9. The Keynesian Heritage in Economics

CHAPTER 9

The Keynesian Heritage in Economics^*

KEYNES THE SALESMAN

What difference has the General Theory made? How do economic theory and policy differ from what they would have been if Keynes had never lived?

Keynes sold the economics profession on concern with the macro problems of employment and demand. This concern was not new. Even—or especially—among Chicago economists in the early years of the Great Depression, it had already led to policy recommendations sounding remarkably Keynesian (Davis 1971). But understanding was far from general, as one can verify by browsing through Joseph Dorfmans Economic Mind in American Civilisation (1959) and by considering how experimental and eclectic anti-depression policy was. Keynes saw and provided what would gain attention—harsh polemics, sardonic passages, bits of esoteric and shocking doctrine. It helps a doctrine make a splash, as Harry Johnson (1971) suggested, to possess the right degree of difficulty—not so much as to discourage those who would thrill at being revolutionaries, yet enough to allow those who think they understand it to regard themselves as an elite vanguard.

If anyone should argue that pro-spending policies inspired by Keynesian doctrines contributed to general prosperity in the industrialised countries for roughly two decades after World War II, I would concede the point. It took roughly that long for expectations to become attuned to what was happening, for the Phillips unemployment/inflation trade-off to break down, and for expansionary policies to waste their impact in price inflation rather than maintain the desired real stimulus. The longer-run effects of Keynesianism are another story.

WHAT KEYNES “CROWDED OUT”

Even in its early years, Keynesianism may have been a misfortune. Sounder developments in economic theory might have gained influence had not Keynesianism crowded them off the intellectual scene. What Clark Warburton has called “monetary disequilibrium theory” already had an honourable tradition, extending back at least as far as David Hume in 1752 and P.N. Christiernin in 1761.¹ Even earlier in that century, a rudimentary version evidently found successful expression in policy in several American colonies (Lester 1939/1970, chaps. iii, iv, and v). Warburton’s own efforts to extend the theory and the statistical evidence for it in the 1940s and 1950s were robbed of attention by the then-prevalent Keynesianism.

A sound approach to macroeconomics, in my view, runs as follows (it largely overlaps what W.H. Hutt teaches in his own idiosyncratic terminology). Fundamentally, behind the veil of money, people specialise in producing particular goods and services to exchange them for the specialised outputs of other people. Any particular output thus constitutes demand for other (non-competing) outputs. Since supply constitutes demand in that sense, there can be no fundamental problem of deficiency of aggregate demand. Even in a depression, men and women are willing to work, produce, exchange, and consume. In particular, employers are willing to hire more workers and produce more goods if only they could find customers, while unemployed workers are willing and eager to become customers if only they could be back at work earning money to spend.

This doctrine is not just a crude, Panglossian version of Say’s Law. It goes on to recognise that something may be obstructing the transactions whereby people might gratify unsatisfied desires to the benefit of all concerned. It inquires into what the obstruction might be. In Hurt’s version, villains are obstructing the market forces that would otherwise move wages and prices to market-clearing levels.

Clark Warburton offered a different emphasis. As he argued (e.g., 1966, selection 1, esp. pp. 26—27), a tendency towards equilibrium rather than disequilibrium is inherent in the logic of a market economy. Whenever, therefore, markets are quite generally and conspicuously failing to clear, some essentially exogenous disturbance must have occurred, a disturbance pervasive enough to resist quick, automatic correction. In a depression, what bars people from accomplishing all the exchanges of each other’s goods and services that they desire is a deficient real quantity of money. Such a deficiency could arise either from shrinkage of the money supply or from its failure to keep pace with the demand for money associated with real economic growth. Even then, the real money supply could remain adequate if people marked down their prices and wages sufficiently and promptly. Price and wage “stickiness” is, however, sensible from the standpoint of individual decisionmakers, even though that stickiness, in the face of monetary disturbances, has painful macroeconomic consequences. (An adaptation of this account, drawing on an analogy between levels and trends of prices, can handle the case of “stagflation.” It is unnecessary to assume, as simplistic Keynesian analysis does, that inflation and depression are exact opposites associated respectively with too much and too little aggregate demand.)

REINTERPRETATIONS OF KEYNES

Robert Clower (1965) and Axel Leijonhufvud (1968), and other writers in their tradition, have interpreted Keynes as espousing a good part of the theory just sketched out. (They ignored its earlier expositors.) They emphasise such concepts as the absence of the Walrasian auctioneer, incomplete and costly and imperfect information, false price signals, sluggish or poorly coordinated price adjustments, quantity adjustments besides price adjustments, the dual-decision process (i.e., people’s decisions about trying to buy or sell in some markets depend on whether or not they succeed in carrying out desired transactions in other markets), and the “income-constrained process” (the infectiousness of failure or success in accomplishing transactions). In brief, information gaps and other frictions bar the swift, coordinated, and appropriate readjustment of interdependent yet separately decided prices. In the face of pervasive disturbances, notably monetary disturbances, the price system cannot maintain or readily restore equilibrium.

Clower and Leijonhufvud admit that Keynes did not explicitly state what they suppose he meant. They offer excuses for him. In trying to break free from orthodoxy, he was handicapped by unavailability of the required concepts. The orthodox doctrine he was attacking had not yet been spelled out explicitly enough. Still, ample excuses for not having done or said something are not, after all, the same as actually having done or said it.

WAS KEYNES A “KEYNESIAN”?

Despite Clower and Leijonhufvud, much of what Keynes says in the General Theory (1936) does indeed resemble the supposedly vulgar Keynesian-ism of the textbooks. If Keynes really was a disequilibrium theorist, why did he make so much of the possibility of equilibrium at underemployment? Why did he minimise and almost deny the automatic forces conceivably working, however sluggishly, towards full-employment equilibrium? Why did he repeatedly worry (as in the General Theory, p. 347) about “a chronic tendency throughout human history for the propensity to save to be stronger than the inducement to invest”? “The desire of the individual to augment his personal wealth by abstaining from consumption,” Keynes continued (p. 348), “has usually been stronger than the inducement to the entrepreneur to augment the national wealth by employing labour on the construction of durable assets.” Why did he say (p. 31) that a rich community would find it harder than a poor community to fill its saving gap with investment? Why did he argue (p. 105) that the more fully investment has already provided for the future, the less scope remains for making still further provision? Keynes’s hints at the stagnation thesis and in favour of government responsibility for total investment also suggest that he worried about real factors making for a chronic tendency for demand to prove deficient. So does his emphasis on a “fundamental psychological law” of consumption spending and his hints in favour of income redistribution (p. 373) to raise the overall propensity to consume.

His worries about excessive thrift date back to before the General Theory. Recall, for example, his parable in the Treatise on Money (1930, vol. 1: pp. 176—178) about the devastation wrought by a thrift campaign in an economy of banana plantations; he goes on to compare his own theory with the over-saving or under-consumption theories of Mentor Bouniatian, J.A. Hobson, W.T. Foster and W.Catchings. Keynes’s banana parable describes too simple an economy to be amenable to interpretation along the lines of Clower and Leijonhufvud. The parable does not even mention money. Clearly Keynes was worrying about over-saving as such.

Keynes’s emphasis in the General Theory on a definite multiplier relation between changes in investment and in total income also suggests concern about difficulties more deep-seated than the Clower-Leijonhufvud analysis describes. This analysis interprets Keynes in terms of the dynamics of income-constrained processes associated with deficiencies of information, inadequately adjusted prices, and the attendant discoordination. It seems significant that W.H. Hutt, whose theory of cumulative deterioration in a depression is remarkably similar to that of Clower and Leijonhufvud (Glazier 1970), believes he is expounding a doctrine quite different from what he considers to be the crudities of Keynes.

George Brockway (1986, p. 13) provides an extreme example of crude, popularised Keynesianism. Possibly Keynes’s greatest contribution was his demonstration that in a capitalist system (or in any system that is advanced much beyond bare subsistence), glut is not only possible; it is always imminent.

Liquidity preference makes the economy unable “to buy and pay for everything it produces; hence a glut.” Brockway finds “disgusting and stupid” the attempt being made in the United States nowadays “to ‘balance’ the budget and thus reduce government expenditures at the very moment they should be expanded.”

“Was Keynes a ‘Keynesian’?” Contradicting Leijonhufvud’s thesis, Herschel Grossman in effect answers “Yes”—and properly, in my view (Yeager 1973): “Keynes’ thinking was both substantially in accord with that of his popularisers and similarly deficient” (Grossman 1972, p. 26). He provided no adequate microeconomic foundation for his macro-theory His treatment of the demand for labour, in particular, is inconsistent with the Clower-Leijonhufvud interpretation. Instead of focusing on the labour-market consequences of disequilibrium in the market for current output, Keynes accepted the classical view that unemployment in a depression derives from an excessive real wage rate. Keynes had in mind nothing like Clower’s interpretation of the consumption function and simply offered an ad hoc formulation instead. Neither Keynes’s writings nor the ensuing controversy and popularisation accomplished a shift away from a classical analytical with such writers as Patinkin and Clower.

Professor Allan Meltzer is another economist who does not accept the Clower-Leijonhufvud interpretation of the General Theory as emphasising the supposedly contagious failure of markets to clear because of sticky or malcoordinated prices (Meltzer 1981, esp. pp. 49,59; also Meltzer 1983). Keynes was indeed concerned whether investment would be adequate to fill the savings gap at full employment. Investment tended to be inadequate—not always, but on the average over time—because investors’ long-term expectations were bedevilled by uncertainty (non-quantifiable contingencies, not mere risks that might be estimated). Because expectations were poorly rooted in objective, measurable circumstances, changes in investors’ “animal spirits” tended to be contagious. Because investment thus fluctuated around a sub-optimal level, so did total output and employment. Some sort of government planning of large segments of investment seemed advisable as a remedy.

For Keynes, as also interpreted by Meltzer, then, macroeconomic difficulties were more real than monetary ones. Potted versions of Keynesian theory understandably came to focus on those of its aspects that are relatively easy to build into models—the consumption function, the savings gap to be filled by investment, the multiplier, and various interest elasticities or inelasticities—rather than on the shapeless topic of hesitant and changeable expectations.

Alan Coddington (1976, in Wood 1983, vol. iv: p. 227) commented aptly on Clower’s suggestion that Keynes must have had the dual-decision hypothesis, in particular, “at the back of his mind”:

The picture here seems to be one of Keynes with a mind full of ideas, some of which he got onto the pages of the General Theory, the task being to work out what the remainder must have been. This is a problem of reading not so much between the lines as off the edge of the page.

Early reviews and anniversary reviews of the General Theory collected in the volumes edited by Wood, especially volume 11, provide little or no support for the Clower-Leijonhufvud interpretation. More recent dissenters from that interpretation, in articles also collected in Wood’s volumes, include Ivan Johnson, Robin Jackman, and Victoria Chick.

The distinctive feature of the General Theory, says Don Patinkin,

is not simply its ... concern with changes in output, but the crucial role that it assigns to such changes as an equilibrating force with respect to aggregate demand and supply—or, equivalently, with respect to saving and investment.

This is “what Keynes’s theory of effective demand is all about” and what lends crucial significance to his “fundamental psychological law” of a marginal propensity to consume less than one (Patinkin 1975, in Wood 1983, vol. 1: p. 493). In letters to economists who had written major review articles on the book, Keynes not only failed to reject the interpretation that gave rise to the standard IS-LM apparatus but even criticised reviewers who gave insufficient emphasis to its cornerstone, his theory of effective demand.

So there is no basis for the ... contention ... that the message which Keynes really meant to convey with his General Theory has been distorted by this interpretation. (Patinkin 1981, in Wood 1983, vol. 1: pp. 607-608)

WAS KEYNES A MONETARIST?

As a self-taught Keynesian who had read and re-read the General Theory before taking any college courses in economics, and also as a self-taught monetarist, I long ago was enthusiastic about the apparently monetarist aspects of chapter 17 in particular. Later I became disillusioned. In describing the “essential properties” that make money a prime candidate for being in excess demand and thereby causing depression, Keynes emphasises money’s yield. Its liquidity advantages in excess of carrying costs may well pose a target rate of return that new capital goods could not match, in the view of potential investors. As a result, investment may be inadequate to fill the savings gap. Keynes even considers whether assets other than money, such as land or mortgages, might pose the same sort of troublesomely high target rate of return. He does not perceive the special snarl that results when the thing in excess demand is the medium of exchange, so that the supply of some goods and services can fail to constitute demand for others. He does not perceive the closely related difficulty that money, alone among all assets, has no price of its own and no market of its own. Keynes’s context offered him an inviting opportunity to make Clower’s point (1967), if he really had it in mind, about a possible hiatus between sales and purchases involving the one thing used in practically all transactions; yet he did not seize that opportunity.²

Keynes is not entirely consistent with himself throughout the General Theory, but on the whole the book conveys a real, nonmonetary, theory of macroeconomic disorder. It diverted economic research and policy away from monetary disequilibrium theory.

DISEQUILIBRIUM THEORY AGAIN

That (sounder) theory can explain the consequences of imbalances between demand for and supply of money when prices and wages are not sufficiently flexible promptly to absorb the full impact of a monetary disturbance. It recognises the utter reasonableness of that inflexibility from the standpoint of individual price-setters and wage negotiators. Although myriad prices and wages are interdependent, they are necessarily set and adjusted piecemeal in a roundabout process. Whether a contemplated transaction can take place to the advantage of both potential parties may well depend on prices besides those subject to the decisions of those parties.

H.J. Davenport, to mention just one example from early twentieth-century America, emphasised the monetary nature of depression.

It remains difficult to find a market for products, simply because each producer is attempting a feat which must in the average be an impossibility—the selling of goods to others without a corresponding buying from others... .[T]he prevailing emphasis is upon money, not as intermediate for present purposes, but as a commodity to be kept... .[T]he psychology of the time stresses not the goods to be exchanged through the intermediary commodity, but the commodity itself. The halfway house becomes a house of stopping... .Or to put the case in still another way: the situation is one of withdrawal of a large part of the money supply at the existing level of prices; it is a change of the entire demand schedule of money against goods. (1913, pp. 319—320)

Davenport also recognised (p. 299) that the depression would be milder and shorter if prices could fall evenly all along the line. In reality, however, not all prices fall with equal speed. Wages fall only slowly and with painful struggle, and entrepreneurs may be caught in a cost-price squeeze. Existing nominal indebtedness also poses resistance to adjustments.³

Monetary disequilibrium theory not only has a long and venerable history but was at times the dominant view on macroeconomics (cf. Warburton’s writings). Much evidence supports it, including statistical evidence of the sort that present-day monetarists produce.

LINGERING KEYNESIANISM

Unfortunately, that promising line of analysis was largely crowded out for a long time by such Keynesian concepts as the IS-LM apparatus, which for some years trivialised the confrontation between Keynesians and monetarists into supposed differences of opinion about interest elasticities. I confess that personal experience has made me even more weary of such concepts. While a visiting professor at George Mason University in the fall of 1983, I not only had to clean the blackboard after my classes, as a professor should; I also had to clear away what the inconsiderate professor before me had left on the board. Through the entire semester, more often than not, it seemed to me, what was left was the Keynesian cross diagram illustrating the simple-minded Keynesian multiplier.

I blame the Keynesians for lingering notions that government budget deficits, apart from how they are financed, unequivocally “stimulate” the economy. Examples of taking this for granted are Abrams and others (1983) and Eisner and Pieper (1984). The latter authors even argue, in effect, that partial repudiation of the U.S. government debt through its decline in nominal market value as interest rates rise, and then through erosion of the dollar itself, should count as a kind of government revenue, making the real budget deficit and its real stimulatory effect slighter than they superficially appear to be.

Buchanan and Wagner (1977) argue that the Keynesian justification of budget deficits in specific circumstances has been illegitimately extended by politicians into a reason for complacency about deficits even in a much-widened range of circumstances.

Although Keynes advocated government deficits to boost total spending in a slack economy, he also called for government surpluses to restrain inflation during booms. But politicians have selectively recalled their Keynesian theory, perennially invoking the spending rationale while conveniently ignoring the restraint Keynes envisioned. (Bendt 1984, p. 5)

Perhaps, as is often said, Keynes was over-confident of his ability to turn public opinion and policy choices around when his own assessments changed.⁴

OVERREACTION AND LABEL-SHIFTING

I conjecture that Keynesianism, followed by disillusionment with it, has provoked an intellectual overreaction. I refer to doctrines of “equilibrium always,” which tend to be associated with the rational-expectations or New Classical school, and which treat disequilibrium theories with scorn.⁵

Why should stickinesses persist and contracts go unrevised, obstructing exchanges, when rational market participants would adjust prices promptly and completely to levels at which mutually advantageous transactions could proceed? Equilibrium-always theorists do not see fluctuations in output and employment as reflecting changing degrees of disequilibrium. They suggest, instead, that markets are still clearing, but with transactors sometimes responding to distorted or misperceived prices. Perceptions of relative prices and relative wages are likely to go awry when price inflation occurs at an unexpectedly high or unexpectedly low rate. In the sense that workers and producers are still operating “on their supply curves,” equilibrium, though distorted, continues to prevail. Even this distortion would supposedly be absent if people fully expected and allowed for the underlying changes in monetary policy, as self-interest would lead them to do to the extent that is cost-effectively possible.

Exaggerated notions of how nearly perfect markets are possess a strange appeal for some theorists. Anyway, these exaggerations, together with the exegetical writings of Clower and Leijonhufvud, have given perceptive Keynesians an opportunity to shift their ground gracefully, with an ironic result: something like the venerable monetary-disequilibrium theory, which Keynesianism had crowded out, now finds itself labelled “Keynesian” by leaders in the over-reaction. The very title, “Second Thoughts on Keynesian Economies,” of an article by Robert Barro (1979), a recanted disequilibrium theorist, suggests the apparent notion that theories invoking wage and price stickiness are Keynesian.⁶ Kenneth Arrow (1980, p. 149) casually refers to “Disequilibrium theorists, ... stemming from Keynes.” Stanley Fischer (in Fischer 1980, p. 223) refers to “Keynesian disequilibrium analysis.” James Tobin (1980a, p. 789) refers to “the Keynesian message” as dealing with disequilibrium and sluggishness of adjustment.

Frank Hahn (1980, p. 137) notes “the present theoretical disillusionment with Keynes” (which, he conjectures, will be reversed). Arthur Okun’s posthumous book (1981) spelling out much of the logic of price and wage stickiness is widely regarded as Keynesian. In a new textbook, Hall and Taylor (1986, pp. 13—14, 325) report that

Keynes’s idea was to look at what would happen if prices were “sticky”... . Macro-economic models that assume flexible prices and wages bear the name classical, because it was this assumption that was used by the classical economists of the early twentieth century... .In the 1930s, John Maynard Keynes began to emphasise the importance of wage and price rigidities.

Really! A manuscript once sent me by the authors even referred to the elasticities approach to balance-of-payments analysis as Keynesian.

Among advanced thinkers, or leaders in the overreaction, “Keynesian” apparently serves as a loose synonym for out of fashion and therefore wrong. More generally, though, Keynes enjoys automatic charity. It is widely taken for granted that such a thing as Keynesian economics exists and makes sense. Discussion concerns just what it is to which the label “Keynesian” properly applies. Pro- and anti-Keynesians alike could well use better care in the application of labels and more respect for the history of thought.

KEYNES’S LASTING APPEAL

I do not want to seem too negative. Much can be said in Keynes’s favour. He actively pursued interests in the arts, public service, and many other fields. He made contributions in analysing Indian currency and finance, in assessing economic conditions and the peace settlements after World War I, in probability theory, and in the study of monetary history and institutions. He wrote charming biographical and other essays. His contributions in the Tract of 1923 ran soundly along lines later called monetarist. Despite unintended influences that his later doctrines may have had, Keynes himself was a lifelong and eloquent opponent of inflation (Humphrey 1981).

Here, however, our concern is mainly with the General Theory. In writing it, Keynes was no doubt moved by a benevolent, if perhaps patrician, humanitarianism—he meant well. Assuming that a first-best (monetarist) diagnosis of and policy response to the depression of the 1930s was somehow not in the cards, then the policies seemingly recommended by the General Theory would have been a good second-best approach. In the United States, however, what brought recovery was not policies inspired by Keynes but an almost accidental monetary expansion, unfortunately interrupted in 1936-1937, and finally wartime monetary expansion. The ideas of the General Theory took several years to filter down through the academic world and did not gain major influence in the policy arena until after the war. Those policy ideas may well have been beneficial in the short run, but their long-run harmfulness started becoming evident in the 1960s, and more so in the 1970s.

Why, even today, after so much academic dissection of Keynesian ideas and so much sorry experience with their results in practice, does the Keynes of the General Theory remain for many a fascinating and even heroic figure? The disorganisation, obscurities, and contradictions of the book, together with its apparent profundity and novelty, actually keep drawing attention to it.⁷ Writing in 1946, Paul Samuelson found it

not unlikely that future historians of economic thought will conclude that the very obscurity and polemical character of the General Theory ultimately served to maximize its long-run influence. (Wood 1983, vol. 11: P-193)

Different economists can read their own favourite ideas into the General Theory. Left-wingers, delighted to learn that no mechanism exists to keep saving and investment equal at full employment, can use that supposed fundamental flaw as one more stick to beat the capitalist system with. Right-wing Keynesians (e.g., Polanyi 1948) rejoice that an easy repair will preserve and strengthen the system.

James Schlesinger (1956, in Wood 1983, vol. 11: p. 281) suggested that what makes Keynes so satisfying is not his theoretical structure but his “emotional attractiveness.” For many economists whose views were shaped by the events of the 1930s, he “represents the Proper Attitude Toward Social Problems.” For them, the symbolic Keynes will retain his present position of veneration, for he is the continuing embodiment of the Dreams of Their Youth—the reforming fervor of ancient days.

APPRAISAL

The discussions, research, and attitudes evoked by the General Theory offer much to admire. Even as propaganda for a short-run policy stance, the book may have had merit (as I said above, with heavy qualifications). But does it deserve lasting admiration as a scientific performance? Even from students writing examination papers under time constraint and stress, we teachers expect adequately clear exposition; and a student’s protests about “what he meant... ”—about what was “at the back of his mind,” to adopt a phrase from Keynes’s sympathetic interpreters—do not suffice to get his grade revised upward. Keynes, likewise, hardly deserves credit for what he supposedly may have meant but did not know how to say. If, more than 50 years later, scholars are still disputing the central message of the General Theory, that very fact should count against rather than in favour of Keynes’s claim to scientific stature. Whatever the General Theory was, it was not great science. It was largely a dressing-up of old fallacies. Worse, for many years it crowded better science off the intellectual scene.

If Keynes had never written, I conjecture, experience in the Great Depression would have prodded economists towards rediscovering and perfecting monetary-disequilibrium theory. Researchers like Clark Warburton would have gained respectful attention earlier. Whatever one may say favourably about Keynes’s work, it did divert attention away from theories that stand up better to factual experience and critical inspection.

REFERENCES

Abrams, Richard K., Richard Froyen, and Roger N. Waud. “The State of the Federal Budget and the State of the Economy.” Economic Inquiry 21 (October 1983): 485-503.

Arrow, Kenneth J. “Real and Nominal Magnitudes in Economics.” The Public Interest, Special Issue (1980): 139—150.

Barro, Robert J. “Second Thoughts on Keynesian Economies.” American Economic Review 69 (May 1979): 54—59

———. Macroeconomics. New York: Wiley, 1984.

Bendt, Douglas L. “Leashing Federal Spending.” The Chase Economic Observer 4 (March/April 1984): 3—5.

Brockway, George P. “Choking to Death on Cream.” New Leader 69 (January 1986): 12—13.

Buchanan, James M., and Richard E. Wagner. Democracy In Deficit: The Political Legacy of Lord Keynes. New York: Academic Press, 1977.

Buiter, Willem. “The Macroeconomics of Dr. Pangloss: A Critical Survey of the New Classical Macroeconomics.” Economic Journal 90 (March 1980): 34—50.

Christiernin, Pelir Niclas. Summary of Lectures on the High Price of Foreign Exchange in Sweden. 1761. In The Swedish Bullionist Controversy, translated and edited by Robert V. Eagly, 41—99. Philadelphia: American Philosophical Society, 1971.

Clower, Robert W. “The Keynesian Counterrevolution: A Theoretical Appraisal.” In The Theory of Interest Rates, edited by F.H. Hahn and F.P.R. Brechling, 103—125. London: Macmillan, 1965.

———. “A Reconsideration of the Micro-foundations of Monetary Theory.” Western Economic Journal 6 (December 1967): 1—9.

Davenport, Herbert J. The Economics of Enterprise. New York: Macmillan, 1913.

Davis, J. Ronnie. The New Economics and the Old Economists. Ames: Iowa State University Press, 1971.

Dorfman, Joseph. The Economic Mind in American Civilization. Vol. 5. New York: Viking Press, 1959.

Eisner, Robert, and Paul J. Pieper. “A New View of the Federal Debt and Budget Deficits.” American Economic Review: 74 (March 1984): 11—29.

Fischer, Stanley, ed. Rational Expectations and Economic Policy. Chicago: University of Chicago Press, 1980.

Glazier, Evelyn M. Theories of Disequilibrium: Clower and Leijonhufvud Compared to Hutt. MA thesis, University of Virginia, 1970.

Greidanus, Tjardus. The Value of Money. 2^nd ed. London: Staples Press, 1950.

Grossman, Herschel I. “Was Keynes a ‘Keynesian? A Review Article.” Journal of Economic Literature 10 (March 1972): 26—30.

Hahn, Frank. “General Equilibrium Theory.” The Public Interest, Special Issue (1980): 123—138.

Hall, Robert E., and John B. Taylor. Macroeconomics. New York: Norton, 1986.

Hayek, FA. “Personal Recollections of Keynes and the ‘Keynesian Revolution.” 1966. In A Tiger by the Tail, 2^nd ed. London: IEA, 1978.

Hume, David. “Of Money.” 1752. In Writings on Economics, edited by Eugene Rotwein, 33-46. Madison: University of Wisconsin Press, 1970.

Humphrey, Thomas M. “Keynes on Inflation.” Federal Reserve Bank of Richmond Economic Review 67 (January/February 1981): 3—13.

Hutt, W.H. Keynesianism—Retrospect and Prospect. Chicago: Regnery, 1963.

———. A Rehabilitation of Say’s Law. Athens: Ohio University Press, 1974.

———. The Keynesian Episode: A Reassessment. Indianapolis: Liberty Press, 1979.

Johnson, Harry G. “The Keynesian Revolution and the Monetarist Counter-Revolution.” American Economic Review 61 (May 1971): 1—14.

Keynes, John Maynard. A Tract on Monetary Reform. London: Macmillan, 1923.

———. A Treatise on Money. 2 vols. London: Macmillan, 1930.

———. The General Theory of Employment, Interest and Money. London and New York: Macmillan and Harcourt Brace, 1936.

Leijonhufvud, Axel. On Keynesian Economics and the Economics of Keynes. New York: Oxford University Press, 1968.

Lester, Richard A. Monetary Experiments: Early American and Recent Scandinavian. 1939. Reprinted Newton Abbot, U.K.: David & Charles Reprints, 1970.

Lucas, Robert E., Jr. “An Equilibrium Model of the Business Cycle.” Journal of Political Economy 83 (December 1975): 1113—1144.

———. “Methods and Problems in Business Cycle Theory.” Journal of Money,Credit, and Banking 12, Pt. 2 (November 1980): 696—715.

Lucas, Robert E., Jr., and Thomas J. Sargent. “After Keynesian Macroeconomics.” In After the Phillips Curve: Persistence of High Inflation and High Unemployment, 49—72. Boston: Federal Reserve Bank of Boston, 1978.

Meltzer, Allan H. “Keynes’s General Theory: A Different Perspective.” Journal of Economic Literature 19 (March 1981): 34—64.

———. “Interpreting Keynes.” Journal of Economic Literature 21 (March 1983): 66—78.

Okun, Arthur. Prices and Quantities. Washington, D.C.: Brookings Institution, 1981.

Polanyi, Michael. Full Employment and Free Trade. Cambridge, U.K.: Cambridge University Press, 1948.

Tobin, James. “Are New Classical Models Plausible Enough to Guide Policy?” Journal of Money, Credit, and Banking 12, Pt. 2 (November 1980a): 788—799.

———. Asset Accumulation and Economic Activity. Oxford: Basil Blackwell, 1980b.

Warburton, Clark. Depression, Inflation, and Monetary Policy. Baltimore: Johns Hopkins Press, 1966.

———. “Monetary Disequilibrium Theory in the First Half of the Twentieth Century.” History of Political Economy 13 (Summer 1981): 285—299.

———. Book-length manuscript on the history of monetary-disequilibrium theory, available in the library of George Mason University, Fairfax, Virginia.

Willes, Mark H. “‘Rational Expectations’ as a Counterrevolution.” The Public Interest, Special Issue (1980): 81—96.

Wood, John Cunningham, ed. John Maynard Keynes: Critical Assessments. 4 vols. London: Croom Helm, 1983.

Yeager, Leland B. “The Keynesian Diversion.” Western Economic Journal 11 (June 1973): 150—163.

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^*‘From Keynes’s General Theory: Fifty Years On, eds. John Burton et al. (London: Institute of Economic Affairs, 1986), 27—44; reprinted in A Critique of Keynesian Economics, ed. Walter Allan (New York: St. Martin’s Press, 1993), 59—71.

¹Pehr Niclas Christiernin (1725—1799) was a Swedish philosopher and economist at the University of Uppsala.

²For further argument that Keynes was preoccupied with oversaving as such rather than with excess demand for holdings of money, see Greidanus 1950, esp. pp. 202—203.

³Further quotations from and citations to pre-Keynesian writings on the prevalence and reasonableness of price and wage stickiness can be found in my “The Keynesian Diversion” (1973).

⁴Professor Hayek recounted just such an expression by Keynes of his belief in his powers of persuasion in a conversation they had “a few weeks before his [Keynes’s] death.” In Hayek 1966/1978, p. 103.

⁵Lucas 1975 and 1980, Lucas and Sargent 1978, and Willes 1980 are examples of writings to this effect. Comments interpreting such writings pretty much as I do include Arrow 1980, Buiter 1980, and Tobin 1980a and 1980b.

⁶Also Barro 1984, esp. chap. 19.

⁷Although I am not directly acquainted with the James Joyce industry, I suspect that Ulysses and the General Theory are alike in offering employment for academic labourers of a certain kind. My own admittedly lame excuse is that I have never written on Keynes except by invitation.