Are there any books that do a good job of condensing Keynesian economics into something more succinct than The General Theory of Employment, Interest and Money ?
Keynesian Economics
Chapter 1: Inflation is good because people have more money
Chapter 2: Government spending multiplies itself by magic
Chapter 3: Recessions are caused by animal spirits
Chapter 4: Unemployment can be solved by having people dig ditches and fill them back in
Chapter 5: Central banking is the best way to determine the natural rate of interest
Chapter 6: Correlation is causation, and markets do not price past information into the system, so central planners are needed to best predict the future
Chapter 7: Profit is zero-sum
Where Keynes Went Wrong, is a book reported to be a good analysis of Keynesian economics, and the problems with the General Theory, without getting deep into detail.
Here’s a review of the book.
That book is good as a non-academic work.
I second Where Keynes Went Wrong.
- The Keynes Solution: The Path to Global Economic Prosperity by Paul Davidson
- The Return to Keynes edited by Bradley W. Bateman (et al.)
- Macroeconomics after Keynes: A Reconsideration of the General Theory by Victoria Chick
The first two are recent; the former being a popularization while the latter is bit more academic. The last one is a bit older but informative.
All three are favorable interpretations of J.M. Keynes.
awascholl,
here is my version of “keynesianism in a nutshell” that i have posted on this board a couple of times.
Nutshell Keynesianism
Let’s say we’re looking at an economy with three markets. A market for goods, a market for labor, and a market for money. And to be consistent with Walras’ Law (or the way some people interpret Say’s Law), we assume that only “relative overproduction” can exist in this economy. That is to say, if there is “overproduction” in branch of the economy, there must be “underproduction” in some other branch of the economy.
This assumption can be more clearly stated by saying that the following equality always hold.
(Y^d - Y^s) + (M^d - ((M^s)/p))+ (N^d - N^s) = 0
Where
Y^d = demand for “goods”
Y^s = supply of “goods”
M^d = demand for money
M^s = nominal money supply
M^s/p = the real supply of money (nominal money supply divided by the price of goods, p)
N^d = demand for labor
N^s = supply of labor
This equation says that the difference between demand and supply across all three markets must always sum to zero. In other words, if the demand for goods exceeds supply (Y^d > Y^s) it must be the case that supply must exceed demand in some other sector of the economy (for example the supply of labor exceeds demand, N^d < N^s).
Now, assuming that equality always holds, lets say unemployment started to rise in our make-believe economy and expenditures on final goods (GDP) started to fall. How would a Keynesian explain this “recession”?
Well, he might say that the demand for money has risen such that there is now excess demand in the money market (M^d > (M^s/p)). And as people are holding more of their income as money instead of spending, they are conversely using less of their income to purchase goods (Y^d < Y^s) and that this is leading to companies laying off workers (N^d < N^s). All of which is consistent and necessary for Walras’ Law to hold:
(Y^d < Y^d) + (M^d > (M^s/p)) + (N^d < N^s) = 0
The central lesson here is that even though we feel the consequences of a recession in the goods market or the labor market, the root causes of recessions in Keynesian Economics lies in the money market.
Now you might say “well, if businesses are selling less, why don’t they lower their prices? wouldn’t that fix this problem?” and you would be right. Looking at our equation we see that if the price level falls, the real money supply effectively increases (M^s is being divided by a smaller p) and this will brining the money market back into equilibrium and the recession will end. But a Keynesian would argue that businesses will be reluctant to change prices because these prices are costly to change. So we cannot expect waiting to lead to a quick recovery. Instead they will offer what they see as the next best solution–increasing the money supply directly.
But that takes us down the road of policy implications, which are usually less interesting because they amount more to politics than theory…
Hopefully, this nutshell description will help you get started in your studies. Obviously this nutshell doesn’t get at a lot of the nuances of how this theory actually works. And fully explaining it would probably take more than a little time to do. But once you are ready for more, I believe you will find a wealth of resources out there.
Here is an online macrotextbook, but it may be a little advanced.
http://www.sfu.ca/~dandolfa/macro2005.pdf
Bernanke and Able have a great macro textbook that I used as an undergrad.
I’ve heard Mankiw’s Macroeconomics is good too.
But if you do want to study more, certainly start with a textbook. These things are designed for teaching and learning about the models they present.
just as a follow up, even though my previous post only discussed a “make-believe” model economy, I believe what I presented is a pretty descent “fast and dirty” description of how Keynesians describe the recent recession. specifically, they blame the financial crisis for leading to a rise in money demand which lead to declining sales and rising unemployment given persistently sticky prices.
as an aside, one neat way we can measure money demand is as the % of people’s incomes they choose to hold as money. this is actually just the inverse of our typically definition of velocy (v = py/m or 1/v = m/py). and we can graph that pretty easily using FRED (gotta say i love that website):
awascholl,
let me know if my post helped out. i’ve posted that a couple of times here and never got specific feedback so i have no clue if it actually helps people understand keyensian economics. 
if it works, i might use it in tutoring intro to macro (by the time you get to intermediate macro you will find some version is-lm, which is probably much better for understanding these issues, though a little more complex and flawed in a variety of ways)
ps* another way of thinking about keynesian economics is the baby sitting co-op metaphor that paul krugman discusses here:
http://www.slate.com/id/1937/