This week in Economics for Business we looked at Keynesian economics, including the rationales for deficit spending (which we'll look at in lots more detail next week) and the movement towards austerity in Europe. This blog entry by Mario Rizzo does a good job of explaining what a pre-Keynesian macroeconomics looks like. Lots of his entries are worth a read.
"Imagine a world without macroeconomics in the Keynesian sense. What is aggregate supply? There are no producers of goods-in-general. There are just producers of specific goods aimed at specific customers. (Of course, some guy can run around adding this up in terms of market prices or whatever.) There are no demanders-in-general. There are just demanders of specific goods to be purchased from specific producers.
And when the Keynesian speaks of aggregate demand falling short of what would generate full employment, this does not mean that every market is characterized by deficient demand. (I am abstracting from what “full employment” might coherently mean.)
So the humble pre-Keynesian economist looks around and sees many specific markets out of equilibrium. The first thing that occurs to such an economist is: Why are there so many errors? Normally, so many producers do not make large errors in deciding what to produce and what to sell. Normally, large numbers of workers do not find themselves making mistakes about where the demand for their services lies."