2 - Towards The General Theory

Summary

INTRODUCTION

The General Theory of Employment, Interest and Money was Keynes's last major work in economics. He referred to the composition of this book as involving ‘a struggle of escape from habitual modes of thought and expression’ (Keynes 1936: viii). Involved here was not only the radical re-working of economic theory to focus on the factors that determine changes in the scale of output and employment for the economy, but also the presentation of this theory in a clear and convincing manner. Yet soon after the publication of his book Keynes came to feel that his exposition could have been clearer. He went on to re-state the essence of his theory, as he then saw it, by emphasising some of its features in his February 1937 Quarterly Journal of Economics article that was written in response to four articles on his book in that journal. In addition, he tried to cover what he came to see as a gap in his treatment of the relationship between investment, money and finance in his 1937 and 1938 articles in the Economic Journal. The presentation of Keynes's General Theory must thus deal with these writings as well as with his book.

Keynes's General Theory represents a significant departure from his earlier theoretical writings because of his concentration on the factors determining changes in output and employment, rather than on prices.