I apologize if what follows is merely rehashing the obvious.
I have always been bothered by the AD / AS analysis because even ON ITS OWN
TERMS it seems so ridiculously wrong-headed.
In a single product market with everything else not changing, it is perhaps
legitimate to imagine an array of price/quantity combinations that exist
somewhat "in the minds" of consumers before they actually discover what the
price offered actually is. The nature of that (almost invariably inverse)
relationship can depend on income, tastes and preferences, etc. The crucial
reason for the existence of such a relationship AT A POINT IN TIME is that
everything else can be (in an imaginary world) held constant.
But what are we holding constant to imagine a NATIONAL set of PRICE LEVEL /
REAL AGGREGATE DEMAND combinations? In the aggregate, there is no opportunity
to say, "nothing else happens" except the PRICE LEVEL changes. That, I think,
was the point of Ellen's initial query. In the real world, as the price level
changes, lots of other things change that will almost certainly result in a
SHIFT in this conceptualized Aggregate Demand. Go back to the possible
examples in previous posts -- most of them involved shifts in the Aggregate
Supply Curve. But unlike individual markets, it is impossible to
conceptualize what the mainstream calls "aggregate demand" (the downward
sloping one!) as being INDEPENDENT of what the mainstream calls "aggregate
supply". It is here where I see the real problem with transferring the
partial equilibrium marshallian analysis of supply and demand to the
AGGREGATE.
If I'm really betraying my absence from real rigorous intellectual encounters
by this soft-headed set of paragraphs, please, let me know gently! Mike
Mike Meeropol
(bitnet%"mmeeropo@wnec")
(in%"[EMAIL PROTECTED]")
(#100)
