Unemployment, Recession and Effective Demand

Unemployment, Recession and Effective Demand

The Contributions of Marx, Keynes and Kalecki

Claudio Sardoni

In the midst of the current world economic crisis, many claim there is a necessity to return to the Marxian and Keynesian traditions in order to better understand the dynamics of market economies. This book is an important step in that direction. It presents a critical examination of the foundations of macroeconomics as developed in the traditions of Marx, Keynes and Kalecki, which are contrasted with the current mainstream. Particular attention is given to the problem of market forms and their relevance for macroeconomics.

Chapter 4: Keynes’s Critique of Say’s Law

Claudio Sardoni

Subjects: economics and finance, history of economic thought, post-keynesian economics


4.1 INTRODUCTION This chapter is mainly devoted to present Keynes’s critique of Say’s Law and to point out the significant similarities to Marx’s own critique. However, before turning to consider these issues, a number of qualifications and clarifications are necessary. First of all, it is necessary to understand what Marx and Keynes meant by the term Say’s Law. Marx dealt with the law as expressed by Ricardo; Keynes, especially in The General Theory, criticized the law expressed in terms that appear quite foreign to the Ricardian formulation. Keynes’s criticism is addressed to what can be defined as the neoclassical version of Say’s Law. There are significant differences between the two versions of the law. It is then important to point out these differences. Section 4.2 is devoted to this topic and to Keynes’s criticism of Say’s Law as presented in The General Theory. Despite the differences in the definition of Say’s Law in classical and neoclassical economics, it is still true that there also exist important similarities and, for this, it is possible to find similarities between Marx’s and Keynes’s criticisms of the law. These similarities are easier to detect in writings of Keynes other than the final version of The General Theory. They are most evident in some earlier drafts of the book, where Keynes went as far as to use Marx’s formula (M – C– M´) to argue against the validity of Say’s Law. Section 4.3 deals with Keynes’s earlier drafts of The...

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