AS/AD

["J. Barkley Rosser, Jr." <rosserjb@xxxxxxx>]

      One more point.  If I remember correctly
although McKenna may have introduced AS/AD
back in 1955, only to have it not take, when it took
was after it was introduced by Baumol and Blinder
in the late 1970s, although I think Branson might
have beaten them to the punch then.  Anyway, just
to remind folks, the issue then was oil price shocks
triggering inflation.  This was an argument being
made by Keynesians of one sort or another.  The
competing hypothesis was the monetarist one,
that it was excess demand due to money supply
increases that was causing the inflation of the 1970s.
It was the monetarists who were initially not interested
in the AS/AD analysis because it was offering a way
to present a non-monetarist explanation of inflation.
The classicals did not like the Keynesian cross, but
their alternative in those days was MV=PQ.
      Of course, once AS/AD became entrenched in
the textbooks, the classical crowd then pounced with
Friedman's natural rate theory and ratex and vertical
Phillips curves and all that stuff, and we got the vertical
AS curve version, which, as I have noted umpteen times,
is indeed genuinely anti-Keynesian.  In the GT, on p. 303,
Keynes admits the possible existence of a vertical AS zone
in the short run when full capacity has been fully reached.
But, he most certainly did not accept a vertical AS in
any time horizon whatsoever.
Barkley Rosser