An Increase in Supply IS (not ‘causes’) an Increase in Demand for Other Things and Vice Versa

Moving forward a century, the same concept is found in the following passage from one of the most widely used economic texts ever published, in which this principle is stated in very clear terms:

It is only because our exchanges are made through money that we have any difficulty in perceiving that an increase in supply is (not ‘causes’) an increase in demand . . . An increase in the supply of cloth is an increase in the demand for other things; and vice versa, an increase in the supply of anything else may constitute a demand for cloth. What is divided among the members of society is the goods and services produced to satisfy its wants; and the same goods and services are both Supply and Demand. (Clay, [1916] 1924: 242)

The notion of aggregate demand separate from aggregate supply was foreign to pre-Keynesian economic thought. Aggregate demand grows at the same rate and by the same amount as aggregate supply, and will not grow unless supply has grown. It is not, however, just any production that will lead to an increase in aggregate demand. What creates demand is the production of forms of output for which enough buyers can be found whose payments cover in aggregate the entire costs of production.

—Steven Kates, Free Market Economics: An Introduction for the General Reader, 3rd ed. (Cheltenham, UK: Edward Elgar Publishing, 2017), Kobo e-book.

Mainstream Macroeconomics and the Keynesian Revolution Can ONLY Be Understood in Relation to Malthus’s Economics

The Keynesian Revolution, and therefore the origins of virtually all macroeconomic theory today, can only be understood in relation to Keynes’s coming across Malthus’s economic writings in 1932. In particular, it was his reading of the Malthus side of the Malthus — Ricardo correspondence, which had been unearthed in 1930 by his close associate Piero Sraffa, that turned Keynes’s mind to the possibility of demand deficiency as a cause of recession. Until that time, economists had been near unanimous in arguing that insufficient demand as a cause of recession was fallacious, and until reading the Malthus  — Ricardo correspondence, this possibility had never crossed Keynes’s mind. . . .

It was Malthus, of course, who had been the leading advocate in the nineteenth century of demand deficiency as a cause of recession, and of increased levels of unproductive spending as the cure. Reading Malthus’s letter to Ricardo, and then the text of Chapter VII of Malthus’s Principles, both of which Keynes did at the end of 1932, ought to be recognized as the single most important reason why Keynes was to write what he wrote in the way that he did.

—Steven Kates, Free Market Economics: An Introduction for the General Reader (Cheltenham, UK: Edward Elgar Publishing, 2017), Kobo e-book.