Substitute “value adding production” for “aggregate demand”
Superb and critical insight in this little vignette by Steven Kates.
Four, it is important to get people to understand that the crucial issue is aggregate demand. This is Keynes’ innovation. I say this to you, that if you use aggregate demand to explain anything at all in economic theory, you cannot and will not understand anything at all about what you are trying to explain.
If every time you used the phrase aggregate demand you substituted “value adding production” then you would start to see things a bit more clearly. As in, “if employment is to rise we need an increase in aggregate demand” now becomes, “if employment is to rise we need an increase in value adding production”. You employ people to produce, not to buy. Alas, between the writers and publishers of economic texts there is enough heft to stop any such adjustment being made in how we teach and explain economics, but you can do it for yourself. And if you do it, you will then see that nothing that transpired as part of the world’s various stimulus packages could ever have led to recovery since none of it led to an increase in value adding production.