Keynes’s General Theory Online

Via Brad Delong, Keynes’ 1936, The General Theory of Employment, Interest and Money, is available free online–also here.  In brief,

Keynes_pic This is generally regarded as probably the most influential social science treatise of the 20th Century, in that it quickly and permanently changed the way the world looked at the economy and the role of government in society.  No other single book, before or since, has had quite such an impact.

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With the General Theory, as it became known, Keynes sought to develop an theory that could explain the determination of aggregate output – and as a consequence, employment. He posited that the determining factor to be aggregate demand. Among the revolutionary concepts initiated by Keynes was the concept of a demand-determined equilibrium wherein unemployment is possible, the ineffectiveness of price flexibility to cure unemployment, a unique theory of money based on ‘liquidity preference’, the introduction of radical uncertainty and expectations, the marginal efficiency of investment schedule breaking Say’s Law (and thus reversing the savings-investment causation), the possibility of using government fiscal and monetary policy to help eliminate recessions and control economic booms.  Indeed, with this book, he almost single-handedly constructed the fundamental relationships and ideas behind what became known as ‘macroeconomics’.”

Adam Przeworski once pointed out one way in which the Keynesian revolution was truly a revolution.  Prior to Keynes, the interests of investors appeared as universal interests, in so much as their investment decisions determined growth, distribution, and the real wage.  The interests of all depended on their choices.  Keynes turned that on its head by arguing that it is not the assets and decisions of the wealthy but the consumption and decisions of workers and the general populace that determine these things because they determine investment decisions. He thereby helped to make the interests of the middle and working classes appear to be universal interests.  In so doing, his work and specifically The General Theory became the core ideological weapon of the reformed social democratic movements of Europe and North America.