Keynes’ treatment of dynamics and stability in a monetary economy: the role played by expectations from the Tract on Monetary Reform to the General Theory

Sylvie Rivot

The European Journal of the History of Economic Thought, 2020, vol. 27, issue 4, 523-548

Abstract: Contrary to the commonly accepted view, Keynes’ static treatment of the effective demand principle in his General Theory should be considered more as an achievement than as an incomplete proof. The Tract investigated the fluctuations due to short-term forecasting errors. Next, the Treatise extended the analysis of expectations’ mismatches to the determination of the level of investment. Hence the major achievement of the General Theory can be located in its demonstration of the possible existence of an underemployment equilibrium due to the indeterminacy of long-term expectations.

Date: 2020
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DOI: 10.1080/09672567.2020.1769152

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