Aggregate Demand

There were many examples of early interconnected electric transmission systems extending across state territories and beyond state boundaries. Statements from a speech by Samuel Insull at Purdue University in 1924 indicated that Minneapolis, St. Paul, St. Louis, Louisville, and Cincinnati soon would be interconnected and that extension of these systems to Pittsburgh and across the Allegheny Mountains to the Atlantic Seaboard could be easily conceivable in a few years. This was but one example across the United States. To quote Insull, It makes electric service available in new places for new pui poses, so that aggregate demand for service is spread over more hours of day and night, and thus opens the way to utmost economy in production and distribution. ... 

The empirical results provided by Borrell17 indicate that the price elasticity of aggregate demand for each therapeutic chapter appears to be much higher than time-series and cross-national studies have shown. Thus, price restriction may be a powerful explanatory factor for the large amount of pharmaceuticals consumed per person in Spain. 

Plan processes that balance aggregate demand and supply to develop a course of action which best meets sourcing, production and delivery requirements. 

Elasticity analysis algorithm as pragmatic approach to determine average price elasticity of aggregated demand forecasts that analyzes underlying customer price-quantity demand. 

The first main purpose of this book is to formalize the role of aggregate demand as a constraint on expanded reproduction. I will develop an analytical model which explores the conditions under which profits can be realized in the reproduction schema. This approach is in keeping with the spirit of Dillard s (1984 425) statement that Marx s economics would be strengthened by a more formal treatment of the theory of effective demand. ... 

In the universities, a mathematical strand of supply-side Marxism has evolved that is closer to mainstream general equilibrium theory. Notably, for Morishima (1973 105), Marx s models are very similar to Walras in many aspects Marx s scheme of simple reproduction, or reproduction on the same scale, corresponds to Walras static general equilibrium system of production... Aggregate demand has hardly any role to play in this microeconomic approach. 

The book is thus a series of steps, from the multiplier and its role in the reproduction schema in Chapter 2 to the Kalecki principle in Chapter 3 and a detailed consideration of the circuit of money in Chapter 4. Having built up a macro monetary model of the reproduction schema, in which both money and aggregate demand are featured, Chapter 5 derives the Domar growth model from these analytical foundations. The relevance of this growth model to Marxian theories of crisis is explored and further developed in Chapter 6. 

Or in other words, will the level of aggregate demand generated by any level of output be sufficient to purchase the whole of that output (Ken way 1980 33). This, Kenway argues, is the issue confronted by Marx in the second volume of Capital and in particular, in chapter twenty (ibid. 33). 

This emphasis on the importance of aggregate demand suggests a multiplier relationship. In Keynesian terms, the aggregate demand for capital goods produced by Department 1 can be defined as investment demand. Since this demand provides for future expansion of means of production, in the current period of production it can reasonably be assumed to be exogenous, not dependent upon any current parameters or constraints. The multiplier provides a possible way of capturing the structural relationship between investment demand and the aggregate income of the economy. 

This demonstrates that the scalar Keynesian multiplier relationship can in principle be derived from a two-sector model. As it stands, however, since (2.14) is defined using net income, no account is taken of the constituent role of constant capital in the production process.9 In embracing Keynes to model aggregate demand, a Marxian response is required to the charge that the scalar multiplier falls prey to Smith s dogma. 

The role of Marx s category of surplus value can therefore be identified in a macro scalar multiplier without the restrictive assumption of a one-good model. This scalar multiplier captures the inter-departmental structure of the reproduction schema without constant capital being assumed away. A formal model of aggregate demand in the reproduction schema is developed, which retains the simplicity of the Keynesian multiplier together with Marx s value categories. 

Of particular importance is the role of money in balanced reproduction. For the balance between aggregate demand and supply to be sustained, circuits of money must continuously open and close in successive periods of production. The key question is not just how much money is required for successive circuits to function, but also where does the money come from. Under expanded reproduction, an increasing amount of money is required to service the growing requirements placed upon a capitalist economy. 

Overproduction of capacity, relative to aggregate demand, is a persistent tendency inherent in the schemes of expanded reproduction, as formalized in the Domar growth model. 

These macroeconomic questions are posed for a model under which proportionality between Departments 1 and 2 is assumed. Consider again (5.10), which exposes the contradiction in the Domar model between absolute amounts of investment, which create new capacity and changes in investment that drive the required amount of aggregate demand. There you see that investment (/) is made up of increments in constant and variable capital, new goods produced by both departments of production. Similarly, the share of surplus value (e) is derived from the value of labour power, which measures the value of inputs (produced in both departments) congealed in worker consumption goods. These macroeconomic terms aggregate across the two departments they transcend the more micro question of proportionality between the two departments. 

More circling is involved in the consideration of money. There is a problem of establishing where the money comes from to back up the aggregate demand. Luxemburg considers Marx s example of capitalists A, that produce a surplus product of capital goods, and capitalists B, that consume this surplus product. The problem is that to get the money to purchase from the A s, the B s must also sell their surplus products. But who could have bought their surplus product It is obvious that the difficulty is simply shifted from the As to B s without having been mastered (ibid. 143). 

An overarching aim of this book is to develop a formal model which captures the role of both aggregate demand and money in the reproduction schema. 

First, the Domar model exposes the stringent requirements on aggregate demand that are associated with balanced growth. Whereas new capacity is generated by absolute levels of investment, a matching aggregate demand requires investment to increase. Domar identifies the problem of demand at... 

It should be noted that proponents of the new interpretation do not claim that they have solved the transformation problem as such, which is why they view their approach to be an interpretation rather than a solution. However, what their approach does show is that it is possible, at least in principle, to retain Marxian value categories in a general model of money and aggregate demand in a capitalist economy. 

In 1878 Karl Marx developed the reproduction schema his model of how total capital is produced and reproduced. This is thought to be the first two-sector economic model ever constructed. Two key aspects of Marx s writings are widely agreed to be undeveloped the role of aggregate demand and the role of money. This book has as its aim the synthesis of various strands of economic thought in an attempt to understand and clarify the structure of the reproduction schema. This synthesis will challenge prevailing orthodoxies. 

Money and aggregate demand in a capitalist economy A.B. Trigg... 

Due to the nature of the product portfolio considered in the pilot application, it was possible to create the clusters rather intuitively without using a formalized methodology such as cluster analysis. When needed clustering techniques such as those used to form manufacturing cells could be adapted to cluster a more complex product portfolio (see Selim et al. (1998) for a review of different clustering techniques). An application of cluster analysis to aggregate demand locations is reported in Muller (1983, pp. 188-190). An intuitive approach similar to the one proposed above was also used by Nickel et al. (2005, pp. 168-170) for an application in steel industry. 

---