In spite of Keynes' caveat in the preface ("This book is chiefly addressed to my fellow economists. I hope that it will be intelligible to others.") I owed it to myself to give it a read. _The General Theory_ is dense reading. Fortunately, Keynes is clear in his exposition, his positions well articulated.
As a non-economist, I was struck by several things. First was Keynes' demolition of "classical" economic theory on the means of increasing employment, political economy, and the relationship of supply to demand. (Think Say, Malthus, and especially Ricardo and Pigou.) This was totally unexpected, but given the revolutionary nature of his argument, entirely understandable. Second, I was stuck by the way in which Keynes structures his theory - it was much more reminiscent of philosophy than economics, as the terms Keynes uses are first clearly defined and deliniated before the relationship between ideas (and his postulates on the cause and effect between them) is discussed. Lastly, I was pleasantly suprised by the wit and cleverness of his writing.
That said, I found it difficult reading, primarily because I am not fluent with many of the concepts Keynes discusses (the "elaasticity of effective demand" as it relates to the Quantity Theory of Money for example). WIth patience, plenty of revisiting the definitions of economic terms and careful deliberate thought, I was able to follow the gist of Keynes' General Theory. It made for slow going. Whether you agree (or not) with Keynes' theories have become as much a political exercise as an economic one, and are waters I'd rather not wade into here. In terms of the merits of the book, for the lay reader, you really have to want it to wade through it - it may be suprising at how poorly represented Keynes' ideas are represented in the popular imagination (for example, that Keynes supported deficit finance). That alone an incentive for giving _The General Theory_ a try.
on November 27, 2001
Are We All Keynesians Now?
Most educated Americans know something of John Maynard Keynes, the great British economist whose hugely influential work “T"The General Theory of Employment, Interest and Money", strongly influenced economic theory and practice during the last half of the twentieth century, particularly with regard to the role of government in stimulating and regulating a nation's’s economic life. Nevertheless it remains true that almost all of the "intelligentsia" in general, and most economists in particular, have never read the book, despite the fact that it is readily available in today’s mega-bookstores such as of course, Amazon.com (at a reasonable price and) in a good quality paperback.
Indeed, by a curious twist, the people who seem most to have made some attempt to read Keynes' oeuvre are those who appear most outraged by it and determined to revile it. If one is skeptical about this, (read the reviews), where veritable "frothing at the mouth" denunciations seem to dominate. These would hardly be worth reading except for the mindset they reveal, which goes far toward illuminating some of the attitudes of the 1930's otherwise inexplicable at the beginning of the twenty-first century. Their very virulence convinces one that Keynes was clearly on to something; if an author enrages half the world he must be at least half right.
Keynes detractors are right about one thing: "General Theory..." is a tough read, though not for some of the reasons they indicate. Keynes actually uses very little mathematics, the alleged prevalence of which is one of the points usually cited in criticism. He uses a little elementary algebra and a little differential calculus, hardly enough to swamp even the most modestly gifted sophomore who has been exposed to the subject.
He does not generally contradict himself, as some allege, beyond the level of ambivalence to be expected of anyone who realizes he is treating an inexact science where many conflicting views can hold some claim to legitimacy. Rather, what makes Keynes' work an ideal bedtime companion for those inflicted with insomnia is the obsessive care
the author takes to be absolutely precise, the somewhat antique 1930's British English
employed (though some, including the present reviewer, may see that as one of its charms)
and the regular use of Latin phrases familiar to Keynes and his contemporaries, such as, e.g., "ceteris paribus" (roughly translated "all things being equal", meaningless to American readers whose formative collegiate experience included little in the way of foreign languages of any kind, let alone classical ones. The trick in reading Keynes is to get beyond these inconveniences of packaging and unwrap the very real gift of ideas enclosed.
Keynes' economic prescriptions are now so generally accepted, even by most conservatives, certainly including "W", that many of us find it hard to recognize what the argument is all about. These days it is taken for granted that the government has a responsibility to stimulate the economy out of recession, at least to the extent of reducing interest rates, and modestly applying the brakes during overexuberant expansion. It is accepted that two of the factors exacerbating economic downturns are the fearfulness of investors in the face of declining corporate earnings and the reluctance of consumers to to put down money they suspect they may need later if they are laid off from their jobs. It was not always so.
Some imagine that Keynes work, along with the massive nineteenth century tomes of Karl Marx, constitute a response to Adam Smith's "Wealth of Nations" a work at least as misunderstood, often deliberately so, as "General Theory...". That is not the case; Keynes hardly ever, refers to Smith and, in any case, those who have read "Wealth of Nations" are well aware that Smith, a truly charming writer quite apart from his undeniable genius, is far more sympathetic to the average worker and much more critical of monopolistic business practices than imagined by those who have deified him but never read him. Instead, the dragons which Keynes sets forth to slay are those who later built a truly "Dark Tower" on Smith's rather benign foundation. Those dragons include, most notably, David Ricardo, Alfred Marshall and "Professor (A. C.) Pigou".
Keynes cannot help but admit to the suspicion that these economists' written views on the question of employment, or the more pressing question of unemployment, reflected their identification of the social classes most likely to buy their books; he never states it quite that baldly, of course. It seems almost incredible to us in this age that the prevailing opinion expressed in those writings is that all unemployment, at the organizational if not the individual level, is voluntary; that depressions and large scale unemployment result from the perverse refusal of workers or their labor union representatives to recognize their labor as just another good in the market, subject to a reduced price in the absence of demand occasioned by downturns in economic activity.
One wonders if some of the tolerance for Adolf Hitler manifested by large segments of the British upper and middle classes, and smaller segments of their American counterparts, in part reflected his action on accession to the Chancellorship to reduce German wages by one third all around. Whether that, by itself, increased German employment numbers or simply made economic room for a huge rearmament program that effectively eliminated labor redundancy is a good question ?but for some other essay.
Keynes argues quite persuasively that a perception of fairness is essential in a democratic society. (10 points to Adolf for fairness?) Wage reductions in capitalist economies tend to be spotty and opportunistic, rather than universal, typically affecting those who can least afford them. Keynes also argues that they do virtually nothing to solve the problems of the economy, partly because employers may very well decide not to decrease prices comparably and, more importantly, because of cascading effects on overall demand; workers on reduced wages don't rush out to buy new automobiles.<P. (...)
on December 29, 2003
I do realize that very little attention will be paid to this review (it being number 30 something), but I shall persevere in my noble effort to restore some order in the court of economics and public opinion.
After seeing the amount of vitriol hurled at this book I wondered for a second if I have somehow misunderstood it, or carelessly missed a passage in which Keynes urged us to kill babies. No, John Maynard Keynes did not kill babies, nor was he as such disproved (merely disagreed with).
The abuse showered upon him is a clear and unfortunate evidence of the ideological division between (politically) liberal and conservative approach to economics, which in itself is not an exact or precise science (some would say it is not even a science) and lacks sufficient rigor to have anything beyond trivial proved or disproved (I, personally, prefer the phrasing along the lines of "convincingly demonstrate") within its framework. With all this in mind economics quite often provides ample room for opposing views, especially when views are not directly conflicting, except when viewed through polarizing lens of ideology.
The "conservative" economists along the lines of Friedman and Hayek, so frequently mentioned as anti-thesis of Keynes preached (in my gross simplification) free markets and government non-intervention, which while a valid perspective hardly merits a nearly religious fervor.
Keynes, or any other sensible theoretical economist, would agree that free-markets are a good idea in principle, which is seldom if ever realized. Government protectionism (not always bad), monopolies (almost always bad), lack of sufficient incentives and transparency (almost always bad), are a few things that prevent markets from forming and operating efficiently "as if by invisible hand" to use one of the most beat up quotes in all economic literature.
Regardless of Keynes' political conclusions the contribution of this book to the economic theory is invaluable. Prior to him there was no "involuntary unemployment", that is people did not have jobs because they chose not to. As people struggling to find work in this jobless recovery know that is far from the truth.
The dynamics of labor markets were analyzed in a very unenlightening (but orthodox) way of supply and demand. There is a fixed supply of labor, there is a flexible demand for it, cut the wages (that will equalize the market) and everyone will be employed. This concept is remarkably easy to grasp, and is also remarkably worthless, because according to it the demand for labor is a certain "thing in itself" floating in economic vacuum with no relations with the real world.
Mr. Keynes, attempted to establish a functional connection between investment, consumption and employment, which is conventional wisdom now, but apparently was not in 1936. Notions such as "propensity to consume", "liquidity preference" have come of this book to take firm hold in our thinking and have not left yet.
The book itself I have to admit, is not easy to understand, was written by Keynes for his fellow economists, and is peppered with technical terms like "marginal disutility of labor" (roughly translated as "how reluctant am I to work another hour") the "multiplier" (the meaning of which escapes me at the time) and of course the "marginal efficiency of capital" (roughly translates as "if I build another piece of capital equipment, how much money can I reasonably expect it to make"). Keynes has an affinity for Latin terms, and a maddening "will to precision" he is perfectly bent on making sure no detail escapes his attention.
If you are still reading my review, I would recommend this book to a serious scholar of economics (serious in a sense of dedicated), with an adequate knowledge of economic concepts and terminology. Otherwise you will be stumped, frustrated and most of all bored.
on June 20, 2015
I do not use to grant 1-stars ratings, but I do know it is important for customers to fully know "in detail" what is the quality of the book, in every sense. This edition (CreateSpace Independent Publishing Platform (November 15, 2011)) is poorly typesetted, when equations arise in the text, they are awkardly represented, you can't read them! I hate to mislead the readers, Mr. Keynes' oeuvres are the highest level, they are excellent readings, but I don't recommend you CreateSpace Independent Publishing Platform (November 15, 2011) edition. Read Keynes in other edition.