Mercantilism, Stamped Money, and Under-Consumption

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Table of Contents

Introduction
Assumptions
The Nature of Money
Political and Moral Implications
Conclusion

Introduction

“Notes on Mercantilism, the Usury Laws, Stamped Money and Theories of Under-Consumption” is one of the chapters in John Maynard Keynes’s work “The General Theory of Employment, Interest, and Money” that was published in 1936. The author argues with the views of other scientists and mainly focused on aspects that are related to capitalism, interest rates, and others.

Assumptions

It needs to be said that Keynes believed that classical economists did not pay as much attention to the issues of unemployment and under-consumption as they should have. The author discusses Bernard Mandeville’s book titled Fable of the Bees that focused on the division of the workforce and social benefits. It needs to be said that it was way ahead of its time but was frequently criticized because of the revolutionary idea that was described in his works.

The main issue is that it was written a particular form that was not appreciated by readers. He also disagreed with the system that was based on the ideas of Gladstonian liberalism and could not support hospitals, monuments, and other important buildings. In this chapter, the author also notes that only several scientists believed that numerous issues that were associated with under-consumption were present at that time. Keynes has noted that Malthus identified that lack of the sufficiency of demand is one of the primary causes of unemployment, and he agrees with this statement. He has also mentioned that some mercantilists have raised such topics in their works.

It is paramount to note that he criticizes ideas of Ricardo quite frequently, and he believed that he did not consider the ideas that were suggested by other prominent economists. English economist agrees with the point of view of Cary, who suggested that an increase in spending is frequently followed by the development of the economy. He has stated that he supported some of the opinions of Hobson and believed that those suggestions were extremely well-founded. The point of view that money should be regarded as one of the most important things is especially interesting, and it is suggested that this approach has numerous benefits from the perspective of the economy.

It is also discussed how this doctrine was not accepted by other scientists. This theory was frequently criticized, but most had to agree that it is extremely reasonable, and this aspect should be considered. He also discusses how he agrees with the points of view of Hobson and Mummery on the topic of interest. Keynes believed that it is simply a sum of money that is spent on access to funds. It is imperative to say that he noted that their theory should not be viewed as complete mainly because they did not have a unique perspective on interest rates. He wrote that he does not agree with Hobson’s opinion that under-consumption often causes an increase in investments that are not profitable.

Keynes believed that it was not explained that a reduction in the propensity to spend money frequently leads to unemployment because the number of new investments is not appropriately increased. One of the main aspects that need to be discussed is that he suggested interest rates are not determined mainly by saving. Keynes believed that ideas of under-consumption were especially popularized after the war, and suggests that some of them were a heretic.

He notes that Major Douglas’s theories were incredibly famous mainly because most could not provide any arguments against his views. The author also discusses how some of his points lack justification and disagrees with one of the theorems. He also noted that many economists had a distorted perspective on this issue and did not understand the issues that were related to the economic system. It needs to be said that the think point is mentioned quite frequently. Keynes tries to make sure that readers have a better understanding of the issues that are associated with enormous savings.

The Nature of Money

He states that the main reason behind the formation of capital is is a reaction to demand that is caused by consumption. He believed that disproportional saving cannot be viewed as an advantage when consumption is also not significantly increased. He notes that such behavior should be followed by a need to spend more funds on commodities. It is also discussed how most economists at that time suggested that it is not likely that consumption may be insufficient.

It is also quite evident that the economist has viewed money as an essential tool that leads to progress because it can be used for the development of new products. He believed that it is understandable that most individuals want to make sure that their wealth is increased, and he suggested that there should be a point where spending and production are closely connected.

Political and Moral Implications

It is paramount to note that the author believed that the way aggregate demand influences the economy cannot be adequately predicted in most cases, and it is affected by numerous internal and external factors. The fact that it may impact employment is also quite significant and should not be disregarded. Keynes believes that an increase in saving had to be regarded as an enormous problem because it may lead to numerous complications, and may hurt the economy of a particular country. One of the main issues that need to be discussed is that the problem of reduction in spending cannot be addressed without the intervention of the government most of the time.

The policies that can be introduced may be viewed as extremely inappropriate and oppressive because individuals should be able to have full control over the funds that they have earned from the moral point of view. It needs to be said that most economists were worried about the possibility of depression and tried to make suggestions that would solve this issue. Another major point that needs to be raised that while some of the author’s suggestions are valid, but he did not take into account several factors such as an overall economic situation. He mainly focused on a few countries, but it is paramount to note that cultural aspects and traditions were also not taken into account.

Conclusion

In conclusion, John Maynard Keynes is one of the most prominent figures in the because of his unique perspectives and revolutionary ideas. It needs to be said that some of his views were met with criticism because he did not agree with neoclassic economists, but his influence on modern macroeconomics should not be disregarded. His idea that under-spending is a critical factor that affects economic activities, and may cause numerous instances of unemployment is quite significant.

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Mercantilism, Stamped Money, and Under-Consumption

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