CONCEPT
Effective Demand
Keynes's technical term for the spending that actually occurs — distinct from what people want. The concept that exposes why abundant AI supply does not automatically generate abundant value.
Effective demand is the total spending that actually occurs in an economy — distinct from what people would want to buy if they had the income. The distinction is critical and central to Keynesian analysis. A displaced worker may want employment; a firm may want to pay for judgment-based services. But effective demand requires willingness plus ability to pay, and that conjunction depends on income, which depends on employment, which depends on the aggregate demand that effective demand constitutes. The circularity is the point: demand, income, and output are simultaneously determined, and no variable can be analyzed independently of the others.
In The You On AI Field Guide
The concept underlies Keynes's demolition of Say's Law. Classical economics assumed that supply generated the income required to demand it. Keynes showed that the income generated by supply could be hoarded rather than spent, so that effective demand could fall short of productive capacity with no automatic mechanism for correction.
The AI application is direct. The trillion