On Mon, 14 Mar 1994 13:55:15 -0500 (EST) Rudy F. said:
>... I guess that
>I don't understand how a change in investment can be large
>enough to cause a recession or a period of expansion, in the
>short run, but not have any impact on the production function.
The idea is that the flow of investment spending has a big
impact on the total flow of spending and aggregate demand but
since the existing stock of means of production is so large,
the effect of investment spending on this stock (or rather,
these stocks) is small.
>
>The whole distinction between short run and long run is a mess.
>Short run in micro is when a factor is fixed. Long run in
>micro is when all factors are variable. In macro short run
>is when actual price is not equal to expected price. Long run
>in macro is when expected price=actual price but the capital
>stock is still assumed to be fixed.....
It's true: there are two different conceptions of the "long run"
floating around. One might be called the "medium run." More
importantly, I think that we have to distinguish between the
neoclassical long run, which assumes that there is a pre-existing
state toward which the economy is tending (at the "natural"
rate of unemployment, etc.), and other conceptions, which
allow for the final state to be affected by the process of
getting there (the hysteresis effect). Of course, we never
get to the final state, since there are always a bunch of
pesky exogenous and endogenous shocks which disrupt the
equilibration.
in pen-l solidarity,
Jim Devine BITNET: jndf@lmuacad INTERNET: [EMAIL PROTECTED]
Econ. Dept., Loyola Marymount Univ., Los Angeles, CA 90045-2699 USA
310/338-2948 (off); 310/202-6546 (hm); FAX: 310/338-1950
