Friday, July 23, 2010

The Postulates of the Classical Economics

At Project Syndicate, Keynes biographer Robert Skidelsky writes:
The chief task that John Maynard Keynes set himself in writing his General Theory of Employment, Interest, and Money was to uncover the deep axioms underlying the economic orthodoxy of his day, which assumed away the possibility of persistent mass unemployment. The question he asked of his opponents was: “What must they believe in order to claim that persistent mass unemployment is impossible, so that government ‘stimulus’ to raise the employment level could do no good?” In answering this question, Keynes reconstructed the orthodox theory – and then proceeded to demolish it.
He goes on to provide a nice quick sketch of Keynes' critique of "classical" economic assumptions; the original argument, which is well worth reading today, is found in chapter 2 and chapter 12 of the General Theory.

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