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Keynes on the Marginal Efficiency of Capital and the Great Depression

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  • Lefteris Tsoulfidis

    (University of Macedonia - Department of Economics)

Abstract

This paper argues that Keynes’s analysis of the marginal efficiency of capital is consistent with the principle of effective demand and is, in this sense, characteristically different from the related classical or neoclassical conceptualisations. Furthermore, the notion of the marginal efficiency of capital is used not only as an explanation of the short term fluctuations in the level of economic activity but also as an interpretation of more serious long term fluctuations such as that of the Great Depression. Finally, some of Keynes’s economic policy proposals are critically evaluated.

Suggested Citation

  • Lefteris Tsoulfidis, 2008. "Keynes on the Marginal Efficiency of Capital and the Great Depression," History of Economic Ideas, Fabrizio Serra Editore, Pisa - Roma, vol. 16(3), pages 65-78.
    • Handle: RePEc:hid:journl:v:16:y:2008:3:5:p:65-78
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    References listed on IDEAS

    as
    1. J. M. Keynes, 1937. "The General Theory of Employment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 51(2), pages 209-223.
    2. Barnett, Vincent, 2001. "Tugan-Baranovsky as a Pioneer of Trade Cycle Analysis," Journal of the History of Economic Thought, Cambridge University Press, vol. 23(4), pages 443-466, December.
    3. Stephen F. LeRoy, 1983. "Keynes's theory of investment," History of Political Economy, Duke University Press, vol. 15(3), pages 397-421, Fall.
    4. Garegnani, Pierangelo, 1979. "Notes on Consumption, Investment and Effective Demand: II," Cambridge Journal of Economics, Oxford University Press, vol. 3(1), pages 63-82, March.
    5. Victoria Chick, 1983. "Macroeconomics after Keynes: A Reconsideration of the General Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262530457, December.
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    Cited by:

    1. Nikolaus Heimerl, 2023. "Crisis theories: Tendential fall in the rate of profit, underconsumption and economic crises in the 21st century," Wirtschaft und Gesellschaft - WuG, Kammer für Arbeiter und Angestellte für Wien, Abteilung Wirtschaftswissenschaft und Statistik, vol. 49(1), pages 121-151.

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    More about this item

    JEL classification:

    • B10 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - General
    • B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
    • B14 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Socialist; Marxist
    • B51 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Socialist; Marxian; Sraffian
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates
    • E6 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook
    • E65 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Studies of Particular Policy Episodes
    • N20 - Economic History - - Financial Markets and Institutions - - - General, International, or Comparative

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