TITLE:
How Flaws in the General Theory Render It Irrelevant to the Real World
AUTHORS:
Ezra Davar
KEYWORDS:
General Theory; Microeconomics; Macroeconomics; Effective Demand; Involuntary Unemployment; Multiplier; Money Theory
JOURNAL NAME:
Modern Economy,
Vol.5 No.1,
January
23,
2014
ABSTRACT: This paper shows how flaws in Keynes’s General Theory render it irrelevant and inapplicable to real world. First of all, Keynes’s
macro model is an incomplete and imprecise. Second, Keynes’s definitions of
full employment, voluntary unemployment and involuntary unemployment are
extremely vague and unfinished. Third, the Keynesian multiplier is based on the
substitution of the cause (the national income) for the effect (investment);
yet, the rate of the multiplier depends on the marginal propensity to invest; therefore,
its genuine meaning is that requirement. Finally, and most importantly,
Keynes’s money theory is incomplete and even incorrect.