Now, although I find much insight from Keen's work (especially his belief that the main source of struggle in the economy is between financial and industrial capital), I simply do not understand why he has to re-invent terminology this way. Also, there are problems with looking at aggregate demand in this fashion. Economist Marc Lavoie expressed caution with Keen's definition of aggregate demand last year in a commentary on the (always relevant) Relentlessly Progressive Economics Blog. Lavoie summarized his thoughts on Keen's view that aggregate demand is equal to GDP plus the change in credit as follows:
This does not make much sense to me. There is also a certain amount of double-counting since investment is often financed by credit. Furthermore, if I get one million dollars in loans to purchase a house, credit goes up by one million; and if the seller of the house puts the proceeds in a bank account, this will have no effect whatsoever on GDP or economic activity. It may only have an impact on the price of houses.
But, for me, the problem with Keen's definition really remains one of terminology. In economics, practitioners should really strive to use commonly used terminology. If not, then discussions on important policy issues become impossible since the focus tends to get bogged down on unimportant and time-consuming language concerns rather than on the issues that really matter.