Alfred Marshall and Arthur Pigou. His career included
appointments to the Treasury in Britain during both world wars,
a leading role in the establishment of the International
Monetary Fund (through discussions at Bretton Woods, New
Hampshire, in 1944), and editorship of the Economic Journal
from 1911 to 1945, all in addition to his academic position at
Kings College.
Keynes published extensively during his life, but his most
influential work, The General Theory of Employment, Interest,
and Money, appeared in 1936. This book was published in the
midst of the Great Depression when the output of goods and
services had fallen drastically, unemployment was intolerably
high, and it had become clear to many that the market would
not self-adjust to achieve potential output within an acceptable
period of time. Fluctuations in economic activity were familiar
at this point, but the failure of the economy to recover rapidly
from this depression was unprecedented. Neoclassical
economists held that during a downturn both wages and the
interest rate would fall low enough to induce investment and
employment and bring about a recovery. They believed that the
persistent unemployment during the 1930s was caused by
inflexible wages and they recommended that workers be
convinced to accept wage cuts.
Keynes believed that this policy, though perhaps correct for a
single industry, was not correct for the entire economy.
Widespread wage cuts would reduce the consumption portion