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The General Theory of Employment, Interest, and Money
Distinguished British economist John Maynard Keynes (1883-1946) set off a series of movements that drastically altered the ways in which economists view the world. In his most important work, The General Theory of Employment, Interest, and Money (1936), Keynes critiqued the laissez-faire policies of his day, particularly the proposition that a normally functioning market economy would bring full employment. Keynes's forward-looking work transformed economics from merely a descriptive and analytic discipline into one that is policy oriented. For Keynes, enlightened government intervention in a nation's economic life was essential to curbing what he saw as the inherent inequalities and instabilities of unregulated capitalism.
423 pages, Paperback
First published November 30, 1935
About the author
John Maynard Keynes
249 books612 followersJohn Maynard Keynes, 1st Baron Keynes (CB, FBA), was an English economist particularly known for his influence in the theory and practice of modern macroeconomics.
Keynes married Russian ballerina Lydia Lopokova in 1925.
NB: Not to be confused with his father who also was an economist. See John Neville Keynes.
Keynes married Russian ballerina Lydia Lopokova in 1925.
NB: Not to be confused with his father who also was an economist. See John Neville Keynes.
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July 16, 2014
One of the hardest things in the world for anyone do to is to change their mindset. Keynes, who suckled at the teats of classical economists, took off the emerald glass spectacles he was given to wear, and took a long hard look at the Depression-era. He had in his life also variously been a businessman and a fairly successful speculator. What he saw was that the theories he taught and had been taught could not explain what was happening.
In a teeny nutshell, classical economics based itself on some key assumptions in modeling the macroeconomic landscape. One was that demand always exceeded supply. The other was that because demand always outstripped supply, involuntary employment was impossible. All you had to do to get a job was accept what was on offer. These assumptions made sense-–if you lived in the 18th century. To argue then that people were short of food and basic necessities, and that if you could provide it, they would always buy it, made sense. For then .
Keynes's big a-ha was to realize that in the 20th century, supply could exceed demand. At least, supply of items for discretionary spending could certainly exceed demand. If you didn't have the money to buy it, you would do without it. But if your economy was based on lots of people buying stuff they didn't really need, then when demand evaporated, so did your jobs. Because if people weren't buying stuff, it didn't matter how little money they were willing to accept as pay. No manufacturer would hire 100 employees to make shoes if he only needed to make 10 shoes, and one employee would suffice for that. Even if you could pay them at 1/100th the salary of the one employee.
It seems so trite to us. So obvious. But at that time that was as big a realization as Gallileo's realization that the sun did not turn round the earth. Suddenly, the world was different and you weren't in Kansas any more. That's some powerful thinking.
Here're some other things about classical economics that Keynes thought didn't fit the 20th century world:
-- Savings weren't irrelevant. Money wasn't irrelevant. Those classical economists assumed that people who had money either spent it (e.g., buying cloth) or used it to invest in factors of production (e.g., looms to weave cloth). This makes a lot of sense when most people didn't have access to bank accounts, and the modern monetary system didn't exist. In the 20th century, we had banks and a modern monetary system. Many more people had money to spend, and to save. But classical economists in love their theories said, "Well, if people weren't investing in new business opportunities, then just lower interest rates on bank deposits. This would make it uneconomical for them to save and so they would invest it in money-making businesses." Keynes's insight was that people weren't accounting machines seeking to make their money work harder. People were people. And since they could save, they saved to protect themselves from uncertainty.
-- And that is the next major milestone. A milestone that was rapidly discarded post-Keynes. People did not know what the future would bring. Even collectively, they weren't prescient. They weren't omniscient. And so they would fall back on convention, on what everyone else was doing, because that was safe. So instead of your rational homo economicus--a kind of Warren Buffet, rational, intelligent, and willing to bet that everyone else was dead wrong--you had lemmings. Lemmings who might buy shares of companies that were grossly overvalued and had no sensible business plan because hey, everyone else was doing it. The market was not automatically self-correcting. Because everyone was doing the same conventional thing. People didn't want to be radical with their money. They wanted to do what seemed safe. Even if it really wasn't.
So, the main thing I've taken away from reading Keynes and Skidelsky's Keynes: The Return of the Master is that economists need to take a reality check from time to time. All that geeky number crunching theory must be real orgasmic, but sometimes you gotta raise your head from the desk and look at the real world. I love it that Keynes did that.
Keynes's General Theory got a lot of things right. And he got it right especially for that situation at that time. Unlike what economists want to think, that's not an indictment. Because economics is ultimately a social science. At the heart of it, it's not billard balls bouncing around a table. It's about people and human systems, each and all complex and changing. There CAN be no magic bullet theory that applies across the board, a Grand Unified Theory of How People Behave for Always and Forever. What explains things at a microeconomic level doesn't scale upward to the macro. What explained things for the 19th century isn't going to explain things for the 20th. Sure, nice mathematical equations and graphs probably help get the cushy professorships and the lucrative consultancies. But these explain what happened before. Maybe, just maybe, things have changed. Time to look out the window.
In a teeny nutshell, classical economics based itself on some key assumptions in modeling the macroeconomic landscape. One was that demand always exceeded supply. The other was that because demand always outstripped supply, involuntary employment was impossible. All you had to do to get a job was accept what was on offer. These assumptions made sense-–if you lived in the 18th century. To argue then that people were short of food and basic necessities, and that if you could provide it, they would always buy it, made sense. For then .
Keynes's big a-ha was to realize that in the 20th century, supply could exceed demand. At least, supply of items for discretionary spending could certainly exceed demand. If you didn't have the money to buy it, you would do without it. But if your economy was based on lots of people buying stuff they didn't really need, then when demand evaporated, so did your jobs. Because if people weren't buying stuff, it didn't matter how little money they were willing to accept as pay. No manufacturer would hire 100 employees to make shoes if he only needed to make 10 shoes, and one employee would suffice for that. Even if you could pay them at 1/100th the salary of the one employee.
It seems so trite to us. So obvious. But at that time that was as big a realization as Gallileo's realization that the sun did not turn round the earth. Suddenly, the world was different and you weren't in Kansas any more. That's some powerful thinking.
Here're some other things about classical economics that Keynes thought didn't fit the 20th century world:
-- Savings weren't irrelevant. Money wasn't irrelevant. Those classical economists assumed that people who had money either spent it (e.g., buying cloth) or used it to invest in factors of production (e.g., looms to weave cloth). This makes a lot of sense when most people didn't have access to bank accounts, and the modern monetary system didn't exist. In the 20th century, we had banks and a modern monetary system. Many more people had money to spend, and to save. But classical economists in love their theories said, "Well, if people weren't investing in new business opportunities, then just lower interest rates on bank deposits. This would make it uneconomical for them to save and so they would invest it in money-making businesses." Keynes's insight was that people weren't accounting machines seeking to make their money work harder. People were people. And since they could save, they saved to protect themselves from uncertainty.
-- And that is the next major milestone. A milestone that was rapidly discarded post-Keynes. People did not know what the future would bring. Even collectively, they weren't prescient. They weren't omniscient. And so they would fall back on convention, on what everyone else was doing, because that was safe. So instead of your rational homo economicus--a kind of Warren Buffet, rational, intelligent, and willing to bet that everyone else was dead wrong--you had lemmings. Lemmings who might buy shares of companies that were grossly overvalued and had no sensible business plan because hey, everyone else was doing it. The market was not automatically self-correcting. Because everyone was doing the same conventional thing. People didn't want to be radical with their money. They wanted to do what seemed safe. Even if it really wasn't.
So, the main thing I've taken away from reading Keynes and Skidelsky's Keynes: The Return of the Master is that economists need to take a reality check from time to time. All that geeky number crunching theory must be real orgasmic, but sometimes you gotta raise your head from the desk and look at the real world. I love it that Keynes did that.
Keynes's General Theory got a lot of things right. And he got it right especially for that situation at that time. Unlike what economists want to think, that's not an indictment. Because economics is ultimately a social science. At the heart of it, it's not billard balls bouncing around a table. It's about people and human systems, each and all complex and changing. There CAN be no magic bullet theory that applies across the board, a Grand Unified Theory of How People Behave for Always and Forever. What explains things at a microeconomic level doesn't scale upward to the macro. What explained things for the 19th century isn't going to explain things for the 20th. Sure, nice mathematical equations and graphs probably help get the cushy professorships and the lucrative consultancies. But these explain what happened before. Maybe, just maybe, things have changed. Time to look out the window.
Want to read
February 16, 2018"لماذا لا يمكنكم إعطاء أبي وظيفة؟"
في بدايات القرن الماضي, عندما كان يريد الماليون تخفيض فائدة القروض, كانوا يلجئون إلى زيادة كمية المال المعروض للإقراض, ويتم ذلك عن طريق البنك المركزي.
وعندما يزيد عرض المال, ينخفض سعر فائدته؛ لأنه هنالك الكثير من الأموال المتنافسة فيما بينها للإقراض فيقدّم بعض أصحاب رؤوس الأموال مزايا للإقبال على أموالهم مثل تخفيض سعر الفائدة, فأن تُخَفِّض سعر الفائدة خير من أن يبقي المال دون أي إقراض.
ويتوقع الماليون عند هذه النقطة, أن يقبل الناس على الاقتراض, وإقامة المشروعات بهذه الأموال, وبهذا تنتعش الأسواق.
وهذه الطريقة تسمّى النظرية النقدية, وكانت تمثّل البرايجم أو المعتقدات الاقتصادية السائدة
ولكن في نهاية العقد الثالث حدث شيء لم يكن يتوقعه الماليون إطلاقاً؛ فهذه الطريقة لم تعد تجدي نفعاً!!!
فبحلول عام 1929 حلّ الكساد الكبير. ركود وكساد في كل النشاطات الاقتصادية لم يعرف العالم له مثيل.
ومهما حاول الماليون دفع النشاط الاقتصادي عن طريق النظرية النقدية, لم يستطيعوا النجاح؛ فالفوائد كانت في أق�� مستوياتها, ولم يستطيعوا خفضها أكثر من ذلك؛ فعند نقطة معينة فضّل أصحاب الأموال الاحتفاظ بأموالهم بدلاً من عناء إقراضها في مقابل لا يُغنيهم في شيء.
عند هذه اللحظة كان البراديجم السائد (النظرية النقدية) في ورطة. بالطبع كان هناك مؤيد لها, ومؤيدين لها مع بعض التعديلات, ولكن كان هناك من استشرف خطأها وهو "جون ماينارد كينز". وكان الحل الذي اقترحه كينز هو زيادة الإنفاق الحكومي لزيادة النشاط الاقتصادي (نسبة التشغيل) والخروج من الأزمة من خلال هذا الكتاب.
بعدها دار الكثير من النقاشات حول الكتاب, ولكنها كانت مناقشات أكاديمية؛ فالكتاب كتب على جزأين بلغة أكاديمية بحته, وكلا الجزأين يتطلب تمكّن في فهم الاقتصاد, وأحد الجزأين يتطلّب خيال عالي ومثابرة لمتابعة الجدليات التي يفترضها؛ مما يجبر طلاب الاقتصاد للمرور على هذا الجزء سريعاً.
ولم يخرج هذا النقاش خارج الحيز الأكاديمي, ولم تلتفت الحكومات لتوصيات كينز.
إذاً كيف خرجنا من مأزق الكساد الكبير؟ عن طريق قيام الحرب العالمية التي زادت من الإنفاق الحكومي بطريقة كبيرة جداً.
كيف نضمن ألا يعود مثل هذا الكساد؟ عن طريق التضخّم, والتضخم هو زيادة الأسعار باضطراد مما يؤدي إلى نقص قيمة النقود التي نحملها, وبذلك يضطر الناس إلى استثمار نقودهم أو استخدامها لشراء السلع الاستهلاكية بصفة مستمرة. والسبب الرئيسي لتوسع التضخم هو تخلي أمريكا عن اتفاقية "بريتون وودز" عام 1971.
وبجانب التضخّم, هناك ثقافة الاستهلاك التي نمت وتوحشّت بنمو مجال الدعايا والإعلان, وبها نضمن أن الأفراد ستقبل دائما على طلب شراء الكثير من السلع ولن تقوم بتخزين النقود.
وهذان الاثنان هما أقوى أسلحتنا الحالية ضد الكساد الكبير.
*****
هذا ملخّص بسيط لأجواء المشكلة التي يحاول الكتاب معالجتها, وأما طريقة العلاج المقترحة فسأحاول تلخيصها فور قراءة الكتاب, ولا أظنني سأنتهي منه قريباً فلدي الكثير لأتعلمه قبلها عن الاقتصاد.
ومن لا يريد قراءة الكتاب كاملاً, فيمكنه الاكتفاء بتقديم "بول كروجمان" الحاصل على نوبل الاقتصاد 2006, والذي يقع في 18 صفحة؛ فهو جيد, بسيط, ويقدم تحليل ثاقب لأجزاء الكتاب.
وهذا التقديم متوفر ضمن ترجمة مشروع كلمة الجيدة.
**
نلاحظ في المقدمة, أنه يفترض أن الاقتصاديين يقرؤون هذا الكتاب خلال دراستهم الجامعية. لكن في كليتي لا نعمل بهذا النظام, فلا نقرأ كتباً عن أي شيء. لا نقرأ كتباً سوى تلك التي يبيعها دكتور المادة ويقبض ثمناً عنها كمؤلف لها.
"اندفاع الأفراد لسحب أموالهم في بداية الكساد العظيم"
في بدايات القرن الماضي, عندما كان يريد الماليون تخفيض فائدة القروض, كانوا يلجئون إلى زيادة كمية المال المعروض للإقراض, ويتم ذلك عن طريق البنك المركزي.
وعندما يزيد عرض المال, ينخفض سعر فائدته؛ لأنه هنالك الكثير من الأموال المتنافسة فيما بينها للإقراض فيقدّم بعض أصحاب رؤوس الأموال مزايا للإقبال على أموالهم مثل تخفيض سعر الفائدة, فأن تُخَفِّض سعر الفائدة خير من أن يبقي المال دون أي إقراض.
ويتوقع الماليون عند هذه النقطة, أن يقبل الناس على الاقتراض, وإقامة المشروعات بهذه الأموال, وبهذا تنتعش الأسواق.
وهذه الطريقة تسمّى النظرية النقدية, وكانت تمثّل البرايجم أو المعتقدات الاقتصادية السائدة
ولكن في نهاية العقد الثالث حدث شيء لم يكن يتوقعه الماليون إطلاقاً؛ فهذه الطريقة لم تعد تجدي نفعاً!!!
فبحلول عام 1929 حلّ الكساد الكبير. ركود وكساد في كل النشاطات الاقتصادية لم يعرف العالم له مثيل.
ومهما حاول الماليون دفع النشاط الاقتصادي عن طريق النظرية النقدية, لم يستطيعوا النجاح؛ فالفوائد كانت في أق�� مستوياتها, ولم يستطيعوا خفضها أكثر من ذلك؛ فعند نقطة معينة فضّل أصحاب الأموال الاحتفاظ بأموالهم بدلاً من عناء إقراضها في مقابل لا يُغنيهم في شيء.
عند هذه اللحظة كان البراديجم السائد (النظرية النقدية) في ورطة. بالطبع كان هناك مؤيد لها, ومؤيدين لها مع بعض التعديلات, ولكن كان هناك من استشرف خطأها وهو "جون ماينارد كينز". وكان الحل الذي اقترحه كينز هو زيادة الإنفاق الحكومي لزيادة النشاط الاقتصادي (نسبة التشغيل) والخروج من الأزمة من خلال هذا الكتاب.
بعدها دار الكثير من النقاشات حول الكتاب, ولكنها كانت مناقشات أكاديمية؛ فالكتاب كتب على جزأين بلغة أكاديمية بحته, وكلا الجزأين يتطلب تمكّن في فهم الاقتصاد, وأحد الجزأين يتطلّب خيال عالي ومثابرة لمتابعة الجدليات التي يفترضها؛ مما يجبر طلاب الاقتصاد للمرور على هذا الجزء سريعاً.
ولم يخرج هذا النقاش خارج الحيز الأكاديمي, ولم تلتفت الحكومات لتوصيات كينز.
إذاً كيف خرجنا من مأزق الكساد الكبير؟ عن طريق قيام الحرب العالمية التي زادت من الإنفاق الحكومي بطريقة كبيرة جداً.
كيف نضمن ألا يعود مثل هذا الكساد؟ عن طريق التضخّم, والتضخم هو زيادة الأسعار باضطراد مما يؤدي إلى نقص قيمة النقود التي نحملها, وبذلك يضطر الناس إلى استثمار نقودهم أو استخدامها لشراء السلع الاستهلاكية بصفة مستمرة. والسبب الرئيسي لتوسع التضخم هو تخلي أمريكا عن اتفاقية "بريتون وودز" عام 1971.
وبجانب التضخّم, هناك ثقافة الاستهلاك التي نمت وتوحشّت بنمو مجال الدعايا والإعلان, وبها نضمن أن الأفراد ستقبل دائما على طلب شراء الكثير من السلع ولن تقوم بتخزين النقود.
وهذان الاثنان هما أقوى أسلحتنا الحالية ضد الكساد الكبير.
*****
هذا ملخّص بسيط لأجواء المشكلة التي يحاول الكتاب معالجتها, وأما طريقة العلاج المقترحة فسأحاول تلخيصها فور قراءة الكتاب, ولا أظنني سأنتهي منه قريباً فلدي الكثير لأتعلمه قبلها عن الاقتصاد.
ومن لا يريد قراءة الكتاب كاملاً, فيمكنه الاكتفاء بتقديم "بول كروجمان" الحاصل على نوبل الاقتصاد 2006, والذي يقع في 18 صفحة؛ فهو جيد, بسيط, ويقدم تحليل ثاقب لأجزاء الكتاب.
وهذا التقديم متوفر ضمن ترجمة مشروع كلمة الجيدة.
**
نلاحظ في المقدمة, أنه يفترض أن الاقتصاديين يقرؤون هذا الكتاب خلال دراستهم الجامعية. لكن في كليتي لا نعمل بهذا النظام, فلا نقرأ كتباً عن أي شيء. لا نقرأ كتباً سوى تلك التي يبيعها دكتور المادة ويقبض ثمناً عنها كمؤلف لها.
"اندفاع الأفراد لسحب أموالهم في بداية الكساد العظيم"
June 22, 2013
Bad writing, confused thinking, pernicious policies.
I first encountered the name Keynes when reading a Time magazine article in around 1975 about West Germany's chancellor Helmut Schmidt. As I recall, the article was a complimentary one, in which Schmidt was portrayed as an intellectual technocrat who favored the intellectual and technocratic economics of John Maynard Keynes. I got the impression that Keynesian economics was something advanced and new, a sophisticated modern theory to be used by sophisticated modern leaders who have the necessary intellectual power and humanitarian vision.
Over the years I would see his name crop up from time to time, usually as representing one pole in an economic debate that I didn't really understand. I did not encounter a meaningful discussion of his ideas until I read Jane Jacobs's excellent Cities and the Wealth of Nations in 1986, in which she examines, in chapter 1, how different economists throughout history have tried to account for the phenomenon of "stagflation," or, in other words, economic decline. On page 16 she describes Keynes as "the most influential economist of this century," but by page 27 she sends him off into history:
Jacobs's own book, which is no longer than Keynes's, goes on to answer the question that stumped the earlier economists, including Keynes. It makes an excellent work to compare with his, because it is a paragon of clarity of both thought and expression. By contrast, Keynes's book is a paragon of obscurity and vagueness.
I had long thought that I should probably read Keynes as part of my general education, but I found myself reluctant to try him, both because of intimations of the difficulty of his writing, and because my own economic beliefs were leading me in the opposite direction to what his ideas seemed to be. When I came across a review on Amazon in which the reviewer recommended reading this book along with a critical analysis by Henry Hazlitt called The Failure of the New Economics: An Analysis of the Keynesian Fallacies, I immediately wanted to try it, and I bought both books at that moment.
I'd already read Hazlitt and liked him. His Economics In One Lesson is an excellent primer on the fundamentals of classical economics. Like Jane Jacobs, Henry Hazlitt thinks and writes with great clarity. Hazlitt, as a classical economist, is hostile to Keynes's ideas, and his book is a debunking of the General Theory, but his analysis is logical, and he has performed a great service to the reader of Keynes in grappling with Keynes's obscurities of expression to reveal their meaning and state them in plain terms.
Do you think I'm being hard on Keynes? Let's try an example. Early in the book he sets out to define some terms. One of the terms he wants to define is "involuntary" unemployment (and the quotation marks are his). Here it is:
Got that? No? Go ahead: read it again. Take your time. It's a definition, so in order to understand what follows in the book, you'll have to grasp this.
Friends, I didn't waste my time. As a sentence, it reminded me of another one penned by James Joyce in Finnegans Wake:
The difference being that Joyce's sentence is an impish joke, while presumably Keynes's is not.
All right, obscurity aside, what is Keynes actually trying to say in his book? He's saying that the cause of unemployment in an economy is a deficiency of consumption. Consumption is deficient because of people's "liquidity-preference"--that is, their desire to save some of their earnings. They are enticed to save partly because interest rates are so high, which in turn is due to the greed of moneylenders. The path to full employment is therefore to push down the interest rate to deter saving, and to boost consumption by all possible means: by preventing any drop in wage-rates on the one hand, and on the other by government's stepping into the breach by doing plenty of spending of its own. If a government needs to run deficits and print money in order to spend, then well and good: these actions are not only harmless, they are positively beneficial and it is immoral to shrink from them. If these actions are undertaken vigorously enough, full employment will result and maximum prosperity will be achieved.
Keynes's great economic discovery was that Aesop got things exactly backwards in his fable of The Ant and the Grasshopper. It was the ant who was doing things wrong, saving up for the winter. For while he was seeing to his own future, he was beggaring the rest of society by creating unemployment. The grasshopper's poverty was due not to his own lack of industry, but to the ant's "liquidity-preference"!
Keynes doesn't actually mention Aesop's fable in his book--I wish he had. But he does make repeated arch jabs at the "vice" of thrift. Not that he really blames people for trying to see to their own futures, but he laments the social damage that, according to him, results from their behavior. That damage has to be undone, or better, prevented, by a sagacious government. People are too foolish and too self-centered to do what is best for the common good.
But wealth is not created by consumption; it's created by production. You don't make anyone richer by consuming; you make everyone richer by producing. And while it's true that producers produce for the sake of consumers, it's at best a circuitous and backwards way of going about things to try to stimulate the process by pushing ever-larger amounts of printed money into consumers' hands. Keynes puts the cart before the horse in this and in many other ways in the course of his book.
Oh yes, along the way there are some equations too. It's not clear whether Keynes himself sees these as anything more than a metaphor or an illustrative device, and he even disparages the use of equations. Equations can only have scientific validity if the variables involved can be isolated and controlled for in an experiment. This is possible in physics, but not in economics. The mathematics in the book is halfhearted and it's safe to skip; Keynes himself even suggests doing so.
In his last chapter Keynes briefly outlines the implications of his theory for policy-making. By and large, the investment of capital is to be taken over by the state. It will not be full-blown socialism, he says, because the state need not own the actual means of production. The state merely needs to decide where to allocate capital to the best overall social advantage. Yes, this will "mean the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital." Both the sentiment here and its manner of expression are worthy of Karl Marx. Keynesianism overall is Marxism Lite.
Keynes repeatedly talks about how to control human behavior, how to formulate public policies to neutralize people's purblind selfishness and misguided actions. The citizens are the livestock on the great farm of the state. Their behavior needs to be channeled in ways that are productive and beneficial--a task that falls to the wise farmer and his farmhands, who in effect form the ruling class. Keynes, by presumably being free of the vices he ascribes to others, is by implication a member of this ruling class. He is its theoretician.
But could Keynes be right after all? We're finding out. Keynes's ideas triumphed in the 20th century, and are being implemented with even more force today in the 21st. Governments all over the world and at all levels are running unprecedented deficits; paper currencies are being printed at record rates to try to "stimulate" sluggish, faltering economies; interest rates are at zero or, in real terms, below zero; great mountains of debt have been accumulated in an effort to "capitalize" ventures of all kinds, often failed ones. And yet unemployment is high and growing: it's higher than our governments dare tell us. Maybe if we open the floodgates of money-printing still further, that will finally create "full employment."
The experiment has failed. We are now just racing to the catastrophic endgame of Keynes's program. I'm afraid that Keynes's popularity arose not from any brilliance in his thought, which was disorderly and confused, or in his writing, which ditto, but from the fact that he told everyone what they wanted to hear. He told workers that the path to prosperity was in spending and consuming, and that their wages should never go down; and he told governments that their greatest virtue lay in spending, borrowing, and printing money. Let's party!
We've been partying now pretty much since this book was published in 1936. We've been keeping the hangover at bay by taking more and more hair of the dog. But the terrible consequences are becoming manifest. Winter is coming, and we're now a world of grasshoppers; soon we'll be in search of those few ants who might have some provisions put by.
I first encountered the name Keynes when reading a Time magazine article in around 1975 about West Germany's chancellor Helmut Schmidt. As I recall, the article was a complimentary one, in which Schmidt was portrayed as an intellectual technocrat who favored the intellectual and technocratic economics of John Maynard Keynes. I got the impression that Keynesian economics was something advanced and new, a sophisticated modern theory to be used by sophisticated modern leaders who have the necessary intellectual power and humanitarian vision.
Over the years I would see his name crop up from time to time, usually as representing one pole in an economic debate that I didn't really understand. I did not encounter a meaningful discussion of his ideas until I read Jane Jacobs's excellent Cities and the Wealth of Nations in 1986, in which she examines, in chapter 1, how different economists throughout history have tried to account for the phenomenon of "stagflation," or, in other words, economic decline. On page 16 she describes Keynes as "the most influential economist of this century," but by page 27 she sends him off into history:
Keynes gloomily commented, as he observed the economic decline of Britain, that possibly an economy could develop structural flaws lying beyond help from his remedies: another way of saying that things can go wrong which his theory couldn't account for.
Jacobs's own book, which is no longer than Keynes's, goes on to answer the question that stumped the earlier economists, including Keynes. It makes an excellent work to compare with his, because it is a paragon of clarity of both thought and expression. By contrast, Keynes's book is a paragon of obscurity and vagueness.
I had long thought that I should probably read Keynes as part of my general education, but I found myself reluctant to try him, both because of intimations of the difficulty of his writing, and because my own economic beliefs were leading me in the opposite direction to what his ideas seemed to be. When I came across a review on Amazon in which the reviewer recommended reading this book along with a critical analysis by Henry Hazlitt called The Failure of the New Economics: An Analysis of the Keynesian Fallacies, I immediately wanted to try it, and I bought both books at that moment.
I'd already read Hazlitt and liked him. His Economics In One Lesson is an excellent primer on the fundamentals of classical economics. Like Jane Jacobs, Henry Hazlitt thinks and writes with great clarity. Hazlitt, as a classical economist, is hostile to Keynes's ideas, and his book is a debunking of the General Theory, but his analysis is logical, and he has performed a great service to the reader of Keynes in grappling with Keynes's obscurities of expression to reveal their meaning and state them in plain terms.
Do you think I'm being hard on Keynes? Let's try an example. Early in the book he sets out to define some terms. One of the terms he wants to define is "involuntary" unemployment (and the quotation marks are his). Here it is:
Men are involuntarily unemployed if, in the event of a small rise in the price of wage-goods relatively to the money-wage, both the aggregate supply of labor willing to work for the current money-wage and the aggregate demand for it at that wage would be greater than the existing volume of employment.
Got that? No? Go ahead: read it again. Take your time. It's a definition, so in order to understand what follows in the book, you'll have to grasp this.
Friends, I didn't waste my time. As a sentence, it reminded me of another one penned by James Joyce in Finnegans Wake:
Utterly impossible as are all these events they are probably as like those which may have taken place as any others which never took person at all are ever likely to be.
The difference being that Joyce's sentence is an impish joke, while presumably Keynes's is not.
All right, obscurity aside, what is Keynes actually trying to say in his book? He's saying that the cause of unemployment in an economy is a deficiency of consumption. Consumption is deficient because of people's "liquidity-preference"--that is, their desire to save some of their earnings. They are enticed to save partly because interest rates are so high, which in turn is due to the greed of moneylenders. The path to full employment is therefore to push down the interest rate to deter saving, and to boost consumption by all possible means: by preventing any drop in wage-rates on the one hand, and on the other by government's stepping into the breach by doing plenty of spending of its own. If a government needs to run deficits and print money in order to spend, then well and good: these actions are not only harmless, they are positively beneficial and it is immoral to shrink from them. If these actions are undertaken vigorously enough, full employment will result and maximum prosperity will be achieved.
Keynes's great economic discovery was that Aesop got things exactly backwards in his fable of The Ant and the Grasshopper. It was the ant who was doing things wrong, saving up for the winter. For while he was seeing to his own future, he was beggaring the rest of society by creating unemployment. The grasshopper's poverty was due not to his own lack of industry, but to the ant's "liquidity-preference"!
Keynes doesn't actually mention Aesop's fable in his book--I wish he had. But he does make repeated arch jabs at the "vice" of thrift. Not that he really blames people for trying to see to their own futures, but he laments the social damage that, according to him, results from their behavior. That damage has to be undone, or better, prevented, by a sagacious government. People are too foolish and too self-centered to do what is best for the common good.
But wealth is not created by consumption; it's created by production. You don't make anyone richer by consuming; you make everyone richer by producing. And while it's true that producers produce for the sake of consumers, it's at best a circuitous and backwards way of going about things to try to stimulate the process by pushing ever-larger amounts of printed money into consumers' hands. Keynes puts the cart before the horse in this and in many other ways in the course of his book.
Oh yes, along the way there are some equations too. It's not clear whether Keynes himself sees these as anything more than a metaphor or an illustrative device, and he even disparages the use of equations. Equations can only have scientific validity if the variables involved can be isolated and controlled for in an experiment. This is possible in physics, but not in economics. The mathematics in the book is halfhearted and it's safe to skip; Keynes himself even suggests doing so.
In his last chapter Keynes briefly outlines the implications of his theory for policy-making. By and large, the investment of capital is to be taken over by the state. It will not be full-blown socialism, he says, because the state need not own the actual means of production. The state merely needs to decide where to allocate capital to the best overall social advantage. Yes, this will "mean the euthanasia of the rentier, and, consequently, the euthanasia of the cumulative oppressive power of the capitalist to exploit the scarcity-value of capital." Both the sentiment here and its manner of expression are worthy of Karl Marx. Keynesianism overall is Marxism Lite.
Keynes repeatedly talks about how to control human behavior, how to formulate public policies to neutralize people's purblind selfishness and misguided actions. The citizens are the livestock on the great farm of the state. Their behavior needs to be channeled in ways that are productive and beneficial--a task that falls to the wise farmer and his farmhands, who in effect form the ruling class. Keynes, by presumably being free of the vices he ascribes to others, is by implication a member of this ruling class. He is its theoretician.
But could Keynes be right after all? We're finding out. Keynes's ideas triumphed in the 20th century, and are being implemented with even more force today in the 21st. Governments all over the world and at all levels are running unprecedented deficits; paper currencies are being printed at record rates to try to "stimulate" sluggish, faltering economies; interest rates are at zero or, in real terms, below zero; great mountains of debt have been accumulated in an effort to "capitalize" ventures of all kinds, often failed ones. And yet unemployment is high and growing: it's higher than our governments dare tell us. Maybe if we open the floodgates of money-printing still further, that will finally create "full employment."
The experiment has failed. We are now just racing to the catastrophic endgame of Keynes's program. I'm afraid that Keynes's popularity arose not from any brilliance in his thought, which was disorderly and confused, or in his writing, which ditto, but from the fact that he told everyone what they wanted to hear. He told workers that the path to prosperity was in spending and consuming, and that their wages should never go down; and he told governments that their greatest virtue lay in spending, borrowing, and printing money. Let's party!
We've been partying now pretty much since this book was published in 1936. We've been keeping the hangover at bay by taking more and more hair of the dog. But the terrible consequences are becoming manifest. Winter is coming, and we're now a world of grasshoppers; soon we'll be in search of those few ants who might have some provisions put by.
September 7, 2016
It is my firm conviction that, if something’s worth doing, it’s worth doing even when you’re badly under-qualified to do it. So here I go!
Few books have inspired as much controversy as John Maynard Keynes' magnum opus. Revered on the left, abhorred on the right, the book has been dragged back into the public spotlight after the previous economic crisis. I’ve heard some economists discuss this book in a tone normally reserved for the Bible, and others in a tone normally reserved for Twilight.
Imagine my reaction, then, when I opened the pages of this book to find some of the densest and driest prose I’ve ever waded through. (It was quite similar to my reaction when, after hearing someone call Euclid’s Elements the “greatest book ever written by a human,” I opened that book to find 400 pages of mathematical proofs.) Marx’s Capital includes pages upon pages of scornful insults; and his famous manifesto describes the evils of capitalism in language as colorful as Jonathan Edwards' “Sinners in the Hands of an Angry God.” But if Keynes is capable of inspiring controversy, it is through the audacity of his ideas, rather than the power of his prose.
In our post-Kensyian world, so thoroughly shaped by this book, it may be difficult to fully appreciate the revolutionary quality of his ideas. For example, one of the ideas Keynes was reacting against—that “supply creates its own demand”—seems downright stupid to a person who is coming into adulthood in the worst economic recession since the Great Depression. But this very idea was enshrined in a law of economic thought in Keynes’ time. In fact, as you read through The General Theory, you realize that Keynes was fighting against an orthodoxy as imposing as the Medieval Catholic Church. This book might as well have been nailed on the door of the London School of Economics.
But, of course, this is not about beliefs—it’s about facts. I am certainly not qualified to pronounce on the accuracy of the ideas in this book. So I won’t. But I will say that Keynes is thorough, thoughtful, and rigorous. To dismiss him as a crazed radical is to act like a crazed radical yourself. Throughout the book, Keynes is careful to point out the assumptions in his opponents’ arguments, as well as his own. He proceeds step-by-step, laying out his theories in careful, halting prose. So much thought went into this book that taking the time to get through even a single paragraph often gave me a headache.
And like Adam Smith, Keynes avoids the problem that besets many on both the right and the left—to treat economic problems as moral problems. Marx put his faith in the proletariat revolution; laissez-faire capitalists put their faith in the free market. I think faith of any kind is bad policy in human affairs.
Figuring out how the economy works is a theoretical and practical problem. Once all of that is figured out, then you can talk about morality and justice—but not before. You can’t have a trial if you don’t have any evidence.
Few books have inspired as much controversy as John Maynard Keynes' magnum opus. Revered on the left, abhorred on the right, the book has been dragged back into the public spotlight after the previous economic crisis. I’ve heard some economists discuss this book in a tone normally reserved for the Bible, and others in a tone normally reserved for Twilight.
Imagine my reaction, then, when I opened the pages of this book to find some of the densest and driest prose I’ve ever waded through. (It was quite similar to my reaction when, after hearing someone call Euclid’s Elements the “greatest book ever written by a human,” I opened that book to find 400 pages of mathematical proofs.) Marx’s Capital includes pages upon pages of scornful insults; and his famous manifesto describes the evils of capitalism in language as colorful as Jonathan Edwards' “Sinners in the Hands of an Angry God.” But if Keynes is capable of inspiring controversy, it is through the audacity of his ideas, rather than the power of his prose.
In our post-Kensyian world, so thoroughly shaped by this book, it may be difficult to fully appreciate the revolutionary quality of his ideas. For example, one of the ideas Keynes was reacting against—that “supply creates its own demand”—seems downright stupid to a person who is coming into adulthood in the worst economic recession since the Great Depression. But this very idea was enshrined in a law of economic thought in Keynes’ time. In fact, as you read through The General Theory, you realize that Keynes was fighting against an orthodoxy as imposing as the Medieval Catholic Church. This book might as well have been nailed on the door of the London School of Economics.
But, of course, this is not about beliefs—it’s about facts. I am certainly not qualified to pronounce on the accuracy of the ideas in this book. So I won’t. But I will say that Keynes is thorough, thoughtful, and rigorous. To dismiss him as a crazed radical is to act like a crazed radical yourself. Throughout the book, Keynes is careful to point out the assumptions in his opponents’ arguments, as well as his own. He proceeds step-by-step, laying out his theories in careful, halting prose. So much thought went into this book that taking the time to get through even a single paragraph often gave me a headache.
And like Adam Smith, Keynes avoids the problem that besets many on both the right and the left—to treat economic problems as moral problems. Marx put his faith in the proletariat revolution; laissez-faire capitalists put their faith in the free market. I think faith of any kind is bad policy in human affairs.
Figuring out how the economy works is a theoretical and practical problem. Once all of that is figured out, then you can talk about morality and justice—but not before. You can’t have a trial if you don’t have any evidence.
May 26, 2012
I think most of these reviews are Ron Paul supporters that don't really understand monetary theory AT ALL. No problem with that however, other than they project their own new version of what Adam Smith said. If they understood Adam Smith and John Maynard Keynes, they would realize that they espouse economic theories, not ideologies on the role of government.
Keynes doesn't disagree with at all Adam Smith; he expands on Adam Smith's theories (which were a good 100 years prior). Keynes and Smith are both capitalists and agree on basic tenants of capitalism, that a free market is an efficient means of allocating resources.
John Maynard Keynes, just as other economist such as Milton Friedman who espouse supply-side intervention, is prescribing solutions to anomalies in the free market in this landmark book. Keynes addresses how to repair or refocus a free market that veers off it's course (sound similar?).
Adam Smith, being a pioneer of economic philosophy, wasn't considering anomalies in free markets; he was defining free markets. Subsequent capitalist philosophers such as Keynes and Friedman expounded on the details and caveats of Smith's theories.
What Adam Smith actually advised was that the wrong interventions in a commercial market by government should be, first, reversed and secondly those wrong interventions should be avoided, and other interventions of governments should be encouraged. This is not the same thing as being against government intervention as a whole. He wasn't of the opinion ascribed to him by modern economists since the 18th century. In fact, Adam Smith advised that certain interventions, not in his time undertaken with much consistency by government, should be undertaken as soon as possible.
By understanding Adam Smith, people can understand Keynes and his theories. Keynes is just Adam Smith with 100 years of additional financial innovation to work from. Not to mention Adam Smith was around during feudalism, John Keynes during the industrial revolution.
Keynes doesn't disagree with at all Adam Smith; he expands on Adam Smith's theories (which were a good 100 years prior). Keynes and Smith are both capitalists and agree on basic tenants of capitalism, that a free market is an efficient means of allocating resources.
John Maynard Keynes, just as other economist such as Milton Friedman who espouse supply-side intervention, is prescribing solutions to anomalies in the free market in this landmark book. Keynes addresses how to repair or refocus a free market that veers off it's course (sound similar?).
Adam Smith, being a pioneer of economic philosophy, wasn't considering anomalies in free markets; he was defining free markets. Subsequent capitalist philosophers such as Keynes and Friedman expounded on the details and caveats of Smith's theories.
What Adam Smith actually advised was that the wrong interventions in a commercial market by government should be, first, reversed and secondly those wrong interventions should be avoided, and other interventions of governments should be encouraged. This is not the same thing as being against government intervention as a whole. He wasn't of the opinion ascribed to him by modern economists since the 18th century. In fact, Adam Smith advised that certain interventions, not in his time undertaken with much consistency by government, should be undertaken as soon as possible.
By understanding Adam Smith, people can understand Keynes and his theories. Keynes is just Adam Smith with 100 years of additional financial innovation to work from. Not to mention Adam Smith was around during feudalism, John Keynes during the industrial revolution.
February 4, 2019
5 stars for the ideas and theories, which are undeniably right (even thought it's impossible to convince the people who read Atlas Shrugged as though it's real). But 3 stars because it is incredibly dense and hard to read. I got through it, but only because I knew what the theory was already and I just wanted to make sure I hadn't missed anything. But Keynes was speaking against Ricardo and others so he was fighting old battles.
May 25, 2021
I learned Keynesian economics in my macroeconomics course I took as an undergrad. It is the leftwing side of mainstream economics and was the dominant model in the post-WWII era until the seventies when we got Hayek and Friedman and neoliberalism which ruined a lot of lives. I vacillate between Keynesian and soft-Marxist outlooks. Bouncing between Left-liberal social democratic outlook and sometimes more of Democratic Socialist stance. This means I haven't got it figured out and remain somewhat flexible. I know what I don't like that is for sure our current arrangement.
June 8, 2016
The importance of this book rivals Das Kapital. Those who follow Marx have founded Communist regimes. Everywhere else, governments have developed systems of national accounts to conform to his proposed system of national accounts with headings such as GNP, GDP, etc.
One major difference is that Das Kapital is somewhat utopian and left its followers no clear way to implement its recommendations. The works of other writers notably Lenin and Stalin were required to make Marxism function in a real world situation.
Keynes in contrast was a British Government economist who proposed measures that could be readily implemented in North America and Western Europe. Keynes propose a technique for moderating cycles to prevent excessive booms (known in Keynesian terms as overheating) and the busts (known as recessions). Everyone recognized that the busts were detrimental to the economy in the long term and in the short term caused tremendous hardship to society's least fortunate members.
Keyne's approach at its most simple was to increase government spending and reduce taxation during recessions to stimulate the economy. Once the economy was in health, taxes would be increased and spending reduced to prevent the economy from overheating.
The first problem encountered with Keynesian economy was that the politicians were willing to spend heavily in times of recession to stimulate a recovery. However, once the recovery was underway, they decided not to reduce spending which lead to the creation of what are now referred to as huge structural deficits which will never be eliminated.
The second problem occurred when Western Powers attempted to apply Keynesian economics to the third world. They overlooked the fact that Keynes assumed a modern economy, a government with the means to collect the taxes it levied, a modern banking system, stock and commodity exchanges, enterprises that operated on Generally accepted accounting principles and a mature legal system. In the absence of these conditions, Keynesian economics proves totally unworkable.
Ultimately, you do not read this book unless you are in graduate school studying the development of economic thought. All universities in the non-communist world currently use a textbook modelled on Paul Samuelson's great book Economics: An Introductory Analysis that explain Keyne's theories very clearly. More importantly their diagrams are much easier to understand than are Keynes'. In other words, if you have taken ECON 100, you are well acquainted with Keynesian economics.
One major difference is that Das Kapital is somewhat utopian and left its followers no clear way to implement its recommendations. The works of other writers notably Lenin and Stalin were required to make Marxism function in a real world situation.
Keynes in contrast was a British Government economist who proposed measures that could be readily implemented in North America and Western Europe. Keynes propose a technique for moderating cycles to prevent excessive booms (known in Keynesian terms as overheating) and the busts (known as recessions). Everyone recognized that the busts were detrimental to the economy in the long term and in the short term caused tremendous hardship to society's least fortunate members.
Keyne's approach at its most simple was to increase government spending and reduce taxation during recessions to stimulate the economy. Once the economy was in health, taxes would be increased and spending reduced to prevent the economy from overheating.
The first problem encountered with Keynesian economy was that the politicians were willing to spend heavily in times of recession to stimulate a recovery. However, once the recovery was underway, they decided not to reduce spending which lead to the creation of what are now referred to as huge structural deficits which will never be eliminated.
The second problem occurred when Western Powers attempted to apply Keynesian economics to the third world. They overlooked the fact that Keynes assumed a modern economy, a government with the means to collect the taxes it levied, a modern banking system, stock and commodity exchanges, enterprises that operated on Generally accepted accounting principles and a mature legal system. In the absence of these conditions, Keynesian economics proves totally unworkable.
Ultimately, you do not read this book unless you are in graduate school studying the development of economic thought. All universities in the non-communist world currently use a textbook modelled on Paul Samuelson's great book Economics: An Introductory Analysis that explain Keyne's theories very clearly. More importantly their diagrams are much easier to understand than are Keynes'. In other words, if you have taken ECON 100, you are well acquainted with Keynesian economics.
June 7, 2012
It's a brutal read, especially the middle third. With an intense focus on the fundamental nature of the three factors mentioned in the title, it's easy to get bored and distracted quickly.
Nonetheless, reading the General Theory reminds me of watching Citizen Kane. The book has so thoroughly reshaped economics in its image that it's hard to recognize how revolutionary it truly is. This exacerbates the problems of the middle third, since not only is it dry and technical, it seems pretty obvious now.
With a little patience comes a lot of reward. Keynes is a wonderful writer, and it shows through in the little moments he gets to show off. His statements on liquidity demonstrate both his wit and the strength of his thoughts. For example,
"Of the maxims of orthodox finance none, surely, is more anti-social than the fetish of liquidity, the doctrine that it is a positive virtue on the part of investment institutions to concentrate their resources upon the holding of "liquid" securities. It forgets that there is no such thing as liquidity for the community as a whole."
He also deserves a lot of credit for including an especially strong understanding of human nature and social psychology, topics far too often neglected in modern economics. You can see this when he takes on the nature of interest:
"It might be more accurate, perhaps, to say that the rate of interest is a highly conventional, rather than a highly psychological, phenomenon. For its actual value is largely governed by the prevailing view as to what its value is expected to be. Any level of interest which is accepted with sufficient conviction as likely to be durable will be durable."
Obviously, this isn't the kind of thing that will get the general public's juices flowing. It's something that Keynes acknowledges in the preface. But for a book intended specifically for the economists of the early 1930s, it's startling how relevant these issues remain.
Nonetheless, reading the General Theory reminds me of watching Citizen Kane. The book has so thoroughly reshaped economics in its image that it's hard to recognize how revolutionary it truly is. This exacerbates the problems of the middle third, since not only is it dry and technical, it seems pretty obvious now.
With a little patience comes a lot of reward. Keynes is a wonderful writer, and it shows through in the little moments he gets to show off. His statements on liquidity demonstrate both his wit and the strength of his thoughts. For example,
"Of the maxims of orthodox finance none, surely, is more anti-social than the fetish of liquidity, the doctrine that it is a positive virtue on the part of investment institutions to concentrate their resources upon the holding of "liquid" securities. It forgets that there is no such thing as liquidity for the community as a whole."
He also deserves a lot of credit for including an especially strong understanding of human nature and social psychology, topics far too often neglected in modern economics. You can see this when he takes on the nature of interest:
"It might be more accurate, perhaps, to say that the rate of interest is a highly conventional, rather than a highly psychological, phenomenon. For its actual value is largely governed by the prevailing view as to what its value is expected to be. Any level of interest which is accepted with sufficient conviction as likely to be durable will be durable."
Obviously, this isn't the kind of thing that will get the general public's juices flowing. It's something that Keynes acknowledges in the preface. But for a book intended specifically for the economists of the early 1930s, it's startling how relevant these issues remain.
March 15, 2018
During my high school years I followed courses in economics. Ever since, my interest has been sparked to follow macro-economic trends and from time to time read some classic economic works. I've read Smith, Ricardo, Hayek and now Keynes.
I haven't finished the book - I quit reading after part 3. This book is written in such an incomprehensive way - clearly outdated from an educational perspective - that one can just as well study the chapters on Keynes in modern day economics textbooks. This way, the exact same information can be digested in a much more accessible way.
Too bad, because Keynes's ideas were revolutionary.
I haven't finished the book - I quit reading after part 3. This book is written in such an incomprehensive way - clearly outdated from an educational perspective - that one can just as well study the chapters on Keynes in modern day economics textbooks. This way, the exact same information can be digested in a much more accessible way.
Too bad, because Keynes's ideas were revolutionary.
September 23, 2011
This certainly is not a book for a quick enjoyable read. I am a Keynesian in my economic beliefs as a result of this book. As we are continuing the crazy response to the current economic crisis, I highly recommend this book to everyone who cares about money and our economy.
March 3, 2023
I came across this book after reading J. K. Galbraith’s American Capitalism: The Concept of Countervailing Power, in which there are a few mentions to J. M. Keynes’s teachings. I thought it would be good to go through the famous rivalry between Keynes and F. Hayek. So I decided to start by reading a good introduction: Nicholas Wapshott’s Keynes X Hayek, and then jump right on to Keynes’s The General Theory.
I did not realize that I would be reading such a pertinent book to the current times of economic depression caused by the Covid-19 pandemic, even though it was written in 1936! The book sets the basis of the author’s most famous idea: the still current and never ending controversial argument that public spending should play an important role in stimulating economies affected by depression. Very simply put, when demand is weak, unemployment rises, so the Government should stimulate the economy by carrying out public works o cutting taxes; which incentivizes consumption levels to meet investment levels, which leads to full employment. Or, as the author puts it:
“(...) although the expansion of government functions implied by the task of adjusting the propensity to consumption with the incentive to invest might seem to a 19th century publicist or a contemporary American financier to be a terrible transgression of individualism, I defend it as the only feasible way to prevent the total destruction of the current economic institutions and as a condition for a successful exercise of individual initiative”.
Another side of this key idea relates to the “liquidity trap”. This is when interest rates reach zero. Monetary policy loses effectiveness to stimulate demand. Hence the importance of stimulating demand via public spending. In times of depression or crisis, the government comes in as the hand that stimulates demand.
The General Theory is definitely a book for economists, which I am not; so reading introductory books and comments on Keynes’s ideas first was crucial, including Paul Krugman’s outstanding introduction to the book. A tough read but worth the struggle if you are minimally interested in understanding the public debate on measures to promote economic recovery in times of crisis or even on how to manage the economy in regular times.
I did not realize that I would be reading such a pertinent book to the current times of economic depression caused by the Covid-19 pandemic, even though it was written in 1936! The book sets the basis of the author’s most famous idea: the still current and never ending controversial argument that public spending should play an important role in stimulating economies affected by depression. Very simply put, when demand is weak, unemployment rises, so the Government should stimulate the economy by carrying out public works o cutting taxes; which incentivizes consumption levels to meet investment levels, which leads to full employment. Or, as the author puts it:
“(...) although the expansion of government functions implied by the task of adjusting the propensity to consumption with the incentive to invest might seem to a 19th century publicist or a contemporary American financier to be a terrible transgression of individualism, I defend it as the only feasible way to prevent the total destruction of the current economic institutions and as a condition for a successful exercise of individual initiative”.
Another side of this key idea relates to the “liquidity trap”. This is when interest rates reach zero. Monetary policy loses effectiveness to stimulate demand. Hence the importance of stimulating demand via public spending. In times of depression or crisis, the government comes in as the hand that stimulates demand.
The General Theory is definitely a book for economists, which I am not; so reading introductory books and comments on Keynes’s ideas first was crucial, including Paul Krugman’s outstanding introduction to the book. A tough read but worth the struggle if you are minimally interested in understanding the public debate on measures to promote economic recovery in times of crisis or even on how to manage the economy in regular times.
November 28, 2017
I shan't comment on the majority of the work which, as Keynes observes, is written for the professional economist. Criticism of those sections of the book when Keynes soars to heights of advanced mathematics I will defer to those better qualified for the task. I read this book primarily to study the moral basis upon which this work rested; indeed, it was upon this moral foundation -- consisting largely of the moral maxims of the 19th century classical liberals (at list to which Marx at times also belongs)-- that both Keynes and Hayek agreed, though they differed about how to go about preserving say, individual liberty. Keynes' shrewd insight was to realize that individual liberty was best preserved when the government, which in democratic societies expresses the "general will of the people", harnessed the market to an extent where unemployment and inequality do not reach levels which cause great unrest-- though as Keynes' correspondence with Hayek makes clear, he assumed that any government control should proceed on a moral basis. He does not advocate for a state-run economy. Indeed he argues that canalizing certain "dangerous human proclivities...into comparatively harmless channels by the existence of opportunities for money-making and private wealth" (374, this edition) is both necessary and good. Keynes stands slightly to the right of Mill, though both recognized the need for reform and both realized that a market left to itself, will not produce the sort of moral society which all of the classical liberal thinkers (Humboldt, Ricardo, Marx (at times), Mill, Russell, Keynes and yes Hayek) yearned for.
May 13, 2020
The theory describes how crises, booms, and unemployment are inevitable aspects of market economies. What Keynes points out, is that the free hand of the market does not necessarily provide stability and fairness. This led many to believe that Keynes’s work was a critique of capitalism. It was not, even though he strongly advocates for economic intervention, his ideas were rather a showdown with the mainstream misinterpretations of economics at the time. Download a public domain version here: https://www.holybooks.com/the-general...
August 18, 2019
The Shakespeare of Economics.
February 16, 2019
Brilliant yet obscure; competent yet dilettantesque; visionary yet misguided... There is a lot to unpack in The General Theory.
The book is written with a heavy-handed jargon that freely mixes established economic terminology with Keynes's own innovations. I am firmly of the opinion that technical jargon and mathematical expression are important servants of economic analysis that should never be allowed to become masters. In Keynes's case, the consequence of the style is not clarity, but a needlessly frustrating reading experience.
Nonethless, the book also contains lucid sections and even a few inspiring and rhetorically powerful sections. This book is a real treasure trove of powerful quotations that distil important but counterintuitive ideas.
And speaking of counterintuitive, let me briefly talk about the contents (without any attempt to summarize the main arguments or to do justice to the pros and cons).
Aside from the obvious impact on trade cycle theory and depression management, the real strength of the book, in my opinion, is that it dares to go against the flow, to swim against the current, in so many crucial respects: 1) By positing a difference between the micro and the macro, and showing how the laws of the first need not operate on the second (and vice versa); 2) By denying the folk wisdom of "a penny saved is a penny earned" and the classical economic wisdom of household frugality (austerity) as a guide to sound fiscal policy under certain macro conditions. 3) By resuscitating numerous occasionally valuable heterodox theories, such as the theory of underconsumption (under the guise of aggregate demand management) and the Sentimentalist-Scottish-Mandevillean emphasis on the dark psychology of capitalism (under the guise of propensity to consume, animal spirits, etc). 4) And by mixing some fresh insights of psychology, probability theory, and complexity theory, with the classical insights of economics (although in a rudimentary way).
That said, there are severe problems with Keynes's theory - both in the pure formulation and in the impure application. The central notions of aggregate demand, the marginal efficiency of capital, the propensity to consume, full employment, the Kahn multiplier, etc., all seem to break down under careful scrutiny. The whole distinction between micro and macro might have been a big mistake. At the very least, the applicability of Keynesian concepts is much more tenuous and limited than might be supposed by the lofty title of a "General Theory."
But whatever the failings of the Keynesian enterprise (there goes one star!) and whatever the failings of the obscure prose (and there goes another!), the book is a rare achievement in two respects: in innovation and inspiration. It is impossible not to be delighted and impressed by the amount of valuable insights and out-of-the-box thinking contained herein.
The cute party trick of being a perennial contrarian seems less impressive when it leads to intellectual error and bad policy (both of which have been the occasional consequence of the General Theory). And the muddied terminology of Keynesian macroeconomics is a needless swamp. But the diversification and improvement of science - and social progress itself - is built upon the work of people who dare to be wrong in an enlightening way.
The book is written with a heavy-handed jargon that freely mixes established economic terminology with Keynes's own innovations. I am firmly of the opinion that technical jargon and mathematical expression are important servants of economic analysis that should never be allowed to become masters. In Keynes's case, the consequence of the style is not clarity, but a needlessly frustrating reading experience.
Nonethless, the book also contains lucid sections and even a few inspiring and rhetorically powerful sections. This book is a real treasure trove of powerful quotations that distil important but counterintuitive ideas.
And speaking of counterintuitive, let me briefly talk about the contents (without any attempt to summarize the main arguments or to do justice to the pros and cons).
Aside from the obvious impact on trade cycle theory and depression management, the real strength of the book, in my opinion, is that it dares to go against the flow, to swim against the current, in so many crucial respects: 1) By positing a difference between the micro and the macro, and showing how the laws of the first need not operate on the second (and vice versa); 2) By denying the folk wisdom of "a penny saved is a penny earned" and the classical economic wisdom of household frugality (austerity) as a guide to sound fiscal policy under certain macro conditions. 3) By resuscitating numerous occasionally valuable heterodox theories, such as the theory of underconsumption (under the guise of aggregate demand management) and the Sentimentalist-Scottish-Mandevillean emphasis on the dark psychology of capitalism (under the guise of propensity to consume, animal spirits, etc). 4) And by mixing some fresh insights of psychology, probability theory, and complexity theory, with the classical insights of economics (although in a rudimentary way).
That said, there are severe problems with Keynes's theory - both in the pure formulation and in the impure application. The central notions of aggregate demand, the marginal efficiency of capital, the propensity to consume, full employment, the Kahn multiplier, etc., all seem to break down under careful scrutiny. The whole distinction between micro and macro might have been a big mistake. At the very least, the applicability of Keynesian concepts is much more tenuous and limited than might be supposed by the lofty title of a "General Theory."
But whatever the failings of the Keynesian enterprise (there goes one star!) and whatever the failings of the obscure prose (and there goes another!), the book is a rare achievement in two respects: in innovation and inspiration. It is impossible not to be delighted and impressed by the amount of valuable insights and out-of-the-box thinking contained herein.
The cute party trick of being a perennial contrarian seems less impressive when it leads to intellectual error and bad policy (both of which have been the occasional consequence of the General Theory). And the muddied terminology of Keynesian macroeconomics is a needless swamp. But the diversification and improvement of science - and social progress itself - is built upon the work of people who dare to be wrong in an enlightening way.
February 14, 2015
It's hard to think of another foundational text, especially in a field with as much pretense to objectivity as economics, that is so personal and so suffused with the author's own feelings and state of mind. Of course the book is systematic in a way, trying to create the image of a whole economy that revolves around concepts like the marginal efficiency of capital and liquidity preference, but much of it is filled with stray strands of logic or evidence, often profound, always thought-provoking, that are meant to jar the reader and give one a sense of even more radical possibilities.
I am grateful that before diving into this book I spent time reading the background to Keynes's thought, in both his own, earlier works, and in syntheses like those by Skildelsky and Laidler. This book, after all, is very much of it's time. It tries to explain both the dire situation in which the world found itself in 1936, and the history of what Keynes felt was the false thought that brought them there. One surprising thing about the book, in fact, is how much of it is taken up with a history of economic thought itself. Keynes basically traces the errors of their age to David Ricardo, who refused to listen to his friend and epsitoler Thomas Malthus, who pointed out that in a money economy there could be a "general glut" of products without purchasers. Ricardo denied this and therefore refused to believe that the output of the economy at any one time was not the maximum possible.
Keynes, as always exaggerating a little, pointed out that contemporary theories of the "trade cycle" were based on Ricardo's ideas of constant, maximum employment, and therefore were contradictory. Keynes thus brought his own, sturdy psychological tools to bear on the issue, and tried to show how a confusion about the future, combined with an excessive love of money, ensured that economies could long be stuck at a unnecessarily low level of output. His argument, in a nutshell, is that entrepreneurs cannot know the future, but their current production is based on it, so output is determined by how entrepreneurs feel about their future profitability (what he calls the "marginal efficiency of capital," basically a psychological concept). If entrepreneurs become unduly pessimistic (they lose their "animal spirits") they are less liable to produce goods and thus create jobs and demand, and therefore their own pessimism creates the low profitability they were worried about.
Other economists at the time claimed that meant the entrepreneurs just saved their income, and this saving provided more money for loans, which reduced the rate of interest on them to a point that it would be profitable for the entrepreneurs to borrow and produce again. Keynes, however, pointed out that loans don't necessarily come from savings, people could "save" under their bed or in cookie jars, and this preference for cold, hard cash (what Keynes called "liquidity preference") meant sometimes savings was simply wasted or not invested. Therefore, interest rates could be higher than the marginal efficiency of capital and production could sag, perhaps for decades or even centuries. In those cases, the government needed to lower the rate of interest or create more investment and demand to energize entrepreneurs to produce again.
These are the basics of Keynes's argument, but such a sketch hardly does the book justice. Much of it is a meditation on the nature of economic thinking, about how individual human desires get transmuted into collective action or inaction in an economic system, and about how the human urge for security can sabotage itself. In the end, the book, by the man who once strove to be a philosopher, is a call for carpe diem, both in taking risks and enjoying the fruits of one's efforts. It contrasts this virile public and private attitude with the dour, Calvinist miserliness that Keynes saw as inherently destructive of happiness. It's no coincidence that his economic formulas mimicked his own, personal attitudes. Keynes, himself an intellectual biographer, understood this connection perfectly.
One can point out many places where contemporary economic thought has superseded Keynes. The book's misunderstanding about potential divergences of savings and investment, and its ironic inability to model a dynamic interaction of the two, is widely acknowledged. Likewise, Keynes's simple-minded belief that prices rose only at maximum employment has been discredited. Keynes seems especially confused about "capital," not sure whether he means by it stocks and equity or actual, physical investments. Still, many of his other insights have never been fully incorporated by economists of any stripe. The "rational expectations" revolution has pushed away much of Keynes's emphasis on animal spirits, but what is perhaps surprising here is how much attention Keynes gave to expectations in general, and their inherent instability. Like so much of the book, these insights are difficult to incorporate in a simple model, but they remain for future thinkers to ponder and wonder.
I am grateful that before diving into this book I spent time reading the background to Keynes's thought, in both his own, earlier works, and in syntheses like those by Skildelsky and Laidler. This book, after all, is very much of it's time. It tries to explain both the dire situation in which the world found itself in 1936, and the history of what Keynes felt was the false thought that brought them there. One surprising thing about the book, in fact, is how much of it is taken up with a history of economic thought itself. Keynes basically traces the errors of their age to David Ricardo, who refused to listen to his friend and epsitoler Thomas Malthus, who pointed out that in a money economy there could be a "general glut" of products without purchasers. Ricardo denied this and therefore refused to believe that the output of the economy at any one time was not the maximum possible.
Keynes, as always exaggerating a little, pointed out that contemporary theories of the "trade cycle" were based on Ricardo's ideas of constant, maximum employment, and therefore were contradictory. Keynes thus brought his own, sturdy psychological tools to bear on the issue, and tried to show how a confusion about the future, combined with an excessive love of money, ensured that economies could long be stuck at a unnecessarily low level of output. His argument, in a nutshell, is that entrepreneurs cannot know the future, but their current production is based on it, so output is determined by how entrepreneurs feel about their future profitability (what he calls the "marginal efficiency of capital," basically a psychological concept). If entrepreneurs become unduly pessimistic (they lose their "animal spirits") they are less liable to produce goods and thus create jobs and demand, and therefore their own pessimism creates the low profitability they were worried about.
Other economists at the time claimed that meant the entrepreneurs just saved their income, and this saving provided more money for loans, which reduced the rate of interest on them to a point that it would be profitable for the entrepreneurs to borrow and produce again. Keynes, however, pointed out that loans don't necessarily come from savings, people could "save" under their bed or in cookie jars, and this preference for cold, hard cash (what Keynes called "liquidity preference") meant sometimes savings was simply wasted or not invested. Therefore, interest rates could be higher than the marginal efficiency of capital and production could sag, perhaps for decades or even centuries. In those cases, the government needed to lower the rate of interest or create more investment and demand to energize entrepreneurs to produce again.
These are the basics of Keynes's argument, but such a sketch hardly does the book justice. Much of it is a meditation on the nature of economic thinking, about how individual human desires get transmuted into collective action or inaction in an economic system, and about how the human urge for security can sabotage itself. In the end, the book, by the man who once strove to be a philosopher, is a call for carpe diem, both in taking risks and enjoying the fruits of one's efforts. It contrasts this virile public and private attitude with the dour, Calvinist miserliness that Keynes saw as inherently destructive of happiness. It's no coincidence that his economic formulas mimicked his own, personal attitudes. Keynes, himself an intellectual biographer, understood this connection perfectly.
One can point out many places where contemporary economic thought has superseded Keynes. The book's misunderstanding about potential divergences of savings and investment, and its ironic inability to model a dynamic interaction of the two, is widely acknowledged. Likewise, Keynes's simple-minded belief that prices rose only at maximum employment has been discredited. Keynes seems especially confused about "capital," not sure whether he means by it stocks and equity or actual, physical investments. Still, many of his other insights have never been fully incorporated by economists of any stripe. The "rational expectations" revolution has pushed away much of Keynes's emphasis on animal spirits, but what is perhaps surprising here is how much attention Keynes gave to expectations in general, and their inherent instability. Like so much of the book, these insights are difficult to incorporate in a simple model, but they remain for future thinkers to ponder and wonder.
November 15, 2018
My reactions:
1. This work represents a critical footing to the foundation underlying modern economics. That said, it's interesting how long Adam Smith's perspectives took to germinate into Keynes' writing, nearly 165 years. Even this work, though, has an unrefined feel to it, from some of the basic assumptions Keynes makes (regarding negative interest rates, for one) to his use of language.
2. Given its importance to our social and political conversations, I'm surprised this was not mandatory reading for anyone pursuing a degree in economics or business. I believe there's merit to understanding what Keynes wrote, and, more importantly, what he did not write. When a commentator today speaks of Keynesian policies, I'm fairly certain that voice is not thinking of this volume, which raises the question of just what they are referring to. I don't believe Keynes specifically makes reference to deficit spending during recessions, for example, once. In fact, I don't recall one distinct policy prescription.
3. Keynes geared his thoughts toward obtaining full employment. Toward this end, he saw several important levers, including monetary policy. I think the following sums his thinking:
4. Keynes' perspective on economic psychology was spot on. I appreciated his analysis of psychologically-induced distortions and expectations.
Five stars for the important contribution of this work to modern thought.
1. This work represents a critical footing to the foundation underlying modern economics. That said, it's interesting how long Adam Smith's perspectives took to germinate into Keynes' writing, nearly 165 years. Even this work, though, has an unrefined feel to it, from some of the basic assumptions Keynes makes (regarding negative interest rates, for one) to his use of language.
2. Given its importance to our social and political conversations, I'm surprised this was not mandatory reading for anyone pursuing a degree in economics or business. I believe there's merit to understanding what Keynes wrote, and, more importantly, what he did not write. When a commentator today speaks of Keynesian policies, I'm fairly certain that voice is not thinking of this volume, which raises the question of just what they are referring to. I don't believe Keynes specifically makes reference to deficit spending during recessions, for example, once. In fact, I don't recall one distinct policy prescription.
3. Keynes geared his thoughts toward obtaining full employment. Toward this end, he saw several important levers, including monetary policy. I think the following sums his thinking:
For my own part I am now somewhat sceptical of the success of a merely monetary policy directed towards influencing the rate of interest. I expect to see the State, which is in a position to calculate the marginal efficiency of capital-goods on long views and on the basis of the general social advantage, taking an ever greater responsibility for directly organising investment; since it seems likely that the fluctuations in the market estimation of the marginal efficiency of different types of capital, calculated on the principles I have described above, will be too great to be offset by any practicable changes in the rate of interest.
4. Keynes' perspective on economic psychology was spot on. I appreciated his analysis of psychologically-induced distortions and expectations.
Five stars for the important contribution of this work to modern thought.
May 25, 2016
First, this is a really difficult book to get through because Keynes was writing for professional economists, in the 1930s, in Britain. So his style is not exactly user friendly for the casual reader.
However, Keynes' basic idea about how to control the inevitable fluctuations of a capitalist market are really important, particularly given the global recession of 2008 (which saw a resurgence of interest in Keynes, though I would argue that neoliberal economics remain deeply entrenched in global economic policy). Essentially, Keynes takes apart several of the premises of classical economics (going back to Ricardo principally), and explains why classical assumptions are unfounded and problematic. But the short version of Keynes' theory is this: in a recession or depression, rather than cutting funding governments should spend against the deficit to provide employment in public works, which will provide people with jobs and wages they can spend back into a consumer economy. Or as Keynes puts it, "For a man who have been long unemployed some measure of labour, instead of involving disutility, may have a positive utility. If this is accepted, the above reasoning shows how 'wasteful' loan expenditure may nevertheless enrich the community on balance" (56-57). Essentially the idea is that government primes the pump of consumption by creating a new wage-earning class, which then buys goods from private corporations, which then re-establish their stability and can hire more labor to produce more goods to meet the new demand, and government can step back from their public role.
However, Keynes' basic idea about how to control the inevitable fluctuations of a capitalist market are really important, particularly given the global recession of 2008 (which saw a resurgence of interest in Keynes, though I would argue that neoliberal economics remain deeply entrenched in global economic policy). Essentially, Keynes takes apart several of the premises of classical economics (going back to Ricardo principally), and explains why classical assumptions are unfounded and problematic. But the short version of Keynes' theory is this: in a recession or depression, rather than cutting funding governments should spend against the deficit to provide employment in public works, which will provide people with jobs and wages they can spend back into a consumer economy. Or as Keynes puts it, "For a man who have been long unemployed some measure of labour, instead of involving disutility, may have a positive utility. If this is accepted, the above reasoning shows how 'wasteful' loan expenditure may nevertheless enrich the community on balance" (56-57). Essentially the idea is that government primes the pump of consumption by creating a new wage-earning class, which then buys goods from private corporations, which then re-establish their stability and can hire more labor to produce more goods to meet the new demand, and government can step back from their public role.
April 22, 2016
Keynes' writing style is an atrocity. He is constantly making reference to things he will discuss later, or things he covered hundred pages earlier, and he is forever obfuscating and torturing his meaning. To wit, "...it may be useful to make clear which elements in the economic system we usually take as given..." That passage is on page 245.
Here's another fave,"But an increase (or decrease) in the rate of investment will have to carry with it and increase (or decrease) in the rate of consumption; because the behavior of the public is, in general, of such a character that they are only willing to widen (or narrow) the gap between their income and their consumption if their income is being increased (or diminished)." Clear? If Keynes intended to inform his reader rather than to serve up this crap, he could have simply said, 'people spend more when they make more.' This book is just an endless collection of run-on sentences and indecipherable mental masturbation. Oh yeah, and his central conclusion (that interest rates and the rate of employment run together) is demonstrably false.
Here's another fave,"But an increase (or decrease) in the rate of investment will have to carry with it and increase (or decrease) in the rate of consumption; because the behavior of the public is, in general, of such a character that they are only willing to widen (or narrow) the gap between their income and their consumption if their income is being increased (or diminished)." Clear? If Keynes intended to inform his reader rather than to serve up this crap, he could have simply said, 'people spend more when they make more.' This book is just an endless collection of run-on sentences and indecipherable mental masturbation. Oh yeah, and his central conclusion (that interest rates and the rate of employment run together) is demonstrably false.
April 30, 2017
نمی تونم این کتاب را ریت بزنم، تلاش بی حاصلی بود که برای خواندنش انجام دادم و چیزی از درونش نفهمیدم، این هم به خاطر این است که بدون هیچ پیش زمینه ای این کتاب را برای خواندن انتخاب کردم؛ به نظر باید ابتدا کتاب ریکاردو را بخوانم که از تئوری کلاسیک اقتصاد آگاه بشوم
تصویری که از کتاب در ذهنم شکل گرفت و چیزی که فهمیدم این است که کینز قالبهای اقتصاد کلاسیک را با این کتاب تغییر داده است نه به این صورت که هر چیزی را که اقتصاد دانان مثل آدام اسمیت و ریکاردو گفتهاند را نقض کند؛ کینز از مکتب منچستری (مکتبی که با آزادی و تجارت باز) دفاع می کند ولی این را بیان میکند که هر فردی که صرفه جویی کند و پس انداز و سرمایه گذاری کند در واقع اقتصاد را مجبور به افزایش مصرف میکند؛ زیرا اگر در یک دورهای همگان پس انداز و سرمایه گذاری کنند و کسی نباشد مصرف کند سرمایه گذاریها با شکست رو به رو میشود و اشتغال از بین می رود، آن چه فهمیدم بین اشتغال و نرخ بهره رابطهای است که گویی خود کینز آن را کشف کرده است.
خواندن کتاب را بدون پیش زمینه برای خوانندهای مثل خودم سفارش نمی کنم، واقعاً بعد از خواندن این کتاب خیلی حس احمق بودن را پیدا کردم
دو ستاره برای نفهمیدن کتاب
:)
تصویری که از کتاب در ذهنم شکل گرفت و چیزی که فهمیدم این است که کینز قالبهای اقتصاد کلاسیک را با این کتاب تغییر داده است نه به این صورت که هر چیزی را که اقتصاد دانان مثل آدام اسمیت و ریکاردو گفتهاند را نقض کند؛ کینز از مکتب منچستری (مکتبی که با آزادی و تجارت باز) دفاع می کند ولی این را بیان میکند که هر فردی که صرفه جویی کند و پس انداز و سرمایه گذاری کند در واقع اقتصاد را مجبور به افزایش مصرف میکند؛ زیرا اگر در یک دورهای همگان پس انداز و سرمایه گذاری کنند و کسی نباشد مصرف کند سرمایه گذاریها با شکست رو به رو میشود و اشتغال از بین می رود، آن چه فهمیدم بین اشتغال و نرخ بهره رابطهای است که گویی خود کینز آن را کشف کرده است.
خواندن کتاب را بدون پیش زمینه برای خوانندهای مثل خودم سفارش نمی کنم، واقعاً بعد از خواندن این کتاب خیلی حس احمق بودن را پیدا کردم
دو ستاره برای نفهمیدن کتاب
:)
August 10, 2011
This is the type of book that needs to have a class attached to it. While I enjoyed it on my own, I would love to have a professor explain in detail more of the concepts inside. Basically, this work is the foundation of economics for the eighty years. The case is brilliantly made and illustrated, but as I mentioned, it is very in depth. This is why the author has so many detractors. If you read Capitalism and Freedom by Milton Friedman side by side with this work, people will choose Capitalism over it any day. The later provides easy to digest and 'safe' ideas, where Keynes forces you to challenge yourself. It's far easier to deamonize something if you can't understand it. The only knocks against the, aside from being a challenging read, fall more upon the fact that it's an 80 year old work that could have never considered the speed of modern computing. A freshening up of the work is in order, but the basics are spot on even decades later.
May 16, 2014
The General Theory of Employment, Interest & Money has turned economic science upside down where the undertone and ideas have inherently defied basic economic principles. Unfortunately, the book still influences monetary and fiscal policy. It also has invaded the economic science in general. Economics is not driven by mathematics or models; it is driven by human action. Overall, it was merely an interesting read just on the basis of understanding where Keynes develops his theory.
April 30, 2020
This is a well written treatise on political economics by the English economist Keynes. However , it is no easy read by any means. It’s very mathematically dense and very dry at times, but I had to give it 3/5 because of its significance on modern economics even though I really didn’t enjoy reading this at all.
Read
January 3, 2022um livro tão interessante quanto é CONFUSO, dá para entender porque surgiram aproximadamente 79 milhões de escolas de pensamento econômico a partir das diversas interpretações que podemos ter dele
obg keynes pela representatividade economista bissexual com muitas ideias e completamente confuso na hora de expressá-las que eu precisava🙏
obg keynes pela representatividade economista bissexual com muitas ideias e completamente confuso na hora de expressá-las que eu precisava🙏
December 1, 2014
Just as warned. This book is the most jargon-laden, badly-outlined book of economics, I've ever read. (I've always agreed with the school of rhetoric which said: if you can't write about it,you are not thinking clearly, but back to Keynes.) If you make it through the first three chapters, he actually starts explaining himself a little. Then we get to the idea that a post-industrial society must consume and consume and save nothing. Keynes is the anti-thrift man. Do not save, or mend your old things. Engage in constant consumption and investment; that is the only way in which you can feed the manufacturing economy, he says. Its like watching that Lucas film THX1183. (Now was Lucas making a film about the dehumanizing tendencies of capitalism, or communism or a socialized capitalism?) Now does a society without reserves become enslaved to the only holder of reserves, i.e. government or go renegade. .....Never mind the social implications of this for now, but lets look at the economics of this. As someone who is not an economist, I am still puzzled why this man would call this book a 'general theory of employment.....". Since it seems glaringly obvious to me that the theory would only apply to that specific period in time in which he wrote, and to a segment of the work force. He himself acknowledges that before that time the classical theories worked just peachy in chapter one. Yes manufacturing techie narrows skilled jobs, but opens up work in information fields as we've come to discover. Now many of his fans have continued on to say that it indeed was more of a 'special' theory of economics, akin to the special theory of relativity. Einstein, a genuinely clear thinker and writer, understood that he was functioning under particular circumstances in his thought experiments. Not so with Keynes.... He really thought he was onto something..... (more later)
September 17, 2020
“The ideas which are here expressed so laboriously are extremely simple and should be obvious. The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.”
Reading Keynes’ magnum opus today likely feels quite different from what it must have a little less than a century ago when he first wrote about them. This is because Keynes ideas have shaped the economic landscape like no one else has, the closest anyone comes is either Marx or Hayek – and neither of their ideas are valued by policymakers anywhere today. The old ideas today are no those of classical economics, which assumed that the price of labor determines the level of employment, rather they are those of Keynes himself. All economics students are aware of Keynes ideas, however reading them on his own terms, in his own words is something they ought to consider at some point. While this work is slightly dry, like any work of economics really, it is a much easier read than, let us say Marx’s work. Keynes style is straightforward, and while he attacks ideas well, you will not find the polemical style you might in Hayek or Marx’s work – probably because Keynes lets his argument do the job for him. There are however places where you might raise an eyebrow – such as when Keynes states that “Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.” (Not sure if this holds true in our era, or if you think about it hard enough, any era).
A classical work so cannot really comment much more on it. Rating 5 stars.
Reading Keynes’ magnum opus today likely feels quite different from what it must have a little less than a century ago when he first wrote about them. This is because Keynes ideas have shaped the economic landscape like no one else has, the closest anyone comes is either Marx or Hayek – and neither of their ideas are valued by policymakers anywhere today. The old ideas today are no those of classical economics, which assumed that the price of labor determines the level of employment, rather they are those of Keynes himself. All economics students are aware of Keynes ideas, however reading them on his own terms, in his own words is something they ought to consider at some point. While this work is slightly dry, like any work of economics really, it is a much easier read than, let us say Marx’s work. Keynes style is straightforward, and while he attacks ideas well, you will not find the polemical style you might in Hayek or Marx’s work – probably because Keynes lets his argument do the job for him. There are however places where you might raise an eyebrow – such as when Keynes states that “Worldly wisdom teaches that it is better for reputation to fail conventionally than to succeed unconventionally.” (Not sure if this holds true in our era, or if you think about it hard enough, any era).
A classical work so cannot really comment much more on it. Rating 5 stars.
January 18, 2016
It's hard to say something new about Keynes and his ideas, and the lesson of all the Ron Paulite reviews of this book in Goodreads ('Keynes is Marxism lite') prove you shouldn't even try. Two of Keynes' points that stand out for me though are (1) when making his argument against wage flexibility being the path to full employment, he points out that 'If ... labour were always in a position to take action ... to reduce its money demands by concerted action to whatever point was required to make money so abundant relatively to the wage-unit that the rate of interest would fall to a level compatible with full employment, we should, in effect, have monetary management by the Trade Unions, aimed at full employment, instead of by the banking system.' Therefore to 'suppose that a flexible wage policy is a right and proper adjunct of a system which on the whole is one of laissez-faire, is the opposite of the truth'. The other point (2) is his tongue-in-cheek defence of the mercantilists. Keynes points out that they are criticised for being 'nationalistic' - despite national advantage being their actual stated goal. However, if all countries actually pursued mercantilist goals of autonomous rates of interest, and national investment leading to full employment, this would benefit the world economy far more than the 'internationalist' pre-occupation with the Gold standard and global laissez-faire.
January 22, 2008
A book that George the second should read. One of the key elements of his argument to me is the "crazy" premise that rich people save money at a greater rate than poor people. Attacks alot of neoclassical theories in a very intuitive way. The question that remains, for the reader, is what does our government do about this in terms of policy, regulation and implementation. Whether or not you agree with the entirety of Keynes conclusions or arguments is irrelevant. This is a very important book.
February 29, 2012
A tour de force of revolutionary Economic thinking, 30s style. A little too complicated to fully comprehend unless you are studying Economics though. Nonetheless a truly groundbreaking work which taught us how to get out of a Depression and stay out. Shame the Chancellor hasn't read it.
Still the style of the book is fun. A bit stiff as you would expect from a pre-sixties academic work but makes repeated efforts to be less stuffy and to reach out. Near the end, Keynes even breaks into song.
Still the style of the book is fun. A bit stiff as you would expect from a pre-sixties academic work but makes repeated efforts to be less stuffy and to reach out. Near the end, Keynes even breaks into song.
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