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Where Keynes Went Wrong: An Unnecessary Revolution?

16 Pages Posted: 29 Jun 2011 Last revised: 13 Jul 2011

David Glasner

Federal Trade Commission

Date Written: 2011


This paper discusses the development of Keynes's ideas about monetary theory in the context of the consequences of Britain's return to the gold standard (opposed by Keynes) in 1925 and his initial unsuccessful attempt to develop a comprehensive theory of macroeconomic fluctuations in his Treatise on Money. The paper suggests that Keynes, who had predicted that rejoining the gold standard at the prewar parity would lead to economic stagnation and high unemployment was shaken in his belief in a monetary explanation for the Great Depression by the failure of Britain's departure from the gold standard to cause a rapid recovery and reduce unemployment. This disappointment led him to undertake a more radical revision of his views in the Treatise than he at first contemplated. In this shift of approach he departed from the views of Ralph Hawtrey with whose monetary theory of the Great Depression he had previously been largely sympathetic.

Keywords: Keynes, Hawtrey, Great Depression, gold standard, unemployment, unemployment insurance

JEL Classification: A11, B22, B31, E52, E58, F33, J64, J65, N10, N14

Suggested Citation

Glasner, David, Where Keynes Went Wrong: An Unnecessary Revolution? (2011). Available at SSRN: or

David Glasner (Contact Author)

Federal Trade Commission ( email )

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