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The paper is in response to criticisms of an earlier paper of mine explaining J.S. Mill’s notorious Fourth Proposition on Capital – “demand for commodities is not demand for labour”. If Mill is correct, his fourth proposition is a complete refutation of theories based on variations in aggregate demand as the basis for understanding variations in employment and output. Unfortunately the presuppositions and conceptual framework of modern economics make it virtually impossible for modern economists to understand pre-Keynesian theory, therefore making it virtually impossible to understand how economies actually work.

classical economics, Keynesian economics