GENERALINTRODUCTION

ThisnewstandardeditionofTheCollectedWritingsofJohnMaynardKeynesformsthememorialtohimoftheRoyalEconomicSociety。HedevotedaverylargeshareofhisbusylifetotheSociety。In1911，attheageoftwenty-eight，hebecameeditoroftheEconomicJournalinsuccessiontoEdgeworth；twoyearslaterhewasmadesecretaryaswell。

Heheldtheseofficeswithoutintermittenceuntilalmosttheendofhislife。

Edgeworth，itistrue，returnedtohelphimwiththeeditorshipfrom1919to1925；MacGregortookEdgeworth'splaceuntil1934，whenAustinRobinsonsucceededhimandcontinuedtoassistKeynesdownto1945。ButthroughalltheseyearsKeyneshimselfcarriedthemajorresponsibilityandmadetheprincipaldecisionsaboutthearticlesthatweretoappearintheEconomicJournal，withoutanybreaksaveforoneortwoissueswhenhewasseriouslyillin1937。ItwasonlyafewmonthsbeforehisdeathatEaster1946thathewaselectedpresidentandhandedoverhiseditorshiptoRoyHarrodandthesecretaryshiptoAustinRobinson。

InhisdualcapacityofeditorandsecretaryKeynesplayedamajorpartinframingthepoliciesoftheRoyalEconomicSociety。ItwasverylargelyduetohimthatsomeofthemajorpublishingactivitiesoftheSociety&frac34；Sraffa'seditionofRicardo，Stark'seditionoftheeconomicwritingsofBentham，andGuillebaud'seditionofMarshall，aswellasanumberofearlierpublicationsinthe1930s&frac34；wereinitiated。

WhenKeynesdiedin1946itwasnaturalthattheRoyalEconomicSocietyshouldwishtocommemoratehim。ItwasperhapsequallynaturalthattheSocietychosetocommemoratehimbyproducinganeditionofhiscollectedworks。

Keyneshimselfhadalwaystakenajoyinfineprinting，andtheSociety，withthehelpofMessrsMacmillanaspublishersandtheCambridgeUniversityPressasprinters，hasbeenanxioustogiveKeynes'swritingsapermanentformthatiswhollyworthyofhim。

Thepresenteditionwillpublishasmuchasispossibleof[Pagex]THE

GENERALTHEORYOFEMPLOYMENT

hisworkinthefieldofeconomics。Itwillnotincludeanyprivateandpersonalcorrespondenceorpublishlettersinthepossessionofhisfamily。Theeditionisconcerned，thatistosay，withKeynesasaneconomist。

Keynes'swritingsfallintofivebroadcategories。First，therearethebookswhichhewroteandpublishedasbooks。Second，therearecollectionsofarticlesandpamphletswhichhehimselfmadeduringhislifetime(EssaysinPersuasionandEssaysinBiography)。Third，thereisaveryconsiderablevolumeofpublishedbutuncollectedwritings&frac34；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，Keyneshadthehelpofasecretary&frac34；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:

itwillcontainthefulltextsofthearticlesorpamphletsincludedinitandnot(asintheoriginalprinting)abbreviatedversionsofthesearticles，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。ItwasverylargelyduetohimthatsomeofthemajorpublishingactivitiesoftheSociety&frac34；Sraffa'seditionofRicardo，Stark'seditionoftheeconomicwritingsofBentham，andGuillebaud'seditionofMarshall，aswellasanumberofearlierpublicationsinthe1930s&frac34；wereinitiated。

WhenKeynesdiedin1946itwasnaturalthattheRoyalEconomicSocietyshouldwishtocommemoratehim。ItwasperhapsequallynaturalthattheSocietychosetocommemoratehimbyproducinganeditionofhiscollectedworks。

Keyneshimselfhadalwaystakenajoyinfineprinting，andtheSociety，withthehelpofMessrsMacmillanaspublishersandtheCambridgeUniversityPressasprinters，hasbeenanxioustogiveKeynes'swritingsapermanentformthatiswhollyworthyofhim。

Thepresenteditionwillpublishasmuchasispossibleof[Pagex]THE

GENERALTHEORYOFEMPLOYMENT

hisworkinthefieldofeconomics。Itwillnotincludeanyprivateandpersonalcorrespondenceorpublishlettersinthepossessionofhisfamily。Theeditionisconcerned，thatistosay，withKeynesasaneconomist。

Keynes'swritingsfallintofivebroadcategories。First，therearethebookswhichhewroteandpublishedasbooks。Second，therearecollectionsofarticlesandpamphletswhichhehimselfmadeduringhislifetime(EssaysinPersuasionandEssaysinBiography)。Third，thereisaveryconsiderablevolumeofpublishedbutuncollectedwritings&frac34；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，Keyneshadthehelpofasecretary&frac34；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:

itwillcontainthefulltextsofthearticlesorpamphletsincludedinitandnot(asintheoriginalprinting)abbreviatedversionsofthesearticles，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，&frac34；withtheorderinwhichtheproblemdevelopedinmymind。WhatsomepeopletreatasanunnecessarilycontroversialtoneisreallyduetotheimportanceinmyownmindofwhatIusedtobelieve，andofthemomentsoftransitionwhichwereformepersonallymomentsofillumination……Youdon'tmentioneffectivedemandor，moreprecisely，thedemandscheduleforoutputasawhole，exceptinsofarasitisimplicitinthemultiplier。Tome，regardedhistorically，themostextraordinarythingisthecompletedisappearanceofthetheoryofdemandandsupplyforoutputasawhole，i。e。thetheoryofemployment，afterithadbeenforaquarterofacenturythemostdiscussedthingineconomics。Oneofthemostimportanttransitionsforme，aftermyTreatiseonMoneyhadbeenpublished，wassuddenlyrealisingthis。ItonlycameafterIhadenunciatedtomyselfthepsychologicallawthat，whenincomeincreases，thegapbetweenincomeandconsumptionwillincrease，&frac34；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，forKeynessufferedasevereheartattackintheearlysummerof1937andwasneverabletoworkatanythingnearhisoldpaceuntilwarcamein1939&frac34；andthenhisenergiesweredirectedinotherdirections。HowhewouldhaverevisedtheGeneralTheoryifhehadremainedingoodhealthisimpossibletoguess。Onecanonlybecertainthathewouldhaverevisedit。

SinceitspublicationinBritaininFebruary1936，theGeneralTheoryhasbeenpublishedintheUnitedStates(originallyfromsheetsprintedinEngland)andtranslatedintoGerman，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。Butmylackofemancipationfrompreconceivedideasshoweditselfinwhatnowseemstometobetheoutstandingfaultofthetheoreticalpartsofthatwork(namely，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，particularlyineconomics(alongwiththeothermoralsciences)，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，&frac34；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，atransitionawayfromtheEnglishclassical(ororthodox)tradition。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，atransitionawayfromtheEnglishclassical(ororthodox)tradition。MyemphasisuponthisinthefollowingpagesanduponthepointsofmydivergencefromreceiveddoctrinehasbeenregardedinsomequartersinEnglandasundulycontroversial。

ButhowcanonebroughtupaCatholicinEnglisheconomics，indeedapriestofthatfaith，avoidsomecontroversialemphasis，whenhefirstbecomesaProtestant？

ButIfancythatallthismayimpressGermanreaderssomewhatdifferently。

Theorthodoxtradition，whichruledinnineteenthcenturyEngland，nevertooksofirmaholdofGermanthought。TherehavealwaysexistedimportantschoolsofeconomistsinGermanywhohavestronglydisputedtheadequacyoftheclassicaltheoryfortheanalysisofcontemporaryevents。TheManchesterSchoolandMarxismbothderiveultimatelyfromRicardo，&frac34；aconclusionwhichisonlysuperficiallysurprising。ButinGermanytherehasalwaysexistedalargesectionofopinionwhichhasadheredneithertotheonenortotheother。

Itcanscarcelybeclaimed，however，thatthisschoolof[Pagexxvi]THEGENERALTHEORYOFEMPLOYMENT

thoughthaserectedarivaltheoreticalconstruction；orhasevenattemptedtodoso。Ithasbeensceptical，realistic，contentwithhistoricalandempiricalmethodsandresults，whichdiscardformalanalysis。ThemostimportantunorthodoxdiscussionontheoreticallineswasthatofWicksell。

HisbookswereavailableinGerman(astheywerenot，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，thepartplayedbytherateofinterest&frac34；theseremainasnecessaryingredientsinourschemeofthought。

ItakethisopportunitytoacknowledgemyindebtednesstotheexcellentworkofmytranslatorHerrWaeger(Ihopehisvocabularyattheendofthisvolume[14]mayproveusefulbeyonditsimmediatepurpose)andtomypublishers，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，atransitionawayfromtheEnglishclassical(ororthodox)tradition。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，therehasbeennosuchdominantschoolsincetheexpiryoftheschoolofFrenchLiberaleconomistswhowereintheirprimetwentyyearsago(thoughtheylivedtosogreatanage，longaftertheirinfluencehadpassedaway，[Pagexxxii]THEGENERALTHEORYOFEMPLOYMENT

thatitfelltomyduty，whenIfirstbecameayouthfuleditoroftheEconomicJournaltowritetheobituariesofmanyofthem&frac34；Levasseur，Molinari，Leroy-Beaulieu)。IfCharlesGidehadattainedtothesameinfluenceandauthorityasAlfredMarshall，yourpositionwouldhavebornemoreresemblancetoours。Asitis，youreconomistsareeclectic，toomuch(wesometimesthink)withoutdeeprootsinsystematicthought。PerhapsthismaymakethemmoreeasilyaccessibletowhatIhavetosay。ButitmayalsohavetheresultthatmyreaderswillsometimeswonderwhatIamtalkingaboutwhenIspeak，withwhatsomeofmyEnglishcriticsconsideramisuseoflanguage，ofthe'classical'schoolofthoughtand'classical'economists。

Itmay，therefore，behelpfultomyFrenchreadersifIattempttoindicateverybrieflywhatIregardasthemaindifferentiaeofmyapproach。

Ihavecalledmytheoryageneraltheory。ImeanbythisthatIamchieflyconcernedwiththebehaviouroftheeconomicsystemasawhole，&frac34；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，assoonasweknowthepropensitytoconsumeandtosave(asIcallit)，thatistosaytheresultforthecommunityasawholeoftheindividualpsychologicalinclinationsastohowtodisposeofgivenincomes，wecancalculatewhatlevelofincomes，andthereforewhatlevelofoutputandemployment，isinprofit-equilibriumwithagivenlevelofnewinvestment；outofwhichdevelopsthedoctrineoftheMultiplier。

Oragain，itbecomesevidentthatanincreasedpropensitytosavewillceterisparibuscontractincomesandoutput；whilstanincreasedinducementtoinvestwillexpandthem。Wearethusabletoanalysethefactorswhichdeterminetheincomeandoutputofthesystemasawhole；&frac34；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]&frac34；MontesquieuwhowastherealFrenchequivalentofAdamSmith，thegreatestofyoureconomists，headandshouldersabovethephysiocratsinpenetration，clear-headednessandgoodsense(whicharethequalitiesaneconomistshouldhave)。ButImustleaveittothetextofthisbooktoshowhowindetailallthisworksout。

IhavecalledthisbooktheGeneralTheoryofEmployment，InterestandMoney；andthethirdfeaturetowhichImaycallattentionisthetreatmentofmoneyandprices。ThefollowinganalysisregistersmyfinalescapefromtheconfusionsoftheQuantityTheory，whichonceentangledme。Iregardthepricelevelasawholeasbeingdeterminedinpreciselythesamewayasindividualprices；thatistosay，undertheinfluenceofsupplyanddemand。Technicalconditions，thelevelofwages，theextentofunusedcapacityofplantandlabour，andthestateofmarketsandcompetitiondeterminethesupplyconditionsofindividualproductsandofproductsasawhole。Thedecisionsofentrepreneurs，whichprovidetheincomesofindividualproducersandthedecisionsofthoseindividualsastothedispositionofsuchincomesdeterminethedemandconditions。Andprices&frac34；bothindividualpricesandtheprice-level&frac34；emergeastheresultantofthesetwo[Pagexxxv]PREFACETOTHEFRENCHEDITION

factors。Money，andthequantityofmoney，arenotdirectinfluencesatthisstageoftheproceedings。Theyhavedonetheirworkatanearlierstageoftheanalysis。Thequantityofmoneydeterminesthesupplyofliquidresources，andhencetherateofinterest，andinconjunctionwithotherfactors(particularlythatofconfidence)theinducementtoinvest，whichinturnfixestheequilibriumlevelofincomes，outputandemploymentand(ateachstageinconjunctionwithotherfactors)theprice-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]

Theclassicaltheoryofemployment&frac34；supposedlysimpleandobvious&frac34；hasbeenbased，I

think，ontwofundamentalpostulates，thoughpracticallywithoutdiscussion，namely:

I。ThewageisequaltothemarginalproductoflabourThatistosay，thewageofanemployedpersonisequaltothevaluewhichwouldbelostifemploymentweretobereducedbyoneunit(afterdeductinganyothercostswhichthisreductionofoutputwouldavoid)；

subject，however，tothequalificationthattheequalitymaybedisturbed，inaccordancewithcertainprinciples，ifcompetitionandmarketsareimperfect。

II。Theutilityofthewagewhenagivenvolumeoflabourisemployedisequaltothemarginaldisutilityofthatamountofemployment。

Thatistosay，therealwageofanemployedpersonisthatwhichisjustsufficient(intheestimationoftheemployedpersonsthemselves)

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:

(a)Animprovementinorganisationorinforesightwhichdiminishes'frictional'unemployment；

(b)adecreaseinthemarginaldisutilityoflabour，asexpressedbytherealwageforwhichadditionallabourisavailable，soastodiminish'voluntary'unemployment；

(c)anincreaseinthemarginalphysicalproductivityoflabourinthewage-goodsindustries(touseProfessorPigou'sconvenienttermforgoodsuponthepriceofwhichtheutilityofthemoney-wagedepends)；

or(d)anincreaseinthepriceofnon-wage-goodscomparedwiththepriceofwage-goods，associatedwithashiftintheexpenditureofnon-wage-earnersfromwage-goodstonon-wage-goods。

This，tothebestofmyunderstanding，isthesubstanceofProfessorPigou'sTheoryofUnemployment&frac34；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，thatasituationwherelabourstipulates(withinlimits)foramoney-wageratherthanarealwage，sofarfrombeingamerepossibility，isthenormalcase。Whilstworkerswillusuallyresistareductionofmoney-wages，itisnottheirpracticetowithdrawtheirlabourwheneverthereisariseinthepriceofwage-goods。

Itissometimessaidthatitwouldbeillogicalforlabourtoresistareductionofmoney-wagesbutnottoresistareductionofrealwages。Forreasonsgivenbelow(p。14)，thismightnotbesoillogicalasitappearsatfirst；and，asweshallseelater，fortunatelyso。But，whetherlogicalorillogical，experienceshowsthatthisishowlabourinfactbehaves。

Moreover，thecontentionthattheunemploymentwhichcharacterisesadepressionisduetoarefusalbylabourtoacceptareductionofmoney-wagesisnotclearlysupportedbythefacts。ItisnotveryplausibletoassertthatunemploymentintheUnitedStatesin1932wasdueeithertolabourobstinatelyrefusingtoacceptareductionofmoney-wagesortoitsobstinatelydemandingarealwagebeyondwhattheproductivityoftheeconomicmachinewascapableoffurnishing。Widevariationsareexperiencedinthevolumeofemploymentwithoutanyapparentchangeeitherintheminimumrealdemandsoflabourorinitsproductivity。Labourisnotmoretruculentinthedepressionthanintheboom&frac34；farfromit。Norisitsphysicalproductivityless。Thesefactsfromexperienceareaprimafaciegroundforquestioningtheadequacyoftheclassicalanalysis。

It[22]wouldbeinterestingtoseetheresultsofastatisticalenquiryintotheactualrelationshipbetween[Page10]THEGENERAL

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