand for that product. Jobs
where still falling. It was feeling like Says had said too much. The main point of view seemed to
be that the business cycle was correcting an imbalance and that by intervening you might only
make things worse.
Karl Marx was the first economist to conceive of a self generated cycle in which good times
produced eventual bad times and the bad times produced good times. During the times of
economic depression, Marx’s followers were quick to point out the failure of Capitalism.
Later the video talked about the Great Depression, how President Hoover depended of the
advice held by both reputable economists and government officials at that time. That theory held
that a hands off approach to the economy was the best medicine. Over and over again Hoover
would say that "Recovery is just around the corner". And leading economists of the era believed
that the price system would make the necessary adjustments. If things were going well people
would make profits, and if they weren’t they wouldn’t make profits and that would help in the
adjusting process.
I some times feel that we as an economy don’t really learn from the mistakes we make. I
say this because it is like a viscous cycle.1
Booms and Busts
In this video Men where out of work. So they asked the question what makes economy so
unstable. Before WWII they had no ideal. The first theory was that the system was self-correcting.
In the early 20th century businessmen still clung to a theory called Says Law which said that
when they produced a commodity they automatically created a demand for that product. Jobs
where still falling. It was feeling like Says had said too much. The main point of view seemed to
be that the business cycle was correcting an imbalance and that by intervening you might only
make things worse.
Karl Marx was the first economist to conceive of a self generated cycle in which good times
produced eventual bad times and the bad times produced good times. During the times of
economic depression, Marx’s followers were quick to point out the failure of Capitalism.
Later the video talked about the Great Depression, how President Hoover depended of the
advice held by both reputable economists and government officials at that time. That theory held
that a hands off approach to the economy was the best medicine. Over and over again Hoover
would say that "Recovery is just around the corner". And leading economists of the era believed
that the price system would make the necessary adjustments. If things were going well people
would make profits, and if they weren’t they wouldn’t make profits and that would help in the
adjusting process.
I some times feel that we as an economy don’t really learn from the mistakes we make. I
say this because it is like a viscous cycle.1