Keynes’s General Theory for Today

Keynes’s General Theory for Today

Contemporary Perspectives

Edited by Jesper Jespersen and Mogens Ove Madsen

The themes of this important new volume were chosen to mark the 75th anniversary of the publication of The General Theory of Employment, Interest and Money. The distinguished authors concentrate on the relevance of this seminal publication for macroeconomic theory, method and the politics of today. This is particularly pertinent as similarities with the 1930s are striking in terms of unemployment, low growth, financial fragility and the European monetary union resembling the gold standard.

Chapter 8: Keynes’s General Theory after 75 years: time to re-read and reflect

Jesper Jespersen

Subjects: economics and finance, history of economic thought, post-keynesian economics

Extract

No doubt, Keynesian unemployment and even The General Theory are still referred to in mainstream textbooks of macroeconomics. But if you have happened to read The General Theory you may be wondering if the textbook author has read the same book as you. In most textbooks so-called Keynesian economics is analysed within a general equilibrium model, where the special Keynes feature is an assumption of real-wage inflexibility which may cause involuntary unemployment in the short run. There might also be a reference to a ‘Keynesian’ consumption function, which is derived from the microeconomic theory of an optimizing household with rational expectations. On the other hand you will hardly find any reference to phenomena like uncertainty, effective demand and liquidity preference, which are some of the distinct novelties explained in The General Theory and emphasized by Keynes in the preface and the very first pages of the book.

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