The 1930s were a desperate time.  National economies were struggling and depressed, and many feared monetary collapse.  It was at this time, in 1936, that John Maynard Keynes published his best-known and most influential work, The General Theory of Employment, Interest, and Money.  This was a treatise dealing with various principles of macroeconomics, a treatise that would strike a chord with enough people that it would lead to the founding of a branch of economic thought called Keynesian Economics. John Maynard Keynes had been educated at Eton and King’s College at Cambridge.  He had overseen a number of positions and written a number of other economic treatises and pamphlets by the time he was ready to publish “The General Theory of Employment, Interest, and Money”.  His understanding of economics, particularly macroeconomics, has since made him one of the best-known and most frequently studied economists in modern history.

Understanding and offering a succinct summary of “The General Theory of Employment, Interest, and Money” on a chapter by chapter basis first requires an understanding of macroeconomics, and what differentiates it from the other subfield of economics, microeconomics.  Macroeconomics deals with the economy on a much larger scale.  It deals with factors like unemployment, payment balances, inflation rates, and the total output and income of nations.  This is related to, but distinct from microeconomics.  Microeconomics’ dealings are primarily with studying economic output, including supply and demand, market trading, and relative price patterns. Key to understanding macroeconomics is national output, and the way that it relates to the concept of a gross national product, or GNP.  A nation’s GNP is the total value of goods and services produced in their economy over a certain period of time, typically one year’s time.  Once a country’s economic activity and production have been measured, that measure is referred to as final demand.  Ultimately, a country’s final demand is determined by their investment, spending, exports, and total consumption. Macroeconomists’ primary concerns are typically centered around the determinants of the size of a country’s GNP, the stability of that GNP, and how that relates to a number of tangential factors.

Studies in macroeconomics are a recent economic innovation, which began in large part with John Maynard Keynes’ work in the 1930s. As the title of “The General Theory of Employment, Interest, and Money” would indicate, much of Keynes’ ideas focused on unemployment, inflation, and the supply of money.  Of these ideas, unemployment and its repercussions have been given the most study.Keynes writes in one of the important quotes from “The General Theory of Employment, Interest, and Money”  … the existing theory of unemployment nonsense. In a depression … there was no wage so low that it could eliminate unemployment. Accordingly, it was wicked to blame the unemployed for their plight. The second proposition proposed an alternative explanation about the origins of unemployment and depression. This centered upon aggregate demand – i.e. the total spending of consumers, business investors, and public agencies. When aggregate demand was low, sales and jobs suffered. When it was high, all was well.

These ideas were espoused in different chapters of  “The General Theory of Employment, Interest, and Money”.  Until Keynes’ publication of this text, unemployment was typically explained very differently.  Prevailing theories at the time stated that labor market rigidity prevented working wages from falling to a level at which the labor market would be in equilibrium.  This was reached when those seeking work had successfully bid down the working wages to the point that some either left the labor market entirely or employers became willing to hire more workers, as lower wages would increase the potential profitability of hiring a larger labor force.  In the event that rigidity were to prevent wages from dropping to a level at which supply and demand for labor were in equilibrium, the problem of unemployment may make itself apparent for some time.

In term of offering an analysis of “The General Theory of Employment, Interest, and Money” Keynes argued against this prevalent theory in several chapters.  He theorized that this nagging unemployment might well be caused by a lack of demand for production of goods or the presence of services.  This runs counter to the idea that unemployment is solely based on labor market fluctuations.  Keynes further theorized that the explanation for this lack of demand was in the failure of planned investment to match planned savings.