The principle of effective demand: Marx, Kalecki, Keynes and beyond

Eckhard Hein
Institute for International Political Economy Berlin, 2015
Level: advanced
Perspectives: Institutionalist Economics, Marxian Political Economy, Other, Post-Keynesian Economics
Topic: growth, macroeconomics, mainstream critique
Format: Working paper/Journal article

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The principle of effective demand: Marx, Kalecki, Keynes and beyond

Hein, Eckhard | 2015


Abstract: The principle of effective demand, and the claim of its validity for a monetary production economy in the short and in the long run, is the core of heterodox macroeconomics, as currently found in all the different strands of post-Keynesian economics (Fundamentalists, Kaleckians, Sraffians, Kaldorians, Institutionalists) and also in some strands of neo-Marxian economics, particularly in the monopoly capitalism and underconsumptionist school In this contribution, we will therefore outline the foundations of the principle of effective demand and its relationship with the respective notion of a capitalist or a monetary production economy in the works of Marx, Kalecki and Keynes. Then we will deal with heterodox short-run macroeconomics and it will provide a simple short-run model which is built on the principle of effective demand, as well as on distribution conflict between different social groups (or classes): rentiers, managers and workers. Finally, we will move to the long run and we will review the integration of the principle of effective demand into heterodox/post-Keynesian approaches towards distribution and growth.

JEL codes: E20, E21, E22,E24,E25

Key words: effective demand, employment, distribution, growth, Marx, Kalecki, Keynes

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Ce projet est le fruit du travail des membres du réseau international pour le pluralisme en économie, dans la sphère germanophone (Netzwerk Plurale Ökonomik e.V.) et dans la sphère francophone (Rethinking Economics Switzerland / Rethinking Economics Belgium / PEPS-Économie France). Nous sommes fortement attachés à notre indépendance et à notre diversité et vos dons permettent de le rester !