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A Dynamic Approach to the Theory of Effective Demand

In: Profits, Deficits and Instability

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  • Anwar Shaikh

Abstract

This chapter attempts to re-situate the theory of effective demand within a dynamic non-equilibrium context. Existing theories of effective demand, which derive from the works of Keynes and Kalecki, are generally posed in static equilibrium terms. That is to say, they serve to define a given level of output which corresponds to the equilibrium point between aggregate demand and supply. We propose to generalise this analysis in three ways. First, we shall extend the analysis to encompass a dynamic, that is, moving short-run path of output, rather than a merely static level. Second, we shall show that this dynamic short-run path need not imply an equilibrium analysis, since it can arise from either stochastically sustained cycles or deterministic limit cycles.1 And third, we will provide generalisation of the theory of effective demand and a possible solution in the instability of warranted growth.

Suggested Citation

  • Anwar Shaikh, 1992. "A Dynamic Approach to the Theory of Effective Demand," Palgrave Macmillan Books, in: Profits, Deficits and Instability, chapter 14, pages 271-294, Palgrave Macmillan.
    • Handle: RePEc:pal:palchp:978-1-349-11786-4_14
    DOI: 10.1007/978-1-349-11786-4_14
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    Cited by:

    1. Claudio H. Dos Santos & Gennaro Zezza, 2008. "A Simplified, ‘Benchmark’, Stock‐Flow Consistent Post‐Keynesian Growth Model," Metroeconomica, Wiley Blackwell, vol. 59(3), pages 441-478, July.
    2. Jamee K. Moudud, 2000. "Finance in a Classical and Harrodian Cyclical Growth Model," Macroeconomics 0004036, University Library of Munich, Germany.
    3. Claudio Dos Santos, 2004. "Keynesian Theorizing During Hard Times: SStock-Flow Consistent Models as an Unexplored 'Frontier' of Keynesian Macroeconomics'," Macroeconomics 0405023, University Library of Munich, Germany.
    4. Claudio H. Dos Santos, 2004. "Keynesian Theorizing During Hard Times: Stock-Flow Consistent Models as an Unexplored 'Frontier' of Keynesian Macroeconomics," Method and Hist of Econ Thought 0406001, University Library of Munich, Germany.

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