The General Theory of Employment, Interest, and Money

The General Theory of Employment, Interest, and Money – John Maynard Keynes

1. Full Citation

Keynes, J.M. (1936) The General Theory of Employment, Interest, and Money. London: Macmillan.

2. Introduction

John Maynard Keynes’s The General Theory of Employment, Interest, and Money revolutionised economics by challenging classical theories that markets are always self-correcting. Published in 1936 during the Great Depression, Keynes argued that aggregate demand drives employment and output, and that government intervention is necessary to stabilize economies. The book laid the foundation for Keynesian economics, influencing fiscal and monetary policies globally, and remains a cornerstone in macroeconomic thought.

3. Author Background and Credentials

John Maynard Keynes (1883–1946) was a British economist and civil servant, widely regarded as one of the most influential economists of the 20th century. His work shaped economic policies worldwide, particularly through his leadership at the Bretton Woods Conference and his advocacy for government spending to counter economic downturns.

4. Summary of Contents

Key concepts include:

  1. Aggregate Demand and Output
    • Emphasises that total spending determines overall economic activity and employment.
  2. The Principle of Effective Demand
    • Argues that insufficient demand causes unemployment and recessions.
  3. Investment and Consumption
    • Explores how decisions by firms and consumers impact economic cycles.
  4. Liquidity Preference and Interest Rates
    • Introduces the idea that money demand affects interest rates and investment.
  5. Role of Government
    • Advocates fiscal policy, including deficit spending, to stimulate demand during downturns.

5. Critical Evaluation

a. Coherence and Argumentation

Keynes’s work presents a robust theoretical framework that contrasts with classical economics, backed by logical argumentation and empirical observation.

b. Originality and Intellectual Contribution

The book was groundbreaking in shifting economic focus to demand management and macroeconomic stabilization.

c. Evidence, Sources, and Method

Though theoretical, Keynes supported his arguments with contemporary economic data and critiques of classical theory.

d. Style and Accessibility

The prose is dense and technical, challenging for lay readers but foundational for economic scholars.

e. Limitations and Critiques

Critics argue Keynesian policies can lead to inflation and government overreach. Later economists have debated its assumptions and applications.

6. Comparative Context

Compared with:

  • Adam Smith’s Wealth of Nations – Classical economics foundation; Keynes challenged its market self-regulation
  • Friedrich Hayek’s The Road to Serfdom – Hayek warns against government intervention; Keynes advocates it
  • Milton Friedman’s monetarism – Friedman critiques Keynesian fiscal policy in favor of monetary control

7. Thematic or Disciplinary Relevance

Central to:

  • Macroeconomic theory
  • Fiscal and monetary policy
  • Economic stabilization and growth
  • Public economics and welfare policy

8. Reflection or Practical Application

Keynes’s insights underpin modern economic policies aimed at managing recessions and unemployment, influencing government roles worldwide.

9. Conclusion

The General Theory remains a foundational work, critical for understanding macroeconomic policy and government intervention’s role in stabilizing economies.

Recommended for: Economists, policymakers, students of economics, and historians of economic thought.

10. Other Works by the Same Author

  • A Treatise on Money (1930)
  • The Economic Consequences of the Peace (1919)
  • Various essays on economic theory and policy

11. Similar Books by Other Authors

  • Milton Friedman – A Monetary History of the United States
  • Alvin Hansen – Fiscal Policy and Business Cycles
  • Joan Robinson – The Accumulation of Capital
  • Paul Samuelson – Economics: An Introductory Analysis

12. References (only if external works are cited)

  • Keynes, J.M. (1936) The General Theory
  • Friedman, M. and Schwartz, A. (1963) A Monetary History of the United States
  • Samuelson, P. (1948) Economics
Home