The Conceptual Difference between Keynes’s General Theory and Classical Theory — Savings and Liquidity

A sage once said that the definition of a “classic” is a book that everyone cites but no one reads. Since it was published in 1936, John Maynard Keynes’s book The General Theory of Employment, Interest and Money is a classic in the sense that economics professors at some of the most prestigious universities, particularly in the United States, have not read Keynes’s book. In fact, ever since World War II, in highly regarded universities’ economics departments, students are told that The General Theory of Employment, Interest and Money is so obscure and confusing that they need not (and should not) read it. For example, a founder of the so-called New Keynesian theory, Harvard Professor N. Greg Mankiw (1992, p. 561) has written that The General Theory is an obscure book … [it] is an outdated book. … We are in a much better position than Keynes was to figure out how the economy works. … Few macro economists take such a dim view of classical economics [as Keynes did] … Classical economics is right in the long run. Moreover, economists today are more interested in the long-run equilibrium. … [There is] widespread acceptance of classical economics.