Summary of General Theory Book I Chapter 2 Section I

In this section, Keynes summarizes what he perceives to be the two fundamental postulates of the classical theory of value and production.

• 1. The wage of a given unit of labor is equal to the marginal utility contributed to the end product.
  • unresolved Does this account for the “surplus value” harvested by the entrepreneur, above and beyond the wages paid? i.e. if the value exchange is indeed equal, what incentive does the entrepreneur have?
• 2. The purchasing power of the wage offsets the marginal disutility, or burden, of the labor experienced by the laborer.

He also argues that the classical theory does not fundamentally account for unemployed labor, which would have implications in the conclusions drawn and models derived from the theory.