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Keynes's principle of effective demand reconsidered: The core of of a heterodox post-Keynesian paradigm, or a fundamentalist Keynesian concept that should be abandoned?

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  • Heise, Arne

Abstract

Keynes's Principle of Effective Demand is widely recognized not only as a major theoretical innovation but also as one of the core concepts uniting various post-Keynesian strands. However, Keynes's own treatment of the Principle of Effective Demand - known as the Z/D model and identified by himself as central to his attempt to fundamentally refute Say's Law - has been ignored or even outright rejected by many post-Keynesians on the grounds that it remains too deeply rooted in mainstream economics. This paper addresses such criticism by emphasizing that any evaluation of the Z/D model must take into account the paradigmatic shift Keynes sought to initiate.

Suggested Citation

  • Heise, Arne, 2025. "Keynes's principle of effective demand reconsidered: The core of of a heterodox post-Keynesian paradigm, or a fundamentalist Keynesian concept that should be abandoned?," ZÖSS-Discussion Papers 119, University of Hamburg, Centre for Economic and Sociological Studies (CESS/ZÖSS).
    • Handle: RePEc:zbw:cessdp:321891
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    JEL classification:

    • B50 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - General
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J23 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Demand

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