Integrating the Formal, Technical, Mathematical Foundations of Keynes’s D-Z Model of the Theory of Effective Demand Into Keynes’s Decision Theory: Toward a New (and Final?) Interpretation of the General Theory

International Journal of Applied Economics and Econometrics, Vol. 17, No. 3, pp. 195-235, July-September, 2009

72 Pages Posted: 22 May 2009 Last revised: 20 Jan 2016

See all articles by Michael Emmett Brady

Michael Emmett Brady

California State University, Dominguez Hills

Carmine Gorga

The Somist Institute

Date Written: May 18, 2009

Abstract

This paper shows how Keynes used the neoclassical marginal productivity theory of one variable input, labor, and one fixed input, capital, to embed expectations of future prices and profits in a micro foundation of the theory of purely competitive firms. Keynes then generalized his technical work by aggregating to the macro level. The paper shows how Keynes, through his elasticity analysis in Chapter 21, was able to effectively incorporate an analysis of uncertainty and risk into the e and ed elasticities in his generalized equation of exchange that demonstrated the special case nature of neoclassical economics. Questions of what Keynes might or should have said are outside the purview of this paper.

Keywords: Macroeconomics, methodology, economic theory

JEL Classification: B23, B41, E12

Suggested Citation

Brady, Michael Emmett and Gorga, Carmine, Integrating the Formal, Technical, Mathematical Foundations of Keynes’s D-Z Model of the Theory of Effective Demand Into Keynes’s Decision Theory: Toward a New (and Final?) Interpretation of the General Theory (May 18, 2009). International Journal of Applied Economics and Econometrics, Vol. 17, No. 3, pp. 195-235, July-September, 2009. Available at SSRN: https://ssrn.com/abstract=1406842

Michael Emmett Brady

California State University, Dominguez Hills ( email )

1000 E. Victoria Street, Carson, CA
Carson, CA 90747
United States

Carmine Gorga (Contact Author)

The Somist Institute ( email )

87 Middle Street
Gloucester, MA 01930
United States
9782835926 (Phone)
9782834936 (Fax)

HOME PAGE: http://www.carmine-gorga.us

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