2007 Reports

Capitalism and Keynes: From the Treatise on Probability to The General Theory

Phelps, Edmund S.

Of the main controversies in 20th century political economy, none were more heated than the debate over Marxism and, relatedly, the debate over capitalism. John Maynard Keynes was a major figure in both controversies. In this paper I will first touch on Keynes’s contribution to the debate with Marxism. I will then go on to take up the criticism of capitalism with which he is lastingly associated. Both these strains in Keynes’s thinking lead us ineluctably (to use a favorite word of his) to his work of great genius, his theory of economic activity. The latter topic will give me a chance to propose a non-monetary model of employment that, contrary to my previous non-monetary models, preserves the main driver in Keynes’s theory and, at the same time, avoids any presuppositions, plausible or implausible, about “money-wage behavior.”