Two points: First point: Here is a question on gluts that I pose to my macro classes. Who Said This? In the first place my attention is fixed by the inquiry, so important to the present interests of society: What is the cause of the general glut of all the markets in the world, to which merchandise is incessantly carried to be sold at a loss? What is the reason that in the interior of every state, notwithstanding a desire of action adapted to all the developments of industry, there exists universally a difficulty of finding lucrative employments? And when the cause of this chronic disease is found, by what means is it to be remedied? On these questions depend the tranquility and happiness of nations. (answer below) Second Point: While Keynes did use the concept of effective aggregate demand, it was not as a concept related to price as it is in the current textbook presentation. It was essentially used as a concept of effective supply--suppliers made their production decisions on expected demand, and thus aggregate supply became a function of expected aggregate demand, which in turn was a function of aggregate supply. It was this interrelationship which was important, and the demand terminology caused much confusion over what Keynes's point was. Would that he had used the concept "effective supply" rather than effective demand. (The first paper I ever wrote in economics tried to make that point--it went nowhere.) When there is a lack of effective supply, you can have an unemployment equilibrium if there are fixed wages. That unemployment equilibrium is preferred to the alternative "equilibrium" which is an spiraling downward of the price level--undermining the asset market and further hurting effective supply. That's the point Barkley and I tried to make when we both independently pushed for a presentation of Keynes with vertical aggregate supply and demand curves. The answer to the first question is, as Per Jonson pointed out in his 1995 Eastern Economic Journal article, Jean Baptiste Say. As usual, issues are more complicated that they appear on the surface. Dave Colander