Are keynesian ideas applicable to the long run? Some theoretical reflections and an illustrative model

This paper presents a model intended to show that the most important Keynesian idea, the principle of effective demand, cannot be only applied to short terms, in which some prices are fixed or sticky; but also to long terms where prices are perfectly flexible and empty the market, firms increase the...

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Detalles Bibliográficos
Autor principal: Missaglia, Marco
Formato: Revistas
Lenguaje:Español
Publicado: Universidad de Cartagena 2015
Acceso en línea:https://revistas.unicartagena.edu.co/index.php/panoramaeconomico/article/view/1380
Descripción
Sumario:This paper presents a model intended to show that the most important Keynesian idea, the principle of effective demand, cannot be only applied to short terms, in which some prices are fixed or sticky; but also to long terms where prices are perfectly flexible and empty the market, firms increase their profits, and where the functional income distribution depends on marginal productivities. Moreover, we will show that the Keynesian nature of a model does not depend on its results, in some cases lowering wages is a good policy and in others it is not. In some cases, the paradox of thrift stands out in the long run and in some others it does not; instead, this nature depends on incorporating (or not) the notion of autonomous demand. To conclude, we will support the idea stating that the way in which monetary wages (and flexibility) are addressed in the General Theory is not applicable to the financialized world, where we live