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Keynes’s slip of the pen: aggregate supply curve vs employment function

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  • Heller, Claudia

Abstract

This paper focuses on Keynes’s exposition of the Principle of Effective Demand and its generalised mathematical representation – the basis of a Z-D type model. It elaborates on Keynes’s algebraic formulation in the General Theory, relying on interpreters who contributed to the generalisation of his most restrictive hypotheses on competition and returns to scale as well as on those who developed the algebraic argumentation that Keynes left only indicated. Instead of correcting Keynes’s mathematics (which is right), the paper concludes that there has been a “slip of the pen” in his own description of these concepts on the footnote to page 55 of the General Theory. Keynes’s employment function, the inverse of his aggregate supply curve is not the same thing as his aggregate supply function. Therefore, in the controversial footnote, it is not the aggregate supply function but the employment function that is linear with a slope given by the reciprocal of the money-wage.

Suggested Citation

  • Heller, Claudia, 2009. "Keynes’s slip of the pen: aggregate supply curve vs employment function," MPRA Paper 12837, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:12837
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    References listed on IDEAS

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    1. Rodolphe DOS SANTOS FERREIRA & Philippe MICHEL, 1991. "Keynes’ Aggregate Supply Function and the Principle of Effective Demand," Discussion Papers (REL - Recherches Economiques de Louvain) 1991023, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
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    4. Asimakopulos, A, 1982. "Keynes' Theory of Effective Demand Revisited," Australian Economic Papers, Wiley Blackwell, vol. 21(38), pages 18-36, June.
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    6. Torr, Christopher, 1984. "The Microfoundations of Kenyes's Aggregate Supply and Expected Demand Analysis: A Comment," Economic Journal, Royal Economic Society, vol. 94(376), pages 936-940, December.
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    11. John King, 1993. "Aggregate Supply and Demand Analysis Since Keynes: A Partial History," Working Papers 1993.16, School of Economics, La Trobe University.
    12. Paul Wells, 1974. "Keynes' Employment Function," History of Political Economy, Duke University Press, vol. 6(2), pages 158-162, Summer.
    13. Axel Leijonhufvud, 1974. "Keynes' Employment Function," History of Political Economy, Duke University Press, vol. 6(2), pages 164-170, Summer.
    14. Patinkin, Don, 1979. "A Study of Keynes' Theory of Effective Demand," Economic Inquiry, Western Economic Association International, vol. 17(2), pages 155-176, April.
    15. J. Hartwig & M. E. Brady, 2008. "Comment: Hayes on Z," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 32(5), pages 815-819, September.
    16. E. Roy Weintraub, 1974. "Keynes' Employment Function," History of Political Economy, Duke University Press, vol. 6(2), pages 162-164, Summer.
    17. Daniel R. Fusfeld, 1985. "Keynes and the Keynesian cross: a note," History of Political Economy, Duke University Press, vol. 17(3), pages 385-389, Fall.
    18. By C. S. SOPER, 1956. "The Supply Curve In Keynesian Economics," South African Journal of Economics, Economic Society of South Africa, vol. 24(1), pages 1-8, March.
    19. Wells, Paul, 1978. "In Review of Keynes: Review Article," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 2(3), pages 315-325, September.
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    Cited by:

    1. Jochen Hartwig, 2021. "Zur Genese von Patinkins Interpretation des Keynes'schen Prinzips der effektiven Nachfrage," Chemnitz Economic Papers 046, Department of Economics, Chemnitz University of Technology, revised Jun 2021.
    2. Strati, Francesco, 2012. "On Keynes's Z-function," MPRA Paper 42918, University Library of Munich, Germany.

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    More about this item

    Keywords

    Principle of effective demand; D/Z-mode´; Aggregate demand; Aggregate supply;
    All these keywords.

    JEL classification:

    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B2 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925

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