PREFACE TO THE GERMAN EDITION
Alfred Marshall, on whose Principles of Economics all
contemporary English economists have been brought up, was at
particular pains to emphasise the continuity of his thought with
Ricardo's. His work largely consisted in grafting the marginal
principle and the principle of substitution on to the Ricardian
tradition; and his theory of output and consumption as a whole,
as distinct from his theory of the production and distribution of
a given output, was never separately expounded. Whether he
himself felt the need of such a theory, I am not sure. But his
immediate successors and followers have certainly dispensed with
it and have not, apparently, felt the lack of it. It was in this
atmosphere that I was brought up. I taught these doctrines myself
and it is only within the last decade that I have been conscious
of their insufficiency. In my own thought and development,
therefore, this book represents a reaction, a transition away
from the English classical (or orthodox) tradition. My emphasis
upon this in the following pages and upon the points of my
divergence from received doctrine has been regarded in some
quarters in England as unduly controversial. But how can one
brought up a Catholic in English economics, indeed a priest of
that faith, avoid some controversial emphasis, when he first
becomes a Protestant?
But I fancy that all this may impress German readers somewhat
differently. The orthodox tradition, which ruled in nineteenth
century England, never took so firm a hold of German thought.
There have always existed important schools of economists in
Germany who have strongly disputed the adequacy of the classical
theory for the analysis of contemporary events. The Manchester
School and Marxism both derive ultimately from Ricardo,セa conclusion which is only superficially
surprising. But in Germany there has always existed a large
section of opinion which has adhered neither to the one nor to
the other.
It can scarcely be claimed, however, that this school of thought has erected a rival theoretical construction; or has
even attempted to do so. It has been sceptical, realistic,
content with historical and empirical methods and results, which
discard formal analysis. The most important unorthodox discussion
on theoretical lines was that of Wicksell. His books were
available in German (as they were not, until lately, in English);
indeed one of the most important of them was written in German.
But his followers were chiefly Swedes and Austrians, the latter
of.whom combined his ideas with specifically Austrian theory so
as to bring them in effect, back again towards the classical
tradition. Thus Germany, quite contrary to her habit in most of
the sciences, has been content for a whole century to do without
any formal theory of economics which was predominant and
generally accepted.
Perhaps, therefore, I may expect less resistance from German,
than from English, readers in offering a theory of employment and
output as a whole, which departs in important respects from the
orthodox tradition. But can I hope to overcome Germany's economic
agnosticism? Can I persuade German economists that methods of
formal analysis have something important to contribute to the
interpretation of contemporary events and to the moulding of
contemporary policy? After all, it is German to like a theory.
How hungry and thirsty German economists must feel after having
lived all these years without one! Certainly, it is worth while
for me to make the attempt. And if I can contribute some stray
morsels towards the preparation by German economists of a full
repast of theory designed to meet specifically German conditions,
I shall be content. For I confess that much of the following book
is illustrated and expounded mainly with reference to the
conditions existing in the Anglo-Saxon countries.
Nevertheless the theory of output as a whole, which is what
the following book purports to provide, is much more easily
adapted to the conditions of a totalitarian state, than is the
theory of the production and distribution of a given output
produced under conditions of free competition and a large measure
of laissez-faire. The theory of the psychologi-cal laws relating consumption and saving, the influence of
loan expenditure on prices and real wages, the part played by the
rate of interestセthese remain as
necessary ingredients in our scheme of thought.
I take this opportunity to acknowledge my indebtedness to the
excellent work of my translator Herr Waeger (I hope his
vocabulary at the end of this volume
may prove useful beyond its immediate purpose) and to my
publishers, Messrs Duncker and Humblot, whose enterprise, from
the days now sixteen years ago when they published my Economic
Consequences of the Peace, has enabled me to maintain contact
with German readers.
J. M. KEYNES
7 September 1936