Further Essays on Economic Theory and Policy

By Nicholas Kaldor; F. Targetti et al. | Go to book overview

3
LIMITATIONS OF THE GENERAL THEORY*

Keynes' General Theory of Employment, Interest and Money, published in 1936, will, I think, be acknowledged as the most important, and certainly the most influential, book on economics of the twentieth century and this, I think, has been or will be conceded by his opponents and not only by his followers. It will rank as one of the top five classics in the field--of comparable importance to Adam Smith 's Wealth of Nations, Ricardo's Principles, Marx's Das Kapital, and Alfred Marshall's Principles of Economics.1

Yet compared with these other books--all of which are in the nature of comprehensive treatises covering all aspects of the phenomena with which they deal--Keynes' book is more akin to a polemical pamphlet addressed to trained economists, the main purpose of which is not to teach but to convert the learned reader to a new way of looking at the economic system, based on a limited number of empirically measurable relationships, in order to forge new instruments capable of improving the performance of the economy by fiscal and monetary measures.

When the General Theory first appeared, none of the leading members of the profession understood the message Keynes intended to convey, and all the leading reviews--by economists of the distinction of Jacob Viner in the United States, of Pigou or Dennis Robertson in England--were highly critical and disapproving; and all claimed to have found some basic logical snag which invalidated its main conclusions.

For these conclusions ran counter to the basic premisses on which economic theory was built. Both classical and neo-classical

____________________
*
The Keynes Lecture to the British Academy, 12 May 1982, printed in Proceedings of the British Academy, London, Vol. LXVIII ( 1982), Oxford University Press.
1
Some may dispute the inclusion of Marshall in this list, and would prefer Walras' Elements of Pure Economics as the more profound and logically more consistent statement of neo-classical economic theory. In my view, however, Marshall's recognition of the impossibility of building a 'pure model' based on a few basic axioms and of the limitations of deductive reasoning, led to results which have been more fruitful than those derived from the single-minded pursuit of an axiomatic theory of value.

-74-

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