Edited by Jesper Jespersen and Mogens Ove Madsen
Chapter 8: Keynes’s General Theory after 75 years: time to re-read and reflect
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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