Keynes Quotes

The duty of "saving" became nine-tenths of virtue and the growth of the cake the object of true religion.

Quotes Criticizing Economics/Economists: -- see also, main page for QUOTES critical of economists

Keynes Quotes

The composition of this book has been for the author a long struggle of escape, and so must the reading of it be for most readers if the author’s assault upon them is to be successful,— a struggle of escape from habitual modes of thought and expression. The ideas which are here expressed so laboriously are extremely simple and should be obvious. The difficulty lies, not in the new ideas, but in escaping from the old ones, which ramify, for those brought up as most of us have been, into every corner of our minds.

It is an extraordinary example of how, starting with a mistake, a remorseless logician can end up in bedlam. Keynes

It is astonishing what foolish things one can temporarily believe if one thinks too long alone, particularly in economics (along with the other moral sciences), where it is often impossible to bring one’s ideas to a conclusive test either formal or experimental

For if orthodox economics is at fault, the error is to be found not in the superstructure, which has been erected with great care for logical consistency, but in a lack of clearness and of generality in the premisses - Keynes preface to GT

For professional economists, after Malthus, were apparently unmoved by the lack of correspondence between the results of their theory and the facts of observation;— a discrepancy which the ordinary man has not failed to observe, with the result of his growing unwillingness to accord to economists that measure of respect which he gives to other groups of scientists whose theoretical results are confirmed by observation when they are applied to the facts.

The classical theorists resemble Euclidean geometers in a non-Euclidean world who, discovering that in experience straight lines apparently parallel often meet, rebuke the lines for not keeping straight as the only remedy for the unfortunate collisions which are occurring. Yet, in truth, there is no remedy except to throw over the axiom of parallels and to work out a non-Euclidean geometry. Something similar is required today in economics.

Some Theory Quotes, all from General Theory, about problems with ET

We must now define the third category of unemployment, namely 'involuntary' unemployment in the

strict sense, the possibility of which the classical theory does not admit.

Clearly we do not mean by 'involuntary' unemployment the mere existence of an unexhausted capacity

to work. An eight-hour day does not constitute unemployment because it is not beyond human capacity

to work ten hours. Nor should we regard as 'involuntary' unemployment the withdrawal of their labour

by a body of workers because they do not choose to work for less than a certain real reward.

Furthermore, it will be convenient to exclude 'frictional' unemployment from our definition of

'involuntary' unemployment. My definition is, therefore, as follows: Men are involuntarily unemployed

If, in the event of a small rise in the price of wage-goods relatively to the money-wage, both the

aggregate supply of labour willing to work for the current money-wage and the aggregate demand for it

at that wage would be greater than the existing volume of employment. An alternative definition, which

amounts, however, to the same thing, will be given in the next chapter (Chapter 3).

Obviously, however, if the classical theory is only applicable to the case of full employment, it is

fallacious to apply it to the problems of involuntary unemployment¾if there be such a thing (and who

will deny it?). The classical theorists resemble Euclidean geometers in a non-Euclidean world who,

discovering that in experience straight lines apparently parallel often meet, rebuke the lines for not

keeping straight¾as the only remedy for the unfortunate collisions which are occurring. Yet, in truth,

there is no remedy except to throw over the axiom of parallels and to work out a non-Euclidean

geometry. Something similar is required to-day in economics. We need to throw over the second

postulate of the classical doctrine and to work out the behaviour of a system in which involuntary

unemployment in the strict sense is possible.

COMPLEXITY ARGUMENT:

It would be interesting to see the results of a statistical enquiry into the actual relationship between

changes in money-wages and changes in real wages. In the case of a change peculiar to a particular

industry one would expect the change in real wages to be in the same direction as the change in moneywages.

But in the case of changes in the general level of wages, it will be found, I think, that the change

in real wages associated with a change in money-wages, so far from being usually in the same direction,

is almost always in the opposite direction. When money-wages are rising, that is to say, it will be found

that real wages are falling; and when money-wages are falling, real wages are rising. This is because, in

the short period, falling money-wages and rising real wages are each, for independent reasons, likely to

accompany decreasing employment; labour being readier to accept wage-cuts when employment is

falling off, yet real wages inevitably rising in the same circumstances on account of the increasing

marginal return to a given capital equipment when output is diminished.

FUNDAMENTAL OBJECTION:

But there is a more fundamental objection. The second postulate flows from the idea that the real wages

of labour depend on the wage bargains which labour makes with the entrepreneurs. It is admitted, of

course, that the bargains are actually made in terms of money, and even that the real wages acceptable

to labour are not altogether independent of what the corresponding money-wage happens to be.

Nevertheless it is the money-wage thus arrived at which is held to determine the real wage. Thus the

classical theory assumes that it is always open to labour to reduce its real wage by accepting a reduction

in its money-wage. The postulate that there is a tendency for the real wage to come to equality with the

marginal disutility of labour clearly presumes that labour itself is in a position to decide the real wage

for which it works, though not the quantity of employment forthcoming at this wage.

The traditional theory maintains, in short, that the wage bargains between the entrepreneurs and the

workers determine the real wage; so that, assuming free competition amongst employers and no

restrictive combination amongst workers, the latter can, if they wish, bring their real wages into

conformity with the marginal disutility of the amount of employment offered by the employers at that

wage. If this is not true, then there is no longer any reason to expect a tendency towards equality

between the real wage and the marginal disutility of labour.