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The General Theory of Employment, Interest, and Money (Great Minds Series) | John Maynard Keynes | Keynes's General Theory versus the classical-neo. theory
 
 


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 The General Theory...  

The General Theory of Employment, Interest, and Money (Great Minds Series)
John Maynard Keynes

Prometheus Books, 1997 - 403 pages

average customer review:based on 51 reviews
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One of the best, most influential books, in Economics ever.

Keynes was certainly a master of economic thought, logic, and above all, certainly the English language.

Most readers have a difficult time in comprehending what Keynes has to say. Most of the readers I doubt hold graduate degrees either. The fact is that this book was written by somebody who was an econ prof. for other econ profs. When some yokel with a GED rants about the difficulty of TGT, I find it very hard to take them seriosuly. This is not to say, however, that Keynes cannot be read or comprehened. Many top colleges require reading parts or the whole of TGT for undergrad Econ studies. The book is difficult to read, however it is not written in code. If you approach this book expecting a read like that found in Dr. Suess's works, you will certainly be overwhelmed. If you take your time reading this book, and in points, re-reading this book, you will have gained an exceptional amount of knowledge.

Many critics here who pan TGT, both in type and in it's rating, do so because they don't comprehend the books meaning, and are nothing more than reactionaries who see Keynes as a figurehead, representing everything that has gone wrong, both in the world, and here in the US. I find it very difficult to accept a critical review of a book when the reviewer does not point out where the book failed. Instead, most tend to be more critical of the man as a whole, and most reviews are not of the book, but of Keynes's general policies.

Many reviewers tend to give the impression that the theories found in TGT have been somehow debunked, and that TGT is no longer accepted as a very important work in economics. Nothing could be further from the truth. While it is important to note that Keynes was not right 100% of the time, no economic theorist is. However, that having been said, much of what Keynes theorized is still taught in collegate macroeconomics today, and that his theories of Aggregate Demand, and the propensity to consume still play an important role in macroeconomics. No examination into macroeconomic theory can be taught without a lengthy discussion of Keynesian postulates, and macroeconomics itself is a development of Keynesian Economics.

To those interested in this book, it is important to have a few, at least introductory, college level economics classes under your belt before attempting to read TGT. Be prepared for a challege, but be prepared to gain a great deal of insight into modern macroeconomic thought as well.


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Keynes's General Theory versus the classical-neo. theory

First,let's write down the core of the classical and/or neoclassical theory Keynes criticized in the General Theory.Let p equal the price level,w equal the money wage,MPL equal the marginal product of labor,mpc equal the marginal propensity to spend on consumption goods,mpi equal the marginal propensity to spend on investment goods(capital or producer goods like machinery,equipment or factories)and mps equal the marginal propensity to save .For the classical- neoclassical theory,the economy is at an optimal state on the boundary of both the static and dynamic production possibilities frontiers if the following equilibrium condition holds for the aggregate labor market:w/p=MPL.For Keynes the condition is w/p=MPL/(mpc+mpi).neoclassical theory is a special case where mpc+mpi=1.Keynes's GT is mpc+mpi


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May the Voice of the Prophet be Heard

I do realize that very little attention will be paid to this review (it being number 30 something), but I shall persevere in my noble effort to restore some order in the court of economics and public opinion.
After seeing the amount of vitriol hurled at this book I wondered for a second if I have somehow misunderstood it, or carelessly missed a passage in which Keynes urged us to kill babies. No, John Maynard Keynes did not kill babies, nor was he as such disproved (merely disagreed with).
The abuse showered upon him is a clear and unfortunate evidence of the ideological division between (politically) liberal and conservative approach to economics, which in itself is not an exact or precise science (some would say it is not even a science) and lacks sufficient rigor to have anything beyond trivial proved or disproved (I, personally, prefer the phrasing along the lines of "convincingly demonstrate") within its framework. With all this in mind economics quite often provides ample room for opposing views, especially when views are not directly conflicting, except when viewed through polarizing lens of ideology.
The "conservative" economists along the lines of Friedman and Hayek, so frequently mentioned as anti-thesis of Keynes preached (in my gross simplification) free markets and government non-intervention, which while a valid perspective hardly merits a nearly religious fervor.
Keynes, or any other sensible theoretical economist, would agree that free-markets are a good idea in principle, which is seldom if ever realized. Government protectionism (not always bad), monopolies (almost always bad), lack of sufficient incentives and transparency (almost always bad), are a few things that prevent markets from forming and operating efficiently "as if by invisible hand" to use one of the most beat up quotes in all economic literature.
Regardless of Keynes' political conclusions the contribution of this book to the economic theory is invaluable. Prior to him there was no "involuntary unemployment", that is people did not have jobs because they chose not to. As people struggling to find work in this jobless recovery know that is far from the truth.
The dynamics of labor markets were analyzed in a very unenlightening (but orthodox) way of supply and demand. There is a fixed supply of labor, there is a flexible demand for it, cut the wages (that will equalize the market) and everyone will be employed. This concept is remarkably easy to grasp, and is also remarkably worthless, because according to it the demand for labor is a certain "thing in itself" floating in economic vacuum with no relations with the real world.
Mr. Keynes, attempted to establish a functional connection between investment, consumption and employment, which is conventional wisdom now, but apparently was not in 1936. Notions such as "propensity to consume", "liquidity preference" have come of this book to take firm hold in our thinking and have not left yet.
The book itself I have to admit, is not easy to understand, was written by Keynes for his fellow economists, and is peppered with technical terms like "marginal disutility of labor" (roughly translated as "how reluctant am I to work another hour") the "multiplier" (the meaning of which escapes me at the time) and of course the "marginal efficiency of capital" (roughly translates as "if I build another piece of capital equipment, how much money can I reasonably expect it to make"). Keynes has an affinity for Latin terms, and a maddening "will to precision" he is perfectly bent on making sure no detail escapes his attention.
If you are still reading my review, I would recommend this book to a serious scholar of economics (serious in a sense of dedicated), with an adequate knowledge of economic concepts and terminology. Otherwise you will be stumped, frustrated and most of all bored.


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reviews: 1, 2, 3, 4, page 5, 6, 7, 8, 9, 10, 11



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