Capital and Effective Demand

  • Pierangelo Garegnani
Part of the Keynesian Studies book series (KST)


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.


Interest Rate Demand Function Capital Good Full Employment Traditional Theory 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Andrews, P. S. (1983) ‘Summary of replies to questions on effects of interest rates’, Oxford Economic Papers.Google Scholar
  2. Böhm-Bawerk, E. (1930) The Positive Theory of Capital (New York: Stechert).Google Scholar
  3. Brockie, M. D. and Grey, A. (1956) ‘The marginal efficiency of capital and investment programming’, Economic Journal.Google Scholar
  4. Clark, J. B. (1907) Essentials of Economic Theory (New York: Macmillan).Google Scholar
  5. Corry, B. A. (1959) ‘Malthus and Keynes’, Economic Journal.Google Scholar
  6. Ebersole, J. E. (1938–9) ‘The influence of interest rates upon entrepreneurial decisions in business’, Harvard Business Review.Google Scholar
  7. Garegnani, P. (1960) Il Capitale nelle Teorie della Distribuzione (Milan: Giuffre).Google Scholar
  8. Garegnani, P. (1970) ‘Heterogeneous capital, the production function and the theory of distribution’, Review of Economic Studies.Google Scholar
  9. Garegnani, P. (1978, 1979) ‘Notes on consumption, investment and effective demand’, Cambridge Journal of Economics, part I, vol. 2, n. 4; part II, vol. 3, n. 1, as reprinted in Eatwell J. and Milgate M. (1983).Google Scholar
  10. Garegnani, P. (1983) ‘Two routes to effective demand’ in J. Kregel (ed.) Distribution, Effective Demand and International Economic Relations (London: Macmillan).Google Scholar
  11. Haberler, G. (1939) Prosperity and Depression, 2nd edn (Geneva: League of Nations).Google Scholar
  12. Haberler, G. (1964) Prosperity and Depression, 4th edn (London: Allen & Unwin).Google Scholar
  13. Hicks, J. R. (1937) ‘Mr Keynes and the classics: a suggested interpretation’, Econometrica, as reprinted in Readings in the Theory of Income Distribution (Toronto, 1946).Google Scholar
  14. Keynes, J. M. (1936) The General Theory of Employment, Interest and Money (London: Macmillan).Google Scholar
  15. Keynes, J. M. (1937) ‘Alternative theories of the rate of interest’, Economic Journal, June.Google Scholar
  16. Malthus, T. R. (1958) Principles of Political Economy, 2nd edn (New York: Kelley) (first printed 1836).Google Scholar
  17. Marshall, A. (1965) Money, Credit and Commerce (New York: Kelley) (first published, 1923).Google Scholar
  18. Marx, K. (1969) Theories of Surplus Value, vol. 2 (London: Lawrence & Wishart).Google Scholar
  19. Meade, J. (1961) A Neo-Classical Theory of Economic Growth (London: Allen & Unwin).Google Scholar
  20. Meek, R. L. (1950–1) ‘Thomas Joplin and the theory of interest’, Review of Economic Studies. Google Scholar
  21. Modigliani, F. (1944) ‘Liquidity preference and the theory of interest and money’, Econome trica, as reprinted in Readings in Monetary Theory (London: Unwin, 1952).Google Scholar
  22. Pasinetti, L. (1974) Growth and Income Distribution: Essays in Economic Theory (Cambridge, CUP).Google Scholar
  23. Patinkin, D. (1948) ‘Trice flexibility and full-employment’, American Economic Review, as reprinted in Readings in Monetary Theory (London: Unwin, 1952).Google Scholar
  24. Pigou, A. C. (1947) ‘Economic progress in stable environment’, Economica, as reprinted in Readings in Monetary Theory (London: Unwin, 1952).Google Scholar
  25. Ricardo, D. (1951) Principles of Political Economy and Taxation, vol. I of Works and Correspondence of David Ricardo, ed. P. Sraffa (Cambridge: CUP).Google Scholar
  26. Robbins, L. (1958) Robert Torrens and the Evolution of Classical Economics (London: Macmillan).Google Scholar
  27. Robertson, D. H. (1963) Lectures on Economic Principles (London: Fontana) (first published 1957–9).Google Scholar
  28. Sayers, R. S. (1940) ‘Business men and the terms of borrowing’, Oxford Economic Papers. Google Scholar
  29. Schumpeter, J. A. (1954) History of Economic Analysis (New York: OUP).Google Scholar
  30. Solow, R. (1956) ‘A contribution to the theory of economic growth’, Quarterly Journal of Economics, February.Google Scholar
  31. Sraffa, P. (1960). Production of Commodities by Means of Commodities (Cambridge: CUP).Google Scholar
  32. Swan, T. (1956) ‘Economic growth and capital accumulation’, Economic Record, November.Google Scholar
  33. Symposium (1966) Symposium on paradoxes in capital theory, Quarterly Journal of Economics. Google Scholar
  34. Tobin, J. (1955) ‘A dynamic aggregative model’, Journal of Political Economy. Google Scholar
  35. Wicksell, K. (1934) Lectures on Political Economy, vol. I (London: Routledge).Google Scholar
  36. Wicksell, K. (1935) Lectures on Political Economy, vol. II (London: Routledge & Kegan Paul).Google Scholar
  37. Wicksell, K. (1965) Interest and Prices (New York: Kelly) (first published 1898).Google Scholar

Copyright information

© Association pou le Dévelopment des Etudes Keynésiennes 1988

Authors and Affiliations

  • Pierangelo Garegnani

There are no affiliations available

Personalised recommendations