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Date: | Sat Feb 17 13:28:05 2007 |
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We have now four communications in this thread in which Steven Kates writes
about "general glut". In the last one (16.2.) he again related Keynes 1936
to this concept. In his first one (31.1.) he wrote: "To argue that aggregate
demand might be deficient is specifically to argue ... that a general glut
is possible." But this is plainly wrong. Keynes 1936 never used the term
"glut" in the entire General Theory. He used the term "effective demand"
which means demand = supply. See, e.g. Keynes 1936, p.31: " effective
demand is the point on the aggregate demand function which becomes effective
because, taken in conjunction with the conditions of supply, it corresponds
to the level of employment which maximises the entrepreneur's expectation of
profit." Entrepreneurs are seen as maximizing their profit. They are _on_
their supply curve. I do not see where even implicitly "glut" in the sense
of overproduction of goods could come in if you follow Keynes.
There _is_ an excess supply of labour (involuntary unemployment in the
strict sense) in the GT. But the unsold labour services lead to deficient
income from the point of view of workers and hence to unsatisfied demand.
In Clower's parlance there is an excess of notional _demand_ over effective
demand.
If you want to see this set out in a more elaborate fashion, please consult
my section on "Say's Law and the irrelevance of overproduction" in: G.M.
Ambrosi: __Keynes, Pigou and Cambridge Keynesians_, Houndmills: Palgrave
Macmillan, 2003, p.389
Michael Ambrosi
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