Keynes’s General Theory: A Solution in Search of a Problem

This article is an evaluation of the General Theory largely on its own terms. Extensive quotations from The General Theory of Employment, Interest, and Money are used in order to allow Keynes himself to expound the theory. The goal of this article is to show that even on its own terms the General Theory must be considered a failure, for the problem it purports to solve, involuntary unemployment, does not exist. Many of the individual points made here have been made before, but no references are provided. Benjamin Anderson (1980), for example, remarks on the counter-intuitive (indeed, worthless) nature of Keynes’s “volume of employment,” and Henry Hazlitt points out that one parts with liquidity whenever one buys anything. I think at least two points here have not been made before: 1) that deficit-spending plays an insignificant or non-existent role in the General Theory, and 2) that involuntary unemployment (used in the manner in which Keynes uses the phrase) is incapable of being known to exist—which removes any justification for the assertion that full employment does not exist.