2013년 5월 19일 일요일

[Searching for comments on] some basic aspects of Keynes's Treatise on Money.

자료 1. D. E. Moggridge, Maynard Keynes: an economist's biography


p. 484.

Keynes's Treatise as it had evolved after 1924 was intended to be a definitive contribution to both pure and applied monetary theory. It covered extensive ground and to summarise the whole of the two volumes that appeared at the end of October 1930 would take me too far from my central concerns. Thus I shall concentrate on what Keynes regarded as the major themes and leave the interested reader to pursue the often stimulating discussions of subsidiary issues. [i]
[i] For instance, I shall not discuss his speculative aside relating the age of Shakespeare to the profit inflation induced by the dispersion of Spain's supplies of precious metals from the New Wordl (^JMK^, VI, 137) which provided a peg for L. C. Knight's Drama and Society in the Age of Johnson (1937).
At the center of the Treatise as of the Tract lay the question of price stability and of the control of the credit cycle. In the Treatise, however, Keynes began to explore the dynamic forces underlying changes in the price level, forces obscured in traditional formulations of the quantity theory such as the Cambridge cash balances approach with its single price level and its aggregative treatment of monetary influences. He produced a Janus-like book: it looked back to his Cambridge inheritance; it looked forward to some of the concerns of The General Theory that would appear in February 1936.

KHNW p055-2 { (1)
The Treatise reflected earlier concerns in many of its basic premisses. It tended to assume that money was neutralㅡthat changes in monetary variables could not affect the long-term equilibrium position of the economy's real variables. As he put it:
Monetary theory, when all is said and done, is little more than a vast elaboration of the truth that ‘it all comes out in the wash’. [28]
[28] ^JMK^, VI, 366. For the rest of this discussion of the ^Treatise^, references to volume and page will appear at the appropriate places in the text.
Despite this basic premiss, throughout the book Keynes provided examples of the forces that could produce contrary results.[j]
  • The central theory of the book carried with it the implicit assumption, if not the logical necessity,[29] of a 'full employment' level of output with the adjustment to monetary influences occurring through changes in prices. 
  • Yet in the non-formal discussions of the book, he often concerned himself with movements of both output and prices: his favorite banana parable, which he also used in the Macmillan Committee, is a good example.[30] 
  • Even when he did so, however, he tended to assume (the banana parable is an exception) that there were forces in the economy tending to take the system to full employment, at least in a closed economy with no foreign trade.[k]
[j] See especially ^JMK^, V. ch. 7 'Diffusion of Price Levels'.
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With these prepositions and in light of his concern for the applicability of economic theory to policy, in the Treatise Keynes was in essence ( ... ※ The author's discussions on A Treatise seems to continue to over p. 490 ... )


자료 2. Vincent Barnett, John Maynard Keynes (Routledge, 2013. 2. 11)

Chapter 12. It All Comes Out in the Wash ( p. 184 ~ )

The publication of A Treatise on Money in October 1930 was the culmination of Keynes's ongoing work on monetary theory and trade cycles across the whole period since 1918. It was certainly his longest book, issued in two thick volumes and a total of nearly 800 pages. It is also not that easy to follow straight through from beginning to end, containing numerous subtle definitions of economic quantities that are then linked by means of various interconnected equations. Thankfully, the meaning of these equations is explained clearly in words, but these explanations are themselves complex and demanding, and hence the reader frequently has to pause in order to 'come up for air': I doubt whether many people have read the entire Treatise from beginning to end in one continuous sitting. And compared to Keynes's previous books, such as The Economic Consequences of the Peace and A Tract on Monetary Reform, there was less discussion of the wider socio-political context of the economic ideas being considered, although there were a few chapters devoted to a consideration of historical examples in the second volume.

In the following chapter, some of the basic features of the book will be explained and its wider significance discussed, but it is as well to admit that every element of such a long and complex work cannot be fully considered in a relatively short chapter; hence this chapter cannot claim to provide a comprehensive guide to every feature, nuance and debate in the book.

The Basic Elements

KHNW p055-2 { (2)
Keynes ended the two volumes of A Treatise on Money with the apparently self-deprecating statement that ‘Monetary Theory, when all is said and done, is little more than a vast elaboration of the truth that “it all comes out in the wash”’. [1]
  • (1) What was meant was the quantity theory-style supposition that, in the long run, many monetary (and other) factors were ‘flushed through’ the economic system leaving little long-term impact
  • (2) But, and this was a very important but, in the short- and medium-run, they could have very significant impact, i.e. the precise nature of ‘the wash’ was what monetary economics should be concerned with.
Remember Keynes's famous quip that ‘In the long run, we are all dead’ : consequently, [:]
  • the situation after ‘the wash’ was completed, was irrelevant to the immediate concerns of most people. 
  • The real question was: what happened to specific variables like savings, investment, the price level, the demand for money and so on as they went through the process of ‘the wash’? This was part of the task that Keynes set himself in the book, to explain how equilibrium and disequilibrium were established and then lost, as an economy went through the sometimes-painful experience of ‘flushing’ various changing quantities through itself.
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At the heart of the explanation of economic fluctuations, in Keynes's 1930 view, were two key variables: savings and investment. The purchasing power of money, or in other words, the general price level (in relation to the goods and services required for consumption in a community): 
 .... oscillates below or above the equilibrium level according as the cost of current investment is running ahead of, or falling behind, savings. A principal object of this Treatise is to show that we have here the clue to the way in which fluctuations of the price-level actually come to pass ... [2]
This statement was the crux of Keynes's explanation of the change in the price level (and other quantities) that were known as trade cycles. It was not simply monetary factors that were causing the oscillations of trade, but the overall relation between savings and investment. A key realisation that he had come to by 1930 was that there were no natural mechanism that automatically brought actual investment in line with actual savings, i.e. the two quantities could diverge, at least for a definite period of time. Thus, there were three possible scenarios for any given period. Savings could equal investment, savings could exceed investment, or savings could be less than investment. The consequences for the economic system of departing from and regaining this equilibrium between savings and investment was the essential driving force behind the changes that were called variously the trade cycle, business fluctuations, or the economic weather.

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