Answer FOUR essay questions, with no more than one question from each section.
Write your answers in a blue book and clearly mark, on the cover, which questions you have answered, e.g., II.1, III.2.
Relative disadvantages of the neo-classical conception: the focus on choice, especially market choice, has resulted in very little attention to work and the sphere of production. Thus even as it has sought a general formulation of the "economic question" it has narrowed its range of attention in important ways.
b) Which point of departure and why? Obviously there are at least two and maybe more answers possible. The point is not just to choose one, but to construct some interesting reasons for doing so --or for rejecting both perhaps. "I prefer one" or the other is not enough. The "why" part of the question must also be answered. Nor is enough to tell me what you think I want to hear. If you have been paying attention, you know that I would probably prefer the classical approach because of the advantage mentioned above. But if you agree with me, you must have reasons. Note: the question asked about your "point of departure" not whether you would simply choose one over the other. Therefore it is quite possible to talk about taking one as a point of departure but then adding in elements of the other, or of something else for that matter --perhaps from other disciplines.
Contrast: where they seem to have differed is in the relationship they saw between their theories and state policies. Whereas the classical theorists thought that their theories justified a "laissez-faire" policy, i.e., the state would only act to guarantee the free working of the markets, Keynes' theory argued for a much more proactive role for the state. In Keynes theory equilibrium might only be achieved by the free market at socially and policially unacceptable levels of unemployment and therefore government was justified in intervening to effect a more acceptable equilibrium, i.e., one with much lower levels of unemployment. In general, the classical theorists claimed unemployment was not a problem, merely a passing phenomenon associated with labor market adjustment toward full employment (that is to say when markets clear and all who want jobs at the going wage find employers who want to hire them at the going wage). But for Keynes, high levels of unemployment could no longer be viewed in this manner. Already in the 1920s when the British were contemplating a return to the gold standard after World War I, he saw that the levels of unemployment that would result would be socially unacceptable and politically dangerous. His classical opponents pooh-poohed his views. In fact when the British did return to the gold standard, unemployment shot up and the English working class reponded with the General Strike of 1926 --the first in history. Again in the Great Depression, the classical's said "hold tight", Keynes said "the governemnt must take responsibility for creating the employment the private sector won't". He was proved right, governments did and the Depression was overcome.
b) the elasticity of demand would definitely have an impact on the success of these policies. The elasticity of demand measures the responsiveness of demand to price. The elasticity of demand, call it e = %ÆQ/%ÆP. In the case of both of these policies (separately and together) there will be a change in price and therefore a change in the quantity demanded, thus in the total value of grain produced and sold. Since in all cases we can assume a downward sloping demand curve, an increase in price will result in a reduction in grain output Q, ie. e<0. Now the impact of the policies will depend on e in the following ways: 1) the restriction of output will lower output (shift supply to the left) while raising price. What the effect will be will depend on e. If e>-1, i.e., the demand is inelastic, then total revenue would rise as say a 10% increase in price was less than offset by a 5% decrease in sales. If e = -1, i.e., demand has unitary elasticity, the value of sales would remain the same. If e <-1, i.e., demand is elastic, it would fall as say a 10% increase in price was more than offset by a 20% fall in sales. 2) what would happen with the increase in demand would depend on the elasticity of supply, about which we have been told nothing. 3) what would happen with a combination of increased demand and restricted supply would depend on the elasticity of both demand and supply as well as on the magnitude of the relative changes, about which, again, we have been told nothing. Clearly policy makers were hoping (or estimated) that the net effect would be to raise prices.
Changes in assumptions: going down the list above: its hard to see how the derivation of market demand could not the simple sum of the quantities demanded --but we could imagine that there is some interaction among the various individual demands. This means that we have a non-sociopathic model of individual choice and the choices of individuals would be related to each other, how the curve might be changed would depend on the assumptions made about the interrelationships. For example, if we assumed that something like a "snob effect" held, then a rising price might result in more rather than less demand among some consumers and if others, following their lead jumped on the bandwagon, we could imagine that the quantity demanded might actually increase as price rose. Clearly a change in income distribution will affect the structures of demand as income is redistributed according the the varying differences in various consumers preferences. If we violate the choice rules, for example, accept the idea that some things are not comparable, not only is A not prefered to B but the two are never even considered in the same thought, then the pattern of behavior changes and the curves must change, but how is not obvious --figuring out how might take a formal derivation. This would obviously affect the issue of substitutes and complements which whose relationship would be cease to be. In all cases if there is an increase or decrease in income (given the distribution) we could assume that demand would increase or decrease accordingly.
Cleaver on the other hand provides us with a fairly detailed analysis of those forces. Whereas Case & Fair say simply that classical economists thought that business cycles were self-correcting, Cleaver provides a whole analysis of why they thought so, how their theory led them to that conclusion, e.g., the dynamics of labor markets, goods markets and capital markets. He also provides a separate analysis based related to his discussion of growth that relates the mechanism of the cycle to the dynamics of antagonism between labor and business. This involves both the business response to wage increases exceeding productivity increases during upturns, i.e., a strike on investment inducing a downturn, and the shifts in power this causes , i.e., labor loses, business gains, which lay the basis for a new upturn. With respect to Keynesian "cycles" Case & Fair haven't said much in what we have seen other than Keynesian economics was aimed at managing aggregate demand and growth and Cleaver has said much the same thing only telling us more about the underlying principles, i.e., productivity deals at both the micro (collective bargaining) and macro (fiscal, monetary, industrial policy plus Bretton Woods) levels. In Case & Fair the discussion of policy making puts less emphasis on "antagonism" than does Cleaver who puts it at the very center of the social dynamics "economics" analyses.
"Discuss" means not only spell out the argument but to also evaluate it in some way. Many answers are possible. Here is one. While all of these relationships are plausible, a key issue must be the relative size of the effects. It becomes obvious that in economic analysis a given change in a variable may be due to a variety of other changes, but which of those other changes has the greatest effect? Some such changes might have diametrically opposed effects, i.e., one pushing a variable up, another pushing it down. Which will have an effect that overrides the other? Broadened from the economy to society more generally we can pose the same question: just how strong are the effects that Cleaver is talking about? Are they marginal and relatively unimportant or large and very important? Cleaver obviously thinks they are very important or he wouldn't spend time on them. Mostly, however, he just asserts this with not what you would call a wealth of empirical evidence of the size of the effects. More information would be useful to evaluate the issue.
b) the species-flow mechanism (based on gold flows) would tend to restore balance in imports and exports. Although any given exported good might be competing with domestic goods elsewhere in a given market, most economists --especially in the classical period-- thought of imports and exports as a kind of international market. The equality of the value of a country's imports and exports would amount to the market having cleared. If a country tried to export but import less then gold would flow in, raise the price level, lower interest rates and the result would be stimulated economic activity and more imports. Thus the species flow mechanism was seen as a kind of market clearing device that could keep international trade/markets in balance.
b) The appropriateness of viewing K. macro as "demand management' in the case of policies used to correct international trade deficits under Bretton Woods regime of fixed exchange rates: Trade deficits involves an excess of imports over exports. The use of fiscal and monetary policies, according to Cleaver (we haven't yet seen how this works) to depress the economy would slow down the growth of imports --bring it back in line with the growth of exports-- due to reduced ecnomic activity. This would certainly involve reduced demand --from the government in the first instance, from others later perhaps as a result. Thus the view would seem appropriate. Now it is also possible that the government might also pursue "supply" policies, e.g., stimulating research and development investment that could lead to improved, lower priced and more competitive exports which would also act to bring imports and exports back into line. In this case, once again, "demand management" seems inadquate as a descriptor of the nature of the policies.