The General Theory of Employment, Interest, and Money

Keynes offers some pretty inspiring theories beneficial to would-be tyrants and solutions that might work better in an alternate reality in which black swan events do not exist.

"I conceive, therefore, that a somewhat comprehensive socialization of investment will prove the only means of securing an approximation to full employment; though this need not exclude all manner of compromises and of devices by which public authority will co-operate with private initiative" Keynes' GT argues that the classic theory of laissez-faire is actually a rare case. His general theory, that a capitalist economy is unstable due to the inherent flaws of capitalism, is the normal condition. An objective of full employment, through monetary and fiscal policy, will alleviate the curse of depressions and major recessions. By allowing government control of output his theory has saved capitalism from demise. It is unfortunate that Keynes' name is used in a modern sense to support actions which he directly refutes in the GT. A must read for anyone interested in the GT is Hyman Minsky's 'Stabilizing an Unstable Economy'. Sidenote: The BN edition of the GT is terrible. I ordered the hardcover edition to have a permanent reference. This edition has numerous typos, nearly unreadable tables, awkward physical dimensions, and Keynes' internal citations do not line up with BN's pages. Also, for some reason the last paragraph in some chapters are a different font. It is possible that it was an update by Keynes but no clue is given in the book. Not even the original date of publication is given. Avoid the BN edition if possible.

A lot of "Kindle" books are not produced and formatted for the Kindle and as a result they are very difficult to read and navigate -- especially for a non-fiction book like Keynes' "General Theory". I wanted to focus specifically on reviewing this book as a Kindle edition. Clearly, the best version of "General Theory" for the Kindle is from Signalman Publishing which has produced and formatted Keynes' works specifically for the Kindle. This version includes a hyper-linked Table of Contents and is fully footnoted with all notes hyper-linked within the text. Additionally, all the equations include the Greek character set as displayed in the original version (something that other Kindle versions either do not have or incorrectly display the equations). If you are going to read Keynes on your Kindle, save yourself a lot of grief and get a version that will correctly display and navigate for you on your Kindle.

One sometimes hears that money is the root of all evil. Keynes would agree, but not because of any animosity towards the profit motive (Keynes was definitely not a socialist and he even agreed with and endorsed Hayek's "The Road to Serfdom"), but because in an economy using money imbalances between the value in any currency of demand and the value of supply are possible. Virtually all economists accept the price mechanism which speedily reconciles any imbalance between supply and demand. The macroeconomy is the sum of all markets and should therefore be more or less in equilibrium. The great French economist Jean-Baptiste Say formulated this in one of the rare laws in economics : every aggregate supply creates a corresponding aggregate demand. The law definitely holds in a barter economy, because even if products or services are not consumed they are lent out to others who will use them. Hoarding purchasing power by keeping money to put under the matress is impossible... without money. Money makes it possible to have leakages of purchasing power because money received by selling goods or services is not spent. If money earned is not consumed it is by definition saved. Usually this would mean that these sums are made available to individuals or companies in need of capital so that savings are equal to investment. Any imbalance would be readjusted by a change in the interest rate. However, Keynes pointed out that saving is not necessarily synonimous with investment viz. that savings can be hoarded as money and that there are good reasons for doing so.

A classic, definitely not an easy read. Keynes brings his economic phillosphies into the light. Not the kindest author but his chapter The Marginal Efficiency of Capital is epic and relivent today. Published in 1936, this book stands the test of time and allows you to develop a mental model of numerous business cycles. Who's reading Keynes? Warren Buffet, he quotes Keynes like everyone else quotes Shakespeare.

Sitting here is Baghdad, one hears often a simple solution to the counter insurgency problem. Usually it's some combination of winning hearts and minds and killing terrorists. The solution may be closer to burying money in the sand. That idea came from John Maynard Keynes who faced far larger problems than the war in Iraq. It's been 21 years since I read Keynes' General Theory, eighty years since it was first published. (My Econ department believed in teaching both major economic choices of the day: Capitalism and Communism. So I got some look at both.) What sold me on Keynes was his General Theory. What turned me against Marxism were my visits to Eastern Block countries where I could see its effect...on the economy and on humanity. There is a heart inside Keynes book, the General Theory, the same heart that wrote The Economic Consequences of the Peace. Keynes does get blamed for failed economic policies of those Keynesians of the sixties and seventies who believed they could tinker the economy into perfection. Mistrust developed in Keynes General Theory. But when I read his book, from start to finish, I came to the conclusion that people just didn't finish the book. They must have skipped over the second half to believe you could just spend your way to prosperity or reverse bad times with clever monetary policy. His theory has worked for 80 years. The book may not be for you, but it is a masterpiece, something to be savored as the seminal work which transformed Classical Economics at a time when the world needed saving, when the alternative, Marxism, which stole the heart of half the globe, but would prove capable only of impoverishing and dehumanizing. The world owes more the Keynes than it acknowledges. If you love the history of ideas, it's a must read or at least it adds a credibility to your library which a select few can appreciate.