Effective demand and short-term adjustments in the General Theory
Keynes' principle of effective demand constitutes a pillar for Post Keynesians theories. But Keynes' presentation remains difficult to interpret, mainly because the aggregate demand function is based on entrepreneurs' expectations. The problem is then to demonstrate how these entrepreneurs (whose only concern is making profits) are led to produce the effective demand (which partially results from the consumers' and investors' behaviour). Previous studies by authors like Weintraub or Davidson highlight the trial and error procedure here at stake. However, since their analyses are not built on a precise accounting of monetary flows, they fail to formally demonstrate the coherence of the whole adjustment process. The aim of this article is to provide such a formal demonstration. We thus concentrate on the General Theory to verify how it constitutes a coherent framework to analyse temporary equilibriums (at the end of every elementary period) and short-term dynamics which bring the economy towards the stationary equilibrium.
|Date of creation:||Feb 2006|
|Date of revision:|
|Contact details of provider:|| Postal: 106 - 112 boulevard de l'Hôpital, 75647 Paris cedex 13|
Phone: 01 44 07 81 00
Fax: 01 44 07 81 09
Web page: http://mse.univ-paris1.fr/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Godley, Wynne, 1999. "Money and Credit in a Keynesian Model of Income Determination," Cambridge Journal of Economics, Oxford University Press, vol. 23(4), pages 393-411, July.
- J. E. King, 1994. "Aggregate Supply and Demand Analysis since Keynes: A Partial History," Journal of Post Keynesian Economics, M.E. Sharpe, Inc., vol. 17(1), pages 3-31, October.
- repec:ltr:wpaper:1993.16 is not listed on IDEAS
- Kregel, J A, 1976. "Economic Methodology in the Face of Uncertainty: The Modelling Methods of Keynes and the Post-Keynesians," Economic Journal, Royal Economic Society, vol. 86(342), pages 209-25, June.
- Casarosa, Carlo, 1981. "The Microfoundations of Keynes's Aggregate Supply and Expected Demand Analysis," Economic Journal, Royal Economic Society, vol. 91(361), pages 188-94, March.
- H. Vandenborre, 1958. "An Integration Of Employment Economics Within The Keynesian Theory Of Money Flows," Oxford Economic Papers, Oxford University Press, vol. 10(2), pages 205-219.
- John King, 1993.
"Aggregate Supply and Demand Analysis Since Keynes: A Partial History,"
1993.16, School of Economics, La Trobe University.
When requesting a correction, please mention this item's handle: RePEc:mse:wpsorb:bla06018. 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: (Lucie Label)
If references are entirely missing, you can add them using this form.