The Marshallian roots of Keynes’s General Theory

The aim of this paper is to elucidate Keynes's Marshallian lineage. I argue that the result of bringing out the Marshallian antecedents of the General Theory highlights Keynes’s failure to achieve the theoretical project he was striving at, namely to demonstrate an involuntary unemployment result in the arising of which nominal wage rigidity would play no role. In the first part of the paper, I reexamine Marshall’s theory of value. This section’s main conclusion is that no theory of unemployment is to be found in Marshall’s writings. In section two, I study the literature spanning from Marshall to Keynes, focusing on Beveridge, Hicks and Pigou, in order to see whether the lacuna present in Marshall’s writings happened to be filled. Documenting the emergence of the notion of frictional unemployment, I come to the conclusion that its arising went along with little theoretical elaboration. The third and last part of the paper is a critical reflection on the General Theory. I start by making the point that Keynes’s theory of effective demand ought to be viewed as an extension of Marshall’s analysis of firms’ short-period production decisions. This enables me to bring out the decisive role played by the wage rigidity assumption in Keynes’s reasoning. I claim that, except for this assumption, the differences between ‘effective demand à la Marshall’ and ‘effective demand à la Keynes’ are minor. I close my analysis of Keynes’s reasoning by showing that no real removal of the nominal rigidity assumption is to be found in chapter 19 of the General Theory.