From 'A Treatise on Money' to the 'General Theory': John Maynard Keyness Departure from the Doctrine of Forced Saving

Abstract

I examine John Maynard Keynes’ struggle with the doctrine of the classical forced saving during the period 1924-1936 from when he worked on 'A Treatise on Money' to the completion of his 'General Theory'. The forced saving notion has been developed as a key mechanism of how monetary expansion results in wealth redistribution and change in production in the classical school. I primarily focus on the role of discussion and criticism in the development of Keynes’ thought. I investigate what led John Maynard Keynes to completely abolish ideas related to forced saving and place his emphasis on effective demand in the 'General Theory' and its process. I provide evidence suggesting that the development of the 'General Theory' is closely linked with the abolition of the forced saving doctrine and argue that such notion is internally inconsistent with 'Fundamental Equations' and subsequent theory of effective demand in the explanation of the problem of unemployment.