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Effective Demand: Securing the Foundations

Author

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  • M.G. Hayes
Abstract
This paper is one of three contributions to a symposium commenting on papers previously published by the other authors. Allain (Allain, O. (2009) Effective demand and short-term adjustments in the General Theory, Review of Political Economy , 21, pp. 1--22) argues that Keynes elides a distinction between aggregate demand and global expenditure that is necessary to explain the formation of price expectations by individual entrepreneurs. Allain's conclusions depend upon redefinitions of aggregate and effective demand and the consumption function. Hartwig (Hartwig, J. (2007) Keynes vs. the Post Keynesians on the principle of effective demand, European Journal of the History of Economic Thought , 14, pp. 725--739) argues that entrepreneurs must take into account the state of the economy as a whole, in order to form price expectations independently and not as a market equilibrium determined by aggregate supply and demand. This leaves demand price expectations to be determined outside the principle of effective demand. Neither author does full justice to Keynes's own treatment. We still need to agree by what mechanism individual entrepreneurs form a collective and mutually consistent state of expectation in The General Theory .

Suggested Citation

  • M.G. Hayes, 2013. "Effective Demand: Securing the Foundations," Review of Political Economy, Taylor & Francis Journals, vol. 25(4), pages 661-671, October.
    • Handle: RePEc:taf:revpoe:v:25:y:2013:i:4:p:661-671
    DOI: 10.1080/09538259.2013.837329
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    References listed on IDEAS

    as
    1. M.G. Hayes, 2013. "Effective Demand: Securing the Foundations," Review of Political Economy, Taylor & Francis Journals, vol. 25(4), pages 661-671, October.
    2. Olivier Allain, 2013. "Effective Demand: Securing the Foundations," Review of Political Economy, Taylor & Francis Journals, vol. 25(4), pages 653-660, October.
    3. Mark Hayes, 2007. "The Point of Effective Demand," Review of Political Economy, Taylor & Francis Journals, vol. 19(1), pages 55-80.
    4. Olivier Allain, 2009. "Effective Demand and Short-term Adjustments in the General Theory," Review of Political Economy, Taylor & Francis Journals, vol. 21(1), pages 1-22.
    5. M. G. Hayes, 2013. "The State of Short-term Expectation," Review of Political Economy, Taylor & Francis Journals, vol. 25(2), pages 205-224, April.
    6. Jochen Hartwig, 2013. "Effective Demand: Securing the Foundations," Review of Political Economy, Taylor & Francis Journals, vol. 25(4), pages 672-678, October.
    7. Jochen Hartwig, 2007. "Keynes vs. the Post Keynesians on the Principle of Effective Demand," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 14(4), pages 725-739.
    8. Kregel, J A, 1976. "Economic Methodology in the Face of Uncertainty: The Modelling Methods of Keynes and the Post-Keynesians," Economic Journal, Royal Economic Society, vol. 86(342), pages 209-225, June.
    9. Olivier Allain, 2013. "Effective Demand: Securing the Foundations," Review of Political Economy, Taylor & Francis Journals, vol. 25(4), pages 653-660, October.
    10. Olivier Allain, 2009. "Effective demand and short-term adjustments in the General Theory," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00345891, HAL.
    11. repec:pke:wpaper:pkwp1212 is not listed on IDEAS
    12. Casarosa, Carlo, 1981. "The Microfoundations of Keynes's Aggregate Supply and Expected Demand Analysis," Economic Journal, Royal Economic Society, vol. 91(361), pages 188-194, March.
    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. David G. Victor, 2010. "Natural Gas and Geopolitics," Chapters, in: François Lévêque & Jean-Michel Glachant & Julián Barquín & Christian von Hirschhausen & Franziska Ho (ed.), Security of Energy Supply in Europe, chapter 4, Edward Elgar Publishing.
    2. Constantinos Repapis, 2020. "Book review: Mark G Hayes, John Maynard Keynes: The Art of Choosing the Right Model," The Economic and Labour Relations Review, , vol. 31(3), pages 470-476, September.
    3. Jochen Hartwig, 2017. "The Comparative Statics of Effective Demand," Review of Political Economy, Taylor & Francis Journals, vol. 29(3), pages 360-375, July.
    4. M.G. Hayes, 2013. "Effective Demand: Securing the Foundations," Review of Political Economy, Taylor & Francis Journals, vol. 25(4), pages 661-671, October.
    5. Hein, Eckhard, 2015. "The principle of effective demand: Marx, Kalecki, Keynes and beyond," IPE Working Papers 60/2015, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    6. Severin Reissl, 2015. "The return of black box economics - a critique of Keen on effective demand and changes in debt," IMK Working Paper 149-2015, IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute.

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    More about this item

    JEL classification:

    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory

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