Keynes explained the level of output and employment in the economy as being determined by effective demand. In a reversal of Say’s Law, Keynes in essence argued that «man creates his own supply,» up to the limit set by full employment.

In «classical» economic theory, adjustments in prices would automatically make demand tend to the full employment level. Keynes, pointing to the sharp fall in employment and output in the early 1930s, argued that whatever the theory, this self-correcting process had not happened.