The General Theory on-line

Here it is, that maddening yet brilliant book. 

The worst part is the talk about the socialization of investment.  My favorite parts — not the same as the best parts — are the notorious chapter 17 (remember all that talk of "own-rates of interest"?), the discussions of "animal spirits," and the short notes at the end about mercantilism and Silvio Gesell.  This book is more poetic, and more image-rich, than just about any other economics tract.  That is one reason why it it has been read in so many contradictory ways. 

What is, after all, the central message?  That aggregate demand matters?  That wages and prices are sticky?  That wages and prices are not always sticky but ought to be, to prevent an ever-worsening downward spiral?  That monetary factors prevent the rate of interest from equilibrating ex ante savings and investment, thereby requiring income adjustments to equilibrate them ex post?  That the rate of interest is simply too high?  That the stock market can screw everything up?  That expectations are the key to the macroeconomy?  All of those?

Keynes’s great contribution was to create an economics in which a persistent Great Depression was possible.  But on policy recommendations, I would stick with Milton Friedman, or for that matter Keynes’s earlier Tract on Monetary Reform.  We can recognize the dangers of deflation without embracing Keynes’s seductive yet unworkably byzantine analytical framework.

Thanks to Brad DeLong for the pointer.


Comments for this post are closed