The new deal and 'domesticated Keynesianism' in America

John Kenneth Galbraith has held up the 'almost unique unreadability' and 'fascinating obscurity' of much of John Maynard Keynes's General Theory of Employment, Interest and Money as a major reason for its success. It created a need for translators and proselytizers to explain its deep meaning to government officials, students and the public at large; and 'as with the Bible and Marx, obscurity stimulated abstract debate' (Galbraith, 1971:44). Unlike much of the preceding theoretical literature on depression economics, Keynes's General Theory was not a theory of the business cycle but rather a theory of the chronic tendency of the free-enterprise economy to depart from full employment, with no automatic tendency, under realistic institutional assumptions, to return to full employment. It is a general theory of disequilibrium or, rather, it explains why there is a multiplicity of possible equilibria, most of them suboptimal, and each one prone to unpredictable shift through the vagaries of businessmen's 'animal spirits'. It called for the visible hand of government to supplement the invisible hand of the market Though a difficult book, Keynes's General Theory is a model of clarity compared with modern 'general equilibrium theory' that purports to explain how 'free', fully flexible markets unencumbered by government may keep the economy close to a unique, optimal full-employment equilibrium. Perhaps for this reason exegesis of the latter now easily displaces Keynesian theory in prestige and classroom time.