Geoff Tily argues that Keynes was primarily concerned with monetary policy, not
fiscal policy. Viewed as a coherent whole, Keynes's work was concerned with the
appropriate technique and infrastructure for the management of money at low rates of
interest. More specifically, his rejection of the gold standard led ultimately to his
proposal for an international clearing union to support domestic debt-management and
monetary policies aimed at cheap money. His ideas became reality. With the start of the
Great Depression, governments across the world began a (short-lived) era of the deliberate
management of money.
While many others have argued that 'Keynesian' economics is a misrepresentation of
Keynes's theory, Tily argues that 'Keynesian' economics also permitted a gross
misrepresentation of his economic policies. 'Keynesian' economics was a different theory
opposed, and indeed rival, to Keynes's work. With the policy perspective restored, an
alternative presentation of Keynes's economics, based on post-Keynesian economics, is
permitted.
In this revised edition, Geoff Tily argues that the economics profession has distorted and
betrayed Keynes's legacy. In virtually all interpretations – especially that taught to
students – Keynes is portrayed as concerned only with government expenditure as a means
to cure economic crisis. Yet Keynes's central aim was the prevention of economic crisis.
His prescription to do so concerned monetary not fiscal policy.
From the moment the great depression began, Keynes began to influence greatly the monetary
policy of the world. Countries, led by the UK and US, put in place capital controls and
mechanisms to manage exchange rates, and changes to debt management and credit policies
that permitted the orderly management of money at low long-term and short-term interest
rates on what should have been a permanent basis. The Bretton Woods negotiations went some
way to re-enforce and formalise these policies, but did not go far enough.
The current crisis is rooted in the dismantling of the remnants of the Bretton Woods
architecture and the liberalisation of finance that began even before 1970. Tily argues
that we should not be surprised that the neglect of Keynes's policies is leading to a
crisis of similar magnitude to the depression that motivated the development and
implementation of those policies in the first place. It is to the same policies that we
must turn, as the crisis becomes a reality.
GEOFF TILY has been a member of the UK Government Economic Service
since 2006 and the Government Statistical Service since 1989. He did his MSc in economics
at University College London and a PhD under the supervision of Victoria Chick.
Table of Contents
Acknowledgements
Introduction
PART I: HISTORY
Monetary Economics and Monetary Policy
JMK and the Fourth Grand Monetary Discussion
The Origins of Keynesian Economics
PART II: THEORY
The Saving-Investment Identity and the Transition to the General Theory
The Theory of Liquidity Preference and Debt Management Policy
The Monetary Theory of Real Activity
PART III: MACROECONOMICS AFTER KEYNES
Keynes's Response to Keynesian Economics
The Keynesian Counter-Revolution and Thereafter
The General Theory and the 'Facts of Experience'
Conclusion
Bibliography
360 pages, Paperback
