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Lectures on John Maynard Keynes’ General Theory of Employment, Interest and Money (6): Chapters 8, 9 and 10: Keynes’ Theory of Consumer Behaviour

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  • Brian S. Ferguson

    (Department of Economics and Finance, University of Guelph)

Abstract

Chapters 8, 9 and 10 set out Keynes’ theory of consumer behavior. Chapter 8 is entitled The Propensity to Consume: I. The Objective Factors, Chapter 9 is The Propensity to Consume: II. The Subjective Factors, and Chapter 10 is The Marginal Propensity to Consume and the Multiplier. Contrary to the widely held belief, Keynes saw the consumer as an intertemporally optimizing agent, in a manner which is quite consistent with Frank Ramsey’s model of intertemporal saving behavior and with modern theories of the behavior of the optimizing consumer. While he did conclude that in the short run income would be the dominant factor underlying consumer behavior, this was an empirical judgement, not simply an assumption about fundamental psychological propensities. Chapter 10 formally introduces the marginal propensity to consume and the multiplier.

Suggested Citation

  • Brian S. Ferguson, 2013. "Lectures on John Maynard Keynes’ General Theory of Employment, Interest and Money (6): Chapters 8, 9 and 10: Keynes’ Theory of Consumer Behaviour," Working Papers 1311, University of Guelph, Department of Economics and Finance.
    • Handle: RePEc:gue:guelph:2013-11
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    File URL: http://www.uoguelph.ca/economics/repec/workingpapers/2013/2013-11.pdf
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    More about this item

    Keywords

    Keynes; General Theory; Keynesian Economics; Classical Economics; Propensity to Consume; Time Preference; Interest Rate; Bequest Motive; Multiplier; Burying bottles of Banknotes.;
    All these keywords.

    JEL classification:

    • B10 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - General
    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • B13 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Neoclassical through 1925 (Austrian, Marshallian, Walrasian, Wicksellian)
    • B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
    • B31 - Schools of Economic Thought and Methodology - - History of Economic Thought: Individuals - - - Individuals
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • N12 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - U.S.; Canada: 1913-
    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-

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