"Would it be accurate to say that Keynes' major innovation in economics was to treat government spending as a big factor to be considered in economic study ? And to express so much concern about abating unemployment and the bust phase of the business cycle ? Before Keynes , political economy did not consider government activity as part of its subject matter ? Was there "the economy" before Keynes ?"
i don't think that's accurate. if you read the general theory you will notice he spends very little actual time talking about government spending. in book one he presents and criticizes neoclassical (what he, confusingly, calls classical economics) economics's basic theory of employment, output and investment determination. at the end of book one he lays out the theory of effective demand. he calls book two "definition and ideas" where he redefines expectations as it relates to economics, how to measure output in a way relevant to economics and how to define and measure income, investment and savings. book three is simply explores the propensity to consume (it's "objective" factors. "subjective" factors and "the marginal propensity to consume and the multiplier". book four discusses various things that cause a capitalist to invest or not invest. here he goes through some of the most crucial factors of the book. he goes through why capitalists make fixed capital investment (the marginal efficiency of capital ie the expected "value" of the income that asset will produce being a certain level higher then the cost of producing it), how long term expectations effect the decision to invest, how interest rates effect that decision, the reason people value liquidity and what is special about money and the "money-rate" of interest (there's also a chapter called "sundry observations about capital" which essentially explores the interplay of liquidity, savings, the rate of interest and the marginal efficiency of capital as relating to investment and another chapter where he essentially lays out his theory of employment in a different way.) book five is about "money wages and prices" and explores his theory of price and money wage determination and how money wages, not real wages, are central to the functioning of the economic system . book six is kind of an epilogue where he discusses the implications of his "general theory" on differing policy suggestions, "social philosophy" and the "trade cycle". in this context i don't think introducing government to economic analysis was a primary or even substantial part of keynes's economics. the word "government" is used only 13 times in the general theory and half of those references happen during the "propensity to consume" chapters. in my mind keynes brought many unique things to the table. first, he gave a place for human agency. in neoclassical theory, markets adjust supply and demand for all "factors of production" not just in money terms, but in real terms. "agents" have perfect information about their lives and the future. in this sense neoclassical competition abstracts not only from reality, but humans themselves. keynes gave entrepreneurs the ability to influence the level of investment, employment, output in his analysis, something that neoclassical economics did not (but notably marx did). under this umbrella i include his explorations of uncertainty, expectations and convention as they relate to capitalist production. Second, he provided an alternative framework that allowed involuntary employment to exist and persist. third, he showed how money and the money rate of interest had properties very different from any other commodity and was central to the functioning of a capitalist economy. in addition, he presented a capitalist economy as a monetary production economy and not a good's producing economy. under capitalism, fixed capital is not efficient because it is physically productive, but because of it's ability to produce a certain level of money income (hence why the marginal efficiency of capital is defined in money terms, not in physical terms). fourth, he provided a theory if liquidity preference that explained how people's desire for liquidity changed and how that desire effected the determination of savings, investment, output and employment. government only became important afterwards because, following the general theory to it's conclusion, it was the only source of autonomous demand that could alleviate involuntary unemployment once expectations become pessimistic and self-reinforcing. -- -Nathan Tankus ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ _______________________________________________ pen-l mailing list [email protected] https://lists.csuchico.edu/mailman/listinfo/pen-l
