On Interpreting Keynes: A Study in Reconciliation

The publication of Keynes' General Theoryin 1936 caused a revolution in economics but, as with most revolutions, its meaning has been contested ever since. In particular, two major schools criticizing the common textbook interpretations of Keynes have emerged, the "fundamentalist" and the "reductionist" (or Clower-Leijonhufvud) factions.

It has long been accepted that these two major schools of criticism are irreconcilable, but this book refutes that position. It argues that a close reading of the key texts of both factions reveals that they disagree through misunderstandings and differences of emphasis rather than through fundamental differences of opinion. The book illustrates their agreement by a careful examination of both schools' positions on the connected topics of unemployment, demand, interest rates, and expenditure. Throughout, the schools are consistent in their emphatic acknowledgement that markets do not function reliably, and this is the starting point from which their positions can be synthesized.