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Keynes’s General Theory: The Central Messages

In: Debates in Macroeconomics from the Great Depression to the Long Recession

Author

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  • Arie Arnon

    (Ben-Gurion University of the Negev)

Abstract

Facing the Great Depression, Keynes and the Circus in Cambridge—the group of younger lecturers and students who discussed the new ideas to appear in the General Theory—doubted the basic assumptions that most others continued to uphold. One of the crucial assumptions that they questioned was the tendency toward full employment in capitalism. The new, roughly formulated ideas were a fundamentally heretical thought: Even under competitive conditions, the market mechanism could, in principle, lead the economy to a level of employment that was below full employment. Keynes had come to believe that levels of employment and unemployment were not determined by the labor market alone and were not the result of a simple aggregation along the many markets; rather, unemployment and the level of production were determined by a market that had not even been conceived of as a well-specified theoretical construct before 1936—the aggregate market for goods and services. Keynes’s major challenge was to convince the community of economists of his novel proposition.

Suggested Citation

  • Arie Arnon, 2022. "Keynes’s General Theory: The Central Messages," Springer Studies in the History of Economic Thought, in: Debates in Macroeconomics from the Great Depression to the Long Recession, chapter 0, pages 79-96, Springer.
    • Handle: RePEc:spr:spshcp:978-3-030-97703-0_5
    DOI: 10.1007/978-3-030-97703-0_5
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