Reflection: In attempting to grok Keynes’ general theory, it now seems necessary to approach it in contradistinction from the classical theory, which I also know little about. I’ve just finished Chapter 13, Section II and he is starting to tie together intricate models of employment, interest, and money, which, as an assemblage of concepts, has several areas which I do not intuitively grasp. In attempting to identify these gaps in my comprehension, I am here also experimenting in notetaking methodology more generally. Specifically, I hope to incisively surface critical areas of my known unknown, and to formulate these areas as questions which I can return to as I proceed through the text. What follows is my attempt at recapitulating what I have understood thus far of Keynes’ General Theory, with a view toward what in particular I do not understand, in the interest of integrating the general theory into my intuition.
Keynes seems to be arguing that the classical theory does not accurately model the dynamics of employment, and other key facets of the economy, because it does not correctly conceptualize some of the underlying factors which influence these facets. As I understand, the classical school of economics generally holds that spontaneous markets will efficiently tend toward equilibrium between supply and demand and will naturally tend toward full employment.
unresolved Keynes, however, argues that if you inspect the complex of evolving factors and their relationships, you will see that the classical supposition is not necessarily so. For example, he argues that employment is not maximized irrespective of the relation between supply and demand, but that supply and demand should be understood as dynamic functions of employment volume, and that maximal employment occurs where these functions intersect. This is also one example of a facet of Keynes’ conceptual assemblage which I do not yet adequately understand.
From a high level perspective, I am approaching Keynes’ general theory as a conceptual assemblage built to better understand economic phenomena, as an improvement upon the orthodoxy of the classical school of economics. As a conceptual assemblage, it can be understood as a complex of dynamic and variable factors which are in imperfect dialogue (i.e. limited by constraints of communicative friction and subjective interpretation) with one another. This complex of factors includes some which are carried over or otherwise preserved from the classical school, and some which Keynes introduces himself.
In trying to understand the general theory, I am attempting to wrap my mind around this conceptual assemblage as a whole, and integrate it into my living acumen, but also into the externalized knowledge base of discourse which my zettelkasten is functioning as. In other words, I am trying to internalize the epistemic spirit of the general theory into my own intuition, while externalizing the more rote body of information, embodied by the book itself, into a queryable and semantically rich hypergraph.
Moreover, as to the former, this epistemic digestion of the general theory is part of the larger effort of internalizing the various epistemes having to do with politico-economic systems, in a rhizomatically dialectical fashion which, despite its pluralistic bearings, may still serve to inform some definite and syncretic model for how a society may be organized to best embody the virtues of our various attempts thus far, whilst best avoiding their pitfalls.
As for Keynes’ general theory, and my comprehension of it, he seems to be building this conceptual assemblage with a practical view toward maximizing employment, and judging from my understanding of the role he went on to play in the global institutionalization of macroeconomic theory, he seemed to succeed in actually implementing much of this, or at least attempting to. Prior to actually reading anything of Keynes, I understood his economic paradigm was referred to as “embedded liberalism” and his school of thought as “Keynesian” economics. Having also already read some of Hayek’s more philosophic work, namely The Road to Serfdom and The Constitution of Liberty, I understand that much of the ensuing school of economics, referred to as neoliberal economics, is largely in response to Keynesian economics or embedded liberalism, and how these preconceptions may in part be molded by antithetical caricatures of Keynesian economics as being pseudo-socialist.
Context being provided, I will now attempt to identify those topics of salient incomprehension across what I have read of the general theory so far, in no particular order.
unresolved Firstly, I do not adequately understand the relation between interest rate and investment rate, nor even what ‘interest rate’ refers to concretely. Is it the aggregate of all interest rates for loans, or is it the interest rate of some central bank? I am starting to understand how the interest rate notionally relates to the aggregate willingness or unwillingness to part with liquid savings in the form of cash.
resolved Secondly, I do not adequately understand the distinction between savings and investment.
- See r-JK-GT-25.1
unresolved Thirdly, I do not understand the conditions under which the general theory posits that full employment can be attained, but I do think it has something to do with there being: a proper balance between aggregate demand (and, of that, sufficient propensity to consume); the marginal disutility of labor being in proper relation to the real wages; the proper relationship between the marginal efficiency of capital and the interest rate; and perhaps some other factors exerting mutual influence over each other.
I also know that many of these dynamics involve the relationship between expected and actual values and how well the former approximately predicts the latter. Another recurring dynamic in this conceptual assemblage is the distinction between mere changes in values, and changes in rates of change, and relations between rates of change. Keynes highlights examples of consequences not only of relations of value, but also relations of derivatives of value (see Ch 13.3 ^041c17).
I have difficulty holding all of these factors within a single conceptual model, but thankfully that is largely due to the fact that I haven’t finished the book yet and I haven’t reviewed my chapter summaries. Regarding the summaries, the intention there, in terms of notetaking methodology, is to re-articulate encountered discourse in terms originating from my present intuition, as if taking a snapshot of my current comprehension of the topic(s). By building a nexus or reticulum of these internal expressions of external discourse, I hope to entrench or innervate these networks of association deeper within my long-term intuition. There may also be a potential role for spaced repetition to play here, in the interest of revisiting these notes. Ideally, I will reach a stage of grokking the general theory so fundamentally that, despite inevitably forgetting particular bits of information, I will have its epistemic essence to deeply innervated into my own intuition that I will need only to periodically revisit some condensed treatment of the text, expressed by my own notes, to return to a deep level of familiarity with it.