It is well known that for Keynes the demand for investment goods, as for labor services, is a derived demand. The demand for investment goods ultimately depends on the extent to which they are needed to produce items of consumption. Certainly, one investment good may be required in the production of a second investment good which, in turn, is needed to produce the first investment good. Iron gets sold to steelmakers who sell some steel to iron makers in a circle that never makes direct contact with the production of consumption goods. But this occurs because such maintenance of iron and steel works enables, indirectly, the supply of investment goods for the production of items of consumption.
In Marx’s framework, the need for investment goods ultimately to have a connection to consumption-goods production is not immediately obvious. In his analysis, the motive of capitalist production is surplus value. If surplus value could be created by producing iron to produce steel to produce iron without any connection, even indirectly, to items of consumption, the uselessness of the activity would have no bearing on whether capitalists deemed the activity worth pursuing. This raises the possibility that the demand for investment goods need not always be a derived demand in Marx’s framework.
Against this, though, is Marx’s proviso that a commodity cannot have a value (including surplus value) without a use value. This raises the question of whether iron-steel-iron production, to the extent it is utterly superfluous to consumption, could have a use value.
It might be tempting to say that, from the perspective of capitalists, the quality of creating surplus value is what ensures the use value of such production. But this would presuppose that such production could create surplus value, and that is the question to be resolved.
There seems to be an ambiguity. It would be helpful if Marx somewhere along the line indicated his own view on the matter. He appears to have done so in a passage in the third volume of Capital, chapter 18:
[A]s we have seen (Book 2, Part III), continuous circulation takes place between constant capital and constant capital (even regardless of accelerated accumulation). It is at first independent of individual consumption because it never enters the latter. But this consumption definitely limits it nevertheless, since constant capital is never produced for its own sake but solely because more of it is needed in spheres of production whose products go into individual consumption.
It seems, at least on the basis of the above, that Marx considered the use value of investment goods (constant capital) to be contingent on the contribution made, either directly or indirectly, to the production of items of consumption. If this were not the case, it would be possible for the production of investment goods to occur profitably even when it had no connection whatsoever, even indirectly, to consumption. And, if so, there would be no need for any such connection from the perspective of capitalists.
If the above passage is an accurate reflection of Marx’s position, it seems compatible with Keynes and Kalecki on demand deficiency.
For Keynes, a reduction in the average propensity to consume results in negative income adjustments unless private investment, government expenditure and export demand happen to increase sufficiently to maintain overall demand and income at the same level. He maintained, of course, that there was no automatic tendency for this to occur.
For Kalecki, weak capitalist consumption relative to investment can contribute to a fall in the realized rate of profit. One way of viewing his ‘tragedy of investment’ is that investment adds not only to profit but to the stock of fixed capital whenever net investment is positive. As a result, a consequence of investment is that the realized rate of profit (i.e. realized profit as a proportion of fixed capital) tends to fall.
A discussion of demand deficiency in relation to Marx is provided in:
On the lack of an automatic tendency to full employment in Keynes’ framework, see:
Kalecki’s profit equation is discussed further in: