KEYNES AND MACROECONOMICS

Keynes's General Theory of Employment, Interest and Money (1936) was about the role of the monetary system in general, and the rate of interest in particular, in causing the overall level of employment in a market economy to fall short of its full potential. A sub-set of its ideas were systematized by a younger generation of economists and introduced to the textbooks, just as the word macroeconomics began to be widely used to distinguish the analysis of the economy as a whole from microeconomics, which dealt with individual households, firms or even industries. Not without justification, macroeconomics soon became a synonym for Keynesian economics; and in the late 1970s, when the influence of Keynes's specific ideas on the sub-discipline had long since waned, he was still commonly credited with having founded it (Lucas and Sargent, 1978).