Academic journal article Journal of Economic Issues

To the Rescue or to the Abyss: Notes on the Marx in Keynes

Academic journal article Journal of Economic Issues

To the Rescue or to the Abyss: Notes on the Marx in Keynes

Article excerpt

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The General Theory of Employment, Interest, and Money of 1936 is missing a line of argument that is prominent in an earlier draft. In the 1933 draft, John Maynard Keynes used a taxonomic framework to differentiate the classical theory of capitalism from his general theory. The taxonomy showed that, depending upon how money and the motivation of production are incorporated, an economic regime's market-clearing results will be either ensured or merely possible. In contrast to the "co-operative" economy of classical theory, the "entrepreneur" economy described by Keynes' general theory can achieve not only market clearing as a possible outcome but also stagnation and instability. In discussing the taxonomy, Keynes commented: "The distinction between a co-operative economy and entrepreneur economy bears some relation to a pregnant observation made by Karl Marx,--though the subsequent use to which he put this observation was highly illogical" (1979, 81). Keynes proceeded to refer specifically to Marx's distinction between C-M-C and M-C-M, that is, between (1) selling commodities (C) for money (M) in order to purchase other commodities and (2) buying commodities with money in order to obtain more money.

This article explores a tension that haunts the theoretical development leading to The General Theory. The tension is partially engendered by an aspect of common cause between Keynes and Marx. Specifically, the rhetorical task of persuading political economists to rethink capitalism's inherent stability requires a refutation of classical theory's thin concepts of money and the monetized nature of capitalist production. The antithesis is provided, of course, by the opposed political agendas: Keynes sought to theorize capitalism's instability in order to find effective policy controls, while Marx aimed at showing that this instability is fundamentally beyond control. This article examines the dissonant synthesis or unstable compound formed in the 1933 draft by Keynes' taxonomic argument and hit-and-run reference to Marx's capital circuits analysis.

When we analyze the manners in which Marx and Keynes opposed classical theory, we can see significant similarities in their treatment of money, the motivation of production, and the conditions of crisis potential. Focusing on these objects, the three sections of this article summarize Keynes' taxonomic argument, describe Marx's capital circuits analysis, and analyze the similarities between Keynes' heuristic taxonomy and Marx's critique of classical economics. While its objective is to analyze the Marx in Keynes, the article provides indirect support for the view that the taxonomic framework and its theoretical linkage to Marx were eschewed in The General Theory of 1936 so that Keynes "the savior" could protect his "fellow economists" from a theory that logically leads to the abyss of capitalism's basic unmanageability.

Keynes' Taxonomy of Economic Systems

We should not judge a book by its cover, we are told. But sometimes the title is instructive, especially when it changes from draft to draft. Before publication in 1936 as The General Theory of Employment, Interest, and Money, the 1933 version bore the shorter title The General Theory of Employment, perhaps revealing a political economist's prime concern. Even earlier, Keynes originally considered "The Monetary Theory of Production" as the title for his general theory of capitalism. This section summarizes the theoretical distinctions Keynes made with the taxonomic analysis of 1933. This summary may shed light on why "The Monetary Theory of Production" made sense as a possible title. It also may illuminate the theoretical link to Marx that Keynes created with his seemingly odd reference, the meaning of which is the topic of sections 2 and 3 below. More than a theoretical curio, Keynes' reference to Marx puts in sharp relief Keynes' view that the classical-neoclassical tradition failed to theorize essential fe atures of capitalism: the complex functions of money, the motivation of production, and their combined implications for stagnation and crisis in an economy in which investment decisions are time-bound, uncertain, and consequential if wrong. …

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