Abstract
Today’s economic theory appears to be unable to provide a generally accepted answer to some of the most basic questions one can raise about the working of a market economy. Among these questions there undoubtedly is the question concerning the relation between decisions to save and decisions to invest. On this question there is a traditional answer according to which, fundamentally, the decisions to save out of full employment income (i.e. the difference between full employment income and the decisions to consume out of that income) determine the amount of investment. Keynes’s criticism has shown the weakness of that answer, but the position has remained uncertain with respect to long-period tendencies. Discussions of Keynes’s theory conducted on the assumption of money wages being flexible relative to the money supply have in fact created a climate of professional opinion favourable to the traditional answer, though they have been by no means sufficient to restore the unanimity and confidence which it once enjoyed.
This chapter derives much material from Garegnani (1978, 1979), to which the reader is referred for a more detailed treatment of questions raised.
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© 1988 Association pou le Dévelopment des Etudes Keynésiennes
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Garegnani, P. (1988). Capital and Effective Demand. In: Barrère, A. (eds) The Foundations of Keynesian Analysis. Keynesian Studies. Palgrave Macmillan, London. https://doi.org/10.1007/978-1-349-08062-5_11
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