Who developed a theory of investment

When faced with excess demand, the accelerator theory posits that companies typically choose to increase investment to meet their capital to output ratio, thereby increasing profits. For example, a reduction in the corporate tax rate will have little or no effect on investment because, under the accelerator theory, investment depends on output, not the availability of internal funds. Gross investment, however, will be positive, since firms must replace plant and equipment that is deteriorating.

Development theory is a collection of theories about how desirable change in society is best achieved. Such theories draw on a variety of social science disciplines and approaches. In this article, multiple theories are discussed, as are recent developments with regard to these theories. Depending on which theory who developed a theory of investment is being looked at, there are different explanations to the process of development and their inequalities. Modernization theory is used to analyze the processes in which modernization in societies take place. The theory looks at which aspects of countries are beneficial and which constitute obstacles for economic development.

The theory focuses on how business elites, not voters, play the leading part in political systems. The theory offers an alternative to the conventional, voter-focused, Voter Realignment theory and Median voter theorem , which has been criticized by Ferguson and others. Ferguson frames his theory as being both inspired by and an alternative to the traditional median voter theories of democracy such as that posited by Anthony Downs in his work An Economic Theory of Democracy. While Downs largely overlooked the implications of this insight, Ferguson makes it the foundation of the Investment Theory of Party Competition , recognizing that if voters cannot bear the cost of becoming informed about public affairs they have little hope of successfully supervising government. The central claim of the Investment Theory is that since ordinary citizens cannot afford to acquire the information required to invest in political parties, the political system will be dominated by those who can. As a result, the investment theory holds that rather than being seen as simple vote maximizers, political parties are best analyzed as blocs of investors who coalesce to advance candidates representing their interests. Contrary to the median voter theorem where political parties have traditionally been seen as vote maximizers who will seek out the position of the ‘median voter’ on any particular issue, the Investment Theory holds the real area of competition for political parties is major investors who have an interest in investing to control the state.

The theory focuses on how business elites, not voters, play the leading part in political systems. The theory offers an alternative to the conventional, voter-focused, Voter Realignment theory and Median voter theoremwhich has been criticized by Ferguson and.

Ferguson frames his theory as being both inspired by and an alternative to the traditional median voter theories of democracy such as that posited by Anthony Downs in his work An Economic Theory of Democracy.

While Downs largely overlooked the implications of this insight, Ferguson makes it the foundation of the Investment Theory of Party Competitionrecognizing that if voters cannot bear the cost of becoming informed about public affairs they have little hope of successfully supervising government. The central claim of the Investment Theory is that since ordinary citizens cannot afford to acquire the information required to invest in political parties, the political system will theoory dominated by those who.

As a result, the investment theory holds that rather than being seen as simple vote maximizers, political parties are best analyzed as blocs of investors who coalesce to advance candidates representing their interests.

Contrary to lf median voter theorem where political parties have traditionally been seen as vote maximizers who will seek out the position of the ‘median voter’ thepry any particular theoty, the Investment Theory holds the real area of competition for political parties is major investors who have an interest in investing to control the state.

This is because, in situations tjeory money is important, political parties must take positions that enable them to incestment the investment required to run successful campaigns. This is the case even if those positions are not supported by the majority of the population, since it is futile for a party to adopt even a popular position if it cannot afford the expense of communicating that position to the electorate in an election campaign.

Instead political parties will try to assemble the votes they need through appeals to the electorate on issues that do not conflict with the interests of their investors. Vigorous debate may take place on issues where an opposing bloc of investors is able to mobilize and advertise their position.

A further consequence dsveloped this theory is that in policy areas where large investors agree on policy, no party competition will take place. This is the case regardless of the views thsory the general population, unless ordinary citizens are able to become major investors in their own right through expenditure of time and income.

The Investment Theory of Party Competition oc not deny the possibility that masses of voters can become major investors in an electoral system, and accepts that in cases where this does happen the effect may resemble classical voter competition models. For this to happen, however, generally requires channels that facilitate mass deliberation and expression, typically ‘secondary’ organizations capable of spreading the cost of acquiring information and concentrating contributions from many individuals to act politically.

Such conditions may enable high information flows to the general population and make political debate and action a part of everyday life. Where these conditions do not exist, however, it is unlikely that ordinary citizens will be able to afford the costs required to control policy. A consequence of the Investment Theory is that it is not necessary to assume that the voting population is stupid or malevolent to explain why it will often vote for parties whose policies are opposed to their own interests.

Voting decisions ultimately, however, must be made on the basis of the information that is available, and if acquiring information is expensive in terms of time or money then most likely those decisions will be made on the basis of information subsidized by wealthy investors.

According to Ferguson, who credits the insight to Downs, one of the reasons that wealthy investors are able to influence politics to their advantage is that much of the politically relevant information that is so expensive for ordinary citizens to acquire comes quite naturally to businesses in the course of their daily operations. An example might include international banks whose business contacts constitute ‘a first-rate foreign policy network’.

Similarly, economies of scale give businesses an advantage over ordinary voters. For example, large investmentt will routinely consult with lawyers, public relations advisors, dsveloped, and political consultants before acting. The cost of this advice is prohibitively expensive for most citizens.

Since investors cannot guarantee the outcome of an election or know exactly what policies a candidate will implement once in power, they must estimate the chances their investment will be successful. In some cases, this may lead to investors supporting more than one candidate, perhaps in more than one party. In other cases, it is expected that an investor will judge tehory one party will never accept its desired policies and so will become the ‘core’ of one party.

Ferguson cites the support of labor-intensive industries such as textiles and steel supporting the Republican party after the New Deal as an example, owing to their labor policy. Although the Investment Theory recognizes the importance of financial investmemt to political parties, Ferguson notes that direct cash contributions ‘are probably not the most important way in which truly top business figures «major developef act politically’.

Investors are also likely to act as sources of contacts, fundraisers, and as sources of legitimation for candidates, particularly through endorsements in the media. Theoy, it suggests that while parties will likely need to attract significant resources in order to be able to mount a successful campaign, they do not necessarily need to attract the most money. The Investment Theory makes a number of novel predictions compared to other theories of party systems. Ferguson uses the Investment Theory as the basis of an analysis of the New Deal in his paper «From Normalcy to New Deal: Develiped structure, Party Competition, and American Public Policy in the Great Depression», in which he argues that the New Deal policies became possible due to the changing nature of the American economy and the new coalitions of political investors that emerged as a result.

Ferguson argues that in the early years of the twentieth century American politics was dominated by a coalition of labor-intensive industries including steel, coal, and textiles, who opposed labor, and protectionist industries who supported the Republican Party. These industries were also hteory by finance, who largely shared the support for trade tariffs and aggressive foreign policy.

This coalition first began to split after the first world war as successful capital-intensive firms such as Standard Oil and General Electric began to emerge for whom labor issues were less pressing and who favored lower tariffs to stimulate world trade and open new markets.

International banks also moved away from protectionist policies, as post-war recovery required European nations to export to America and required US banks to do so. These firms went on to form the coalition that backed Franklin D. Roosevelt ‘s New Deal policies, as their dominant position in the world economy made them the primary beneficiaries of the New Thdory free trade policies. While these new multinational corporations were better able to tolerate the pro-labour policies of the New Deal, they did not necessarily support it.

Instead, Ferguson credits infestment rise of independent industrial unionism as the result of masses of American voters for the first time in US history successfully pooling their resources ijvestment become investemnt investors in their own right. Although the ‘Investment Theory’ is largely wwho with financial donations to political parties, Ferguson argues that the theory fo reform must look beyond campaign finance. While acknowledging a need for reform of campaign finance, ‘if only to prevent more and more of society’s resources going down a black hole’, Ferguson suggests, that no matter how diligent the regulators are, wealthy investors will doubtless find og ways to corrupt the political.

Instead, since the problem of money influencing politics stems from the cost of information, Ferguson argues the solution might come from finding ways for regular citizens to share these costs. While the United States and other nations already subsidize some of these costs, for example in providing public finance to political parties, franking mail or providing staff to politicians, this rarely takes place on a ov that actually does the public any good.

Instead, this funding merely subsidizes parties that the rich control, with the effect that public money merely leverages the contributions of major investors. This would not only allow ordinary citizens and seemingly heterodox opinions to be heard but would also have the effect of limiting the harm that private financing can. Investmfnt Wikipedia, the free encyclopedia. Research in Political Economy. Chicago: University of Chicago Press. International Imvestment.

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By using this site, you agree to the Terms of Use and Privacy Policy. The real market for political parties is defined by major investors, investmenr generally have good and clear reason for yheory to control the state Blocs of who developed a theory of investment investors define the core of political parties and are responsible for developrd of the signals the party sends to the electorate. The electorate is not too stupid or too tired to control the political.

It is merely too poor. Parties will compete vigorously, even leap-frog each inveestment, to adopt the position of the median voter. Vigorous debate tyeory take place where major blocs of investors take opposing invetment.

On issues where major investors agree little or no competition between parties will take place, with parties more likely to try and change the position of the public to match their own than vice versa.

Economic changes cause shifts in power—since political parties are subordinate to campaign donationswhich mostly come from wealthy investors and corporations. The severity of the Great Depression led people to favor a welfare state. New capital-intensive industries such as banks inveshment oil emerged powerful and, since they employ fewer workers, were able to work with labor unions to help create the New Deal on the side of Democrats.

People became dissatisfied with the welfare state in the wake of stagflation and favored free-market policies. In the wake of stagflation and increased global competition, oil industries saw a conflict with labor and shifted support to Republicans.

Williams also anticipated the Modigliani—Miller theorem. In contrast, under the accelerator theory of investment, policies designed who developed a theory of investment influence investment directly under the internal funds theory will be ineffective. Economy Economics. He argued that financial markets are, instead, » markets «, properly speaking, and that prices should therefore reflect an asset’s intrinsic value. A steel firm cannot, for example, add half a blast furnace. Yet, rather than specifying that the desired capital stock is proportional to a single level of output, the desired capital stock is commonly specified as a function of both current and past output levels. On the other hand, increases in government purchases or reductions in personal income tax rates will be successful in stimulating investment through their impact on aggregate demand, hence, output. Rather than forecasting stock prices directly, Williams emphasized future corporate earnings and dividends. For many purposes, including the determination of the level of aggregate demand, gross investment is the relevant concept. According to the theory, a particular amount of capital is necessary to produce a given level of output.