Time An Important

Time An Important

Time, an important element in much economic analysis. Economic phenomena take time to show their effects. Many economic propositions are true 'in the long run', but often in personal, industrial and public affairs what matters is what happens in the short run. Keynes once said: 'In the long run we are all dead.' If 'the long run' consisted of a continuous chain of 'short runs' in which economic causes and effects never had time to work themselves out, many economic propositions might be interesting in theory but irrelevant in practice. But in so far as human beings learn by trial and error, 'short runs' do not merely repeat themselves but show successive differences, each based on the experience and the lessons learned from previous ones.

In many economic activities the important period is the long run and not the short run. Thus in the short run firms will continue to produce as long as price covers only prime ('marginal') costs, but sooner or later all equipment must be renewed and the price must therefore cover the full average costs of the product if firms are to continue to produce.

It is possible to regard time itself as a factor of production since without it there can be no production of goods or services. In this sense time is necessary for the production of capital (through 'abstinence' from consumption) and of labour (in training, acquiring experience, learning judgment, etc.).

There is much discussion about the power of the 'laws' of supply and demand. For a time the 'forces' of supply and demand can be controlled or suppressed by fixing prices, licensing producers and suppliers, rationing consumers, limiting entry into an industry by producers' monopolies or Government decree, restricting entry into the professions by unnecessarily high standards of qualifications or into manual occupations by closed shops, demarcation rules and so on. In time the refusal to accept restrictions and the spontaneous tendency for people to come together in exchange as buyers and sellers leads them to find ways round the restrictions through the 'working of market forces'. 500ner or later restrictions on prices or supply or demand of goods and services produces 'black markets'. Rationing of consumer goods is bypassed by private arrangements between shopkeepers and customers. Licensing and other means of restricting entry into an industry produces unlicensed suppliers which provide essentially the same service or a near substitute; e.g. the licensing of public houses has helped to produce an increase in the number of clubs supplying alcoholic drinks; restrictions on the number of workers who may perform given tasks may sooner or later stimulate the introduction of labour-saving machinery; heavy taxation of income leads people to avoid tax by asking for payment in kind or in cash.

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Since then his writings have in turn been increasingly reinterpreted as a special case both by some followers and by some economists who had not wholly accepted his writings. The content of economics is in a state of change, and this consumeraffairs.org.uk site is therefore not a final statement of economic doctrine.

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