A Treatise on Money [Hardcover]

John Maynard Keynes (Author)

Book Description

ISBN-10: 0404150004 | ISBN-13: 978-0404150006 | Publication Date: June 1976

'...among the glories of modern publishing...edited with exemplary authority and lack of fuss...' - London Review of Books This definitive edition contains all Keynes's published writings, including less accessible articles and letters to the press, as well as previously unpublished speeches, government memoranda and minutes, drafts and economic correspondence. No other writer in this century has done more than Maynard Keynes to change the ways in which economics is taught written. No other economist has done more to change the ways in which nations conduct their economic and financial affairs. The Collected Writings are indispensable to all economists. They are a vital reference work for students, academics and professionals alike.

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Review

'...among the glories of modern publishing...edited with exemplary authority and lack of fuss...' - London Review of Books --This text refers to an out of print or unavailable edition of this title.

Product Details

• Hardcover
• Publisher: Ams Pr Inc (June 1976)
• Language: English
• ISBN-10: 0404150004
• ISBN-13: 978-0404150006
• Average Customer Review: 5.0 out of 5 stars  See all reviews (1 customer review)
• Amazon Best Sellers Rank: #4,683,181 in Books (See Top 100 in Books)

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12 of 12 people found the following review helpful:

5.0 out of 5 stars Demonstrates that banker manipulations of interest rates will not provide a full employment level of investment, September 4, 2006

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Michael Emmett Brady "mandmbrady" (Bellflower, California ,United States) - See all my reviews
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This review is from: A Treatise on Money (Hardcover)

A truly magnificient effort by Keynes that demonstrated that the necessary required optimality condition for full employment of all resources in the short run and the long run,that Investment(I) must equal Savings(S) on the boundary of both the Static and Dynamic Production Possibilities Frontiers,could not be attained and then maintained over time at an optimal interest rate that would provide for an optimal stock of capital goods, since a private,independent(or quasi-private and partly independent central bank like the American Federal Reserve System), commercial banking system's profit and sales maximizing behavior would generally lead to interest rates that were too high(profit maximizing) or too low(sales maximizing).Keynes concluded that attempts to deal with changes in the business cycle ,which, if not dealt with, could lead to deflationary gaps(severe recessions-depressions,but not minor inventory recessions)or inflationary gaps of different types(profit inflations,credit inflations,wage inflations,etc.),by changes in interest rates would generally not succeed because the world's banking systems were essentially set up with a different optimizing goal in mind -maximizing the overall rate of return on their portfolio of national and international loans and assets.Private banker optimizing behavior was a major factor causing destabilizing fluctuations in the purchasing power of money .The manner in which monetary policy influenced prices and real and nominal wage rates, under a policy regime geared to implementing the maximizing goals of individual banks,meant that monetary policy would be unable to attain a full employment level of output at non inflationary levels and maintain it since this goal was not the policy under which banking systems operate.

Keynes worked with an aggregated model of purely competitive firms operating under conditions of constant returns to labor in the short run and constant returns to scale in the long run.This allowed him to define the standard long run position of equilibrium as being attained when a situation of only normal profits was reached .Expectations and anticipations of future changes in expected profits during a particular decision period(short run) for the individual firm were incorporated in the model by the use of windfall gains and losses,windfall gains creating expectations of greater, future profits and windfall losses creating expectations of greater, future losses.It was these expectations that bank rate(interest rate)policy would not be able to cancel out because the bankers did not have this as one of their goals ,since it would not maximize their own profits and/or sales over time.Keynes's conclusions are unique in that he traced the inevitable failure of a monetary policy based on constantly raising and lowering interest rates ,to counterbalance unstable business expectations of future profits ,to the private banking industry's own optimizing behavior under constraints that conflicted with those of the entreprenuer-employer of a firm and worker-employees he hired in the present to create goods for sale in the future based on expectations formed in the present.

In the General Theory,Keynes went back to the ancient wisdom of Adam Smith and the Scholastics,such as Thomas Aquinas-maintain low,fixed rates of interest permanently and skew credit away from financial speculation and the conspicuous consumption of the rich by not allowing such loans to be made.Keynes,of course,like Adam Smith,realized that these kinds of loans were the most profitable for the banking industry.His conclusion in the General Theory was that if the forces of banking and finance were able to maintain the standard approach to interest rate determination,economic progress would not take place at a rate required to attain and then maintain over time full employment.Involuntary unemployment would result.One should note that Keynes's exposition is not complete in the A Treatise on Money.He does not discuss the importance of making decisions under conditions of uncertainty,or Ellsbergian ambiguity,as opposed to risk ,when the decision is the investment decision ;nor does he emphasize the importance of the degree of confidence a decision maker has in his estimate of a probability that is vague,unclear,unreliable,or ambiguous.It is Keynes's reformulation of the impact that expectations have on unemployment ,as presented in his theory of effective demand in chapters 20-21 of the General Theory,combined with his emphasis on degrees of uncertainty and degrees of confidence that differentiates the A Treatise on Money(1930) from the General Theory(1936).