The Economics of John Maynard Keynes

157 Pages·2023·1.369 MB·English

by  Fabio Terra

THE ECONOMICS OF JOHN
MAYNARD KEYNES
Widely recognized as one of the greatest economists in history, there has been
a surge of interest in the work of John Maynard Keynes since the financial crisis
of 2008 with people looking for solutions to rebalance the economy. Presciently,
Keynes argued that free markets are unable to fully organize economic activity
and that the steadying and reforming hand of the State is needed for capitalism to
function properly. In the aftermath of the financial crisis of 2008, exacerbated by a
global pandemic, these ideas are more timely than ever.
This book provides an introduction to Keynes’ thoughts on capitalism, the State,
and macroeconomics. It starts with Keynes’ epistemological theory of his A Treatise on
Probability (1921), from which aspects such as uncertainty and the decision-making
process, both later important in his economic work, can be drawn. The book then
pursues Keynes’ economic writings. From A Tract on the Monetary Reform (1923) and
A Treatise on Money (1930), it shows Keynes’ pursuit of a full understanding of the
role of money in the economy. Keynes masterfully demonstrated the knowledge
he gained through his 1936 masterpiece The General Theory of Employment,
Interest and Money. Going beyond Keynes’ classic, this book also explores his
later work on economic policy prescriptions and finally his concept of State and
economic development.
This accessible introduction to the economic thought of Keynes will be essential
reading for those interested in the history and development of economics, as well as
political scientists, sociologists, historians, and others seeking an overview of these
foundational economic ideas.
Fabio Terra was born in Araxa, a town in the state of Minas Gerais, Brazil.
He received a Bachelor of Economics degree from the Federal University of
Uberlandia, an MSc degree from the Federal University of Parana, and a PhD
degree from the Federal University of Rio Grande do Sul. He is a professor at the
Federal University of ABC and of the Post-graduate Program in Economics of the
Federal University of Uberlandia, as well as a researcher at the Brazilian Council
for Scientific and Technological Development. He is Former Visiting Fellow of
Wolfson College, University of Cambridge, UK, and Former Chair of the Brazilian
Keynesian Association.

THE ECONOMICS
OF JOHN MAYNARD
KEYNES
Fabio Terra
Designed cover image: © Getty Images
First published 2023
by Routledge
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and by Routledge
605 Third Avenue, New York, NY 10158
Routledge is an imprint of the Taylor & Francis Group, an informa business
© 2023 Fabio Terra
The right of Fabio Terra to be identified as author of this work has been
asserted in accordance with sections 77 and 78 of the Copyright, Designs
and Patents Act 1988.
All rights reserved. No part of this book may be reprinted or reproduced or
utilised in any form or by any electronic, mechanical, or other means, now
known or hereafter invented, including photocopying and recording, or in
any information storage or retrieval system, without permission in writing
from the publishers.
Trademark notice: Product or corporate names may be trademarks or
registered trademarks, and are used only for identification and explanation
without intent to infringe.
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
ISBN: 978-1-032-26211-6 (hbk)
ISBN: 978-1-032-26210-9 (pbk)
ISBN: 978-1-003-28709-4 (ebk)
DOI: 10.4324/9781003287094
Typeset in Bembo
by Apex CoVantage, LLC
To my beloved parents Iolivan and Eliane
To my loved sweetest thing, Fernanda
To my dear masters, Fernando Ferrari Filho
and Fernando Cardim de Carvalho
To all those who believe in a better world, just like you do

CONTENTS
Acknowledgments ix
Introduction 1
PART I
Foundations 5
1 The Origins of Uncertainty 7
2 A Brief Debate About a Controversial Topic: Keynes’ Method 13
PART II
Flirting With Money 17
3 In the Long Run We Are All Dead: A Tract
on the Monetary Reform 19
4 The Wicksellian Keynes: A Treatise on Money 24
PART III
Keynes’ Checkmate: The General Theory
of Employment, Interest and Money 33
5 Checkmating the Neoclassical Theory 35
viii Contents
6 If Not Neoclassical Supply-Side Economics,
Then What? Keynes’ Demand-Side Economics 43
7 Demand Explained: Consumption 50
8 Demand Explained: Investment 56
9 Money Explained: Liquidity Preference and
the Interest Rate 64
10 Money Explained: Why Is It so Special in the Economy?
The Peculiarities of Money 75
11 Economic Dynamics Explained: A Summary
of The General Theory 83
12 Final Elements of The General Theory 90
PART IV
Beyond The General Theory of Employment,
Interest and Money: Economic Policies, State,
and Development 103
13 Fiscal Policy 105
14 Monetary Policy 116
15 The Exchange Rate Policy 125
16 The State 130
17 Development 134
Conclusion 138
Bibliographical References 141
Index 144
ACKNOWLEDGMENTS
I am grateful to all my professors for the knowledge they have kindly given to
me. I am also thankful to Brazilian State for all the education and financial grants
it has provided me with. I hope I am returning it back to the Brazilian society in
the classes I lecture as well as in the research I do, of which this book is the most
important work I have done so far.