Barkley Rosser, amongst other things, wrote "you make much of the issue of whether effects are coming from investment or consumption and somehow argue that the first have nothing to do with AD.* Keynes clearly emphasized fluctuations of I as key to AD fluctuations leading to macro fluctuations."

I simply do not see why saying any of this constitutes a reply to what I wrote. Economists, I suppose, are now so completely used to thinking macro in terms of aggregate demand that this approach seems entirely natural and everything else generally foreign. But from a classical point of view, far from being natural, this way of thinking was seen as utterly fallacious. You would know the famous observation that it was only economists under fifty who bought into the General Theory while all of Keynes's contemporaries thought of it as dangerous nonsense. Keynes's "brave army of heretics" (GT: 371) were in his own time the cranks of the economics profession. Who today would have a good word to say about Major Douglas or Silvio Gesell yet these were economists Keynes aligned himself with. That he took the notion of demand deficiency directly from Malthus seems to me obvious beyond argument, but I seem to remain in a minority of one on that. It is all the same almost certainly true as I shall expand upon briefly in my reply to Michael Ambrosi and David Colander below. 

But what is difficult to understand is that you feel the need to point out that it was a fall in investment that led to the depths the Great Depression eventually reached, or worse, that it may have required Keynes to point it out. I cannot imagine why you would think I believe anything else. It was the stock and trade of pre-Keynesian economists to look for the root causes of recession in falling investment and a seizing up of business confidence (although it was not the only place they looked). Indeed, when I look at others amongst the recent postings on the Great Depression which are couched in terms of a fall in aggregate demand, I just wonder what might events might ever not be seen in this way, or worse, what information is actually transmitted by saying so. 

To a well brought up classical economist, following good classical principles (which are now subsumed under the heading of Say's Law), demand was constituted by supply. Whatever caused production to fall, say a rise in interest rates, bank failures, increased protection levels or whatever, that would lead to a fall in sales and a slowdown across the economy. But the fall in demand was a mere shadow of the actual reality of a breakdown on the production side of the economy. Recessions occurred because the wheels of the economy did not mesh, and until the economy was back in sync, high levels of unemployment would prevail. 

What Keynes added was demand deficiency. An economy would equilibrate at a level of activity below the full employment level. The C+I+G analysis remains textbook macro to this day. It is an accurate representation of Keynes's arguments. There is insufficient spending to buy up all of the goods and services produced at the full employment level of output. The economy therefore slips down into a level of activity that only partially employs the working population. The notion that Keynes brought the concept of uncertainty into economics is one of the stranger fictions amongst the legends that surround the Keynesian Revolution. And possibly as strange is the idea that it took Keynes to bring forward the idea of public works during a downturn. Try to find a pre-Keynesian text on the business cycle that didn't talk about shifting public works to the leeward side of the trough to create employment. 

As to James Mill as the author of Say's Law, this too is duly noted in my book where I wrote: "It is in [James] Mill that the law of markets is for the first time outlined in a focused and comprehensive fashion" (Kates 1998: 24). Nevertheless, if you are looking for the standard statement that would remain the core text on these principles for the subsequent ninety-odd years, it is in the works of John Stuart Mill that they are most fully articulated as a settled conclusion within the economics profession. 

However, James Mill was not the author of the words "supply creates its own demand" although he did write things that are roughly similar. This particular phrase was  first found in just that way in the writings of Keynes himself with the closest source within the classical school being John Stuart Mill. 

Let me then turn to the issues raised by Michael Ambrosi and in some ways by David Colander. Michael wrote, "I do not see where even implicitly "glut" in the sense of overproduction of goods could come in if you follow Keynes." Michael denies that the archaic term "glut" is in any way related to what Keynes had in mind. 

Again I must refer you to my book for the full story, but let me add this. Keynes took on the idea that recessions are due to demand failure because at the end of 1932 he came upon that part of Malthus's correspondence with Ricardo that dealt with general gluts. He was also very privileged to do so since they were in the hands of Piero Sraffa who would not publish this correspondence for another twenty years, until well after World War II. Keynes read Malthus's letters to Ricardo, which he immediately followed up by reading the relevant chapters of Malthus's Principles. He therefore wrote, in his Essays in Biography, published in early 1933, that is, just after he had become acquainted with Malthus's economic views, the following extraordinary but entirely familiar passage:

     "If only Malthus, instead of Ricardo, had been the parent stem from which nineteenth-century economics proceeded, what a much wiser and richer place the world would be today." (CW X: 101-02)

And then, at the very opposite end of the process of writing the General Theory, in his famous letter to Harrod, written on 8 November 1935 just as the General Theory was going to print, Keynes wrote this:

     "Effective demand. In modern economics this term has gone out of use and that is part of my defence for reviving it in my own sense, but my own sense seems to me to bear an exceedingly close family resemblance to what Malthus meant by it." (CW XIII: 602)

No one knew this at the time, actually no one seems to know it even now, but in 1936 Keynes revived the general glut debate, taking the side of Malthus and of those who had argued that demand deficiency, overproduction or, in classical terms, a general glut, could be a potent factor in causing economic depression and mass unemployment. But if what Keynes meant by effective demand is what Malthus had meant, which is what Keynes himself says, then it is exceptionally hard not to see that he was thinking along the same lines as those who had engaged in that earlier debate, which was touched off, as it happens, by the publication of Malthus's Principles in 1820. 

And let me just note in reply to David Colander that if Keynes had used "effective supply" as his base concept then he would have been merely restating classical economic theory which was based on the creation of effective supply, effective in the sense that supply had to be what those with incomes wanted to buy. But ensuring that the structure of supply matched the structure of demand is a very very different matter from ensuring that the level of demand matches the level of supply. In that you have the nature of the shift between classical macroeconomic theory and the modern. 

Dr Steven Kates