Among the ranks of economists, there exists a propensity to label any theoretical results which, for some reason or another, throw up a market failure of some sort which can be improved upon by policy as "Keynesian". What makes this particularly unfortunate is that this might imply that The General Theory of Employment, Interest and Money, the formidable 1936 treatise by John Maynard Keynes, was nothing more than an anthology of policy conclusions to be applied to cases of market failures or, more simplistically, a manifesto for government intervention. What might have been the impact of "Keynesian Revolution" on public policy is not our concern here. What we shall seek to understand is how (and indeed, whether) the General Theory actually contributed to the analytical arsenal of modern economics. Such a task, of course, must involve some degree of unlicensed interpretation. Such is unavoidable - for while Keynes might have been a systematic thinker, the style of his work does not, unfortunately, make that very apparent. Surprisingly for such a usually clear writer, The General Theory is a dense, muddled book. Why this is so become apparent when we realize the manifold objectives which Keynes set upon himself with this book. From the outset, there were two tasks, a positive one and a negative one. The negative task was to provide an efficient critique of the old orthodox Neoclassical theory; the positive task was the construction of a new theory. Unfortunately, these two tasks are not cleanly divided in pages of the General Theory. At many places, it is not certain where the criticism of the old ends and the construction of the new begins. This is further complicated by Keynes's belief that he was providing a more general theory than the Neoclassical one. This meant effectively that he could not really undertake a thorough job with his critique of the old as such an undertaking might compromise his own new theory's claims to generality as well. Thus, in the General Theory, we find criticism is interspersed with contribution, novel concepts couched in an old language, momentary insights left teasingly hanging by themselves in footnotes an asides, the most damaging critiques withheld and the closure of the system open to interpretation. Of course, these are the perfect ingredients for a "classic": it provides sufficient room for interpretation to generate interminable debates on "what Keynes really meant". In the struggle for apostolic succession, various schools of thought have emerged which have struggled to interpret the content and importance of Keynes's message. Some (such as the Post Keynesians) are quite "fundamentalist", seeking to build their theoretical framework on "chapter-and-verse" of the General Theory. Others (such as the New Keynesians) make no pretense to even share the central message of the General Theory but merely claim affiliation on the basis of the similarity of policy conclusions. Most other interpreters were willing to take a middle ground between these two extremes, but even these could not come to an agreement. The most prominent, the Neo-Keynesians, adopted Keynes's new theoretical schema but did not realize that there was also a "critique" of the old theory involved; others (such as the Post-Walrasians) embraced the critique, but replaced Keynes's theoretical building blocks with very different ones. Even the role of Keynes's General Theory in the history of economics is disputed. Some, (such as the Cambridge Keynesians), perceived it as a self-contained, new, revolutionary theory. Others, such as the Monetarists, considered it a temporary insurgency, an aberrant blip on a Neoclassical thoroughfare. Still others, such as the Neo-Ricardians, perceived Keynes as a perhaps unwitting guardian of Classical political economy, who flattened the Neoclassical bump on a Classical thoroughfare. One thing should be made clear. John Maynard Keynes's General Theory has proved to be probably the most influential social science treatise of the 20th Century. It quickly and permanently changed the way the world looked at the economy and the role of government in society. No other economics book, before or since, has had such an impact. A knowledge of it, even if only a passing knowledge, is an essential part of the training of any economist and of the education of any lay person. Regretfully, there are some radical ideologues in prominent positions today who claim this is not so. So much the worse for them.
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All rights reserved, Gonçalo L. Fonseca