Microeconomic Theory

Ferguson's Microeconomic Theory is the best intermediate to beginning graduate level text ever published.Ferguson's handling of general equilibrium theory and Welfare economics,especially the construction of the Edgeworth-Bowley Box diagram ,the production possibilities frontier and the derivation of the contract curve,are done so clearly that any graduate student will find that he can master this material. Section 13.2,especially part a,should be required reading for any macroeconomist who is interested in discovering for himself the mathematical foundations of Keynes's theory of effective demand presented by Keynes in chapter 20 of the General Theory in 1936.The mathematics of Keynes's analysis is very straightforward once Ferguson's treatment,both mathematical and diagrammatical,is covered,since the only difference is that Keynes's price and profit terms are expected and represent aggregate terms for the set of all firms while Ferguson's price and profit terms are realized and represent micro terms at the firm level.The mathematics of Keynes's and Ferguson's models is a one to one onto isomorphism.It is a very simple task to take the variables in Ferguson that he defined in section 13.2[p,q,pi(economic profit),x,f(x),q=f(x),w,F]AND DUPLICATE EXACTLY EVERY SINGLE MATHEMATICAL AND ELASTICITY RESULT presented by Keynes on pp.282-286 of the GT.Figure 13.2.1,panel a ,on page 397 of Ferguson shows one D function and one Z function intersecting at one point on the total revenue curve at a total revenue outcome of $245 with 7 units of labor employed.This is under diminishing returns to labor(the constant returns aggregate supply curve is simply the linear total variable cost curve ,where expected economic profit is equal to 0 in Ferguson's diagram).This point is one point on Keynes's aggregate supply curve,a set of different D=Z points.Any economist can simply repeat the analysis with different prices above(say $6.00) and below(say $4.00) the $5.00 price used by Ferguson in his example.Now you have 3 points on Keynes's aggregate supply curve,which is simply a locus of all intersections of the set of expected aggregate demand functions(expected total revenue,pO,where O is a function of N)D and the set of all expected aggregate supply functions Z,where Z is the sum of the aggregate wage bill,wN,plus expected economic profit,P(Ferguson's pi).This means that Z must equal wN +P(Z=wN+P)and can't possibly be equal to pO(Z=pO) as claimed by myriad Post Keynesians,like Paul Davidson,who claims that Keynes used trickery,deceit,and deception in the presentation of his theory of effective demand in the GT, and all Cambridge Keynesians,like G C Harcourt,who accepts at face value the claim made by Richard Kahn that Keynes was a poor mathematician by 1927 who had forgotten all of his math training.Don Patinkin's claims,that Z=wN+QT or that Z=wN or that Z=TVC(total variable cost)are all generally false.Only in the special case of P=0(constant returns to