The General Theory of Employment, Money, and Interest

This review is a classic, originally published in 1936.

Without a doubt, Keynes' General Theory has been the most significant book on economics in the past 75 years. Born of the 1930s Great Depression, it revolutionized both thinking within the economics profession and attitudes toward public policy, notably the possibility for the government, through budgetary policy, to stabilize the national economy and above all to prevent a repetition of the Depression. It in effect created the subfield of macroeconomics.

Curiously, the General Theory as cast assumed a closed economy; it was left to others to adapt the theory to the more realistic case of economies open to foreign trade and movements of capital. But Keynes himself was highly sensitive to the international environment. He first became widely known for his Economic Consequences of the Peace (1920), a trench ant criticism of the Treaty of Versailles, which reached the highly charged conclusion (later challenged by others) that the economic burden on Germany of proposed reparations was impossibly high, and if vigorously pursued would ensure economic privation and social upheaval and even prevent lasting peace in Europe.

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