Re: D1 + D2

["Dr. Bruce McFarling" <ecbm@xxxxxxxxxxxxxxxxxxx>]

"William B. Ryan" <william_b_ryan@xxxxxxxxxx>,
on Fri, 16 Aug 2002 11:27:56 -0500, writes:

> Effective demand is the sum of D1 and D2 in Keynes' schema:
> D = D1 + D2.  Because of the "psychological law", the ratio
> of D is increasing to D1.

> This may be the only paragraph in *The General Theory* where
> Keynes specifically refers to change through time with an
> "increasing gap."

And indeed, note that it is not really change THROUGH time
that is being talked about here.  When reading one theory
for correspondences with another, one must take special
care:

> When employment increases, D1 will increase, but not by so much

> as D; since when our income increases our consumption increases

> also, but not by so much.


WHEN ... not AS ... so this is clearly an event in time, but
whether it is a description of a process through time, or a
description of a status for a period of time, is not explicit.
Of course, since D1 and D2 are empirically defined over
periods rather than continuously (being flow aggregates of
transactions rather than stock aggregates of ownership
entitlements), we may be inclined to viewing this as a
period statement, but since those empirical periods might
be at a very high frequency, say "weeks", when compared
with the period being analysed, say "years", the analysis
might be a process "through" time description approximating
a continuous analysis.

> The key to our practical problem is to be found in this

> psychological law.


Exposition, so nothing here about the time dimension.

> For it follows from this that the

> greater the volume of employment the greater will be

> the gap between the aggregate supply price (Z) of the

> corresponding output and the sum (D1) which the entrepreneurs

> can expect to get back out of the expenditure of consumers.


This is not a specifically diachronic statement: it would be
compatible with a process description AS volume changes, or
with a statement of alternative possible outcomes from
alternative possible levels of employment for a GIVEN period
of time.Therefore, nothing here pins down the time dimension.

> Hence, if there is no change in the propensity to consume,

> employment cannot increase, unless at the same time D2 is

> increasing so as to fill the increasing gap between Z and

> D1...


Take two periods, 1 and 2.  If c1=c2, N1=N2, UNLESS D2>D1,
so that there is effective demand for a potential
(Z2-D2)>(Z1-D1).  And the language is entirely consistent
with EITHER a gross period analysis reflecting an underlying
quasi-continuous process, OR with a fine period,
quasi-continuous analysis.

So while, as the characterisation says, this MAY be the
only time that the GT mentions a growing gap THROUGH time,
the ambiguity in the "MAY" reflects both the question of
whether there is a discussion in those terms elsewhere
(for example, people often overlook the price response
elasticities chapter and the notes chapter), AND the
ambiguity in terms of whether the quoted passage is
talking about an evolution of D1, D2, D, Z and N
*through* time, or about an evolving process that is
reflected in differences in these aggregates between
two periods in time.