The General Theory of Employment, Interest, and Money

The General Theory of Employment, Interest, and Money

John Maynard Keynes

Language: English

Pages: 403

ISBN: 0156347113

Format: PDF / Kindle (mobi) / ePub

Keynes profoundly influenced the New Deal and created the basis for classic economic theory. “I can think of no single book that has so changed the conception held by economists as to the working of the capitalist system” (Robert L. Heilbroner). Index.

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will be after there has been time to adjust the equipment to the new situation. If we suppose a state of expectation to continue for a sufficient length of time for the effect on employment worked itself out so completely that there is, broadly speaking, no piece of employment going on which would not have taken place if the new state of expectation had always existed, the steady level of employment thus attained may be called the longperiod employment 1 corresponding to that state of

decreasing employment; labour being readier to accept wage-cuts when employment is falling off, yet real wages inevitably rising in the same circumstances on account of the increasing marginal return to a given capital equipment when output is diminished. If, indeed, it were true that the existing real wage is a minimum below which more labour than is now employed will not be forthcoming in any circumstances, involuntary unemployment, apart from frictional unemployment, would be

efficiency of capital relatively to the rate of interest. IV Two types of risk affect the volume of investment which have not commonly been distinguished, but it is important to distinguish. The first is the entrepreneur's or borrower's risk and arises out of doubts in his own mind as to the probability of his actually earning the prospective yield for which he If a man is venturing his own money, this is hopes. the only risk which is relevant. But where a system of borrowing and lending

opinion are more usual. ch. 13 THE GENERAL THEORY OF INTEREST 173 III We have now introduced money into our causal nexus for the first time, and we are able to catch a first glimpse of the way in which changes in the quantity of money work however, we their way into the are tempted economic system. If, money is the activity, we must to assert that drink which stimulates the system to remind ourselves that there may be several slips between the cup and the lip. For whilst an

revised their fundamental theory. In the first instance, these conclusions may have been applied to the kind of economy in which we actually live by false analogy from some kind of nonexchange Robinson Crusoe economy, in which the in- , come which individuals consume or retain as a result of their productive activity is, actually and exclusively, the output in specie of that activity. But, apart from this, the conclusion that the costs of output are always covered in the aggregate by the

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