Keynes’s General Theory

Abstract

If one were to isolate from the many readings of Keynes’s General Theory those which might be said to have dominated the discipline, including those of his theoretical adversaries as well as those of his advocates, one characteristic feature would be present in them all. This is the idea that the contribution of the General Theory consists in the examination of the ‘disequilibrium’ behaviour of a market system. Of course, to its proponents, the General Theory is seen to provide not only what the old classical economists or Marshall might have referred to as an analysis of the temporary effects of particular changes, but also a rationale for taking these to be of paramount importance in the circumstances in which we actually conduct our daily lives. The General Theory, it is sometimes said, draws our attention to the fact that the underlying forces working towards the establishment of equilibrium, while ever present, are often only weakly felt. The simple and appealing notion behind this view is that a market economy may become ‘stuck’, so to speak, in a situation where certain frictions and rigidities (sometimes of formidable dimensions) prevent more persistent forces from producing those permanent effects which they ultimately have a tendency to produce. At the risk of some oversimplification, I shall classify readings of the General Theory which view its concern as being with ‘disequilibrium’, as falling within the compass of ‘received opinion’. One consequence of received opinion has been that debate over the significance of the book has frequently been played out in the arena of empirical argument and practical affairs.

This chapter was originally published in The New Palgrave: A Dictionary of Economics, 1st edition, 1987. Edited by John Eatwell, Murray Milgate and Peter Newman