SOAS Research Online

Abstract

With few exceptions all paradigm changing contributions in the social sciences fall victim to multiple interpretations. These often dilute and obscure what made the contribution intellectually innovative. This is notably the case for Keynes and especially The General Theory. This paper argues that the core of Keynes's ‘game changing’ contribution was the analytical insight that market economies are demand-constrained, not relative price-constrained. It is from this core that all his other enduring insights flow, especially his treatment of uncertainty. The difference between demand-constrained analysis and the quantity adjustment it implies, and relative price-constrained analysis with its price adjustments, is analogous to the difference between Euclidian and non-Euclidian geometry. This paper demonstrates the implications of demand-constrained analysis and in doing so suggests why the mainstream of the economics profession was and is so loath to embrace it.