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CIAO DATE: 03/02
Critical Review
Capitalism, Coordination, and Keynes: Rejoinder to Horwitz
By Greg Hill
Abstract
In the ideal market of general equilibrium theory, choices are made in full knowledge of one another and all expectations are fulfilled. This pre-harmonization of individual plans does not occur in real-world markets wheredecisions must be taken in ignorance of one another. The Austrian school grants this, but claims that real-world price systems are nonetheless effective in coordinating saving and investment decisions, which are motivated by disparate considerations. In contrast, Keynes held that without the pre-reconciliation of individual plans, investment and employment would be less than optimal, and the resulting distribution of income arbitrary and inequitable.