Keynes General Theory of Employment

In 1936, John Maynard Keynes published a book entitled The General Theory of Employment, Interest, and Money. In economic and political circles, the book was an immediate success, particularly among the new breed of American economists. Not to be immodest, British Keynes wrote a letter to the philosopher George Bernard Shaw stating that, "I believe myself to be writing a book on economic theory which will largely revolutionize . . . the way the world thinks about economic problems" (Harrod 462). Keynes' theory, and the furor it continues to cause, will be the subject of this paper. The paper will begin with a background analysis of both Keynes and his General Theory. It will then focus on the Keynesian legacy in economics, politics, and intellectualism. Finally, the paper will conclude with an assessment of the General Theory within the context of the modern economic system.

As he predicted, the General Theory made a major impact on economic theory, clearly not confined to the economic world. Although the extent of the book's impact on governmental economic policy is still hotly debated in academic circles, its influence has been considerable in the postwar economic policies in the West. However, the exact nature of the theoretical contribution made by Keynes has been the subject of a heated debate. After the book was published, harsh criticism of his theories eventually led to the emergence of a neoclassical economic synthesis, accord to which Keynesian economic

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ultural and economic modifiers (Burton, et al. 4-7). Keynes' General Theory changed economic theory by emphasizing the macro problems of employment and demand. Briefly, the theory's economic thesis states that behind the veil of monetary policy (money), people specialize in producing goods and services to exchange for the specialized output of other people. Any particular output thus constitutes demand for other noncompeting outputs. Since supply constitutes demand in that sense, there is no such thing as a problem of demand. Even in an economic depression, people are willing to work in order to exchange goods and services. In particular, employers are willing to hire more workers and thus produce more goods as long as they can find adequate customers eager to spend money (Eatwell and Milgate passim). Keynes' lasting appeal to economists lies more in the benevolence in which he practiced monetarism. For many, though, the economic legacy of Keynes' General Theory lies in the fact that liberals can use it to support the idea that no mechanism exists to keep saving and investment equal at full employment, and conservatives use the same notion to posit that an easy repair of any economic downturn (recession, etc.) will pres

Category: Economics - K