Setbacks of supply-side economics in the face of fundamental uncertainty - The case for unleashing aggregate demand

Although fundamentally the General Theory and the orthodox approach both study the functioning of a market economy in which rational individuals operate, they obtain radically opposite properties in competitive equilibrium. One of the most remarkable differences is the predominance of aggregate supply conditions in the orthodox approach and aggregate demand conditions in the General Theory. The article discusses why the General Theory obtains such different results while studying an apparently similar system. The fact is that the appearance is deceptive, and that because of the radically different way in which the two approaches approach uncertainty and decisionmaking in the face of risk, one leads to a 'supply-side economy' in which money is neutral, while in the other it is, on the contrary, the non-neutrality of money that creates the conditions for a 'demand-side economy'. The article also explains why supply-side conditions only affect equilibrium income if they influence aggregate demand, and why supply-side policies have perverse effects when they are implemented in a system where demand takes precedence. In so doing, it reveals all the benefits that simply abandoning these policies can produce for economic growth. In passing, the article points out a number of recurring problems in the macroeconomic literature, concerning among other things the definition of aggregates, the conceptual and formal treatment of equilibrium and the interpretation of the General Theory.