General Theory of Employment，Interest and Money_第1章

　　GENERALINTRODUCTION
　　ThisnewstandardeditionofTheCollectedWritingsofJohnMaynardKeynesformsthememorialtohimoftheRoyalEconomicSociety。HedevotedaverylargeshareofhisbusylifetotheSociety。In1911，attheageoftwenty-eight，hebecameeditoroftheEconomicJournalinsuccessiontoEdgeworth；twoyearslaterhewasmadesecretaryaswell。
　　Heheldtheseofficeswithoutintermittenceuntilalmosttheendofhislife。
　　Edgeworth，itistrue，returnedtohelphimwiththeeditorshipfrom1919to1925；MacGregortookEdgeworth'splaceuntil1934，whenAustinRobinsonsucceededhimandcontinuedtoassistKeynesdownto1945。ButthroughalltheseyearsKeyneshimselfcarriedthemajorresponsibilityandmadetheprincipaldecisionsaboutthearticlesthatweretoappearintheEconomicJournal，withoutanybreaksaveforoneortwoissueswhenhewasseriouslyillin1937。ItwasonlyafewmonthsbeforehisdeathatEaster1946thathewaselectedpresidentandhandedoverhiseditorshiptoRoyHarrodandthesecretaryshiptoAustinRobinson。
　　InhisdualcapacityofeditorandsecretaryKeynesplayedamajorpartinframingthepoliciesoftheRoyalEconomicSociety。ItwasverylargelyduetohimthatsomeofthemajorpublishingactivitiesoftheSociety¾；Sraffa'seditionofRicardo，Stark'seditionoftheeconomicwritingsofBentham，andGuillebaud'seditionofMarshall，aswellasanumberofearlierpublicationsinthe1930s¾；wereinitiated。
　　WhenKeynesdiedin1946itwasnaturalthattheRoyalEconomicSocietyshouldwishtocommemoratehim。ItwasperhapsequallynaturalthattheSocietychosetocommemoratehimbyproducinganeditionofhiscollectedworks。
　　Keyneshimselfhadalwaystakenajoyinfineprinting，andtheSociety，withthehelpofMessrsMacmillanaspublishersandtheCambridgeUniversityPressasprinters，hasbeenanxioustogiveKeynes'swritingsapermanentformthatiswhollyworthyofhim。
　　Thepresenteditionwillpublishasmuchasispossibleof[Pagex]THE
　　GENERALTHEORYOFEMPLOYMENT
　　hisworkinthefieldofeconomics。Itwillnotincludeanyprivateandpersonalcorrespondenceorpublishlettersinthepossessionofhisfamily。Theeditionisconcerned，thatistosay，withKeynesasaneconomist。
　　Keynes'swritingsfallintofivebroadcategories。First，therearethebookswhichhewroteandpublishedasbooks。Second，therearecollectionsofarticlesandpamphletswhichhehimselfmadeduringhislifetimeEssaysinPersuasionandEssaysinBiography。Third，thereisaveryconsiderablevolumeofpublishedbutuncollectedwritings¾；articleswrittenfornewspapers，letterstonewspapers，articlesinjournalsthathavenotbeenincludedinhistwovolumesofcollections，andvariouspamphlets。
　　Fourth，thereareafewhithertounpublishedwritings。Fifth，thereiscorrespondencewitheconomistsandconcernedwitheconomicsorpublicaffairs。
　　ThisserieswillattempttopublishacompleterecordofKeynes'sseriouswritingasaneconomist。Itistheintentiontopublishalmostcompletelythewholeofthefirstfourcategorieslistedabove。TheonlyexceptionsareafewsyndicatedarticleswhereKeyneswrotealmostthesamematerialforpublicationindifferentnewspapersorindifferentcountries，withminorandunimportantvariations。Inthesecases，thisserieswillpublishoneonlyofthevariations，choosingthemostinteresting。
　　ThepublicationofKeynes'seconomiccorrespondencemustinevitablybeselective。Inthedayofthetypewriterandthefilingcabinetandparticularlyinthecaseofsoactiveandbusyaman，topublisheveryscrapofpaperthathemayhavedictatedaboutsomeunimportantorephemeralmatterisimpossible。Weareaimingtocollectandpublishasmuchaspossible，however，ofthecorrespondenceinwhichKeynesdevelopedhisownideasinargumentwithhisfelloweconomists，aswellasthemoresignificantcorrespondenceattimeswhenKeyneswasinthemiddleofpublicaffairs。
　　Apartfromhispublishedbooks，themainsourcesavailabletothosepreparingthisserieshavebeentwo。First，KeynesinhiswillmadeRichardKahnhisexecutorandresponsiblefor[Pagexi]GENERAL
　　INTRODUCTION
　　hiseconomicpapers。TheyhavebeenplacedintheMarshallLibraryoftheUniversityofCambridgeandhavebeenavailableforthisedition。Until1914Keynesdidnothaveasecretaryandhisearliestpapersareinthemainlimitedtodraftsofimportantlettersthathemadeinhisownhandwritingandretained。Atthatstagemostofthecorrespondencethatwepossessisrepresentedbywhathereceivedratherthanbywhathewrote。Duringtheyears1914-18and1940-46
　　KeyneswasservingintheTreasury。Withtheopeningofofficialrecords，manyofthepapersthathewrotehavebecomeavailable。From1919onwards，throughouttherestofhislife，Keyneshadthehelpofasecretary¾；formanyyearsMrsStevens。Thusforthelasttwenty-fiveyearsofhisworkinglifewehaveinmostcasesthecarboncopiesofhisownlettersaswellastheoriginalsofthelettersthathereceived。
　　Therewere，ofcourse，occasionsduringthisperiodonwhichKeyneswrotehimselfinhisownhandwriting。Insomeofthesecases，withthehelpofhiscorrespondents，wehavebeenabletocollectthewholeofbothsidesofsomeimportantinterchangeandwehavebeenanxious，injusticetobothcorrespondents，toseethatbothsidesofthecorrespondencearepublishedinfull。
　　ThesecondmainsourceofinformationhasbeenagroupofscrapbookskeptoveraverylongperiodofyearsbyKeynes'smother，FlorenceKeynes，wifeofNevilleKeynes。From1919onwardsthesescrapbookscontainalmostthewholeofMaynardKeynes'smoreephemeralwriting，hisletterstonewspapersandagreatdealofmaterialwhichenablesonetoseenotonlywhathewrote，butthereactionofotherstohiswriting。WithouttheseverycarefullykeptscrapbooksthetaskofanyeditororbiographerofKeyneswouldhavebeenimmenselymoredifficult。
　　Theplanoftheedition，asatpresentintended，isthis。Itwilltotaltwenty-fivevolumes。Ofthese，thefirsteightwillbeKeynes'spublishedbooksfromIndianCurrencyandFinance，in1913，totheGeneralTheoryin1936，withtheadditionofhisTreatiseonProbability。
　　Therewillnextfollow，asvols。IXandx，EssaysinPersuasionandEssaysinBiography，[Pagexii]THEGENERALTHEORYOFEMPLOYMENT
　　graphy，representingKeynes'sowncollectionsofarticles。EssaysinPersuasionwilldifferfromtheoriginalprintingintworespects:
　　itwillcontainthefulltextsofthearticlesorpamphletsincludedinitandnotasintheoriginalprintingabbreviatedversionsofthesearticles，anditwillhaveaddedoneortwolaterarticleswhichareofexactlythesamecharacterasthoseincludedbyKeynesinhisoriginalcollection。InthecaseofEssaysinBiography，weshalladdoneortwootherbiographicalstudiesthatKeyneswrotelaterthan1933。
　　Therewillfollowfourvolumes，XItoXIV，ofeconomicarticlesandcorrespondence，andonevolumeofsocial，politicalandliterarywritings。
　　WeshallincludeinthesevolumessuchpartofKeynes'seconomiccorrespondenceasiscloselyassociatedwiththearticlesthatareprintedinthem。
　　Thefurtherninevolumes，asweestimateatpresent，willdealwithKeynes'sActivitiesduringtheyearsfromthebeginningofhispubliclifein1905untilhisdeath。Ineachoftheperiodsintowhichweproposetodividethismaterial，thevolumeconcernedwillpublishhismoreephemeralwritings，allofithithertouncollected，hiscorrespondencerelatingtotheseactivities，andsuchothermaterialandcorrespondenceasisnecessarytotheunderstandingofKeynes'sactivities。ThesevolumesarebeingeditedbyElizabethJohnsonandDonaldMoggridge，anditistheirtasktotraceandinterpretKeynes'sactivitiessufficientlytomakethematerialfullyintelligibletoalatergeneration。Untilthisworkhasprogressedfurther，itisnotpossibletosaywithexactitudewhetherthismaterialwillbedistributed，aswenowthink，overninevolumes，orwhetheritwillneedtobespreadoverafurthervolumeorvolumes。Therewillbeafinalvolumeofbibliographyandindex。
　　Thoseresponsibleforthiseditionhavebeen:LordKahn，bothasLordKeynes'sexecutorandasalongandintimatefriendofLordKeynes，abletohelpintheinterpretingofmuchthatwouldotherwisebemisunderstood；
　　SirRoyHarrodastheauthorofhisbiography；AustinRobinsonasKeynes'sco-editorontheEconomicJournalandsuccessorassecretaryoftheRoyalEconomicSociety。Theinitialeditorial[Pagexiii]GENERALINTRODUCTION
　　taskswerecarriedbyElizabethJohnson。MorerecentlyshehasbeenjoinedinthisresponsibilitybyDonaldMoggridge。TheyhavebeenassistedatdifferenttimesbyJaneThistlethwaite，MrsMcDonald，whowasoriginallyresponsibleforthesystematicorderingofthefilesoftheKeynespapers；
　　JudithMasterman，whoformanyyearsworkedwithMrsJohnsononthepapers；
　　andmorerecentlybySusanWilsher，MargaretButler，andBarbaraLowe。GeneralIntroduction[Pageix]
　　GENERALINTRODUCTION
　　ThisnewstandardeditionofTheCollectedWritingsofJohnMaynardKeynesformsthememorialtohimoftheRoyalEconomicSociety。HedevotedaverylargeshareofhisbusylifetotheSociety。In1911，attheageoftwenty-eight，hebecameeditoroftheEconomicJournalinsuccessiontoEdgeworth；twoyearslaterhewasmadesecretaryaswell。
　　Heheldtheseofficeswithoutintermittenceuntilalmosttheendofhislife。
　　Edgeworth，itistrue，returnedtohelphimwiththeeditorshipfrom1919to1925；MacGregortookEdgeworth'splaceuntil1934，whenAustinRobinsonsucceededhimandcontinuedtoassistKeynesdownto1945。ButthroughalltheseyearsKeyneshimselfcarriedthemajorresponsibilityandmadetheprincipaldecisionsaboutthearticlesthatweretoappearintheEconomicJournal，withoutanybreaksaveforoneortwoissueswhenhewasseriouslyillin1937。ItwasonlyafewmonthsbeforehisdeathatEaster1946thathewaselectedpresidentandhandedoverhiseditorshiptoRoyHarrodandthesecretaryshiptoAustinRobinson。
　　InhisdualcapacityofeditorandsecretaryKeynesplayedamajorpartinframingthepoliciesoftheRoyalEconomicSociety。ItwasverylargelyduetohimthatsomeofthemajorpublishingactivitiesoftheSociety¾；Sraffa'seditionofRicardo，Stark'seditionoftheeconomicwritingsofBentham，andGuillebaud'seditionofMarshall，aswellasanumberofearlierpublicationsinthe1930s¾；wereinitiated。
　　WhenKeynesdiedin1946itwasnaturalthattheRoyalEconomicSocietyshouldwishtocommemoratehim。ItwasperhapsequallynaturalthattheSocietychosetocommemoratehimbyproducinganeditionofhiscollectedworks。
　　Keyneshimselfhadalwaystakenajoyinfineprinting，andtheSociety，withthehelpofMessrsMacmillanaspublishersandtheCambridgeUniversityPressasprinters，hasbeenanxioustogiveKeynes'swritingsapermanentformthatiswhollyworthyofhim。
　　Thepresenteditionwillpublishasmuchasispossibleof[Pagex]THE
　　GENERALTHEORYOFEMPLOYMENT
　　hisworkinthefieldofeconomics。Itwillnotincludeanyprivateandpersonalcorrespondenceorpublishlettersinthepossessionofhisfamily。Theeditionisconcerned，thatistosay，withKeynesasaneconomist。
　　Keynes'swritingsfallintofivebroadcategories。First，therearethebookswhichhewroteandpublishedasbooks。Second，therearecollectionsofarticlesandpamphletswhichhehimselfmadeduringhislifetimeEssaysinPersuasionandEssaysinBiography。Third，thereisaveryconsiderablevolumeofpublishedbutuncollectedwritings¾；articleswrittenfornewspapers，letterstonewspapers，articlesinjournalsthathavenotbeenincludedinhistwovolumesofcollections，andvariouspamphlets。
　　Fourth，thereareafewhithertounpublishedwritings。Fifth，thereiscorrespondencewitheconomistsandconcernedwitheconomicsorpublicaffairs。
　　ThisserieswillattempttopublishacompleterecordofKeynes'sseriouswritingasaneconomist。Itistheintentiontopublishalmostcompletelythewholeofthefirstfourcategorieslistedabove。TheonlyexceptionsareafewsyndicatedarticleswhereKeyneswrotealmostthesamematerialforpublicationindifferentnewspapersorindifferentcountries，withminorandunimportantvariations。Inthesecases，thisserieswillpublishoneonlyofthevariations，choosingthemostinteresting。
　　ThepublicationofKeynes'seconomiccorrespondencemustinevitablybeselective。Inthedayofthetypewriterandthefilingcabinetandparticularlyinthecaseofsoactiveandbusyaman，topublisheveryscrapofpaperthathemayhavedictatedaboutsomeunimportantorephemeralmatterisimpossible。Weareaimingtocollectandpublishasmuchaspossible，however，ofthecorrespondenceinwhichKeynesdevelopedhisownideasinargumentwithhisfelloweconomists，aswellasthemoresignificantcorrespondenceattimeswhenKeyneswasinthemiddleofpublicaffairs。
　　Apartfromhispublishedbooks，themainsourcesavailabletothosepreparingthisserieshavebeentwo。First，KeynesinhiswillmadeRichardKahnhisexecutorandresponsiblefor[Pagexi]GENERAL
　　INTRODUCTION
　　hiseconomicpapers。TheyhavebeenplacedintheMarshallLibraryoftheUniversityofCambridgeandhavebeenavailableforthisedition。Until1914Keynesdidnothaveasecretaryandhisearliestpapersareinthemainlimitedtodraftsofimportantlettersthathemadeinhisownhandwritingandretained。Atthatstagemostofthecorrespondencethatwepossessisrepresentedbywhathereceivedratherthanbywhathewrote。Duringtheyears1914-18and1940-46
　　KeyneswasservingintheTreasury。Withtheopeningofofficialrecords，manyofthepapersthathewrotehavebecomeavailable。From1919onwards，throughouttherestofhislife，Keyneshadthehelpofasecretary¾；formanyyearsMrsStevens。Thusforthelasttwenty-fiveyearsofhisworkinglifewehaveinmostcasesthecarboncopiesofhisownlettersaswellastheoriginalsofthelettersthathereceived。
　　Therewere，ofcourse，occasionsduringthisperiodonwhichKeyneswrotehimselfinhisownhandwriting。Insomeofthesecases，withthehelpofhiscorrespondents，wehavebeenabletocollectthewholeofbothsidesofsomeimportantinterchangeandwehavebeenanxious，injusticetobothcorrespondents，toseethatbothsidesofthecorrespondencearepublishedinfull。
　　ThesecondmainsourceofinformationhasbeenagroupofscrapbookskeptoveraverylongperiodofyearsbyKeynes'smother，FlorenceKeynes，wifeofNevilleKeynes。From1919onwardsthesescrapbookscontainalmostthewholeofMaynardKeynes'smoreephemeralwriting，hisletterstonewspapersandagreatdealofmaterialwhichenablesonetoseenotonlywhathewrote，butthereactionofotherstohiswriting。WithouttheseverycarefullykeptscrapbooksthetaskofanyeditororbiographerofKeyneswouldhavebeenimmenselymoredifficult。
　　Theplanoftheedition，asatpresentintended，isthis。Itwilltotaltwenty-fivevolumes。Ofthese，thefirsteightwillbeKeynes'spublishedbooksfromIndianCurrencyandFinance，in1913，totheGeneralTheoryin1936，withtheadditionofhisTreatiseonProbability。
　　Therewillnextfollow，asvols。IXandx，EssaysinPersuasionandEssaysinBiography，[Pagexii]THEGENERALTHEORYOFEMPLOYMENT
　　graphy，representingKeynes'sowncollectionsofarticles。EssaysinPersuasionwilldifferfromtheoriginalprintingintworespects:
　　itwillcontainthefulltextsofthearticlesorpamphletsincludedinitandnotasintheoriginalprintingabbreviatedversionsofthesearticles，anditwillhaveaddedoneortwolaterarticleswhichareofexactlythesamecharacterasthoseincludedbyKeynesinhisoriginalcollection。InthecaseofEssaysinBiography，weshalladdoneortwootherbiographicalstudiesthatKeyneswrotelaterthan1933。
　　Therewillfollowfourvolumes，XItoXIV，ofeconomicarticlesandcorrespondence，andonevolumeofsocial，politicalandliterarywritings。
　　WeshallincludeinthesevolumessuchpartofKeynes'seconomiccorrespondenceasiscloselyassociatedwiththearticlesthatareprintedinthem。
　　Thefurtherninevolumes，asweestimateatpresent，willdealwithKeynes'sActivitiesduringtheyearsfromthebeginningofhispubliclifein1905untilhisdeath。Ineachoftheperiodsintowhichweproposetodividethismaterial，thevolumeconcernedwillpublishhismoreephemeralwritings，allofithithertouncollected，hiscorrespondencerelatingtotheseactivities，andsuchothermaterialandcorrespondenceasisnecessarytotheunderstandingofKeynes'sactivities。ThesevolumesarebeingeditedbyElizabethJohnsonandDonaldMoggridge，anditistheirtasktotraceandinterpretKeynes'sactivitiessufficientlytomakethematerialfullyintelligibletoalatergeneration。Untilthisworkhasprogressedfurther，itisnotpossibletosaywithexactitudewhetherthismaterialwillbedistributed，aswenowthink，overninevolumes，orwhetheritwillneedtobespreadoverafurthervolumeorvolumes。Therewillbeafinalvolumeofbibliographyandindex。
　　Thoseresponsibleforthiseditionhavebeen:LordKahn，bothasLordKeynes'sexecutorandasalongandintimatefriendofLordKeynes，abletohelpintheinterpretingofmuchthatwouldotherwisebemisunderstood；
　　SirRoyHarrodastheauthorofhisbiography；AustinRobinsonasKeynes'sco-editorontheEconomicJournalandsuccessorassecretaryoftheRoyalEconomicSociety。Theinitialeditorial[Pagexiii]GENERALINTRODUCTION
　　taskswerecarriedbyElizabethJohnson。MorerecentlyshehasbeenjoinedinthisresponsibilitybyDonaldMoggridge。TheyhavebeenassistedatdifferenttimesbyJaneThistlethwaite，MrsMcDonald，whowasoriginallyresponsibleforthesystematicorderingofthefilesoftheKeynespapers；
　　JudithMasterman，whoformanyyearsworkedwithMrsJohnsononthepapers；
　　andmorerecentlybySusanWilsher，MargaretButler，andBarbaraLowe。EditorialIntroduction[Pagexv]
　　EDITORIALINTRODUCTION
　　'Ihavebeenmuchpre-occupiedwiththecausation，sotospeak，ofmyprogressofmindfromtheclassicalpositiontomypresentviews，¾；withtheorderinwhichtheproblemdevelopedinmymind。WhatsomepeopletreatasanunnecessarilycontroversialtoneisreallyduetotheimportanceinmyownmindofwhatIusedtobelieve，andofthemomentsoftransitionwhichwereformepersonallymomentsofillumination……Youdon'tmentioneffectivedemandor，moreprecisely，thedemandscheduleforoutputasawhole，exceptinsofarasitisimplicitinthemultiplier。Tome，regardedhistorically，themostextraordinarythingisthecompletedisappearanceofthetheoryofdemandandsupplyforoutputasawhole，i。e。thetheoryofemployment，afterithadbeenforaquarterofacenturythemostdiscussedthingineconomics。Oneofthemostimportanttransitionsforme，aftermyTreatiseonMoneyhadbeenpublished，wassuddenlyrealisingthis。ItonlycameafterIhadenunciatedtomyselfthepsychologicallawthat，whenincomeincreases，thegapbetweenincomeandconsumptionwillincrease，¾；aconclusionofvastimportancetomyownthinkingbutnotapparently，expressedjustlikethat，toanyoneelse's。Then，appreciablylater，camethenotionofinterestbeingthemeasureofliquiditypreference，whichbecamequiteclearinmymindthemomentIthoughtofit。Andlastofall，afteranimmenselotofmuddlingandmanydrafts，theproperdefinitionofthemarginalefficiencyofcapitallinkeduponethingwithanother。'
　　Withthesewords，KeynestoldR。F。Harrodinthesummerof1936thedevelopmentofhisideastowardstheGeneralTheory。'[1]
　　TheoriginsoftheGeneralTheorylieinKeynes'sdissatisfactionwithhisTreatiseonMoneyevenatthetimeofpublication[2]，intheprolongedinternationalslumpoftheyears[Pagexvi]THEGENERALTHEORYOFEMPLOYMENT
　　after1929，andinthestimulationthatemanatedfroma'circus'ofyoungCambridgeeconomistswhobeganmeetingsoonafterthepublicationoftheTreatisetodiscussanddissectitstwovolumes。Itwasthediscussionswithinthisgroup，retailedtohimbyRichardKahn，thatprovidedthebasisforthefirsttransitionalstagebetweentheTreatiseandtheGeneralTheory。'[3]
　　ThisstagewassoonfollowedbyKeynes'sexplicitcommitmenttorevisethetheoreticalfoundationsoftheTreatise，whichhadonlydealtincidentallyintermsofmovementsinoutput。ThusinhisprefaceforJapanesereadersoftheTreatise，datedApril1932，KeynesnotedthatratherthanrevisehisTreatiseheproposed'topublishashortbookofapurelytheoreticalcharacter，extendingandcorrectingthetheoreticalbasisofmyviewsassetforthinBooksIIIandIV'。[4]Thiscommitmentbecameclearerintheautumnof1932，whenKeyneschangedthetitleofhiscourseoflecturesfrom'ThePureTheoryofMoney'，theirtitlesincetheautumnof1929，to'TheMonetaryTheoryofProduction'，thetitletheyweretohaveuntil1934。Theselectureswereconcernedwithmovementsinoutputasawholeandhadthebeginningsoftheconceptofliquiditypreference，althoughitwasnotuntilhislecturesintheautumnof1933thatittooktheformusedintheGeneralTheory。
　　ThefirstmajorpublishedindicationsofthedirectionKeynes'sthoughtwastakingbetweentheTreatiseandtheGeneralTheorycamein1933intheformofanessay'TheMonetaryTheoryofProduction'，apamphlet'TheMeanstoProsperity'，anarticle'TheMultiplier'whichisincludedintheAmericaneditionof'TheMeanstoProsperity'，andabiographicalsketchofT。R。Malthus，[5]allofwhicharecastintermsofmovementsofoutputasawholeandreflecteddissatisfactionwithacceptedtheory。
　　ThusthemajorbuildingblocksoftheGeneralTheoryhad[Pagexvii]EDITORIALINTRODUCTION
　　beensteadilyaccumulatingeversince1931。Bythespringof1934，infact，allofthemwereinplace，exceptfortheideaofthemarginalefficiencyofcapital，asisclearfromdraftsfromthatperiodandaworkingpaperKeynespreparedduringhisVisittoAmericainMayandJune。[6]Itwasonlyduringthesummerof1934，however，thatthefinalpiecefellintoplace，andbytheautumnKeyneswasdeliveringhislectures，nowentitled'TheGeneralTheoryofEmployment'fromproofsheets。
　　However，beforepublicationtherewastobeanotheryearofintensediscussionandredrafting。KeynescirculatedproofsofthebooktoR。F。
　　Kahn，JoanRobinson，R。F。Harrod，D。H。RobertsonandR。G。Hawtreyandtookcarefulnoteoftheircommentsandsuggestedimprovements，statingclearlyhispointsofdisagreementwhenhedidnotadoptthem。[7]ThusitwasafteralmostfiveyearsofintensepreparationthatthebookappearedinFebruary1936atapriceof5shillingstoencouragealargesaleamongstudents。
　　Afterpublicationtherewasstillfurtherdiscussionand，occasionally，controversy。Keyneshimselfencouragedthisdiscussion，for，asheputit[8]
　　IammoreattachedtothecomparativelysimplefundamentalideaswhichunderliemytheorythantotheparticularformsinwhichIhaveembodiedthem，andhavenodesirethatthelattershouldbecrystallizedatthepresentstageofthedebate。Ifthesimplebasicideascanbecomefamiliarandacceptable，timeandexperienceandthecollaborationofanumberofmindswilldiscoverthebestwayofexpressingthem。
　　Inthisspirit，Keynesenteredintoconsiderablecorrespondencewithcritics，expositorsandextendersofhisideas。[9]Moreover，asthedebateprogressed，hisownideaswerechangingandbyAugust1936hewaswritingtoR。G。Hawtrey[10]
　　[Pagexviii]THEGENERALTHEORYOFEMPLOYMENT
　　ImaymentionthatIamthinkingofproducinginthecourseofthenextyearorsowhatmightbecalledfootnotestomypreviousbook，dealingwithvariouscriticismsandvariouspointswhichwantcarryingfurther。
　　Ofcourse，infact，thewholebookwantsre-writingandrecasting。ButIamstillnotinasufficientlychangedstateofmindasyettobeinthepositiontodothat。OntheotherhandIcandealwithspecificpoints。
　　Fromthisperiod，wehaveonedrafttableofcontentstoabookentitledFootnotestoTheGeneralTheoryofEmploymentInterestandMoney，atitlethatechoeshisfirstdrafttableofcontentsafterEconomicConsequencesofthePeace。[11]HealsousedthistitleforthelectureshedeliveredinCambridgeinthespringof1937，fromwhichdraftsoftwolecturessurvive。[12]InfactheseemstohavebeenmakingconsiderableprogresstowardssteppingoutsidetheGeneralTheorybythattime，forhetoldJoanRobinsoninApril1937[13]
　　Iamgraduallygettingmyselfintoanoutsidepositiontowardsthebook，andamfeelingmywaytonewlinesofexposition。PerhapsyouwillseewhatIhaveinmindinmyforthcominglectures。
　　Unfortunately，theproposed'footnotes'nevergotbeyondthelectures，forKeynessufferedasevereheartattackintheearlysummerof1937andwasneverabletoworkatanythingnearhisoldpaceuntilwarcamein1939¾；andthenhisenergiesweredirectedinotherdirections。HowhewouldhaverevisedtheGeneralTheoryifhehadremainedingoodhealthisimpossibletoguess。Onecanonlybecertainthathewouldhaverevisedit。
　　SinceitspublicationinBritaininFebruary1936，theGeneralTheoryhasbeenpublishedintheUnitedStatesoriginallyfromsheetsprintedinEnglandandtranslatedintoGerman，Japanese，French，Spanish，Czech，Italian，Serbo-Croat，Hindi，Finnish，Roumanian，HungarianandRussian。
　　TheGerman，FrenchandJapaneseeditionsallcarriedspecialadditionalprefaceswhichfollowedtheoriginalEnglishpreface。Theseadditionalprefacesareprintedbelow。
　　[Pagexix]EDITORIALINTRODUCTION
　　ThiseditionfollowsthereprintedEnglishfirstedition，whichdiffersfromthefirstEnglishprintinginthatacorrectiontolines23-5
　　ofpage123wasmovedfromanerratumnotefollowingtheindexintothetextandcorrectionsweremadetopages44，113，176，357。InAppendixIwehaveintroducedalistofminortextualcorrectionsfromthereprintedfirstedition。Inaddition，inAppendices2and3wereprintKeynes'sarticles'FluctuationsinNetInvestmentintheUnitedStates'and'RelativeMovementsofRealWagesandOutput'whichdealwitherrorsonpages103-4
　　and9-10respectivelyofthetextitself。ForfurtherdiscussionoftheGeneralTheoryanditsgenesis，thereaderisreferredtovolumesxiiiandxiv。
　　Inprintingthisvolumewehavemadeitourfirstobjectivetofollowaspreciselyaspossiblethepaginationoftheoriginaledition。Animmenseliteratureofdetailedcriticismandanalysishasgrownuparoundthetextoftheoriginaleditionandwehavebeenanxiousthatreferencesinthatliteratureshouldapplyequallytothisnewedition。Thishasmeantthatwehavebeenunabletofollowpreciselythestandardtypographyoftheothervolumesintheseries。Thegainofreadyreference，inourview，justifiesthiscourse。Asinothervolumesoftheseries，wehavereducedtheexcessivecapitalisationfavouredbyKeynes'soriginalprinters，butirritatingtoamoderneye。
　　Preface[Pagexxi]
　　PREFACE
　　Thisbookischieflyaddressedtomyfelloweconomists。Ihopethatitwillbeintelligibletoothers。Butitsmainpurposeistodealwithdifficultquestionsoftheory，andonlyinthesecondplacewiththeapplicationsofthistheorytopractice。Foriforthodoxeconomicsisatfault，theerroristobefoundnotinthesuperstructure，whichhasbeenerectedwithgreatcareforlogicalconsistency，butinalackofclearnessandofgeneralityinthepremisses。ThusIcannotachievemyobjectofpersuadingeconomiststore-examinecriticallycertainoftheirbasicassumptionsexceptbyahighlyabstractargumentandalsobymuchcontroversy。Iwishtherecouldhavebeenlessofthelatter。ButIhavethoughtitimportant，notonlytoexplainmyownpointofview，butalsotoshowinwhatrespectsitdepartsfromtheprevailingtheory。Those，whoarestronglyweddedtowhatIshallcall'theclassicaltheory'，willfluctuate，Iexpect，betweenabeliefthatIamquitewrongandabeliefthatIamsayingnothingnew。
　　Itisforotherstodetermineifeitheroftheseorthethirdalternativeisright。Mycontroversialpassagesareaimedatprovidingsomematerialforananswer；andImustaskforgivenessIf，inthepursuitofsharpdistinctions，mycontroversyisitselftookeen。ImyselfheldwithconvictionformanyyearsthetheorieswhichInowattack，andIamnot，Ithink，ignorantoftheirstrongpoints。
　　Themattersatissueareofanimportancewhichcannotbeexaggerated。
　　But，ifmyexplanationsareright，itismyfelloweconomists，notthegeneralpublic，whomImustfirstconvince。Atthisstageoftheargumentthegeneralpublic，thoughwelcomeatthedebate，areonlyeavesdroppersatanattemptbyaneconomisttobringtoanissuethedeepdivergencesofopinionbetweenfelloweconomistswhichhaveforthetimebeingalmostdestroyedthepracticalinfluenceofeconomictheory，andwill，untiltheyareresolved，continuetodoso。
　　TherelationbetweenthisbookandmyTreatiseonMoney[Pagexxii]THEGENERALTHEORYOFEMPLOYMENT
　　[JMKvols。vandvi]，whichIpublishedfiveyearsago，isprobablyclearertomyselfthanitwillbetoothers；andwhatinmyownmindisanaturalevolutioninalineofthoughtwhichIhavebeenpursuingforseveralyears，maysometimesstrikethereaderasaconfusingchangeofview。ThisdifficultyisnotmadelessbycertainchangesinterminologywhichIhavefeltcompelledtomake。ThesechangesoflanguageIhavepointedoutinthecourseofthefollowingpages；butthegeneralrelationshipbetweenthetwobookscanbeexpressedbrieflyasfollows。WhenIbegantowritemyTreatiseonMoneyIwasstillmovingalongthetraditionallinesofregardingtheinfluenceofmoneyassomethingsotospeakseparatefromthegeneraltheoryofsupplyanddemand。WhenIfinishedit，Ihadmadesomeprogresstowardspushingmonetarytheorybacktobecomingatheoryofoutputasawhole。Butmylackofemancipationfrompreconceivedideasshoweditselfinwhatnowseemstometobetheoutstandingfaultofthetheoreticalpartsofthatworknamely，BooksIIIandIV，thatIfailedtodealthoroughlywiththeeffectsofchangesinthelevelofoutput。
　　Myso-called'fundamentalequationswereaninstantaneouspicturetakenontheassumptionofagivenoutput。Theyattemptedtoshowhow，assumingthegivenoutput，forcescoulddevelopwhichinvolvedaprofit-disequilibrium，andthusrequiredachangeinthelevelofoutput。Butthedynamicdevelopment，asdistinctfromtheinstantaneouspicture，wasleftincompleteandextremelyconfused。Thisbook，ontheotherhand，hasevolvedintowhatisprimarilyastudyoftheforceswhichdeterminechangesinthescaleofoutputandemploymentasawhole；and，whilstitisfoundthatmoneyentersintotheeconomicschemeinanessentialandpeculiarmanner，technicalmonetarydetailfallsintothebackground。Amonetaryeconomy，weshallfind，isessentiallyoneinwhichchangingviewsaboutthefuturearecapableofinfluencingthequantityofemploymentandnotmerelyitsdirection。Butourmethodofanalysingtheeconomicbehaviourofthepresentundertheinfluenceofchangingideasaboutthefutureisonewhichdependsontheinteractionofsupplyanddemand，andisin[Pagexxiii]PREFACE
　　thiswaylinkedupwithourfundamentaltheoryofvalue。Wearethusledtoamoregeneraltheory，whichincludestheclassicaltheorywithwhichwearefamiliar，asaspecialcase。
　　Thewriterofabooksuchasthis，treadingalongunfamiliarpaths，isextremelydependentoncriticismandconversationifheistoavoidanundueproportionofmistakes。Itisastonishingwhatfoolishthingsonecantemporarilybelieveifonethinkstoolongalone，particularlyineconomicsalongwiththeothermoralsciences，whereitisoftenimpossibletobringone'sideastoaconclusivetesteitherformalorexperimental。
　　Inthisbook，evenmoreperhapsthaninwritingmyTreatiseonMoney，IhavedependedontheconstantadviceandconstructivecriticismofMrR。F。Kahn。Thereisagreatdealinthisbookwhichwouldnothavetakentheshapeithasexceptathissuggestion。IhavealsohadmuchhelpfromMrsJoanRobinson，MrR。G。HawtreyandMrR。F。Harrod，whohavereadthewholeoftheproof-sheets。TheindexhasbeencompiledbyMrD。M。Bensusan-ButtofKing'sCollege，Cambridge。
　　Thecompositionofthisbookhasbeenfortheauthoralongstruggleofescape，andsomustthereadingofitbeformostreadersiftheauthor'sassaultuponthemistobesuccessful，¾；astruggleofescapefromhabitualmodesofthoughtandexpression。Theideaswhicharehereexpressedsolaboriouslyareextremelysimpleandshouldbeobvious。Thedifficultylies，notinthenewideas，butinescapingfromtheoldones，whichramify，forthosebroughtupasmostofushavebeen，intoeverycornerofourminds。
　　J。M。KEYNES
　　13December1935
　　PrefacetoJapaneseEdition[Pagexxix]
　　PREFACETOTHEJAPANESEEDITION
　　AlfredMarshall，onwhosePrinciplesofEconomicsallcontemporaryEnglisheconomistshavebeenbroughtup，wasatparticularpainstoemphasisethecontinuityofhisthoughtwithRicardo's。HisworklargelyconsistedingraftingthemarginalprincipleandtheprincipleofsubstitutionontotheRicardiantradition；andhistheoryofoutputandconsumptionasawhole，asdistinctfromhistheoryoftheproductionanddistributionofagivenoutput，wasneverseparatelyexpounded。Whetherhehimselffelttheneedofsuchatheory，Iamnotsure。Buthisimmediatesuccessorsandfollowershavecertainlydispensedwithitandhavenot，apparently，feltthelackofit。ItwasinthisatmospherethatIwasbroughtup。I
　　taughtthesedoctrinesmyselfanditisonlywithinthelastdecadethatIhavebeenconsciousoftheirinsufficiency。Inmyownthoughtanddevelopment，therefore，thisbookrepresentsareaction，atransitionawayfromtheEnglishclassicalororthodoxtradition。MyemphasisuponthisinthefollowingpagesanduponthepointsofmydivergencefromreceiveddoctrinehasbeenregardedinsomequartersinEnglandasundulycontroversial。
　　ButhowcanonebroughtupinEnglisheconomicorthodoxy，indeedapriestofthatfaithatonetime，avoidsomecontroversialemphasis，whenhefirstbecomesaProtestant？
　　PerhapsJapanesereaders，however，willneitherrequirenorresistmyassaultsagainsttheEnglishtradition。WearewellawareofthelargescaleonwhichEnglisheconomicwritingsarereadinJapan，butwearenotsowellinformedastohowJapaneseopinionsregardthem。TherecentpraiseworthyenterpriseonthepartoftheInternationalEconomicCircleofTokyoinreprintingMalthus's'PrinciplesofPoliticalEconomy'asthefirstvolumeintheTokyoSeriesofReprintsencouragesmetothinkthatabookwhichtracesitsdescentfromMalthusratherthanRicardomaybereceivedwithsympathyinsomequartersatleast。
　　[Pagexxx]THEGENERALTHEORYOFEMPLOYMENT
　　AtanyrateIamgratefultotheOrientalEconomistformakingitpossibleformetoapproachJapanesereaderswithouttheextrahandicapofaforeignlanguage。
　　J。M。KEYNES
　　4December1936
　　PrefacetoGermanEdition[Pagexxv]
　　PREFACETOTHEGERMANEDITION
　　AlfredMarshall，onwhosePrinciplesofEconomicsallcontemporaryEnglisheconomistshavebeenbroughtup，wasatparticularpainstoemphasisethecontinuityofhisthoughtwithRicardo's。HisworklargelyconsistedingraftingthemarginalprincipleandtheprincipleofsubstitutionontotheRicardiantradition；andhistheoryofoutputandconsumptionasawhole，asdistinctfromhistheoryoftheproductionanddistributionofagivenoutput，wasneverseparatelyexpounded。Whetherhehimselffelttheneedofsuchatheory，Iamnotsure。Buthisimmediatesuccessorsandfollowershavecertainlydispensedwithitandhavenot，apparently，feltthelackofit。ItwasinthisatmospherethatIwasbroughtup。I
　　taughtthesedoctrinesmyselfanditisonlywithinthelastdecadethatIhavebeenconsciousoftheirinsufficiency。Inmyownthoughtanddevelopment，therefore，thisbookrepresentsareaction，atransitionawayfromtheEnglishclassicalororthodoxtradition。MyemphasisuponthisinthefollowingpagesanduponthepointsofmydivergencefromreceiveddoctrinehasbeenregardedinsomequartersinEnglandasundulycontroversial。
　　ButhowcanonebroughtupaCatholicinEnglisheconomics，indeedapriestofthatfaith，avoidsomecontroversialemphasis，whenhefirstbecomesaProtestant？
　　ButIfancythatallthismayimpressGermanreaderssomewhatdifferently。
　　Theorthodoxtradition，whichruledinnineteenthcenturyEngland，nevertooksofirmaholdofGermanthought。TherehavealwaysexistedimportantschoolsofeconomistsinGermanywhohavestronglydisputedtheadequacyoftheclassicaltheoryfortheanalysisofcontemporaryevents。TheManchesterSchoolandMarxismbothderiveultimatelyfromRicardo，¾；aconclusionwhichisonlysuperficiallysurprising。ButinGermanytherehasalwaysexistedalargesectionofopinionwhichhasadheredneithertotheonenortotheother。
　　Itcanscarcelybeclaimed，however，thatthisschoolof[Pagexxvi]THEGENERALTHEORYOFEMPLOYMENT
　　thoughthaserectedarivaltheoreticalconstruction；orhasevenattemptedtodoso。Ithasbeensceptical，realistic，contentwithhistoricalandempiricalmethodsandresults，whichdiscardformalanalysis。ThemostimportantunorthodoxdiscussionontheoreticallineswasthatofWicksell。
　　HisbookswereavailableinGermanastheywerenot，untillately，inEnglish；indeedoneofthemostimportantofthemwaswritteninGerman。
　　ButhisfollowerswerechieflySwedesandAustrians，thelatterof。whomcombinedhisideaswithspecificallyAustriantheorysoastobringthemineffect，backagaintowardstheclassicaltradition。ThusGermany，quitecontrarytoherhabitinmostofthesciences，hasbeencontentforawholecenturytodowithoutanyformaltheoryofeconomicswhichwaspredominantandgenerallyaccepted。
　　Perhaps，therefore，ImayexpectlessresistancefromGerman，thanfromEnglish，readersinofferingatheoryofemploymentandoutputasawhole，whichdepartsinimportantrespectsfromtheorthodoxtradition。ButcanIhopetoovercomeGermany'seconomicagnosticism？CanIpersuadeGermaneconomiststhatmethodsofformalanalysishavesomethingimportanttocontributetotheinterpretationofcontemporaryeventsandtothemouldingofcontemporarypolicy？Afterall，itisGermantolikeatheory。HowhungryandthirstyGermaneconomistsmustfeelafterhavinglivedalltheseyearswithoutone！Certainly，itisworthwhileformetomaketheattempt。AndifIcancontributesomestraymorselstowardsthepreparationbyGermaneconomistsofafullrepastoftheorydesignedtomeetspecificallyGermanconditions，Ishallbecontent。ForIconfessthatmuchofthefollowingbookisillustratedandexpoundedmainlywithreferencetotheconditionsexistingintheAnglo-Saxoncountries。
　　Neverthelessthetheoryofoutputasawhole，whichiswhatthefollowingbookpurportstoprovide，ismuchmoreeasilyadaptedtotheconditionsofatotalitarianstate，thanisthetheoryoftheproductionanddistributionofagivenoutputproducedunderconditionsoffreecompetitionandalargemeasureoflaissez-faire。Thetheoryofthepsychologi-
　　[Pagexxvii]PREFACETOTHEGERMANEDITION
　　callawsrelatingconsumptionandsaving，theinfluenceofloanexpenditureonpricesandrealwages，thepartplayedbytherateofinterest¾；theseremainasnecessaryingredientsinourschemeofthought。
　　ItakethisopportunitytoacknowledgemyindebtednesstotheexcellentworkofmytranslatorHerrWaegerIhopehisvocabularyattheendofthisvolume[14]mayproveusefulbeyonditsimmediatepurposeandtomypublishers，MessrsDunckerandHumblot，whoseenterprise，fromthedaysnowsixteenyearsagowhentheypublishedmyEconomicConsequencesofthePeace，hasenabledmetomaintaincontactwithGermanreaders。
　　J。M。KEYNES
　　7September1936
　　PrefacetoJapaneseEdition[Pagexxix]
　　PREFACETOTHEJAPANESEEDITION
　　AlfredMarshall，onwhosePrinciplesofEconomicsallcontemporaryEnglisheconomistshavebeenbroughtup，wasatparticularpainstoemphasisethecontinuityofhisthoughtwithRicardo's。HisworklargelyconsistedingraftingthemarginalprincipleandtheprincipleofsubstitutionontotheRicardiantradition；andhistheoryofoutputandconsumptionasawhole，asdistinctfromhistheoryoftheproductionanddistributionofagivenoutput，wasneverseparatelyexpounded。Whetherhehimselffelttheneedofsuchatheory，Iamnotsure。Buthisimmediatesuccessorsandfollowershavecertainlydispensedwithitandhavenot，apparently，feltthelackofit。ItwasinthisatmospherethatIwasbroughtup。I
　　taughtthesedoctrinesmyselfanditisonlywithinthelastdecadethatIhavebeenconsciousoftheirinsufficiency。Inmyownthoughtanddevelopment，therefore，thisbookrepresentsareaction，atransitionawayfromtheEnglishclassicalororthodoxtradition。MyemphasisuponthisinthefollowingpagesanduponthepointsofmydivergencefromreceiveddoctrinehasbeenregardedinsomequartersinEnglandasundulycontroversial。
　　ButhowcanonebroughtupinEnglisheconomicorthodoxy，indeedapriestofthatfaithatonetime，avoidsomecontroversialemphasis，whenhefirstbecomesaProtestant？
　　PerhapsJapanesereaders，however，willneitherrequirenorresistmyassaultsagainsttheEnglishtradition。WearewellawareofthelargescaleonwhichEnglisheconomicwritingsarereadinJapan，butwearenotsowellinformedastohowJapaneseopinionsregardthem。TherecentpraiseworthyenterpriseonthepartoftheInternationalEconomicCircleofTokyoinreprintingMalthus's'PrinciplesofPoliticalEconomy'asthefirstvolumeintheTokyoSeriesofReprintsencouragesmetothinkthatabookwhichtracesitsdescentfromMalthusratherthanRicardomaybereceivedwithsympathyinsomequartersatleast。
　　[Pagexxx]THEGENERALTHEORYOFEMPLOYMENT
　　AtanyrateIamgratefultotheOrientalEconomistformakingitpossibleformetoapproachJapanesereaderswithouttheextrahandicapofaforeignlanguage。
　　J。M。KEYNES
　　4December1936
　　PrefacetoFrenchEdition[Pagexxxi]
　　PREFACETOTHEFRENCHEDITION
　　Forahundredyearsorlonger，EnglishPoliticalEconomyhasbeendominatedbyanorthodoxy。Thatisnottosaythatanunchangingdoctrinehasprevailed。
　　Onthecontrary。Therehasbeenaprogressiveevolutionofthedoctrine。
　　Butitspresuppositions，itsatmosphere，itsmethodhaveremainedsurprisinglythesame，andaremarkablecontinuityhasbeenobservablethroughallthechanges。Inthatorthodoxy，inthatcontinuoustransition，Iwasbroughtup。Ilearntit，Itaughtit，Iwroteit。TothoselookingfromoutsideIprobablystillbelongtoit。Subsequenthistoriansofdoctrinewillregardthisbookasinessentiallythesametradition。ButImyselfinwritingit，andinotherrecentworkwhichhasleduptoit，havefeltmyselftobebreakingawayfromthisorthodoxy，tobeinstrongreactionagainstit，tobeescapingfromsomething，tobegaininganemancipation。Andthisstateofmindonmypartistheexplanationofcertainfaultsinthebook，inparticularitscontroversialnoteinsomepassages，anditsairofbeingaddressedtoomuchtotheholdersofaparticularpointofviewandtoolittleadurbemetorbem。Iwaswantingtoconvincemyownenvironmentanddidnotaddressmyselfwithsufficientdirectnesstooutsideopinion。
　　Nowthreeyearslater，havinggrownaccustomedtomynewskinandhavingalmostforgottenthesmellofmyoldone，Ishould，ifIwerewritingafresh，endeavourtofreemyselffromthisfaultandstatemyownpositioninamoreclear-cutmanner。
　　Isayallthis，partlytoexplainandpartlytoexcuse，myselftoFrenchreaders。ForinFrancetherehasbeennoorthodoxtraditionwiththesameauthorityovercontemporaryopinionasinmyowncountry。IntheUnitedStatesthepositionhasbeenmuchthesameasinEngland。ButinFrance，asintherestofEurope，therehasbeennosuchdominantschoolsincetheexpiryoftheschoolofFrenchLiberaleconomistswhowereintheirprimetwentyyearsagothoughtheylivedtosogreatanage，longaftertheirinfluencehadpassedaway，[Pagexxxii]THEGENERALTHEORYOFEMPLOYMENT
　　thatitfelltomyduty，whenIfirstbecameayouthfuleditoroftheEconomicJournaltowritetheobituariesofmanyofthem¾；Levasseur，Molinari，Leroy-Beaulieu。IfCharlesGidehadattainedtothesameinfluenceandauthorityasAlfredMarshall，yourpositionwouldhavebornemoreresemblancetoours。Asitis，youreconomistsareeclectic，toomuchwesometimesthinkwithoutdeeprootsinsystematicthought。PerhapsthismaymakethemmoreeasilyaccessibletowhatIhavetosay。ButitmayalsohavetheresultthatmyreaderswillsometimeswonderwhatIamtalkingaboutwhenIspeak，withwhatsomeofmyEnglishcriticsconsideramisuseoflanguage，ofthe'classical'schoolofthoughtand'classical'economists。
　　Itmay，therefore，behelpfultomyFrenchreadersifIattempttoindicateverybrieflywhatIregardasthemaindifferentiaeofmyapproach。
　　Ihavecalledmytheoryageneraltheory。ImeanbythisthatIamchieflyconcernedwiththebehaviouroftheeconomicsystemasawhole，¾；withaggregateincomes，aggregateprofits，aggregateoutput，aggregateemployment，aggregateinvestment，aggregatesavingratherthanwiththeincomes，profits，output，employment，investmentandsavingofparticularindustries，firmsorindividuals。AndIarguethatimportantmistakeshavebeenmadethroughextendingtothesystemasawholeconclusionswhichhavebeencorrectlyarrivedatinrespectofapartofittakeninisolation。
　　LetmegiveexamplesofwhatImean。Mycontentionthatforthesystemasawholetheamountofincomewhichissaved，inthesensethatitisnotspentoncurrentconsumption，isandmustnecessarilybeexactlyequaltotheamountofnetnewinvestmenthasbeenconsideredaparadoxandhasbeentheoccasionofwidespreadcontroversy。Theexplanationofthisisundoubtedlytobefoundinthefactthatthisrelationshipofequalitybetweensavingandinvestment，whichnecessarilyholdsgoodforthesystemasawhole，doesnotholdgoodatallforaparticularindividual。ThereisnoreasonwhateverwhythenewinvestmentforwhichIamresponsibleshouldbearanyrelationwhatevertotheamountofmyownsavings。Qutelegitimatelyweregardanindi-
　　[Pagexxxiii]PREFACETOTHEFRENCHEDITION
　　vidual'sincomeasindependentofwhathehimselfconsumesandinvests。
　　Butthis，Ihavetopointout，shouldnothaveledustooverlookthefactthatthedemandarisingoutoftheconsumptionandinvestmentofoneindividualisthesourceoftheincomesofotherindividuals，sothatincomesingeneralarenotindependent，quitethecontrary，ofthedispositionofindividualstospendandinvest；andsinceinturnthereadinessofindividualstospendandinvestdependsontheirincomes，arelationshipissetupbetweenaggregatesavingsandaggregateinvestmentwhichcanbeveryeasilyshown，beyondanypossibilityofreasonabledispute，tobeoneofexactandnecessaryequality。Rightlyregardedthisisabanaleconclusion。Butitsetsinmotionatrainofthoughtfromwhichmoresubstantialmattersfollow。Itisshownthat，generallyspeaking，theactuallevelofoutputandemploymentdepends，notonthecapacitytoproduceoronthepre-existinglevelofincomes，butonthecurrentdecisionstoproducewhichdependinturnoncurrentdecisionstoinvestandonpresentexpectationsofcurrentandprospectiveconsumption。Moreover，assoonasweknowthepropensitytoconsumeandtosaveasIcallit，thatistosaytheresultforthecommunityasawholeoftheindividualpsychologicalinclinationsastohowtodisposeofgivenincomes，wecancalculatewhatlevelofincomes，andthereforewhatlevelofoutputandemployment，isinprofit-equilibriumwithagivenlevelofnewinvestment；outofwhichdevelopsthedoctrineoftheMultiplier。
　　Oragain，itbecomesevidentthatanincreasedpropensitytosavewillceterisparibuscontractincomesandoutput；whilstanincreasedinducementtoinvestwillexpandthem。Wearethusabletoanalysethefactorswhichdeterminetheincomeandoutputofthesystemasawhole；¾；wehave，inthemostexactsense，atheoryofemployment。Conclusionsemergefromthisreasoningwhichareparticularlyrelevanttotheproblemsofpublicfinanceandpublicpolicygenerallyandofthetradecycle。
　　Anotherfeature，speciallycharacteristicofthisbook，isthetheoryoftherateofinterest。Inrecenttimesithasbeenheldbymanyeconomiststhattherateofcurrentsavingdetermined[Pagexxxiv]THEGENERALTHEORYOFEMPLOYMENT
　　thesupplyoffreecapital，thattherateofcurrentinvestmentgovernedthedemandforit，andthattherateofinterestwas，sotospeak，theequilibratingprice-factordeterminedbythepointofintersectionofthesupplycurveofsavingsandthedemandcurveofinvestment。Butifaggregatesavingisnecessarilyandinallcircumstancesexactlyequaltoaggregateinvestment，itisevidentthatthisexplanationcollapses。Wehavetosearchelsewhereforthesolution。Ifinditintheideathatitisthefunctionoftherateofinteresttopreserveequilibrium，notbetweenthedemandandthesupplyofnewcapitalgoods，butbetweenthedemandandthesupplyofmoney，thatistosaybetweenthedemandforliquidityandthemeansofsatisfyingthisdemand。Iamherereturningtothedoctrineoftheolder，pre-nineteenthcenturyeconomists。Montesquieu，forexample，sawthistruthwithconsiderableclarity，[15]¾；MontesquieuwhowastherealFrenchequivalentofAdamSmith，thegreatestofyoureconomists，headandshouldersabovethephysiocratsinpenetration，clear-headednessandgoodsensewhicharethequalitiesaneconomistshouldhave。ButImustleaveittothetextofthisbooktoshowhowindetailallthisworksout。
　　IhavecalledthisbooktheGeneralTheoryofEmployment，InterestandMoney；andthethirdfeaturetowhichImaycallattentionisthetreatmentofmoneyandprices。ThefollowinganalysisregistersmyfinalescapefromtheconfusionsoftheQuantityTheory，whichonceentangledme。Iregardthepricelevelasawholeasbeingdeterminedinpreciselythesamewayasindividualprices；thatistosay，undertheinfluenceofsupplyanddemand。Technicalconditions，thelevelofwages，theextentofunusedcapacityofplantandlabour，andthestateofmarketsandcompetitiondeterminethesupplyconditionsofindividualproductsandofproductsasawhole。Thedecisionsofentrepreneurs，whichprovidetheincomesofindividualproducersandthedecisionsofthoseindividualsastothedispositionofsuchincomesdeterminethedemandconditions。Andprices¾；bothindividualpricesandtheprice-level¾；emergeastheresultantofthesetwo[Pagexxxv]PREFACETOTHEFRENCHEDITION
　　factors。Money，andthequantityofmoney，arenotdirectinfluencesatthisstageoftheproceedings。Theyhavedonetheirworkatanearlierstageoftheanalysis。Thequantityofmoneydeterminesthesupplyofliquidresources，andhencetherateofinterest，andinconjunctionwithotherfactorsparticularlythatofconfidencetheinducementtoinvest，whichinturnfixestheequilibriumlevelofincomes，outputandemploymentandateachstageinconjunctionwithotherfactorstheprice-levelasawholethroughtheinfluencesofsupplyanddemandthusestablished。
　　Ibelievethateconomicseverywhereuptorecenttimeshasbeendominated，muchmorethanhasbeenunderstood，bythedoctrinesassociatedwiththenameofJ-B。Say。Itistruethathis'lawofmarkets'hasbeenlongabandonedbymosteconomists；buttheyhavenotextricatedthemselvesfromhisbasicassumptionsandparticularlyfromhisfallacythatdemandiscreatedbysupply。Saywasimplicitlyassumingthattheeconomicsystemwasalwaysoperatinguptoitsfullcapacity，sothatanewactivitywasalwaysinsubstitutionfor，andneverinadditionto，someotheractivity。Nearlyallsubsequenteconomictheoryhasdependedon，inthesensethatithasrequired，thissameassumption。Yetatheorysobasedisclearlyincompetenttotackletheproblemsofunemploymentandofthetradecycle。PerhapsIcanbestexpresstoFrenchreaderswhatIclaimforthisbookbysayingthatinthetheoryofproductionitisafinalbreak-awayfromthedoctrinesofJ-B。SayandthatinthetheoryofinterestitisareturntothedoctrinesofMontesquieu。
　　J。M。KEYNES
　　20February1939
　　King'sCollegeCambridgeTheGeneralTheory[Page3]
　　Chapter1
　　THEGENERALTHEORY
　　IhavecalledthisbooktheGeneralTheoryofEmployment，InterestandMoney，placingtheemphasisontheprefixgeneral。Theobjectofsuchatitleistocontrastthecharacterofmyargumentsandconclusionswiththoseoftheclassical[16]theoryofthesubject，uponwhichIwasbroughtupandwhichdominatestheeconomicthought，bothpracticalandtheoretical，ofthegoverningandacademicclassesofthisgeneration，asithasforahundredyearspast。Ishallarguethatthepostulatesoftheclassicaltheoryareapplicabletoaspecialcaseonlyandnottothegeneralcase，thesituationwhichitassumesbeingalimitingpointofthepossiblepositionsofequilibrium。Moreover，thecharacteristicsofthespecialcaseassumedbytheclassicaltheoryhappennottobethoseoftheeconomicsocietyinwhichweactuallylive，withtheresultthatitsteachingismisleadinganddisastrousifweattempttoapplyittothefactsofexperience。
　　PostulatesofClassicalEconomics[Page4]
　　Chapter2
　　THEPOSTULATESOFTHECLASSICALECONOMICS
　　Mosttreatisesonthetheoryofvalueandproductionareprimarilyconcernedwiththedistributionofagivenvolumeofemployedresourcesbetweendifferentusesandwiththeconditionswhich，assumingtheemploymentofthisquantityofresources，determinetheirrelativerewardsandtherelativevaluesoftheirproducts。[17]
　　Thequestion，also，ofthevolumeoftheavailableresources，inthesenseofthesizeoftheemployablepopulation，theextentofnaturalwealthandtheaccumulatedcapitalequipment，hasoftenbeentreateddescriptively。
　　Butthepuretheoryofwhatdeterminestheactualemploymentoftheavailableresourceshasseldombeenexaminedingreatdetail。Tosaythatithasnotbeenexaminedatallwould，ofcourse，beabsurd。Foreverydiscussionconcerningfluctuationsofemployment，ofwhichtherehavebeenmany，hasbeenconcernedwithit。Imean，notthatthetopichasbeenoverlooked，butthatthefundamentaltheory[Page5]POSTULATES
　　OFTHECLASSICALECONOMICS
　　underlyingithasbeendeemedsosimpleandobviousthatithasreceived，atthemost，abaremention。[18]
　　Theclassicaltheoryofemployment¾；supposedlysimpleandobvious¾；hasbeenbased，I
　　think，ontwofundamentalpostulates，thoughpracticallywithoutdiscussion，namely:
　　I。ThewageisequaltothemarginalproductoflabourThatistosay，thewageofanemployedpersonisequaltothevaluewhichwouldbelostifemploymentweretobereducedbyoneunitafterdeductinganyothercostswhichthisreductionofoutputwouldavoid；
　　subject，however，tothequalificationthattheequalitymaybedisturbed，inaccordancewithcertainprinciples，ifcompetitionandmarketsareimperfect。
　　II。Theutilityofthewagewhenagivenvolumeoflabourisemployedisequaltothemarginaldisutilityofthatamountofemployment。
　　Thatistosay，therealwageofanemployedpersonisthatwhichisjustsufficientintheestimationoftheemployedpersonsthemselves
　　toinducethevolumeoflabouractuallyemployedtobeforthcoming；subjecttothequalificationthattheequalityforeachindividualunitoflabourmaybedisturbedbycombinationbetweenemployableunitsanalogoustotheimperfections[Page6]THEGENERAL
　　THEORYOFEMPLOYMENT
　　ofcompetitionwhichqualifythefirstpostulate。Disutilitymustbehereunderstoodtocovereverykindofreasonwhichmightleadaman，orabodyofmen，towithholdtheirlabourratherthanacceptawagewhichhadtothemautilitybelowacertainminimum。
　　Thispostulateiscompatiblewithwhatmaybecalled'frictional'unemployment。
　　Forarealisticinterpretationofitlegitimatelyallowsforvariousinexactnessesofadjustmentwhichstandinthewayofcontinuousfullemployment:forexample，unemploymentduetoatemporarywantofbalancebetweentherelativequantitiesofspecialisedresourcesasaresultofmiscalculationorintermittentdemand；ortotime-lagsconsequentonunforeseenchanges；ortothefactthatthechange-overfromoneemploymenttoanothercannotbeeffectedwithoutacertaindelay，sothattherewillalwaysexistinanon-staticsocietyaproportionofresourcesunemployed'betweenjobs'。Inadditionto'frictional'unemployment，thepostulateisalsocompatiblewith'voluntary'
　　unemploymentduetotherefusalorinabilityofaunitoflabour，asaresultoflegislationorsocialpracticesorofcombinationforcollectivebargainingorofslowresponsetochangeorofmerehumanobstinacy，toacceptarewardcorrespondingtothevalueoftheproductattributabletoitsmarginalproductivity。Butthesetwocategoriesof'frictional'
　　unemploymentand'voluntary'unemploymentarecomprehensive。Theclassicalpostulatesdonotadmitofthepossibilityofthethirdcategory，whichIshalldefinebelowas'involuntary'unemployment。
　　Subjecttothesequalifications，thevolumeofemployedresourcesisdulydetermined，accordingtotheclassicaltheory，bythetwopostulates。
　　Thefirstgivesusthedemandscheduleforemployment，thesecondgivesusthesupplyschedule；andtheamountofemploymentisfixedatthepointwheretheutilityofthemarginalproductbalancesthedisutilityofthemarginalemployment。
　　[Page7]POSTULATES
　　OFTHECLASSICALECONOMICS
　　Itwouldfollowfromthisthatthereareonlyfourpossiblemeansofincreasingemployment:
　　aAnimprovementinorganisationorinforesightwhichdiminishes'frictional'unemployment；
　　badecreaseinthemarginaldisutilityoflabour，asexpressedbytherealwageforwhichadditionallabourisavailable，soastodiminish'voluntary'unemployment；
　　canincreaseinthemarginalphysicalproductivityoflabourinthewage-goodsindustriestouseProfessorPigou'sconvenienttermforgoodsuponthepriceofwhichtheutilityofthemoney-wagedepends；
　　ordanincreaseinthepriceofnon-wage-goodscomparedwiththepriceofwage-goods，associatedwithashiftintheexpenditureofnon-wage-earnersfromwage-goodstonon-wage-goods。
　　This，tothebestofmyunderstanding，isthesubstanceofProfessorPigou'sTheoryofUnemployment¾；theonlydetailedaccountoftheclassicaltheoryofemploymentwhichexists。
　　[19]
　　II
　　Isittruethattheabovecategoriesarecomprehensiveinviewofthefactthatthepopulationgenerallyisseldomdoingasmuchworkasitwouldliketodoonthebasisofthecurrentwage？For，admittedly，morelabourwould，asarule，beforthcomingattheexistingmoney-wageifitweredemanded。[20]Theclassicalschoolreconcilethisphenomenonwiththeirsecondpostulatebyarguingthat，whilethedemandforlabour[Page8]THEGENERAL
　　THEORYOFEMPLOYMENT
　　attheexistingmoney-wagemaybesatisfiedbeforeeveryonewillingtoworkatthiswageisemployed，thissituationisduetoanopenortacitagreementamongstworkersnottoworkforless，andthatiflabourasawholewouldagreetoareductionofmoney-wagesmoreemploymentwouldbeforthcoming。Ifthisisthecase，suchunemployment，thoughapparentlyinvoluntary，isnotstrictlyso，andoughttobeincludedundertheabovecategoryof'voluntary'unemploymentduetotheeffectsofcollectivebargaining，etc。
　　Thiscallsfortwoobservations，thefirstofwhichrelatestotheactualattitudeofworkerstowardsrealwagesandmoney-wagesrespectivelyandisnottheoreticallyfundamental，butthesecondofwhichisfundamental。
　　Letusassume，forthemoment，thatlabourisnotpreparedtoworkforalowermoney-wageandthatareductionintheexistinglevelofmoney-wageswouldlead，throughstrikesorotherwise，toawithdrawalfromthelabourmarketoflabourwhichisnowemployed。Doesitfollowfromthisthattheexistinglevelofrealwagesaccuratelymeasuresthemarginaldisutilityoflabour？Notnecessarily。For，althoughareductionintheexistingmoney-wagewouldleadtoawithdrawaloflabour，itdoesnotfollowthatafallinthevalueoftheexistingmoney-wageintermsofwage-goodswoulddoso，ifitwereduetoariseinthepriceofthelatter。Inotherwords，itmaybethecasethatwithinacertainrangethedemandoflabourisforaminimummoney-wageandnotforaminimumrealwage。Theclassicalschoolhavetacitlyassumedthatthiswouldinvolvenosignificantchangeintheirtheory。Butthisisnotso。Forifthesupplyoflabourisnotafunctionofrealwagesasitssolevariable，theirargumentbreaksdownentirelyandleavesthequestionofwhattheactualemploymentwillbequiteindeterminate。
　　[21]Theydonotseemtohaverealisedthat，unlessthesupplyoflabourisafunctionofrealwagesalone，[Page9]POSTULATES
　　OFTHECLASSICALECONOMICS
　　theirsupplycurveforlabourwillshiftbodilywitheverymovementofprices。Thustheirmethodistiedupwiththeirveryspecialassumptions，andcannotbeadaptedtodealwiththemoregeneralcase。
　　Nowordinaryexperiencetellsus，beyonddoubt，thatasituationwherelabourstipulateswithinlimitsforamoney-wageratherthanarealwage，sofarfrombeingamerepossibility，isthenormalcase。Whilstworkerswillusuallyresistareductionofmoney-wages，itisnottheirpracticetowithdrawtheirlabourwheneverthereisariseinthepriceofwage-goods。
　　Itissometimessaidthatitwouldbeillogicalforlabourtoresistareductionofmoney-wagesbutnottoresistareductionofrealwages。Forreasonsgivenbelowp。14，thismightnotbesoillogicalasitappearsatfirst；and，asweshallseelater，fortunatelyso。But，whetherlogicalorillogical，experienceshowsthatthisishowlabourinfactbehaves。
　　Moreover，thecontentionthattheunemploymentwhichcharacterisesadepressionisduetoarefusalbylabourtoacceptareductionofmoney-wagesisnotclearlysupportedbythefacts。ItisnotveryplausibletoassertthatunemploymentintheUnitedStatesin1932wasdueeithertolabourobstinatelyrefusingtoacceptareductionofmoney-wagesortoitsobstinatelydemandingarealwagebeyondwhattheproductivityoftheeconomicmachinewascapableoffurnishing。Widevariationsareexperiencedinthevolumeofemploymentwithoutanyapparentchangeeitherintheminimumrealdemandsoflabourorinitsproductivity。Labourisnotmoretruculentinthedepressionthanintheboom¾；farfromit。Norisitsphysicalproductivityless。Thesefactsfromexperienceareaprimafaciegroundforquestioningtheadequacyoftheclassicalanalysis。
　　It[22]wouldbeinterestingtoseetheresultsofastatisticalenquiryintotheactualrelationshipbetween[Page10]THEGENERAL

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