Lesson plan
underconsumption
Underconsumption is a theory in economics that recessions and stagnation arise from an inadequate consumer demand, relative to the amount produced. In other words, there is a problem of overproduction and overinvestment during a demand crisis. The theory formed the basis for the development of Keynesian economics and the theory of aggregate demand after the 1930s. Underconsumption theory narrowly refers to heterodox economists in Britain in the 19th century, particularly from 1815 onwards, who advanced the theory of underconsumption and rejected classical economics in the form of Ricardian economics. The economists did not form a unified school, and their theories were rejected by mainstream economics of the time. Underconsumption is an old concept in economics that goes back to the 1598 French mercantilist text Les Trésors et richesses pour mettre l'Estat en splendeur (The Treasures and riches to put the State in splendor) by Barthélemy de Laffemas, if not earlier. The concept of underconsumption had been used repeatedly as part of the criticism of Say's law until underconsumption theory was largely replaced by Keynesian economics which points to a more complete explanation of the failure of aggregate demand to attain potential output, i.e., the level of production corresponding to full employment.…
Article summary
Underconsumption is a theory in economics that recessions and stagnation arise from an inadequate consumer demand, relative to the amount produced. In other words, there is a problem of overproduction and overinvestment during a demand crisis. The theory formed the basis for the development of Keynesian economics and the theory of aggregate demand after the 1930s. Underconsumption theory narrowly refers to heterodox economists in Britain in the 19th century, particularly from 1815 onwards, who advanced the theory of underconsumption and rejected classical economics in the form of Ricardian economics. The economists did not form a unified school, and their theories were rejected by mainstream economics of the time. Underconsumption is an old concept in economics that goes back to the 1598 French mercantilist text Les Trésors et richesses pour mettre l'Estat en splendeur (The Treasures and riches to put the State in splendor) by Barthélemy de Laffemas, if not earlier. The concept of underconsumption had been used repeatedly as part of the criticism of Say's law until underconsumption theory was largely replaced by Keynesian economics which points to a more complete explanation of the failure of aggregate demand to attain potential output, i.e., the level of production corresponding to full employment.…
Key claims
No claims recorded.
Discussion questions
- Summarise the article in your own words. Which single claim would you verify first, and why?
- Which claim in this article is most likely to be revised as the sources update? How would you check its current status?
- If two sources disagreed about one of these facts, what would you need in order to trust one over the other?
Bibliography
No sources recorded.
Key claims and bibliography are generated from the same tracked claims and sources as the article page.