Keynes held that free-market capitalism usually has deficient effective demand

Evidence

Th e innovation that explains why Keynes attached such an importance to government expenditure is his idea that, within free market capitalism, eff ective demand is usually defi cient with respect to the level needed to achieve full employment. Th is is because, most of the time, entrepreneurs do not have suffi ciently high expectations to actually invest. — Clara E. Mattei, The Capital Order, 1690

Categorization

• DEFINE: Defines the Keynesian concept of deficient effective demand and why it justifies government expenditure.
• XREF: Contrasts Keynes’s demand-deficiency view with Hawtrey’s savings-spent-sooner-or-later optimism, a key theoretical fault line behind policy debates. — connects to: Even Keynes endorsed the crowding-out logic against deficit-financed public works in 1924 — Mark Blyth, Austerity: The History of a Dangerous…, 331; Keynes held laissez-faire a popular distortion absent from Smith, Ricardo, and Malthus — Angus Burgin, The Great Persuasion: Reinventing Free…, 11; Keynes’s General Theory reframed economics around aggregate demand — Angus Burgin, The Great Persuasion: Reinventing Free…, 76