----------------- HES POSTING ----------------- 
 
The standard version of AS/AD is largely a phenomenon of introductory textbooks.  I
believe that it was first popularized by the Baumol and
Blinder textbook in the late 1970s as a handy way to explain the stagflationary responses
in the oil importing countries to the oil price shocks that began in 1973, although I do
not know if they were the first ones to actually present it.
 
One can find earlier versions of AS/AD that follow along more strictly Keynesian lines in
Sidney Weintraub, _An Approach to the Theory of Income Distribution: A synthesis of the
theory of income determination and income distribution_, 1958, Philadephia: Chilton and in
the followup volume by Paul Davidson and Eugene Smolensky, _Aggregate Supply and Demand
Analysis_, 1964, New York: Harper and Row.  But neither of these works put price on either
axis.
 
Curiously enough, what may be the first version of the "standard textbook" AS/AD may have
appeared in Keynes's _General Theory_, although he did not
actually draw the figure. But, a verbal presentation that describes it appears in Chapter
21, "The Theory of Prices," in section IV, especially on pp. 300-301. He does not provide
much of a description (or derivation) of the AD
curve, focusing more on  shifts of it, although it appears to be downward sloping in price
and quantity space, which is what he is dealing with here, unlike in the rest of his book.
He lays out what is now the standard textbook AS curve with an elastic "Keynesian" portion
at low employment levels, which then becomes increasingly "inelastic" (his terminology)
due to "bottlenecks" as full employment is approached (the standard "intermediate zone")
until "the final critical point of full employment at which money-wages have to rise, in
response to an increasing effective demand in terms of money, fully in proportion to the
rise in the prices of wage-goods,..."  (p. 301) in short, the standard textbook "classical
zone." He further remarks about details of the time path of this involving
"discontinuities" in the psychology of workers, and notes that as more time elapses,
elasticity of supply can increase.
 
Barkley Rosser 
 
------------ FOOTER TO HES POSTING ------------ 
For information, send the message "info HES" to [log in to unmask]