Keynes's General Theory

Abstract

Keynes’s General Theory of Employment, Interest and Money is a notoriously difficult book, which this chapter tries to explain as simply as possible. Keynes could be a great stylist and the General Theory’s many quotable passages have enhanced its appeal. Elsewhere, however, Keynes’s prose is dense and the arguments highly technical and convoluted. In contrast to other great works of political economy like Smith’s Wealth of Nations or Marx’s Capital, the General Theory was never meant to be understood by non-specialists. The difficulties of comprehension appear to be confirmed in the way the General Theory has been subject to widely different interpretations, as a radical departure or a mild amendment of the orthodoxy he was criticising. The chapter argues for something in between. The General Theory provides a substantial critique of standard economics but it does this by engaging with the mainstream on its own terms, and this qualifies claims of Keynes’s radicalism. The chapter provides a very brief overview and commentary on the overall argument of the book and its conceptual priorities. It is then organised around sections on savings and consumption, on money and the rate of interest, and on investment and employment, introducing a general discussion of how this leads to Keynes’s vision of the prospect of ‘unemployment equilibrium’ and the possibility of state intervention to ameliorate this. A final substantive section discusses dynamic change, cycles and long-term tendencies, into which it suggests the General Theory provides important but subsidiary insights.