Nature of Competition: All the Follies of Ineffective Demand

 

In a sense, macroeconomics is founded on the sham notion of “ineffective aggregate demand.” There in Here on earth, “There ain't no such thing as IAD” (TANSTAIAD).

 

By definition,

1)     “Effectiveness” means the right means to the defined end. In other words, all demand is effective as the end of each or all: I demand this because I demand this, no questions to be asked. Put differently effectiveness addresses the kind as opposed to efficiency or sufficiency the degree. Each and  every demand is justified and entitled in the Republic. 

2)     In economics, “demand” never means wish, hope, dream, admiration, preference, trust or firm belief. The invisible and accordingly invincible hand does not let free-riders in the market. “The empty-handed, thou shalt not enter! I’m the only invisible in my territory.”

3)     In each market, the demand curve is always separated from the supply curve but on the point of Golden Cross, non-Keynesian of course. 

             Alas, what is true individually is not necessarily so, according to the Apostle Paul (Economics, 1948, p.9).

In all the markets of the macro-economy, the demand is somehow named, or misnamed to be precise, as “aggregate demand.” To be let in the sunshine, “aggregate demand” shalt not be empty-handed. The only way there-into is with “aggregate supply cross-armed.” Where there is AD on one side, there must be AS on the flipside. We might be reminded of the Samsonite Cross: it is nowhere (L⁰, for irrelevancy) for each but everywhere (L¹, or a line) for all.

Ergo, AD≡ AS, no questions asked. To paraphrase, there would be no cross in economics, while there are so many on a “single file” in macroeconomics.

What in this world do you mean with a “Keynesian Cross”?

4)     All names including “demand, supply, AD and AS” are true because naming is by definition for the purpose of identification. Everywhere under the sun while we are in Here, all identities are always true by definition.

5)     Wait, there no law without an exception. The name “Robinson Crusoe” by himself is nominal. His real name by construct of Daniel Defoe is “Me.”  

 

Thomas Malthus. In one way or another, he seems to be oxymoronic if not inconsistent. His best-known essay is effectively about “aggregate demand way too effective to be met by aggregate supply.” In his less-well known book, The Principles of Political Economy, he refers as many as 29 times to the more or less pejorative “indolence,” possibly implying recession due to “ineffective aggregate demand.” Most of us, non-macroeconomist, would wonder, “Which of the two propositions of his is more true or even truer if on Earth?”

             Incidentally, Lord Keynes moderately relies on the Malthusian idea of “effectiveness of demand” and explicitly refers to him so many times particularly in Chapter 23 of the General Theory. By naming, by the way, a “general theory” is usually biblical and the Book is no exception.

 

Indolence. To the rest of us, rest, relief, recreation, repose, reflection, review, rethink, replenishment and so many “Other r’s R Us.” Again, we may refer to J.S. Mill (Utilitarianism 1861): We humans do not only need excitement but also indolence. Aha, creation and recreation are equally legitimately existing on the stage called “secular life.” We need recreation for the sake of creation.

 

TANSTAIAD, period!