Re: GT and microfoundations

[Jochen.Hartwig@xxxxxxxx]

Mathew Forstater wrote:

"Has anybody read Darity's piece in _The Second Edition of The General
Theory_ (ed. by Harcourt and Riach) or the articles by Darity and/or Darity
and Horn on related issues of labor demand and supply (e.g., Southern
Economic Journal)?  What is the relevance of these arguments for the
clearing/equilibrium distinction? Mat"

As I understand it, Darity/Horn argue that we should forget about the labor
market as an analytical tool (cf. JPKE 10, No. 2, 1987/88, p. 216ff.). The level
of employment is determined by the D- and Z-curves at the point of effective
demand (in conjunction with Keynes's employment function, GT, chapter 20). Labor
market analysis is superfluos.
I think they are right.
Paul Davidson (PKMT, p. 177-193) adheres to labor market analysis and uses a
vertical labor demand curve. I think this offers no additional insight.
"Equilibrium" - in the sense of Keynes's shiftig equilibrium - refers to the
point of effective demand which shifts from one production period to the next
under the influence of changing expectations. "Market clearing" becomes a
senseless notion if there is no such thing as the labor market. The market for
goods and services need not clear if the ex ante expectations of the employers
were wrong.
Kind regards
Jochen Hartwig