On Interpreting Keynes: A Study in Reconciliation

The publication of Keynes’ General Theory in 1935 caused a revolution in economics but, as with most revolutions, its meaning has been contested ever since. In particular, two major schools criticising the common textbook interpretations of Keynes have emerged, the fundamentalist’ and the reductionist’ (or Clower-Leijonhufved) factions. It has long been accepted that these two major schools of criticism are irreconcilable, but this book refutes that position. It argues that a close reading of the key texts of both factions reveal that they disagree through misunderstandings, and differences of emphasis, rather than through fundamental differences of opinion. The book illustrates this by a careful working through of both schools’ positions on the connected themes of unemployment, demand, interest rates and expenditure. Throughout both schools are consistent in their emphatic acknowledgement that markets do not function reliably, and this is the starting point from which their positions can be synthesised.