Keynes’s General Theory Reconsidered in the Context of the Japanese Economy

  • Masayuki Otaki

Part of the SpringerBriefs in Economics book series (BRIEFSECONOMICS)

Also part of the Development Bank of Japan Research Series book sub series (BRIEFSDBJRS)

Table of contents

  1. Front Matter
    Pages i-xi
  2. Reconsideration of The General Theory

    1. Front Matter
      Pages 1-1
    2. Masayuki Otaki
      Pages 9-21
    3. Masayuki Otaki
      Pages 23-33
    4. Masayuki Otaki
      Pages 35-42
    5. Masayuki Otaki
      Pages 43-58
    6. Masayuki Otaki
      Pages 59-66
    7. Masayuki Otaki
      Pages 67-73
    8. Masayuki Otaki
      Pages 75-77
  3. Developing a New Collective Intelligence from The General Theory

    1. Front Matter
      Pages 79-79
    2. Masayuki Otaki
      Pages 95-96
  4. Back Matter
    Pages 97-98

About this book


This book reconsiders Keynes’s The General Theory of Employment, Interest and Money and establishes a new interpretation. In contrast to the existing models, this book finds that the stickiness in the nominal wage is not crucial for his theory. Moreover, the author has also succeeds in capturing the concept of liquidity in a rigorous mathematical model. In conjunction with the development of the concept of liquidity, the separation of the decision between savings and capital investment, which plays a key role in the principle of effective demand and denies Say’s law, is exactly and originally formulated.

The theory thus developed is applicable to elucidating some serious political economic causes that entrap the long-stagnated Japanese economy. For example, an analytical explanation is provided about why disinflation/deflation incessantly progresses despite the exorbitant expansionary monetary policy (ijigen kin-yuu seisaku) by the Bank of Japan. This phenomenon is an unsolvable question from the quantity-theoretic approaches (e.g., monetarism and new Keynesianism) which, although they differ in assumptions concerning the length of adjustment periods, commonly assume that the price level sooner or later rises in proportion to the quantity of money.

Owing much to Keynes, the author’s approach considers that the price level is mainly governed by its marginal prime cost which is equal to the nominal wage as a first approximation. As such, the drastically sagging wages during the past 10 years provoke serious disinflation/deflation. It should be noted that this discussion never depends on the quantity of money.


Decentralization between investment and saving Effective demand Involuntary unemployment under the flexible wage Liquidity Speculative bubbles

Authors and affiliations

  • Masayuki Otaki
    • 1
  1. 1.The University of TokyoTokyoJapan

Bibliographic information

  • DOI
  • Copyright Information Development Bank of Japan 2016
  • Publisher Name Springer, Tokyo
  • eBook Packages Economics and Finance
  • Print ISBN 978-4-431-55913-9
  • Online ISBN 978-4-431-55915-3
  • Series Print ISSN 2191-5504
  • Series Online ISSN 2191-5512
  • Buy this book on publisher's site