The General Theory of Employment, Interest and Money by John Maynard Keynes
My rating: 3 of 5 stars
Keynes is often touted as the most famous of economists, mainly because he was most influential as to how governments and economies are run today. We do have to recognize that his theory was the product of his times, and that economics as a whole is still developing.
In a sense though, Keynes is less a creative theoretician than he is a mechanic. If you understand neoclassical economics as a set of relations, Keynes is best understood as ushering a new era of economics in which the “natural” point of equilibrium is no longer viable. This is like the difference between structuralism and post-structuralism. Keynes allows us to understand that given a particular initial context, the “natural” equilibrium could be anywhere else. This allows governments today to twist the economy around so that we don’t focus so much on producer credit as we do on consumer credit. Keynes has found a new way to exploit a market bubble, one founded on consumption.
We are paying the price for his ideas.
Yet his ideas are really only a mechanic’s patch. If the machine works only in certain temperatures, then let us keep that machine in those temperatures. Not revolutionary. Just understanding a limit of economics’ rationalism.
Towards the end of his book he makes a stab at understanding the limits to the formal limits of economics when he realizes that all he is really doing is questioning assumptions in economics. He ends by stating that often economists only go for the logically consistent and easy answers rather than risk being wrong going for an obscure truth. He admires those of the latter but isn’t seemingly willing to build a new theory based off of any obscure truths. In this sense, his questioning of economics rationality is a questioning of his own theories as well. Does he undermine his book? In a way he does. He should have started with this foundation instead. But alas, I guess Keynes is more an academic than anything else.
I did find his writing to be stuffy. His precision is remarkable but his writing is too flat. He could emphasize his ideas better and explicate them by speaking sometimes of an outside of economics.
I think that as an economist he is important to understanding where we come from. After Keynes we got away from all the speculation panics that used to rock the economy every 20 years with its horrid unemployment. Too often, as many of these reviewers demonstrate, that, in not knowing where Keynes is responding to, we only see the insufficiency of his ideas. And so, his ideas are too dated. As a mechanic he helped usher in an era of abundance but this abundance was found on tooling the neoclassical system and “hacking” it to work a certain way, not on building a new theory, one that would ultimately be sustainable. Our current consumer and government debt in sustaining endless demand for relatively full employment is proving to be worrisome.
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