> In other words, effective demand is determined by what "entrepreneurs"
> (the word Keynes used rather than "capitalists") make possible through
> their investment and hiring decisions - and it's based on their
> expectations of profit. So it actually has more in common with Marx's
> POV than you might think.
One key thing they have in common is that both treat the psychology of the capitalist as a form of self-estrangement, the essential feature of which is an irrational love of money and money-making so that M-C-M' also represents the irrational subjectivity of capitalism. Marx understands this in terms of Hegel's idea of the "passions"; Keynes most likely understands it in terms of the psychoanalytic theory of greed as an expression of psychopathology.
Both (mistakenly in my judgment) believed the rate of profit would fall in the long run, though Keynes's reasoning differed from Marx's (Keynes claimed, for instance, that there were good reasons for believing the organic composition of capital would fall as capitalism matured).
For Keynes, this creates the possibility of a future liquidity trap (there's more than one kind of such trap) arising from the irrational love of money that characterizes the psychology of capitalism. This irrational liquidity preference creates a minimum rate of profit that must be expected from investment in real capital if such investment is to be undertaken. Stagnation sets in when the rate of profit falls to this minimum. The effect of reduced aggregate investment, by the way, is reduced aggregate profit since on Keynes's assumptions "capitalists get what they spend."
It's not clear to me why a falling rate of profit would generate the same problem on Marx's assumptions. He assumes competition "compels him [the capitalist] to keep constantly extending his capital, in order to preserve it, but extend it he cannot, except by means of progressive accumulation."
"Only as personified capital is the capitalist respectable. As such, he shares with the miser the passion for wealth as wealth. But that which in the miser is a mere idiosyncrasy, is, in the capitalist, the effect of the social mechanism, of which he is but one of the wheels. Moreover, the development of capitalist production makes it constantly necessary to keep increasing the amount of the capital laid out in a given industrial undertaking, and competition makes the immanent laws of capitalist production to be felt by each individual capitalist, as external coercive laws. It compels him to keep constantly extending his capital, in order to preserve it, but extend it he cannot, except by means of progressive accumulation." (Capital, Volume I, Chapter 24, Section 3, ¶3)
Ted