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Cambridge Journal of Economics Advance Access published online on April 7, 2008
Cambridge Journal of Economics, doi:10.1093/cje/ben013
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© The Author 2008. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

Comment: Hayes on Z

J Hartwig and M. E. Brady*

* The authors would like to thank Christian Conrad for his helpful comments. The usual disclaimer applies

Address for correspondence: J. Hartwig, Swiss Economic Institute at ETH Zurich (KOF ETH), Weinbergstr. 35, 8092 Zurich, Switzerland; email: hartwig@kof.ethz.ch

Manuscript received October 19, 2007; final version received October 19, 2007.

Key Words: Principle of effective demand • D/Z-model

JEL classification: B31

The first 150 words of the full text of this article appear below.

Mark Hayes's contribution (Hayes, 2007) is to be welcomed as it reaffirms that the economics of Keynes, which is sometimes denounced as being restricted to the demand side, has a solid supply-side basis in Keynes's ‘Aggregate Supply Function’, Z. Of course, Hayes is not the first scholar to stress this. Roberts (1978), Koenig (1980), Amadeo (1989), Palley (1997) and others have pointed out that Keynes's acceptance of the ‘first classical postulate’ (Keynes, 1973, pp. 17–8) implies the adoption of the neo-classical supply-side assumptions of price-taking, profit-maximisation and decreasing marginal returns to labour. What distinguishes Hayes's contribution from this literature is his emphasis on the heterogeneity of output. Hayes reminds us that Keynes, in the General Theory (1973, pp. 38–40), expresses his unease with the concepts of aggregate levels of prices and output. Yet to claim that Keynes was ‘adamant’ that these concepts . . . [Full Text of this Article]


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