James Tobin 51 expectations of economic futures, individual, national, and global, are inft enced by current events, perhaps to an irrational extent. As Keynes explicitly observed, his theory refers to economies with incom- plete markets. In his day futures markets were rare, and contingent futures markets even rarer. They are still scarce. As Keynes explained, decisions not to spend now are not coupled with any definite orders for future or contingent deliveries. Typically they result in accumulations of assets that can be spent on anything at any future time. The multiplier effects of lower current spending propensities are not offset by specific and firm expectations of higher future eman Business Cycles as Demand Fluctuations According to Keynesian macroeconomics, business cycles are fluctuations in aggregate effective demand, carrying output and employment in their wake. They do not reflect movements in market-clearing supply-equals-demand rla Supplies of labor and other factors of production move fairly smoothly from year to year and from cycle to cycle. So does economy-wide factor productivity, largely reflecting technological progress. Equilibrium output and employment cannot be as variable as actual cyclical observations. In the neoclas- sical neo-Keynesian synthesis, trend growth is supply-determined; markets are cleared; supply truly creates its own demand. In cyclical departures from trend demand evokes its own supply. Keynesian short-run macroeconomics does not pretend to apply to problems of long- run growth and development Equilibrium cycle theories(Plosser, 1989) are unconvincing. They rely on incredible volatili hnology, retrogressive as well as progressiv rely on extreme intertemporal substitutions among work, leisure, and con- sumption. Or they contrive informational asymmetries and misperceptions that seem easy to correct. For example, a few years ago a popular theory attributed business cycles to confusions by suppliers of products and labor between increases in their own real prices, on the one hand, and economy-wide infla tion, on the other. Evidently businesses and households were assumed to ignore the food of current statistics on prices and money supplies I am using the word equilibrium to mean Walrasian market-clearing by prices, as is the current usage of both new classical macroeconomists and isequilibrium theorists. Keynes used it otherwise, to refer to a position of rest. That is why he referred to outcomes with involuntary unemployment as equilibria on a par with full employment, and why he termed his the general"in the title of his book. The basic issue is not semantic. It is whether situations of general excess supply can and do exist for significant periods of ime, whether or not they are called equilibria