The concept of equilibrium: A key theoretical element in Keynes' revolution

L. Johnson, Robert Ley and Thomas Cate

Atlantic Economic Journal, 2004, vol. 32, issue 3, 222-232

Abstract: This paper presents Keynes' concept of equilibrium, which was one key theoretical element that constituted the theoretical core of the General Theory and was critical in his attack on the classical model. Keynes' concept of equilibrium differed in structure, content, and purpose from that of the neoclassical orthodoxy. There were four unique features of Keynes' equilibrium and these features all reflect his overriding focus on involuntary unemployment. First, Keynes' equilibrium reflected a purposive function that differed in its maximand and normative content from his predecessors. Second, Keynes' equilibrium reflected the fact that the composition of national income determined the level of aggregate demand, which in turn determined of the equilibrium level of national income and employment. Third, his notion of equilibrium was based on use of the ex ante-ex post analysis. Finally, Keynes' equilibrium presented an alternative view of market-clearing. Copyright International Atlantic Economic Society 2004

Date: 2004
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DOI: 10.1007/BF02299440

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