Keynes’s Macroeconomics Rethought
Chapter 6: Inflation/Deflation and the Policy of the General General Theory
In terms of its immediate reception, one of the most devastating and damaging impacts of Hicks’s interpretation of Keynes’s General Theory had been to make of Keynes’s 1936 work a story (not a theory) of Depression. Hicks’s reading of The General Theory was centred on the issue of wages as determinant of employment in circumstances where prices are irrelevant, since he thought Keynes assumed them fixed. Without challenging scrutiny, this interpretation became that of the profession, to which it immediately responded almost by open consensus. Hicks’s reworking of The General Theory was coupled with the easy acceptance of Hayek’s and Robertson’s attacks on the Treatise, making that contribution of Keynes even less read than The General Theory and quickly dismissed and forgotten by most. The combination gave the impression that Keynes had little to say about, among other things, inflation and deflation. It is not surprising thus to read that Tibor Scitovsky at the Keynes’s Centenary Conference in 1983, a gathering which was designed to assess the general contribution of Keynes, stated bluntly, ‘Inflation was not a problem Keynes gave much thought to’ (Worswick and Trevithick, 1983, p. 223). John M. Fleming, his discussant, rightly responded, ‘This is an extraordinary proposition to make’, but Fleming, himself, under the influence of the Hicksian tradition of Keynesianism, went on to characterize the argument of The General Theory as centred around wages as cause rather than effect (Worswick and Trevithick, 1983, p. 223). It is ironic that Hubert Henderson in June 1936, just...
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