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The paper reviews JNK's examination of the scope and method of political economy, suggests that Friedman's re-examination of JNK's pronouncements on methodology resulted in two problems (a) the over emphasis of positive science at the expense of the art of political economy (hereafter applied economics), and (b) the coupling of the positive science of political economy to laissez faire in the face of JNK's warning, argues that JMK used applied economic models based on the needs of the British economy in his books as the basis for his pragmatic public policy proposals, and concludes that, beginning with the Principles courses the profession must do a better job of (1) explaining the differences among positive science, normative science, and applied economics. (2) recruiting more students into economics in general and into applied economics in particular. (3) shifting resources away from positive science to applied economics, and (4) explaining ourselves to the general voter.

The volume under review is a collection of essays some of which have been published previously, some of which are based on events sponsored by the Summer Institute for the Preservation of the History of Economics. All of the essays are authored by recognized experts in the history of economics, and, as such, represent a notable contribution to this sub-discipline within economics. Chapter 1 provides the reader with a plan of the collection and its unifying theme: the interplay among the three competing philosophies of analytical egalitarianism (AE), practical egalitarianism (PE), and analytical hierarchicalism (AH). The result is a fascinating collection of essays for those readers who are well-versed in the history of economic thought: the novice may be intimidated by the authors’ command of their chosen subject.

The General Theory contains a very simple model of a closed economy albeit with some very subtle and not well-understood assumptions and variables. The paper identifies a short list of research topics that emerged from this model and links those topics to specific individuals who were awarded the Nobel Prize in Economics for their work on one or more of those topics.

In this paper we discuss the fundamental inconsistency that results from employing the two traditional concepts of rationality as the basis of selecting social goals. We then consider the possibility that the selection of social goals must be based on explicitly ethical criteria. To do so a third concept of rationality namely, ontological rationality, should be adopted. Moreover, we argue that J. M. Keynes in A Tract Monetary Reform based his public policy recommendations on a modified version of ontological rationality, thereby introducing ontological rationality into economics as the basis for selecting social goals.

This paper presents Keynes' concept of equilibrium, which was one key theoretical element that constituted the theoretical core of the General Theory and was critical in his attack on the classical model. Keynes' concept of equilibrium differed in structure, content, and purpose from that of the neoclassical orthodoxy. There were four unique features of Keynes' equilibrium and these features all reflect his overriding focus on involuntary unemployment. First, Keynes' equilibrium reflected a purposive function that differed in its maximand and normative content from his predecessors. Second, Keynes' equilibrium reflected the fact that the composition of national income determined the level of aggregate demand, which in turn determined of the equilibrium level of national income and employment. Third, his notion of equilibrium was based on use of the ex ante-ex post analysis. Finally, Keynes' equilibrium presented an alternative view of market-clearing.

This paper centers on Keynes' theory of money and his attack on the classical model. Keynes criticized the self-correcting model of the British orthodoxy along two separate lines. In the first, in which Keynes' theory of money was crucial, he took the institutional variables as given and examined the functional relationships. Keynes' burden was to undermine what he termed the "classical dichotomy," where money was a veil, playing no role in determining output and employment. Two key features of the orthodox model were loanable funds and quantity theories, and Keynes' theory of money emerged from the rejection of these theories. The key to his attack on the classical dichotomy was the speculative demand for money, which he presented as an indirect, unstable function of the interest rate. Hence, Keynes linked money demand to the interest rate. The interest rate was thus determined by monetary variables rather than real factors, contrary to British orthodox opinion. Keynes then demonstrated that intended investment and saving need not be equal at a full employment equilibrium.

Evaluating Keynes' belief that the "general theory" would create a revolution in economics, depends, in part, on what defines the key elements of the general theory. This paper presents the analytical preconditions for one of these key elements, his liquidity preference theory of money. It is argued here that Keynes's liquidity preference theory of money was both a result of his own intellectual development and a theoretical necessity, given the rest of the theoretical structure of the general theory. Specifically, this paper argues that there were two analytical preconditions for the theory of money contained in the general theory. The first was Keynes' rejection of the quantity theory of money as the basis for conducting monetary policy, a theory he inherited from his English predecessors and he himself had embraced and to which he contributed earlier in his professional career. The second was his rejection of the neoclassical loanable funds theory of interest rate determination.

Keynes believed that the "general theory" would create a revolution in economics. The extent to which his prophesy was realized, in part, depends on the definition of "key elements" in the general theory itself. This paper presents one of the key elements that led Keynes to believe the general theory might indeed create such a revolution. This key element is his theory of probability. Keynes' theory of probability evolved over time and resulted in his employing two distinctly different theories of probability in the general theory—one, implicitly, the other, explicitly. The first was an objective degree of belief theory of probability that was implicitly employed in the general theory. The second was a subjective degree of belief theory of probability that Keynes explicitly developed in the general theory.