Tuesday, 16 February 2016

Keynesian Theory of Value.

"I believe myself to be writing a book on economic theory which will largely revolutionise … the way the world thinks about economic problems. When my new theory has been duly assimilated and mixed with politics and feelings and passions, I can’t predict what the final upshot will be in its effect on actions and affairs. But there will be a great change, and in particular the Ricardian foundations of Marxism will be knocked away". (Keynes to George Bernard Shaw, Jan 1, 1935, as quoted by Geoffrey Pilling)
Ever since the dawn of capitalism, humanity wondered about the laws governing distribution: prices, profits, wages. The Physiocrats in France, Adam Smith, David Ricardo, and Karl Marx, in Britain -- among others -- devoted their best efforts to that endeavour.

All to no avail.

The long wait ended when John Maynard Keynes cracked the secret code:
You pay for the Keynesian what he is really worth and you sell him for what he believes he is worth.
That's where profits come from.


Don't let yourself be fooled by that deceptively simple statement: there's unsuspected depth in there.

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