PREFACE
This book is chiefly addressed to my fellow economists. I hope
that it will be intelligible to others. But its main purpose is
to deal with difficult questions of theory, and only in the
second place with the applications of this theory to practice.
For if orthodox economics is at fault, the error is to be found
not in the superstructure, which has been erected with great care
for logical consistency, but in a lack of clearness and of
generality in the pre misses. Thus I cannot achieve my object of
persuading economists to re-examine critically certain of their
basic assumptions except by a highly abstract argument and also
by much controversy. I wish there could have been less of the
latter. But I have thought it important, not only to explain my
own point of view, but also to show in what respects it departs
from the prevailing theory. Those, who are strongly wedded to
what I shall call 'the classical theory', will fluctuate, I
expect, between a belief that I am quite wrong and a belief that
I am saying nothing new. It is for others to determine if either
of these or the third alternative is right. My controversial
passages are aimed at providing some material for an answer; and
I must ask forgiveness If, in the pursuit of sharp distinctions,
my controversy is itself too keen. I myself held with conviction
for many years the theories which I now attack, and I am not, I
think, ignorant of their strong points.
The matters at issue are of an importance which cannot be
exaggerated. But, if my explanations are right, it is my fellow
economists, not the general public, whom I must first convince.
At this stage of the argument the general public, though welcome
at the debate, are only eavesdroppers at an attempt by an
economist to bring to an issue the deep divergences of opinion
between fellow economists which have for the time being almost
destroyed the practical influence of economic theory, and will,
until they are resolved, continue to do so.
The relation between this book and my Treatise on Money
[JMK vols. v and vi], which I published five years ago,
is probably clearer to myself than it will be to others; and what
in my own mind is a natural evolution in a line of thought which
I have been pursuing for several years, may sometimes strike the
reader as a confusing change of view. This difficulty is not made
less by certain changes in terminology which I have felt
compelled to make. These changes of language I have pointed out
in the course of the following pages; but the general
relationship between the two books can be expressed briefly as
follows. When I began to write my Treatise on Money I was
still moving along the traditional lines of regarding the
influence of money as something so to speak separate from the
general theory of supply and demand. When I finished it, I had
made some progress towards pushing monetary theory back to
becoming a theory of output as a whole. But my lack of
emancipation from preconceived ideas showed itself in what now
seems to me to be the outstanding fault of the theoretical parts
of that work (namely, Books III and IV), that I failed to deal
thoroughly with the effects of changes in the level of
output. My so-called 'fundamental equations were an instantaneous
picture taken on the assumption of a given output. They attempted
to show how, assuming the given output, forces could develop
which involved a profit-disequilibrium, and thus required a
change in the level of output. But the dynamic development, as
distinct from the instantaneous picture, was left incomplete and
extremely confused. This book, on the other hand, has evolved
into what is primarily a study of the forces which determine
changes in the scale of output and employment as a whole; and,
whilst it is found that money enters into the economic scheme in
an essential and peculiar manner, technical monetary detail falls
into the background. A monetary economy, we shall find, is
essentially one in which changing views about the future are
capable of influencing the quantity of employment and not merely
its direction. But our method of analysing the economic behaviour
of the present under the influence of changing ideas about the
future is one which depends on the interaction of supply and
demand, and is in this way linked up with our fundamental theory of value. We
are thus led to a more general theory, which includes the
classical theory with which we are familiar, as a special case.
The writer of a book such as this, treading along unfamiliar
paths, is extremely dependent on criticism and conversation if he
is to avoid an undue proportion of mistakes. It is astonishing
what foolish things one can temporarily believe if one thinks too
long alone, particularly in economics (along with the other moral
sciences), where it is often impossible to bring one's ideas to a
conclusive test either formal or experimental. In this book, even
more perhaps than in writing my Treatise on Money, I have
depended on the constant advice and constructive criticism of Mr
R.F. Kahn. There is a great deal in this book which would not
have taken the shape it has except at his suggestion. I have also
had much help from Mrs Joan Robinson, Mr R.G. Hawtrey and Mr R.F.
Harrod, who have read the whole of the proof-sheets. The index
has been compiled by Mr D. M. Bensusan-Butt of King's College,
Cambridge.
The composition of this book has been for the author a long
struggle of escape, and so must the reading of it be for most
readers if the author's assault upon them is to be successful,¾a struggle of escape from habitual modes
of thought and expression. The ideas which are here expressed so
laboriously are extremely simple and should be obvious. The
difficulty lies, not in the new ideas, but in escaping from the
old ones, which ramify, for those brought up as most of us have
been, into every corner of our minds.
J.M. KEYNES
13 December 1935