the classical way of looking at economics. In the book he seems to struggle to escape from the habitual modes of thought and expression that were so deeply ingrained into the psyche of the economists of his day. The ideas that are expressed in his book so laboriously are extremely simple and should be obvious. The difficulty lies, not in the new ideas, but in escaping from the old ones, which were so pervasive as to penetrate into all studies of economics as the time Keynes wrote the book.Keynes asked questions that in some sense had never been asked before; he was interested in the level of national income and the volume of employment rather than in the equilibrium of the firm or the allocation of resources. It was still a problem of supply and demand. But by "demand" Keynes meant the total level of effective demand in the economy, and by "supply" Keynes meant the nation's capacity to produce. Keynes said that when effective demand falls short of productive capacity, the result is unemployment and depression, and when it exceeds the capacity to produce, the result is inflation. The heart of Keynesian economics consists of an analysis of the what determines the level of effective demand. Keynes said that if one ignores foreign trade, then effective demand basically consists of three separate spending streams: consumption expenditures, investment expenditures, and government expenditures, each of which is independently determined. Keynes attempted to show that if you determined the level of effective demand this way one may well exceed or fall short of the physical capacity to produce goods and services: He discounted Say's Law of full employment in saying that there is no automatic tendency for an economy to produce at a level that results in the full employment of all available men and machines. This fundamental implication of the theory came as something of a shock to proponents of the traditional economics who had been inclined to ta...
