IDEAS home Printed from https://ideas.repec.org/p/kof/wpskof/04-95.html
   My bibliography  Save this paper

Explaining the Aggregate Price Level with Keynes's Principle of Effective Demand

Author

Listed:
  • Jochen Hartwig

Abstract

The conventional wisdom about Keynes's Principle of Effective Demand is that it states something about quantities. It is widely held that the Principle determines the levels of output and employment in a world not governed by Say's Law. This paper argues that the Principle of Effective Demand goes beyond this to explain not only 'real' activity levels but also the aggregate price level. A variant of the Post Keynesian D/Z-model is brought together with Marxian reproduction schemes to derive this result.

Suggested Citation

  • Jochen Hartwig, 2004. "Explaining the Aggregate Price Level with Keynes's Principle of Effective Demand," KOF Working papers 04-95, KOF Swiss Economic Institute, ETH Zurich.
  • Handle: RePEc:kof:wpskof:04-95
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.3929/ethz-a-004871456
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Nell,Edward J., 1998. "The General Theory of Transformational Growth," Cambridge Books, Cambridge University Press, number 9780521590068, March.
    2. Paul Davidson, 1994. "Post Keynesian Macroeconomic Theory," Books, Edward Elgar Publishing, number 124, April.
    3. Dutt, Amitava Krishna, 1987. "Keynes with a Perfectly Competitive Goods Market," Australian Economic Papers, Wiley Blackwell, vol. 26(49), pages 275-293, December.
    4. Jochen Hartwig, 2004. "Beyond the Market Paradigm: on Keynes's Principle of Effective Demand, and on the Irrelevance of Rigidities for His Explanation of Involuntary Unemployment," History of Economic Ideas, Fabrizio Serra Editore, Pisa - Roma, vol. 12(1), pages 67-94.
    5. John King, 1993. "Aggregate Supply and Demand Analysis Since Keynes: A Partial History," Working Papers 1993.16, School of Economics, La Trobe University.
    6. A. P. Thirlwall & J. M. Keynes, 1999. "A “Second Edition” of Keynes’ General Theory," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 21(3), pages 367-386, March.
    7. Davidson, Paul, 1972. "Money and the Real World," Economic Journal, Royal Economic Society, vol. 82(325), pages 101-115, March.
    8. Palley, Thomas I, 1997. "Expected Aggregate Demand, the Production Period and the Keynesian Theory of Aggregate Supply," The Manchester School of Economic & Social Studies, University of Manchester, vol. 65(3), pages 295-309, June.
    9. E. Roy Weintraub, 1974. "Keynes' Employment Function," History of Political Economy, Duke University Press, vol. 6(2), pages 162-164, Summer.
    10. Skott,Peter, 2008. "Conflict and Effective Demand in Economic Growth," Cambridge Books, Cambridge University Press, number 9780521066310, March.
    11. Claude Gnos, 2004. "Is ex-ante ex-post analysis irrelevant to Keynes's theory of employment?," Review of Political Economy, Taylor & Francis Journals, vol. 16(3), pages 335-345.
    12. Asimakopulos,A., 1991. "Keynes's General Theory and Accumulation," Cambridge Books, Cambridge University Press, number 9780521368155, March.
    13. Louis-Philippe Rochon, 1999. "Credit, Money and Production," Books, Edward Elgar Publishing, number 1565, April.
    14. Hicks, J. R., 1987. "Methods of Dynamic Economics," OUP Catalogue, Oxford University Press, number 9780198772873.
    15. Gilbert Koenig, 1980. "Les fondements microéconomiques du principe de la demande effective," Revue Économique, Programme National Persée, vol. 31(3), pages 430-464.
    16. Giuseppe Fontana, 2004. "Hicks on monetary theory and history: money as endogenous money," Cambridge Journal of Economics, Oxford University Press, vol. 28(1), pages 73-88, January.
    17. 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.
    18. Douglas Vickers, 1987. "Aggregate Supply and the Producers’ Expected Demand Curve: Performance and Change in the Macroeconomy," Journal of Post Keynesian Economics, Taylor & Francis Journals, vol. 10(1), pages 84-104, September.
    19. Victoria Chick, 1983. "Macroeconomics after Keynes: A Reconsideration of the General Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262530457, January.
    20. Jochen Hartwig, 2004. "Keynes's multiplier in a two-sectoral framework," Review of Political Economy, Taylor & Francis Journals, vol. 16(3), pages 309-334.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Jochen Hartwig, 2014. "Relative Movements of Real Wages and Output," KOF Working papers 14-355, KOF Swiss Economic Institute, ETH Zurich.
    2. M. G. Hayes, 2008. "Keynes's Z function: a reply to Hartwig and Brady," Cambridge Journal of Economics, Oxford University Press, vol. 32(6), pages 1003-1003, November.
    3. repec:pke:wpaper:pkwp1211 is not listed on IDEAS
    4. Jochen Hartwig, 2009. "D and Z in ROPE," KOF Working papers 09-243, KOF Swiss Economic Institute, ETH Zurich.

    More about this item

    Keywords

    Effective demand; Multiplier; Post Keynesianism; D/Z-model; Reproduction schemes;

    JEL classification:

    • B14 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Socialist; Marxist
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kof:wpskof:04-95. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (). General contact details of provider: http://edirc.repec.org/data/koethch.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.