In 1935, while he was writing The General Theory of Employment, Interest and Money, John Maynard Keynes wrote to George Bernard Shaw, "I believe myself to be writing a book on economic theory which will largely revolutionise--not, I suppose, at once but in the course of the next ten years--the way the world thinks about economic problems."[1] Keynes was not wrong--The General Theory did cause a great change in economic thought. It disproved many traditional beliefs about savings, investment, and especially unemployment. The question can still be asked, however, to what extent Keynes's General Theory was, in fact, revolutionary and to what extent was it based on the economic theories before it. Some of the ideas presented in The General Theorycan be found in the writings of Malthus and Hobson, and in the writings of more contemporary economists such as Knut Wicksell, D.H. Robertson, and Richard F. Kahn. Also, the actions that Keynes in The General Theory argued were necessary to be executed by government had already been started in certain countries several years before The General Theory came out.
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Gold Bar and Investment Jewelry
InvestmentBut even though many of Keynes's individual ideas in The General Theory were not completely original, Keynes was the first person to get them widely accepted and to use them to influence government policy. In addition, Keynes provided a much more "general" theory than had existed in the past by exposing assumptions of classical economists, and he caused a great shift in emphasis to aggregates, the short run, and the problems of employment. In these ways The General Theory was revolutionary.
The General Theory was published in 1936. The basic idea of The General Theory is that "the equilibrium level of employment...will depend on the amount of current investment....But there is no reason in general for expecting it to...