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Effective Demand: Securing the Foundations

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  • Jochen Hartwig

Abstract

This paper is one of three contributions to a symposium commenting on papers previously published by the other authors. I basically agree with Allain's (2009) reconstruction of Keynes's model of effective demand from Chapter 3 of The General Theory , except that I think that entrepreneurs take the overall economic situation into account when forming expectations as to how much demand will be forthcoming to them. I also agree with Hayes (2007a) on the most important--and most controversial--issues surrounding the principle of effective demand. Some disagreement remains on the merits of the 'Swedish' method of comparing ex ante expectations with ex post results and on the 'nature' of the equilibrium represented by the point of effective demand: for Hayes, it is a market equilibrium, while I regard it to be an expectational equilibrium in the minds of entrepreneurs.

Suggested Citation

  • Jochen Hartwig, 2013. "Effective Demand: Securing the Foundations," Review of Political Economy, Taylor & Francis Journals, vol. 25(4), pages 672-678, October.
    • Handle: RePEc:taf:revpoe:v:25:y:2013:i:4:p:672-678
    DOI: 10.1080/09538259.2013.837330
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    References listed on IDEAS

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    1. Victoria Chick, 1983. "Macroeconomics after Keynes: A Reconsideration of the General Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262530457, December.
    2. Edward J. Amadeo, 1989. "Keynes’s Principle of Effective Demand," Books, Edward Elgar Publishing, number 11.
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    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. 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.
    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. 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).
    5. 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.

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