There is a strand of economic theory concerned with the operation of Keynes’ principle of effective demand in the long run. In this tradition, a central role is given to demand in analyses of accumulation and growth under capitalist conditions, in contrast with the neoclassical New Keynesian approach which attempts to confine the influence of demand on output and employment to the short run. The latter approach, being reliant on adjustments of demand to supply-determined rates of growth via the price mechanism, has been undermined by the capital debates.
A recent paper by Sergio Cesaratto provides a helpful overview of the various positions so far adopted in the debate:
In a couple of places, Cesaratto alludes to compatibilities between the analysis of demand-led growth and neo-chartalist and circuitist approaches to money. Monetary questions are not a focus of his paper (money and finance being left out of the analysis), but it is nevertheless interesting, in relation to money and finance, to note the significant role attributed in demand-led growth models to autonomous non-capacity-creating demand. When such models are extended to incorporate government and external sectors, autonomous non-capacity-creating demand includes government expenditure and exports in addition to credit-financed private-consumption expenditure.
Significant contributions to the literature on demand-led growth can be found in the reference list provided by Cesaratto. A 1995 paper by Frankin Serrano is particularly relevant as background to Cesaratto’s argument:
A somewhat different perspective has been put forward by Attilio Trezzini. For example:
See also a recent paper by Matthew Smith: