Keynes’s General Theory in a nutshell

Brad DeLong blogged Paul Krugman’s intro to the General Theory

Stripped down, the conclusions of The General Theory might be expressed as four bullet points:

  • Economies can and often do suffer from an overall lack of demand, which leads to involuntary unemployment
  • The economy’s automatic tendency to correct shortfalls in demand, if it exists at all, operates slowly and painfully
  • Government policies to increase demand, by contrast, can reduce unemployment quickly
  • Sometimes increasing the money supply won’t be enough to persuade the private sector to spend more, and government spending must step into the breach

    To a modern practitioner of economic policy, none of this – except, possibly, the last point – sounds startling or even especially controversial. But these ideas weren’t just radical when Keynes proposed them; they were very nearly unthinkable. And the great achievement of The General Theory was precisely to make them thinkable….