Summary of John Maynard Keynes's The General Theory of Employment, Interest and Money

By IRB Media

Please note: This is a companion version & not the original book.

Book Preview: #1 I have called this book the General Theory of Employment, Interest and Money, placing the emphasis on the prefix general. The object of such a title is to contrast the character of my arguments and conclusions with those of the classical theory of the subject, upon which I was brought up and which dominates the economic thought of the governing and academic classes of this generation.

• Language: English
• Publisher: IRB Media
• Release date: Feb 19, 2022
• ISBN: 9781669349600

IRB Media

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Insights on John Maynard Keynes's The General Theory of Employment Interest and Money

Contents

Insights from Chapter 1

Insights from Chapter 2

Insights from Chapter 3

Insights from Chapter 4

Insights from Chapter 5

Insights from Chapter 6

Insights from Chapter 7

Insights from Chapter 8

Insights from Chapter 9

Insights from Chapter 10

Insights from Chapter 11

Insights from Chapter 12

Insights from Chapter 13

Insights from Chapter 14

Insights from Chapter 15

Insights from Chapter 16

Insights from Chapter 17

Insights from Chapter 18

Insights from Chapter 19

Insights from Chapter 20

Insights from Chapter 21

Insights from Chapter 22

Insights from Chapter 23

Insights from Chapter 24

Insights from Chapter 1

#1

I have called this book the General Theory of Employment, Interest and Money, placing the emphasis on the prefix general. The object of such a title is to contrast the character of my arguments and conclusions with those of the classical theory of the subject, upon which I was brought up and which dominates the economic thought of the governing and academic classes of this generation.

Insights from Chapter 2

#1

The question of the size of the available resources, in the sense of the size of the employable population, the extent of natural wealth and the accumulated capital equipment, has been discussed descriptively in many treatises on the theory of value and production. But the fundamental theory underlying it has never been examined in detail.

#2

The classical theory of employment is based on two fundamental postulates: the first states that the wage is equal to the marginal product of labor, and the second states that the utility of the marginal product is equal to the disutility of the marginal employment.

#3

The classical theory of unemployment is based on the assumption that the price of non-wage-goods is higher than the price of wage-goods, and that the marginal physical productivity of labor in the wage-goods industries is higher than in the non-wage-goods industries.

#4

The classical school believed that the demand for labor at the existing money-wage may be satisfied before everyone willing to work at this wage is employed. They believed that if labor as a whole would agree to a reduction of money-wages, more employment would be forthcoming. But this is not always the case.

#5

The classical theory of wages asserts that the unemployment which characterizes a depression is caused by a refusal by labor to accept a reduction in money-wages. However, this is not always the case. For example, if more labor than is currently employed is available at the existing money-wage, even though the price of wage-goods is rising, the wage-goods equivalent of the existing money-wage is not an accurate indicator of the marginal disutility of labor.

#6

The traditional theory argues that the wage bargains between the entrepreneurs and the workers determine the real wage. If this is not true, there is no reason to expect a tendency towards equality between the real wage and the marginal disutility of labor.

#7

The second postulate of the classical theory is that the general level of real wages is determined by the wage bargain between the workers and the employers. However, this assumption is not always true. There may be no method available for labor as a whole to bring the general level of money-wages into line with the marginal disutility of the current volume of employment.

#8

The struggle over money-wages between individuals and groups is often believed to determine the general level of real wages. However, this is not the case. The general level of real wages depends on the other forces of the economic system.

#9

The third category of unemployment is involuntary unemployment in the strict sense. It occurs when a small rise in the price of wage goods relative to the money-wage causes both the supply of labor willing to work for the money-wage and the demand for it at that wage to be greater than the existing volume of employment.

#10

The second postulate of the classical theory, which states that the economy will always be in equilibrium, is fallacious. We need to throw over this postulate and work out the behavior of a system in which involuntary unemployment is possible.

#11

The first postulate of the classical system, that real wages are positively correlated with the volume of employment, remains unchanged in our system.