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.
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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, June.
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