Keynes and the Bretton Woods Order

John Maynard Keynes (1883-1946), a Cambridge economist who had studied under Alfred Marshall, published The General Theory of Employment, Interest and Money in 1936, in the depths of the Great Depression. The book directly challenged the classical assumption, resting ultimately on Say's Law, that market economies naturally self-correct toward full employment. Keynes argued instead that an economy could settle into a prolonged equilibrium featuring substantial involuntary unemployment, because aggregate demand could remain chronically insufficient and because wages and prices were not flexible enough, especially downward, to restore full employment automatically.