1. Keynes Seminar 26 November 2008 Mark Hayes Robinson College, Cambridge General Theory Reading Group 4: Expectation and output www.postkeynesian.net © PKSG 2009

2. Calendar time and equilibrium periods Quantum unit of time – the ‘day’ Period of production – a number of days Short-period aspect of day: effective demand Market-period aspect of day: income Horizon of short term = period of production = long period (i.e. time over which capital stock adjusts to a given state of short-term expectation)

4. Three approaches to equilibrium Old Keynesian

6. Three approaches to equilibrium Old Keynesian Post Keynesian

8. Three approaches to equilibrium Old Keynesian Post Keynesian Keynes

9. Convergence to long-period equilibrium employment (A)

10. Convergence to long-period equilibrium employment (B)

11. Expectations and realised results “Express reference to current long-term expectations can seldom be avoided. But it will often be safe to omit express reference to short- term expectation, in view of the fact that in practice the process of revision of short-term expectation is a gradual and continuous one, carried on largely in the light of realised results; so that expected and realised results run into and overlap one another in their influence. For, although output and employment are determined by the producer’s short-term expectations and not by past results, the most recent results usually play a predominant part in determining what these expectations are.” (G.T. 50–51)

13. Expectations and realised results “I found I could get all that was required by the conceptions of effective demand and income which were identical for factors but income of entrepreneurs at any time depended on outcome of prediction undertaken at various previous periods under influence of effective demand.” (C.W. XIV, p. 180)

14. Expectations and realised results For other economists, I find, lay the whole emphasis, and find the whole explanation in the differences between effective demand and income; and they are so convinced that this is the right course that they do not notice that in my treatment this is not so. (C.W. XIV, p. 181)

15. Expectations and realised results I should have distinguished more sharply between a theory based on ex ante effective demand, however arrived at, and a psychological chapter indicating how the business world reaches its ex ante decisions. It is only in this chapter that income, investment and saving, which are ex post concepts, come in. (C.W. XIV, pp. 182-3)