Keynes, the Keynesians and the Classics: A Suggested Interpretation.

Abstract

Mainstream interpretations of John Maynard Keynes's General Theory are surveyed. An alternative postclassical 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 macroanalysis. The productive sector is characterized by the utilization mode of activity regulated by the nonallocative 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 macroeconomy is suggestive of the need for a more realistic method in macroeconomics. Copyright 1995 by Royal Economic Society.