Abstract
As described in Chap. 1 of this current work, Books V and VI of The General Theory are its epilogue and complements. Book V mainly considers the stickiness of prices and the nominal wage. Keynes asserts that the stability of the nominal wage guarantees confidence in the value of money in terms of money. However, I would like to stress the opposite causality; namely a stable price level creates an insensitive nominal wage. This originates from the following. Workers negotiate their nominal wages, conferring the price level stream from the present to the future. This is because their earnings are mostly saved in terms of nominal assets such as money and public debt, and if expectations on the price level stream are changed, this affects their attitudes toward wage negotiation. Accordingly, as far as such expectations remain stable, equilibrium nominal wages are also stable over time. To summarize, what is significantly important for a monetary economy is to preserve confidence in the value of money in terms of goods. From this perspective, it is natural that most monetary authorities are careful to stabilize the price level through regulation and monetary policies.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
In the last equation on page 285, there is a trifling typographical error. In the text, the equation is written as \(e_{p} = 1 = e_{0} (1 - e_{w} ).\) We should correct this to \(e_{p} = 1 - e_{0} (1 - e_{w} ).\)
- 2.
Keynes shows how increased effective demand is divided into a rise in prices and an increase in employment through elasticity analysis. However, there is a miscalculation on page 305. From the result obtained on page 283, it should be modified as follows:
‘This gives us
\(\frac{Mdp}{pdM} = e_{p} \cdot e_{d}\) where \(e_{p} = 1 - e_{0} (1 - e_{w} );\)
so that
\(e = e_{d} - (1 - e_{w} )e_{d} \cdot e_{o}\)
\(= e_{d} (1 - e_{0} + e_{0} \cdot e_{w} )\).’
- 3.
- 4.
It is thinkable, apart from the effects of the Great Depression, that the sudden decay of British agriculture at the nineteenth century is intrinsically related to this fact. Trevelyan (1944; p. 527) argues:
Agriculture was not at once ruined by the Repeal of Corn Laws in 1846, nor was aristocratic government of the villages and market towns overthrown by that measure. Until the American prairies were able to empty their grain and cattle into the English market a generation later, English agriculture flourished, sustaining the social system with which it was associated.
References
Keynes, J. M. (1936). The general theory of employment, interest and money. London: Macmillan.
Otaki, M. (2015). Keynesian economics and price theory: Re-orientation of a theory of monetary economy. Tokyo, Japan: Springer.
Trevelyan, G. M. (1944). English social history: A survey of six centuries, Chaucer to Queen Victoria (p. 1973). Reprint. London: Book Club Associates.
Author information
Authors and Affiliations
Corresponding author
Rights and permissions
Copyright information
© 2016 Development Bank of Japan
About this chapter
Cite this chapter
Otaki, M. (2016). Analyzing Book V of The General Theory . In: Keynes’s General Theory Reconsidered in the Context of the Japanese Economy. SpringerBriefs in Economics(). Springer, Tokyo. https://doi.org/10.1007/978-4-431-55915-3_6
Download citation
DOI: https://doi.org/10.1007/978-4-431-55915-3_6
Published:
Publisher Name: Springer, Tokyo
Print ISBN: 978-4-431-55913-9
Online ISBN: 978-4-431-55915-3
eBook Packages: Economics and FinanceEconomics and Finance (R0)