In review of Keynes

Abstract

the theoretical structure and scholarly worth of the General Theory. In this short review of Keynes' book Patinkin first develops a version of that maddeningly elusive and not well understood model of aggregate supply and demand which Keynes hid somewhere in the early pages of his General Theory. He next examines that old, highly important, but apparently still unsettled question as to the effect a reduction in the money wage rate will have on the level of employment. Patinkin concludes his three-chapter dis cussion with some original and valuable observations concerning what he calls 'The conceptual framework of the General Theory'. Despite the fact that the whole of Patinkin's book contributes much to our under standing of the development of Keynes' monetary thinking, his brief discussion of the General Theory is not fully satisfactory. The reason for this is that it fails in two major respects to uncover the full importance of those aspects of the General Theory he chose to investigate. Specifically, the model of aggregate supply and demand which Patinkin puts forward in his Chapter 9 captures only a small part of the rich analytical structure Keynes formulated early on in the General Theory. Secondly, perhaps because of Patinkin's inadequate account of Keynes' model of supply and demand, his discussion of the effects of money wage rate reductions on the level of economic activity misses both the main line of Keynes' reasoning and the importance of his conclusions on this subject. This paper will investigate more fully the short-run dynamic disequilibrium model of employment which Keynes developed in Chapters 3 and 5 of the General Theory. To do this, I shall first render a sketch of Patinkin's somewhat conventional interpre tation, and then construct a more extended version of the same material. Following this, two distinct but complementary lines of thought which Keynes explored, having to do with the question of flexible money wages, will be considered. The two lines of