Keynes's General Theory, the Rate of Interest and Keynesian' Economics

In this book, first published in January 2007, Geoff Tily argues that the economics profession has distorted and betrayed Keynes's legacy. In virtually all interpretations - especially those taught to students - Keynes is portrayed as concerned only with government expenditure as a means to cure economic crises. Yet Keynes's central aim was the prevention of economic crises, for which he prescribed monetary not fiscal policies.

The present crisis has its origins in the loss of these policies. Keynes's central concern was the management of money at a low long-term rate of interest. His rejection of the gold standard led ultimately to his proposal for an international clearing union and capital controls to support domestic debt management and monetary policies aimed at cheap money. While his initiatives greatly influenced the financial architecture of the world in the wake of the Great Depression, they were never fully embraced by the authorities. With the termination of the Bretton Woods Agreement and the liberalisation of finance that began even before 1970, they were decisively abandoned. We should not be surprised that the loss of Keynes's policies has led finally to a crisis of similar nature and magnitude to the depression that had motivated the development and implementation of the policies in the first place.

Tily is concerned with recovering the monetary perspective on Keynes's economics, through a historical study of Keynes's policy initiatives, a reinterpretation of the theoretical analysis of the General Theory, and an account of how 'Keynesian economics distorted this approach. As was the case in the 1930s, the theory and associated practical conclusions offers a means to the resolution of the 'great recession' and to the possibilities of a new golden age.