| Recent literature in the tradition of Sraffa and the Classicals has suggested that a union of Keynes' theory of effective demand with the Classical Theory of value and distribution might be analytically fruitful. The Cambridge critique of orthodox capital theory, it is argued, has undermined the logical foundation for the neoclassical synthesis, thereby opening the way to a resuscitation of the theory of effective demand. At the same time, Classical analysis can provide Keynes' theory, deprived by the capital controversy of its Marshallian underpinnings, with a coherent approach to distribution and price formation. The Classical system, for its part, would benefit by gaining a theory of output. My purpose in this dissertation is to investigate whether and to what extent the Classical and Keynesian systems are compatible, with a view toward showing, in a concrete and precise way, how they may be combined.; The first issue to be taken up is the question of what Keynes meant to accomplish in the General Theory--in particular, the question of whether he intended the theory of effective demand to refer to the short period or the long period. I contend that while Keynes set his discussion in the short-period, he believed his results to be valid for the long-period. The next order of business is to sketch out the essential features of Classical and neoclassical theories of value and distribution, as a prelude to the construction of a formal model combining the theory of effective demand with a Classical treatment of prices. This model is presented in Chapter V, and the remainder of the dissertation is concerned with the resolution of a number of issues which have not been given sufficient attention by modern proponents of the Classical surplus approach: the determination of investment, the role of relative prices in output determination, and, finally, the appropriate treatment of wages in a Classical model.; I conclude that the Classical approach to price formation and distribution does provide a more suitable setting for the theory of effective demand. Once the General Theory is reformulated in terms of the surplus approach the way is clear to the result that market economies generally tend toward positions of long-period equilibrium which are characterized by substantial unemployment; Keynes is vindicated. |
