[.ca] General Theory Of Employment, Interest And Money (ISBN 0230004768)

The savior of "capitalism" or corporatist liberalism?:
I read Keynes' "General Theory" as a high-school sophomore in 1970. Even as a high-school student, I was able to see the central analytical error. The key Keynesian argument is that there can be an imbalance between savings and investment: savers may try to save more than they invest, in effect taking money out of circulation and thereby throwing the economy into depression. Of course, they have to do something with this money, presumably holding it as cash in some form. Therefore, if you follow through the analysis to the end, Keynes is saying that people are trying to hold more cash than is available: the demand of savers to hold savings in cash rather than as investments is what causes depressions. Keynes and his followers accept this conclusion: the term which came to be used was that there was a "liquidity trap," the desire to hold more cash ("liquidity") than was actually supplied in the economy is what produces depressions. However, as soon as the matter is phrased in terms of an imbalance between the supply and demand of money, anyone who passed economics 101 should remember that market economies are _very_ good at equilibrating supply and demand. If the current demand for a good is too high, then the current market value is too low, and a rise in the market value of that commodity will solve the problem. It works for money, too. A rise in the value of money is called "price deflation," and economists have known for centuries that price deflation does indeed naturally occur in depressions. As the general price level falls, the existing supply of money becomes more valuable -- in effect, the real supply of money becomes greater. It becomes more tempting to spend one's cash on now cheaper goods or investments. Price deflation, if allowed to occur by governments, cures liquidity traps. I figured this out for myself as a high-school student (there is an alternative but equivalent analysis based on "dimensional analysis" which, as a budding physicist, I found especially cogent). I was not of course the first to work this out: even _before_ Keynes published the "General Theory," the British economist A. C. Pigou had worked through this analysis and the matter is often therefore referred to as the "Pigou effect." Since Pigou, various eminent economists have worked out the mechanism in great detail with careful mathematical analyses, but the basic idea is freshman economics. When I entered college, I found out that the advanced graduate-level "macro" books did indeed let the secret out that Keynes' analysis was wrong. It was only undergrads, politicians, and the general public that were expected to believe the Keynesian fallacy. So why the decades of lying? Just as the Communist governments of the old Soviet empire needed Karl Marx's goofy economics theories and laughable philosophical scribblings in order to prop up their own corrupt regimes, so also the rising mid-twentieth-century predatory military-university-government-industrial complex in Western nations needed an ideology to justify the corporatist-socialist regimes it was creating. Keynes' prescriptions for monetary inflation, deficit spending, rejection of the gold standard, and high levels of government spending and taxation were tailor-made for the democratic-socialist welfare/warfare states then being erected in various Western nations. As corporate liberals are so fond of saying, Keynes did indeed "save capitalism" if by "capitalism" one means not free-market capitalism but rather the corrupt crony capitalism under which we now all live. Keynes himself knew this of course. The infamous statement he made in the introduction to the German translation of the "General Theory" ("theory of aggregate production, which is the point of the following book, nevertheless can be much easier adapted to the conditions of a totalitarian state than the theory of production and distribution of a given production put forth under conditions of free competition and a large degree of laissez-faire") obviously does not prove that Keynes was sympathetic to Nazism. But it does show that Keynes rightly recognized that his proposals were of great potential value for the oppressive political regimes that were being created during the twentieth century. Even though Keynesian theories are now intellectually discredited "flat-earth" economics, they live on because they serve a political need. Even conservative politicians nowadays often spout Keynesian nostrums ("stimulating demand" via tax cuts or monetary growth) rather than make the painful acknowledgement that it is the corporate-socialist economic system under which we live which is the problem. No regime lasts forever. Eventually, the present corporatist-collectivist regime will collapse, probably when the majority of the human race figures out how to free itself from the current American geopolitical hegemony. At that point, Keynes will be universally viewed as the economically incompetent charlatan that he actually was. (For a more detailed analysis of the Keynesian system, I recommend Henry Hazlitt's classic "Failure of the New Economics" and the collection of critical essays Hazlitt edited, "Critics of Keynesian Economics." For an analysis that goes beyond Keynes in analyzing the process which causes the initial imbalance in the investment sector and the resulting liquidity crisis, see Murray Rothbard's "America's Great Depression." Keynes purported to believe that the triggering forces of the investment crisis were irrational and inexplicable "animal spirits." Rothbard shows that, on the contrary, these forces can be rationally explained and understood: in essence, it is incompetent financial policy, of the sort Alan Greenspan has provided in the last decade, which causes economic crises. Milton Friedman's and Anna Schwartz's famed "The Great Contraction" focuses solely on the monetary aspects of the Great Depression, thereby missing the causative process in the investment sector.)

Worthless and Disproven:
Keynes was no doubt an influential economist. His theories and 'expertise' on economics influenced the post-New Deal economic policies of the United States and the internationalist wealth redistribution schemes like IMF. However, his ideas on economics failed miserably and it was application of Keynesian ideas that wrecked so much havoc on the U.S. particularly in the 1970s with the stagflation (an inflationary recession with unemployment which was theoretically impossible accordingly to Keynesism.) We have Keynes to thank for budget deficits and the nebulous idea that we can spend ourselves into prosperity through the largesse of the federal government. Read Planning for Freedom or Socialism by Ludwig von Mises instead.

Read Henry Hazlitt along with this book and compare.:
Anyone interested in Keynesian economics at work should look at Japan over the last 25 years or so. The Keynesian solutions employed there are right out of the 'General Theory' and are crystal clear examples of the fallacies inherent in government directed economies. Hundreds of billions have been spent by the government pouring concrete under virtually every river and creek bed in that country (and least 60 percent of the ocean shoreline) in a vain attempt to stimulate the economy with make-work projects. Japan is on the verge of a depression. It is in fact the only developed nation since WW II to be suffering from sustained deflation. I suspect few readers who start this book have the stamina or stomach to complete it but if you do I suggest you read Henry Hazlitts "The Failure of the New Economics" (a line by line analysis of the "General Theory") alongside it and judge for yourself how coherent, logical, or true, Keynes thought really is. For those of you who are not worshippers, employees, or dependents of the STATE and are capable of entertaining economic ideas other than totalitarian ones check out Mises.org as a starting point for free market economics and the writings of Hayek and von Mises. One might discover there the argument that depressions and wild business cycle swings are the result of government interference in the economy. It's an idea at least worth looking at. Anyone looking for a general introduction to economics could not do better than Hazlitts "Economics in One Lesson." It is short, intentionally clear and intellectually honest; the very opposite of the "General Theory." To the professors who have written in praise of this book and criticized others on this site I suggest reading a beginning textbook on logic and logical fallacies. I assume a few can still be found in university libraries. Just as an intellectual exercise, see how many fallacies you can discover in your own posts at this site. Sometimes I do it with my own writing when trying to be precise and objective, applying it like a spell checker tool and find it helps in clearing up sloppy thinking. Of course when arguing for a position by manipulating feelings because either reason doesn't support the case or one is not secure in its validity, logical fallacies are the tools of the trade.

A genius work, also a classic.:
Undoubtedly, Lord Keynes's this book is very influential, not only to economics thought, but to the world economy. A genius's work is always tough because too many ideas and concepts are filled in only a few sentences, and there is no expeption with Lord Keynes's this book (Economist Paul Samuelson also called this book a genius's work). Lord Keynes is a member of Cambrige School of Classical School in the early twentith century. Professor A.C. Pigou, Alfred Marshall were his teachers, and William Jevons, Francis Edgeworth, J. Robinson and Frank Ramsey were his colleague and friends. Surrounded with so good an academic environment and endowed with his own talent (Also heavily influenced by philosopher Moore), Keynes is the most important and influential economist in the 20 century. In his thought, economist should not only sit there and work out mathematical problems, but go outside and do something. Economist should not only just observe the "Storm" appear and pass by but find solutions to overcome the economic problems for the nation and people. Some people disagree so much with Keynes's economic thought that they thought Keynes was a criminal of the concept of "Gonvernment inteferes people". I think they miss something and I'm sure that the miss will be reduced if they know exactly what kind of person Lord Keynes was and exactly what the core concept of his economic thought is. Anyway, this book is just like what Paul Samuelson ever expressed, you'll get something (maybe very many things) from this classic. If you read it carefully, maybe you will get something different from the macroeconomics textbook and those chapters which are about Keynesian theory in that textbook. You will be stunned with Keynes's mind, his way of watching things, his thinking, etc. Reading this book requires very good logic and a mind of willing to think. "In the long run we are all dead." True, go read this book and seize the concepts of the most important economist in the twentieth century.

Keynes made the Depression worse:
John Maynard Keynes was neither a hero, as alleged by Paul Samuelson and Paul Krugman, nor was he a devil as portrayed by conservative economists of today. He was simply a well meaning man who was profoundly wrong on many levels. Keynes coined staple economic phrases and equations dealing with things like the "Marginal Propensity to Consume;" he believed it was consumer spending which drove the economy (sound familiar?) Shockingly, Keynes dismissed the idea of savings with the immortal and flippant phrase, "In the long run, we are all dead." Unfortunately, this had severe repercussions for the world economy. Contrary to what Keynes and his disciples believe, it is not spending which drives the economy. Entrepreneurship drives it and savings (capital) fuels it. During the Great Depression, Keynes advocated government work programs, the idea being to "put money in people's pocket" (boy this is sounding familiar.) There's just one problem with that: where does he think government gets its money in the first place? They can tax it, borrow it, or print it. How does it stimulate anything to take with one hand and give with the other? Printing money is akin to taxation, albeit the invisible kind which is called inflation. There is considerable evidence that Keynes's prescriptions lengthened and worsened the Great Depression. If ever there was proof of the bankruptcy of Keynsian economics, the 1970's is it. His disciples stood by helplessly, stymied by the twin problems of rising unemployment and inflation called stagflation, something Keynes himself apparently never considered. On top of all that, the previous reviewers are correct in stating this book is a very difficult read. I wouldn't wish it on anyone. It is handy to keep as a reference however; if you're going to argue forcefully for the benefits of laissez-faire capitalism, it helps to be familiar with the ideas of its opponents.