Keynes and The Classical Economists

Abstract

From the beginning to the end of the General Theory, Keynes continually insisted on the break between his own theory and that of the classical economists. He was convinced that the operative forces in the capitalist system are incapable of promoting consistent full resource utilization or of creating conditions ensuring that the economy moves spontaneously toward its full employment stance. Unemployment is not to be discerned as a temporary phenomenon ascribable only to frictions or imperfections: it is a structural attribute of capitalism. Furthermore, the extreme instability in the marginal efficiency of capital and in liquidity preference precludes simplistic rules of economic policy capable of automatically steering the economy to the full employment goal. Keynes’s challenge to the traditional theory can hardly be overstated.