A Letter from Keynes to Harlan McCracken dated 31st August 1933: Why the Standard Story on the Origins of the General Theory Needs to be Rewritten

A previously undocumented and unpublished letter from John Maynard Keynes to the American economist Harlan Linneus McCracken dated 31 August 1933, a letter only discovered in July 2007, should lead to a revision of our understanding of the sequence of events that led to the eventual focus of the General Theory on demand deficiency and Say’s Law. These were the very issues dealt with at length by McCracken in his 1933 publication Value Theory and Business Cycles. In his letter Keynes states that he has read McCracken’s book and that he agrees with McCracken on the importance of Malthusian ideas if one is to understand the nature of the business cycle. The letter should thus, firstly, provide recognition that amongst the most important influences on Keynes in writing the General Theory was the early nineteenth-century economist, Thomas Robert Malthus. Secondly, Keynes’ letter should establish the major role played by Harlan McCracken in deepening Keynes’ understanding of the issues surrounding demand deficiency and Say’s Law. The very slightly modified reappearance in the General Theory of McCracken’s phrase, ‘supply created its own demand’, is only one amongst a series of parallels between the two works that underscore the singularly important role played by McCracken’s Value Theory and Business Cycles in the formation of Keynes’ own ideas.