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Keynes on Investment and the Business Cycle

Author

Listed:
  • Paul Burkett
  • Mark Wohar

    (Department of Economics, P0. Box 248126, University of Miami, Coral Gables, Florida 33124 (305/284-5540) and Department of Economics, CBA 512K, University of Nebraska, Omaha, Nebraska 68182 (402/554-2786).)

Abstract

Keynes' analysis of the instability of investment and the businesss cycle emphasizes the effects of uncertainty and shifting expectations on investment decisions. Keynes' focus on historical/ qualitative change and on the essentially incalculable nature of expectations in a world of uncertainty distinguishes his analysis from the more determinate neoclassical world in which economic agents engage in an optimizing search for equilibrium subject to well-defined constraints. However, although Keynes demonstrates the possibility of crises in capitalist economy, his analysis of actual cyclical crisis tendencies in Chapter 22 of the General Theory suffers from an inadequate treatment of how the wage struggle and capitalist production relations influence the actual profitability of investment. In analyzing Keynes' business cycle theory it is crucial to clearly distinguish Keynes' short run, mathematical model of the factors which make crises possible from Keynes' historical/qualitative theory of the business cycle.

Suggested Citation

  • Paul Burkett & Mark Wohar, 1987. "Keynes on Investment and the Business Cycle," Review of Radical Political Economics, Union for Radical Political Economics, vol. 19(4), pages 39-54, December.
    • Handle: RePEc:sae:reorpe:v:19:y:1987:i:4:p:39-54
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