ABSTRACT
Keynes’s General Theory of Employment, Interest and Money is a most remarkable work. It is remarkable for its theoretical insight, and it is remarkable for its empirical realism, but, above all, it is remarkable for a curious omission. The orthodox interpretation of “Say’s Law” is that, in a perfectly competitive economy, there can be no such thing as deficiency of effective demand. Keynes’s liquidity preference doctrine, by providing a rational motive for hoarding, nails the coffin-lid well and truly down. The justification for this action is that "contemporary economists, who might hesitate to agree with Mill, do not hesitate to accept conclusions which require Mill’s doctrine as their premiss". The orthodox argument, inherited from Walras and Wicksell, relies on the "real-balance effect". As the desire for monetary savings increases, money is withdrawn from the commodity markets. The General Theory is refreshingly free of the desert island economics characteristic of the traditional classical textbooks on economic theory.
