<ul>
<li>In an economic model, we normally have a production function that increases with the amount of labour. Since inherited capital is fixed, in the short run,the only way to increase out (supply) is via increasing the amount of labour employed. The real world is somewhat fuzzier; some service industries (like software) can have greater sales without increasing the number of employees. However, such behaviour is limited, and greater output is normally associated with more people working.</li>
<li>The relationship between aggregate supply and aggegate demand somewhat depends on prior economic views. To summarise the Keynesian view, if aggregate demand rises (or is expected to rise), firms will increase output (hiring more labour) to meet expected increased demand.</li>
</ul>

CC BY-SA 4.0
2018-11-20T12:28:58.477Z
2018-11-20T12:28:58.477Z
Brian Romanchuk
<p><strong>Beyond Say's Law: THE SIGNIFICANCE OF J.-B. SAY’S MONETARY VIEWS</strong></p>
<p><a href="https://www.cambridge.org/core/journals/journal-of-the-history-of-economic-thought/article/beyond-says-law-the-significance-of-jb-says-monetary-views/A935591E24CFA9B18D47B266D511765F" rel="nofollow noreferrer">https://www.cambridge.org/core/journals/journal-of-the-history-of-economic-thought/article/beyond-says-law-the-significance-of-jb-says-monetary-views/A935591E24CFA9B18D47B266D511765F</a></p>
<blockquote>
<p>In his discussion of unproductive capital, Say ([1828–29] 2010, p. 149) stated that “the lack of security and confidence often leads owners of capital funds to refrain from investing for fear of compromising them. They prefer to lose interest instead of risking the principal.” Say explained that owners of idle capital funds factored risk and return in their decision making. The riskier and the less profitable the investment, the more capitalists would be incentivized to hoard. The take-away was that hoarding could involve large amounts, depending on the expected return and the level of risk. The fact of the matter is that, for Say, the interest rate not only affected the decision to hold bills of exchange and promissory notes, but also determined how long individuals held such assets. This clearly shows that Say described a form of money demand in which money was also a store of value, not just a medium of exchange.</p>
</blockquote>
<blockquote>
<p>The conventional narrative about Say’s explanation of economic downturns holds that overproduction and unemployment could temporarily occur in a particular industry, but equilibrating forces would allow swift adjustments; therefore, general overproduction or unemployment could not occur (Sowell Reference Sowell2006, p. 27). In reality, this interpretation of Say’s crises theory is reductive and incomplete. Say admitted that economic crises could take place, but he rejected Malthus’s and Sismondi’s thesis, which held that crises resulted from too rapid capital accumulation. In Say’s framework, crises could originate in two ways. As we saw in section II, he concluded that it was because the production of the missing products declined that the oversupplied products did not sell (Say [1814] 2006, p. 252). Crises resulted from an imbalance between supply and demand. Say (Reference Say1826b) later developed a monetary theory of crises, which held that economic disturbances were caused by poor decisions on the part of banking institutions. This section analyzes whether Say’s monetary theory of crises constituted a reinterpretation or a repudiation of his initial views on outlets.</p>
</blockquote>
<p><strong>Involuntary Unemployment versus “Involuntary Employment”
J.M. Keynes and Beyond</strong></p>
<p><a href="https://www.econ.shiga-u.ac.jp/ebr/Ronso-417sakai.pdf" rel="nofollow noreferrer">https://www.econ.shiga-u.ac.jp/ebr/Ronso-417sakai.pdf</a></p>
<blockquote>
<p>Following the original work of Keynes
(1936), let Z be the aggregate supply price of
the output from employing N men. We may
call the relationship between Z and N, namely
Z = φ(N ) , the aggregate supply function. Let
D be the proceeds that entrepreneurs expect to
receive from the employment of N men. We
can call the relationship between D and N, i.e.
D = f (N ), the aggregate demand function.
Then the volume of employment is provided by
the point of intersection between the aggregate
supply function and the aggregate demand
function. The value of D at the point of f (N ),
where it is intersected by φ(N ), is named by
Keynes the effective demand. Keynes claims
that this is the substance of the General Theory
of Employment.</p>
</blockquote>

CC BY-SA 4.0
2022-01-04T01:26:00.547Z
2022-01-04T01:26:00.547Z
SystemTheory
<p>When we talk about excess or deficient aggregate demand , how does employment suddenly comes ?</p>

<macroeconomics><unemployment><nonexpert><aggregate-production>
How is employment related to aggregate demand and aggregate supply?
JIM
# How is employment related to aggregate demand and aggregate supply?

(Asked by: username_0 on 2018-11-20)

When we talk about excess or deficient aggregate demand , how does employment suddenly comes ?

**Tags:** macroeconomics, unemployment, nonexpert, aggregate-production

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## 2 answers

### Answer by username_1 on 2018-11-20. Score: 1

* In an economic model, we normally have a production function that increases with the amount of labour. Since inherited capital is fixed, in the short run,the only way to increase out (supply) is via increasing the amount of labour employed. The real world is somewhat fuzzier; some service industries (like software) can have greater sales without increasing the number of employees. However, such behaviour is limited, and greater output is normally associated with more people working.
* The relationship between aggregate supply and aggegate demand somewhat depends on prior economic views. To summarise the Keynesian view, if aggregate demand rises (or is expected to rise), firms will increase output (hiring more labour) to meet expected increased demand.


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### Answer by username_2 on 2022-01-04. Score: -1

**Beyond Say's Law: THE SIGNIFICANCE OF J.-B. SAY’S MONETARY VIEWS**

<https://www.cambridge.org/core/journals/journal-of-the-history-of-economic-thought/article/beyond-says-law-the-significance-of-jb-says-monetary-views/A935591E24CFA9B18D47B266D511765F>

> In his discussion of unproductive capital, Say ([1828–29] 2010, p. 149) stated that “the lack of security and confidence often leads owners of capital funds to refrain from investing for fear of compromising them. They prefer to lose interest instead of risking the principal.” Say explained that owners of idle capital funds factored risk and return in their decision making. The riskier and the less profitable the investment, the more capitalists would be incentivized to hoard. The take-away was that hoarding could involve large amounts, depending on the expected return and the level of risk. The fact of the matter is that, for Say, the interest rate not only affected the decision to hold bills of exchange and promissory notes, but also determined how long individuals held such assets. This clearly shows that Say described a form of money demand in which money was also a store of value, not just a medium of exchange.

> The conventional narrative about Say’s explanation of economic downturns holds that overproduction and unemployment could temporarily occur in a particular industry, but equilibrating forces would allow swift adjustments; therefore, general overproduction or unemployment could not occur (Sowell Reference Sowell2006, p. 27). In reality, this interpretation of Say’s crises theory is reductive and incomplete. Say admitted that economic crises could take place, but he rejected Malthus’s and Sismondi’s thesis, which held that crises resulted from too rapid capital accumulation. In Say’s framework, crises could originate in two ways. As we saw in section II, he concluded that it was because the production of the missing products declined that the oversupplied products did not sell (Say [1814] 2006, p. 252). Crises resulted from an imbalance between supply and demand. Say (Reference Say1826b) later developed a monetary theory of crises, which held that economic disturbances were caused by poor decisions on the part of banking institutions. This section analyzes whether Say’s monetary theory of crises constituted a reinterpretation or a repudiation of his initial views on outlets.

**Involuntary Unemployment versus “Involuntary Employment”
J.M. Keynes and Beyond**

<https://www.econ.shiga-u.ac.jp/ebr/Ronso-417sakai.pdf>

> Following the original work of Keynes
> (1936), let Z be the aggregate supply price of
> the output from employing N men. We may
> call the relationship between Z and N, namely
> Z = φ(N ) , the aggregate supply function. Let
> D be the proceeds that entrepreneurs expect to
> receive from the employment of N men. We
> can call the relationship between D and N, i.e.
> D = f (N ), the aggregate demand function.
> Then the volume of employment is provided by
> the point of intersection between the aggregate
> supply function and the aggregate demand
> function. The value of D at the point of f (N ),
> where it is intersected by φ(N ), is named by
> Keynes the effective demand. Keynes claims
> that this is the substance of the General Theory
> of Employment.


---

