Now the school that believes in self-adjustment is, in fact, assuming that the rate of interest adjusts itself more or less automatically, so as to encourage, just the right amount of production of capital goods to keep our incomes at the maximum level that our energies and our organization and our knowledge of how to produce efficiently are capable of providing. This is, however, pure assumption. There is no theoretical reason for believing it to be true.This quote is floating around the webosphere.
Investors do not fund redundant goods and services, doing so would cause inventory surpluses. I think Keynes is interested in households, he wants household goods that should be produced, but are not. The implication is that households are not demanding goods that remove redundancies in their lives. So, I would ask are there noticeable redundancies in the retail economy that could be eliminated in 1934?
We define noticeable to mean an observable, 70% chance the debt costs justify their removal. Well the information channel between business and consumer is certainly working, Keynes is on public radio here, and by then widespread radio advertising was common. Retail information about household conveniences was certainly working better than ever before. The consumer credit channel had been well established by then So bankers are hearing the story, business is advertising the available conveniences. Where is the information block? There is none, households saw little redundancy in their lives..
What happened to household redundancies of 1934? The radio itself removed them. Households knew what was available, and now long it would be available and in what quantities. So households had greater power to plan their purchases farther ahead, they extended their planning time line.
It was producers who were confused, they were likely way behind the technology curve. They needed product plans that matched the new consumer.
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