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Cambridge Journal of Economics Advance Access originally published online on April 26, 2007
Cambridge Journal of Economics 2007 31(5):741-753; doi:10.1093/cje/bem007
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© The Author 2007. Published by Oxford University Press on behalf of the Cambridge Political Economy Society. All rights reserved.

Keynes's Z function, heterogeneous output and marginal productivity

MG Hayes*

* Homerton College, University of Cambridge

Address for correspondence: Homerton College, Cambridge CB2 8PH, UK; email: mgh37{at}cam.ac.uk

Keynes was adamant that the assumption of homogeneous output and capital in macroeconomic theory is inadmissable. His aggregate supply or Z function is a generalisation of Marshall's ordinary supply function to take account of heterogeneous output, and is an essential element of the principle of effective demand. The ‘linear Z curve’ controversy can be attributed to Keynes's desire to demonstrate how his general monetary theory of value and output encompasses the special case of Classical theory, including the marginal productivity theorem. The infamous second footnote on pages 55–6 of The General Theory can thereby be fully resolved.

Key Words: Keynes • Marshall • Aggregate supply • Marginal productivity • Heterogeneity

JEL classifications: B31, B41, E10, E25

Manuscript received January 24, 2007; final version received January 24, 2007.


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This article has been cited by other articles:


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M. G. Hayes
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Camb. J. Econ., September 1, 2008; 32(5): 811 - 814.
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