1 Keynes on the Stages of Development of the Capitalist Economy: The Institutional Foundation of Keynes's Methodology

Most economists assume that Keynes's theory of the capitalist macroeconomy is adequately represented by the standard set of "Keynesian " aggregate supply and demand curves. The generally accepted interpretation of The General Theory, pioneered and popularized by Paul Samuelson, suggests that the consumption, marginal efficiency of capital, liquidity preference, and labor supply functions constitute the scientific core of the book; the comments, observations and asides that surround this core, it is assumed, have little scientific value. These core behavioral equations of mainstream Keynesianism are derived from the optimizing decisions of typical neoclassical economic agents who are fully specified through their endowment bundles and preference orderings. Indeed, the fact that modern Keynesian theory is logically founded on such starkly defined, isolated agents is the reason it is granted scientific status. This essay is concerned with the following important implication of the standard interpretation of Keynes's theory. If mainstream Keynesian theory is indeed an adequate reflection of Keynes's approach to macroeconomic analysis, then his theory must be ahistorical and institutionally nonspecific, and The General Theory must be a model of capitalism-in-general, equally applicable in all times and in all places where the capitalist system dominate