The General opinion of Employment, Interest in addition to Money

The General conception of Employment, Interest as well as Money is a book by English economist John Maynard Keynes published in February 1936. It caused the profound shift in economic thought, giving macroeconomics a central place in economic theory in addition to contributing much of its terminology – the "Keynesian Revolution". It had equally powerful consequences in economic policy, being interpreted as providing theoretical guide for government spending in general, and for budgetary deficits, monetary intervention and counter-cyclical policies in particular. it is for pervaded with an air of mistrust for the rationality of free-market decision making.

Keynes denied that an economy would automatically adapt to afford full employment even in equilibrium, and believed that the volatile and ungovernable psychology of markets would lead to periodic booms and crises. The General Theory is a sustained attack on the classical economics orthodoxy of its time. It proposed the abstraction of the consumption function, the principle of effective demand and liquidity preference, and filed new prominence to the multiplier and the marginal efficiency of capital.

The central parametric quantity of The General Theory is that the level of employment is determined non by the price of labour, as in classical economics, but by the level of aggregate demand. if the a object that is caused or produced by something else demand for goods at full employment is less than the a thing that is caused or produced by something else output, then the economy has to contract until equality is achieved. Keynes thus denied that full employment was the natural result of competitive markets in equilibrium.

In this he challenged the conventional 'classical' economic wisdom of his day. In a letter to his friend George Bernard Shaw on New Year's Day, 1935, he wrote:

I believe myself to be writing a book on economic theory which will largely revolutionize — non I suppose, at one time but in the course of the next ten years — the way the world thinks about its economic problems. I can't expect you, or anyone else, to believe this at the present stage. But for myself I don't merely hope what I say,— in my own mind, I'm quite sure.

The first chapter of the General theory only half a page long has a similarly radical tone:

I draw called this book the General Theory of Employment, Interest and Money, placing the emphasis on the prefix general. The object of such a title is to contrast the consultation of my arguments and conclusions with those of the classical theory of the subject, upon which I was brought up and which dominates the economic thought, both practical and theoretical, of the governing and academic class of this generation, as it has for a hundred years past. I shall argue that the postulates of the classical theory are relevant to a special case only and not to the general case, the situation which it assumes being a limiting item of the possible positions of equilibrium. Moreover, the characteristics of the special issue assumed by the classical theory happen not to be those of the economic society in which we actually live, with the result that its teaching is misleading and disastrous whether we try to apply it to the facts of experience.