The Gold Standard and
It is somewhat strange to find that, in the voluminous secondary literature given over to the study of the activities of economists in Cambridge during the interwar period, little attention has been devoted to the exchanges of comment and criticism that passed between Keynes and Pigou, both on practical matters of economic policy and on the theory of money and the theory of employment. The apparent neglect of this material is all the more perplexing, given that it encapsulates in miniature, so to speak, many of the more important issues that were at stake in Keynes’s challenge to what he dubbed the classical theory of money and employment. Indeed, since according to Keynes, Pigou was the chief representative of that very school of thought,1 the comment and criticism directed by each toward the work of the other warrants serious attention.
Although the material that forms the basis of the analysis of the debates between Keynes and Pigou took different forms,2 the controversy between them in the interwar years may conveniently be divided into four stages. The first stage covers the period leading up to and immediately following Britain’s return to the gold standard in 1925. The second stage covers the period of the Treatise on Money. The third and fourth stages overlap—the former relates to Keynes’s reactions to Pigou’s Theory of Unemployment, the latter to Pigou’s reactions to the General Theory. The purpose here to examine the first two stages the better to highlight the issues at stake in the debates by which they were characterized.