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Fallacies in Aggregate Demand/Supply Analyses

Author

Listed:
  • Amit Bhaduri
  • Kazimierz Laski
  • M. Riese

Abstract

The aggregate demand (AD)/aggregate supply (AS) framework as presented in almost all textbooks is logically inconsistent, because it seperates the demand side from the supply side. Due the the circular flow nature of the macroeconomic process, however, production/supply and income/demand cannot be dichotomised. Specifically it is shwon that the AD/AS apparatus implies incompatible levels of employment for all positions out of equilibrium. A reformulated aggregate demand schedule, which avoids these inconsistencies, typically has a positive slope; together with the positively sloped AS curve equilibrium thus becomes unstable.

Suggested Citation

  • Amit Bhaduri & Kazimierz Laski & M. Riese, 1994. "Fallacies in Aggregate Demand/Supply Analyses," wiiw Working Papers 4, The Vienna Institute for International Economic Studies, wiiw.
    • Handle: RePEc:wii:wpaper:4
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    File URL: https://wiiw.ac.at/fallacies-in-aggregate-demand-supply-analyses-dlp-4559.pdf
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    Cited by:

    1. Gillman, Max & Benk, Szilard & Csabafi, Tamas, 2023. "Supply-side economics with AS-AD in Ramsey dynamic general equilibrium," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 505-531.
    2. A. Bhaduri & K. Laski & M. Riese, 1999. "Effective demand versus profit maximization in aggregate demand/supply analysis: a dynamic perspective," Banca Nazionale del Lavoro Quarterly Review, Banca Nazionale del Lavoro, vol. 52(210), pages 281-293.
    3. Martin Riese, 2016. "Kazimierz Laski (1921-2015): ein engagierter Kaleckianer," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 42(1), pages 119-129.

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