Review of Keynesian Economics

Keen on endogenous money and effective demand: a further comment*

Severin Reissl *

Keywords: effective demand, endogenous money, debt


This article comments on Steve Keen's rebuttal in which he replies to the critiques of his recent paper restating the argument that ‘effective demand equals income plus the change in debt’. Building on a critique of Keen's original paper by the present author, it is argued that in using an alternative way to derive his statement, Keen modifies his hypothesis to the point of turning it into an outright tautology which, importantly, was not the case previously. While he thus indeed arrives at a relationship which necessarily holds, this contains no novel insight and does not justify his strong claims regarding any necessary relationship between changes in debt and effective demand. This paper also comments on Keen's peculiar views on the loanable funds model which appear to lie at the root of his hypothesis.

Author Notes

I thank two anonymous referees for their helpful comments on an earlier draft of this article. All remaining errors are of course my own.

The author is a graduate student (MSc Political Economy, Macroeconomics and Finance) at Kingston University, UK.

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