Keynes’s slip of the pen: aggregate supply curve vs employment function
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.
|Date of creation:||18 Jan 2009|
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- Victoria Chick, 1983. "Macroeconomics after Keynes: A Reconsideration of the General Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262530457.
- 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.
- Patinkin, Don, 1979. "A Study of Keynes' Theory of Effective Demand," Economic Inquiry, Western Economic Association International, vol. 17(2), pages 155-76, April.
- J. Hartwig & M. E. Brady, 2008. "Comment: Hayes on Z," Cambridge Journal of Economics, Oxford University Press, vol. 32(5), pages 815-819, September.
- John King, 1993.
"Aggregate Supply and Demand Analysis Since Keynes: A Partial History,"
1993.16, School of Economics, La Trobe University.
- John King, 1993. "Aggregate Supply and Demand Analysis Since Keynes: A Partial History," Working Papers 1993.16, School of Economics, La Trobe University.
- E. Roy Weintraub, 1974. "Keynes' Employment Function," History of Political Economy, Duke University Press, vol. 6(2), pages 162-164, Summer.
- 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).
- Wells, Paul, 1978. "In Review of Keynes: Review Article," Cambridge Journal of Economics, Oxford University Press, vol. 2(3), pages 315-25, September.
- Jochen Hartwig, 2007. "Keynes vs. the Post Keynesians on the Principle of Effective Demand," The European Journal of the History of Economic Thought, Taylor & Francis Journals, vol. 14(4), pages 725-739.
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