Autor: Bruce, Anderson and McShane, Philip

Buch: Beyond Establishment Economics

Titel: Beyond Establishment Economics

Stichwort: Angebot und Nachfrage (supply a. demand): Lonergan - Mankiw

Kurzinhalt: Differences in Supply & Demand: Monetary Circulation versus Snap-Shot Equilibrium; what for Lonergan is a tendency of markets, for Mankiw is the law of supply & demand

Textausschnitt: 6.1.3 Differences in Supply & Demand: Monetary Circulation versus Snap-Shot Equilibrium
116b It seems that an obvious site for comparing Lonergan & Mankiw would be supply & demand. It is easy to notice that for Lonergan there are two distinct types of demand - surplus demand & basic demand - and two distinct types of supply - surplus supply & basic supply - but that for Mankiw supply & demand are undifferentiated with regard to types of goods and types of payments. Supply & demand, for Mankiw, covers all types of goods & services regardless of their use in the economy. (Fs)

116c But the significance of this particular comparison fades when we compare Lonergan & Mankiw's treatment of supply & demand. Lonergan has a precise definition for supply and demand. Demand is the term Lonergan uses to denote sums of money held in reserve for expenditure. Supply is the term he uses to denote sums of money held in reserve for outlay.1 By contrast, Mankiw's uses the term demand - in the context of markets - to refer to what is common knowledge, namely that people will generally buy more goods when the price falls. He uses the term supply to refer to the fact that sellers will generally produce more goods when the price rises. This usage is less precise than Lonergan's in that Mankiw offers no measures of supply & demand and it does not seem possible to measure them. (Fs) (notabene)

116d But picking supply & demand as a point of comparison obscures larger differences between Lonergan & Mankiw. Demand does entirely different jobs for each of them. For Lonergan, surplus demand and basic demand are elements in the flow of payments in an economy. They are only part of the monetary circulation. For Mankiw, demand (along with supply) is the frame of reference which guides or directs all examinations of the economy. (Fs) (notabene)
117a Can we reconcile these two views? In particular, does Lonergan's analysis of monetary circulation encompass Mankiw's perspective on supply & demand? Can we fit Mankiw's view into Lonergan's larger perspective? At a glance the answer seems to be yes. Mankiw's explanation of how markets work seems to be consistent with Lonergan's description of the tendency of markets. Mankiw's argument is that an equilibrium price balances the supply & demand for goods; an equilibrium interest rate balances the supply & demand for loanable funds; the inflation rate balances the supply & demand for money; and the exchange rate balances the supply & demand for foreign-currency exchange. (Fs)
117b An excerpt from Lonergan captures how he reconciles analogous differences in perspective. (Fs)
M Leon Walrus developed the conception of the markets as exchange equilibria. Concentrate all markets into a single hall. Place entrepreneurs behind a central counter. Let all agents of supply offer their services, and the same individuals, as purchasers, state their demands. Then the function of the entrepreneur is to find the equilibrium between these demands and potential supply. (Fs)
The conception is exact, but it is not complete. It follows from the idea of exchange, but it does not take into account the phases of the productive rhythms. As has been shown, economic activity moves through a series of transformations and exploitations; and this series generates the succession of capitalist, materialist, cultural, and static phases. Now each phase in an exchange economy will have its exchange equilibrium, but the equilibria of the different phases differ radically from one another.1 (Fs)

117c There is, however, a crucial difference between Lonergan & Mankiw on this matter. For Lonergan the tendency of markets possesses a dynamic character in the sense that an equilibrium or uniform price is something that is never achieved even in a stable or steady-state economy. It is evident that prices of goods vary among stores, that interest rates & exchange rates vary among customers and vary each day, and that inflation rates are subject to drastic changes. Lonergan does not place supply & demand at the centre of his analysis. There is more to understanding how an economy works than supply & demand. For Lonergan, it is simply a fact that prices tend toward uniformity. (Fs) (notabene)

118a By contrast, what for Lonergan is a tendency of markets, for Mankiw is the law of supply & demand. Mankiw does not discuss the dynamic nature of markets. Rather, he presents his analysis of how markets work as a snap-shot. It is as if achieving the point of equilibrium freezes the frenetic activity of the market. The dynamic aspect is presented in terms of one-time shifts in the demand curve or the supply curve. (Fs) (notabene)