Keynes, The Keynesians and the Classics: A Suggested Interpretation

Abstract

Mainstream interpretations of Keynes's General Theory are surveyed. An alternative post-classical interpretation is proposed. Keynes is interpreted as treating classical theory as the valid theory of allocation but this type of theory is of limited relevance for macro analysis. The productive sector is characterised by the utilisation mode of activity regulated by the non-allocative multiplier process. However the financial sector is allocative and Keynes proposed the allocative theory of liquidity preference. It is argued that this dual conception of the macro economy is suggestive of the need for a more realistic method in macroeconomics.

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