The Malthusian Origins of the General Theory: Or How Keynes Came to Write a Book About Say’s Law and Effective Demand

Abstract

It was because Keynes read Malthus’s letters to Ricardo in late 1932 that he eventually focused on effective demand in the General Theory. Because of his reading of Malthus, Keynes attacked Say’s Law and wrote the General Theory to establish variations in effective demand as the major cause of fluctuations in economic activity. If these conclusions are right, the story of how the General Theory came to be written cannot be understood in isolation from Malthus’s role nor is it possible to understand the General Theory itself without seeing it in relation to Keynes’s interpretation of Malthus. The continuing focus on aggregate demand by macro and business cycle theorists is due to the insights gained by Keynes from his reading of the Malthus side of the Malthus-Ricardo correspondence during the months of October and November, 1932.