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The Comparative Statics of Effective Demand

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  • Jochen Hartwig

Abstract

Keynes introduces the term ‘effective demand’ in Chapter 3 of the General Theory as designating the point of intersection of two functions: the ‘aggregate demand function’ (D) and the ‘aggregate supply function’ (Z). For the first time in the literature, I here use specific functional forms for the D and Z functions and run numerical simulations which allow study of the comparative statics of the model in the face of various ‘shocks’. The demonstration of how the D/Z model actually works will hopefully prove useful for future students of the economics of Keynes.

Suggested Citation

  • Jochen Hartwig, 2017. "The Comparative Statics of Effective Demand," Review of Political Economy, Taylor & Francis Journals, vol. 29(3), pages 360-375, July.
    • Handle: RePEc:taf:revpoe:v:29:y:2017:i:3:p:360-375
    DOI: 10.1080/09538259.2017.1352191
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    References listed on IDEAS

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    1. MG Hayes, 2007. "Keynes's Z function, heterogeneous output and marginal productivity," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 31(5), pages 741-753, September.
    2. Gerhard Michael Ambrosi, 2011. "Keynes' abominable Z-footnote," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 35(3), pages 619-633.
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    5. Olivier Allain, 2013. "Effective Demand: Securing the Foundations," Review of Political Economy, Taylor & Francis Journals, vol. 25(4), pages 653-660, October.
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    7. Mark Hayes, 2007. "The Point of Effective Demand," Review of Political Economy, Taylor & Francis Journals, vol. 19(1), pages 55-80.
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    9. Paul Davidson, 2002. "Financial Markets, Money and the Real World," Books, Edward Elgar Publishing, number 2467.
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    11. John King, 1993. "Aggregate Supply and Demand Analysis Since Keynes: A Partial History," Working Papers 1993.16, School of Economics, La Trobe University.
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    18. Alfonso Palacio-Vera, 2009. "Capital Accumulation, Technical Progress and Labour Supply Growth: Keynes's Approach to Aggregate Supply and Demand Analysis Revisited," Review of Political Economy, Taylor & Francis Journals, vol. 21(1), pages 23-49.
    19. Shaikh, Anwar, 1974. "Laws of Production and Laws of Algebra: The Humbug Production Function," The Review of Economics and Statistics, MIT Press, vol. 56(1), pages 115-120, February.
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    21. Olivier Allain & Jochen Hartwig & M.G. Hayes, 2013. "Introduction to the Symposium," Review of Political Economy, Taylor & Francis Journals, vol. 25(4), pages 650-652, October.
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    More about this item

    JEL classification:

    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory

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