Keynesianism - 1

Today, I started reading (long pending) John Maynard Keynes’ book called GENERAL THEORY OF EMPLOYMENT, INTEREST & MONEY.

You people may ask, why Keynes named/started his book name with the term “GENERAL”? In his first Chapter only he explained that, to contrast the “CLASSICAL” word from CALSSICAL THEORY OF ECONOMICS what he learnt through out his student lifetime!!!

He argued that classical theory is applicable to only special cases like EQUILIBRIUM which will not happen in our day today life.

In 2nd Chapter he talked about the employment, real wages, profits and their correlation which I Just browsed instead going into deep. And he concluded the 2nd chapter by these 3 points…

Classical theory depends in succession on the assumptions:

(1) That the real wage is equal to the marginal disutility of the existing employment;

(2) That there is no such thing as involuntary unemployment in the strict sense;

(3) That supply creates its own demand in the sense that the aggregate demand price is equal to the aggregate supply price for all levels of output and employment.

These three assumptions, however, all amount to the same thing in the sense that they all stand and fall together, any one of them logically involving the other two.


will be continued...