Lectures on John Maynard Keynes' General Theory of Employment, Interest and Money (6): Chapters 8, 9 and 10: Keynes' Theory of Consumer Behaviour

University of Guelph Department of Economics and Finance Working Paper No. 2013-11

45 Pages Posted: 22 Aug 2013

See all articles by Brian S. Ferguson

Brian S. Ferguson

University of Guelph - Department of Economics

Date Written: July 28, 2013

Abstract

Chapters 8, 9 and 10 set out Keynes’ theory of consumer behavior. Chapter 8 is entitled The Propensity to Consume: I. The Objective Factors, Chapter 9 is The Propensity to Consume: II. The Subjective Factors, and Chapter 10 is The Marginal Propensity to Consume and the Multiplier. Contrary to the widely held belief, Keynes saw the consumer as an intertemporally optimizing agent, in a manner which is quite consistent with Frank Ramsey’s model of intertemporal saving behavior and with modern theories of the behavior of the optimizing consumer. While he did conclude that in the short run income would be the dominant factor underlying consumer behavior, this was an empirical judgement, not simply an assumption about fundamental psychological propensities. Chapter 10 formally introduces the marginal propensity to consume and the multiplier.

Keywords: Keynes, General Theory, Keynesian Economics, Classical Economics, Propensity to Consume, Time Preference, Interest Rate, Bequest Motive, Multiplier, Burying bottles of Banknotes

JEL Classification: B10, B12, B13, B22, B31, E12, N12, N14

Suggested Citation

Ferguson, Brian S., Lectures on John Maynard Keynes' General Theory of Employment, Interest and Money (6): Chapters 8, 9 and 10: Keynes' Theory of Consumer Behaviour (July 28, 2013). University of Guelph Department of Economics and Finance Working Paper No. 2013-11. Available at SSRN: https://ssrn.com/abstract=2313442 or http://dx.doi.org/10.2139/ssrn.2313442

Brian S. Ferguson (Contact Author)

University of Guelph - Department of Economics ( email )

50 Stone Road East
Guelph, Ontario N1G 2W1
Canada

Register to save articles to
your library

Register

Paper statistics

Downloads
302
Abstract Views
1,534
rank
100,175
PlumX Metrics