The Economics of Keynes 
                     
                     
                     
                     
                  The Economics of 
                  Keynes 
                   
                  A New Guide to The General Theory 
                     
                     
                     
                     
                     
                     
                  Mark Hayes 
                  Senior Research Fellow, 
                  Homerton College, University of Cambridge, UK 
                  Visiting Fellow, 
                  Durham Business School, University of Durham, UK 
                  Newcastle Business School, Northumbria University, UK 
                  NEW DIRECTIONS IN MODERN ECONOMICS 
                  Edward Elgar 
                  Cheltenham, UK · Northampton, MA, USA 
                                     Contents 
                                      
                                      
                                     Contents of Appendices                                                        vii 
                                     Foreword                                                                      ix 
                                     Preface                                                                       xi 
                                         
                                     FIVE PROPOSITIONS OF THE GENERAL THEORY                                        1 
                                     PROLOGUE                                                                       2 
                                           P.1   Equilibrium                                                        3 
                                           P.2   Competition                                                        9 
                                           P.3   Money                                                             14 
                                           P.4   Expectation                                                       16 
                                           P.5   Liquidity                                                         20 
                                           APPENDIX TO THE PROLOGUE                                                24 
                                     1.    TWO THEORIES OF EMPLOYMENT                                              46 
                                           1.1   General Theory or Special Case?                                   48 
                                           1.2   The Classical Theory of Employment                                50 
                                           1.3   The Point Of Effective Demand as the Position of System 
                                                 Equilibrium                                                       54 
                                           1.4   Summary                                                           59 
                                           APPENDIX TO CHAPTER 1                                                   62 
                                     2.    DEFINITIONS AND IDEAS                                                   69 
                                           2.1   Defining Price and Quantity                                       70 
                                           2.2   Expectation as Determining Output and Employment                  73 
                                           2.3   The Investment-Saving Identity                                    78 
                                           2.4   Summary                                                           83 
                                           APPENDIX TO CHAPTER 2                                                   86 
                                                                             v 
                                           vi          The Economics of Keynes: A New Guide to The General Theory 
                                            
                                           3.     THE PROPENSITY TO CONSUME                                                         119 
                                                  3.1    Average and Marginal                                                       120 
                                                  3.2    Consumption and Employment                                                 124 
                                                  3.3    Income, Effective Demand and the Multiplier                                125 
                                                  3.4    Summary                                                                    127 
                                                  APPENDIX TO CHAPTER 3                                                             129 
                                           4.     THE INDUCEMENT TO INVEST                                                          138 
                                                  4.1    A Hierarchy Of Liquidity                                                   139 
                                                  4.2    Stocks and Flows                                                           144 
                                                  4.3    The State of Long-Term Expectation                                         147 
                                                  4.4    The Nature of Liquidity                                                    151 
                                                  4.5    Summary                                                                    154 
                                                  APPENDIX TO CHAPTER 4                                                             156 
                                           5.     EMPLOYMENT, MONEY AND THE PRICE-LEVEL                                             174 
                                                  5.1    The Equilibrium Sub-System of The General Theory                           175 
                                                  5.2    The Influence of Money-Wages on Employment                                 177 
                                                  5.3    The Influence of Employment on Money-Wages and Prices  179 
                                                  5.4    Money and the Price-Level                                                  181 
                                                  APPENDIX TO CHAPTER 5                                                             184 
                                           6.     POLICY IMPLICATIONS                                                               197 
                                                  6.1    Notes on the Trade Cycle                                                   198 
                                                  6.2    Other Remedies for Chronic Under-Employment                                200 
                                                  6.3    Political Implications                                                     203 
                                                  6.4    Conclusion                                                                 205 
                                                   
                                           EPILOGUE                                                                                 206 
                                                  E.1  Stagflation                                                                  208 
                                                  E.2  Full Employment                                                              213 
                                                  E.3  Growth and Innovation                                                        219 
                                                  E.4  Conclusion                                                                   221 
                                                  APPENDIX TO THE EPILOGUE                                                          223 
                                           References                                                                               238 
                                           Index                                                                                    247