Monday, April 15, 2013

Preface of The General Theory of Employment, Interest and Money

Keynes divided his book The General Theory of Employment, Interest and Money into six different books, each book containing multiple chapters. For now, I am going to follow the same pattern in my review of his book. If any of the chapters have too much information or require a more detailed explanation, I might have to break them into smaller pieces.

Keynes states in the preface of The General Theory that he was addressing the book chiefly at his fellow economists, but he hoped that it would be understandable by a more general, wider audience.

Prior to Keynes writing, and including some earlier writing by Keynes, the focus had been on an instantaneous picture of the economy. The idea was that, given a steady output, supply and demand forces would arise that would cause the need to change the output. The problem was that they dynamics of the change were left largely in the dark. In other words, it seemed like they could get a picture of what would change that very second, but not where the economy was going in general.

Keynes tries to correct those problems with this book, stating:

This book, on the other hand, has evolved into what is primarily a study of the forces which determine changes in the scale of output and employment as a whole; and, whilst it is found that money enters into the economic scheme in an essential and peculiar manner, technical monetary detail falls into the background. A monetary economy, we shall find, is essentially one in which changing views about the future are capable of influencing the quantity of employment and not merely its direction.

So technical monetary detail falls to the background? How can that be? Money seems to be the thing that makes the world go around. It doesn't matter whether it is concerning taxes, paychecks, retirement plans, or the latest gadget advertised on television; money seems to be the primary focus of all things political and economic. And that seems to be as true today as it was in Keynes time. But Keynes warned that the difficulty wasn't in the theories in the book, the problem was in the challenge to see things differently than we have seen all our lives.

... a struggle of escape from habitual modes of thought and expression. The ideas which are here expressed so laboriously are extremely simple and should be obvious. The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.

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