Chapter 13 THE PROOFING PROCESS OF THE ＧＥＮＥＲＡＬ ＴＨＥＯＲＹ (1) by T. Hirai

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Chapter 13

THE PROOFING PROCESS OF THE ＧＥＮＥＲＡＬ ＴＨＥＯＲＹ (1)

Before proceeding to a critical appraisal of the General Theory in Chapter 15, we first, in this and the next chapter, examine the period leading up to its publication. During the eighteen months or so from summer 1934 to February 1936, Keynes submitted the manuscript to his publisher in instalments, and revised the galley proofs several times. In fact, he continued to modify the expression of his ideas all through this period right up to publication.
  A reconstruction of the proofing process illuminates the gestation of the General Theory. There are two main reasons for this. First, Keynes adopted the somewhat unusual procedure of handing in his manuscript piecemeal rather than in one go, rewriting constantly as he went along. Retracing this process gives us considerable insight into the significant changes he introduced along the way. In this context it should be remembered that although the consumption theory, the investment theory, and the theory of liquidity preference had all virtually reached their final forms by spring 1934, the theory of effective demand and the definitions of some fundamental concepts - such as user cost - had yet to be finalised. Second, Keynes sent the corrected galley proofs to several close colleagues for their reactions. The correspondence this generated highlights the differences between Keynes's theory and the theories of these colleagues very clearly, as well as the features they had in common. The picture is somewhat complicated, however, because the debates concerning points of disagreement Keynes had with Robertson and Hawtrey had begun prior to the Treatise and continued into the period of the General Theory, with no clear line of demarcation between the discussions of the one book and those of the other.
  We begin this chapter with a brief overview of the proofing process before examining the main characteristics of each of the galley proofs in detail. The proofing process after what we shall refer to as 'The Great Revision' (August 1935) will be dealt with in the next chapter.
1. An Outline of the Proofing Process
  Keynes had constructed many of the major components of the General Theory (including the theory of liquidity preference, the marginal efficiency of capital, the fundamental psychological law, and the multiplier) before the time of 'The General Theory'. However, in terms of style it is in 'The General Theory' that we first find material that was actually incorporated into the General Theory. For example, Chapter 12, 'The State of Long-Term Expectation (or Confidence)', of 'The General Theory' was very much the prototype for Chapter 12, 'The State of Long-Term Expectation', of the General Theory (see Note 1 to Chapter 12 above). Similarly, Chapter 10, 'The Propensity to Spend', of 'The General Theory' is the precursor of Chapter 8, 'The Propensity to Consume: I. The Objective Factors', and Chapter 9, 'The Propensity to Consume: II. The Subjective Factors', of the General Theory (see Section 1 (B) of Chapter 12).
  As mentioned earlier (see Section 4 of Chapter 8), Keynes remarks in his letter to Kitoh of 22 June 1934 that 'it will be some months more before I am ready for printing'. This should be compared with the fact that he had completed almost all the text outlined in the table of contents of 'The General Theory' by March 1934, went to the United States in May and came home in June, as we saw in Section 1 (E) of Chapter 12. The succeeding phases of the proofing process can be illuminated by reference to eight pieces of evidence with which we shall deal in chronological order.
  Our first item of evidence is a typescript, referred to by Moggridge as 'The Pre-First Proof Typescript',１ that was produced in the summer of 1934 (concurrently with the Summer Manuscript; see Section 2 of Chapter 12). This typescript contains the prototypes of Chapter 4, 'The Choice of Units', Chapter 5, 'Expectation as Determining Output and Employment', and Chapter 11, 'The Marginal Efficiency of Capital', of the General Theory . Chapter 6, 'The Meaning of Definition', of 'The General Theory' corresponds to the General Theory's Chapter 6, 'The Definition of Income, Saving and Investment', (and its 'Appendix on User Cost').
  In summer 1934 Keynes was visited by Kahn, who was very helpful to him. In early September２　Keynes wrote to his publisher, Daniel Macmillan: 'I am now fairly well on with my forthcoming Treatise on Economic Theory and am hopeful that it might be ready for publication sometime next year. Will you be prepared to publish it for me on the same conditions as previously? ... My provisional title is The General Theory of Employment, Interest and Money.'
  After the Pre-First Proof Typescript came a set of galleys, which we will call the 'First', 'Second' and 'Third' Galleys. When surveying how Keynes went about the proofing process, we need to pay attention to five points３:
(1) The three galleys share the same table of contents, that is to say the table of contents of the Third Galley (JMK.13, pp. 525-526), dated June 1935, is also that of the First and Second Galleys. We will refer to this as the 'Galley Table of Contents'.
(2) The Second Galley is the revision of the First, and the Third is the revision of the Second. However, the proofing process also has the following characteristic. In each galley, only part of the material specified in the Galley Table of Contents was actually written. Moreover, the Second Galley rewrites only parts of the First Galley, and the Third Galley rewrites only parts of the Second (see Table 13-1 below). As a result of this, some sections of the text remained at either the First or Second Galley stage until what we shall refer to as the 'Changeover' (September 1935. See Section 1 (F) of Chapter 14).
(3) The text which became the First Galley was of course the first written. However, as this text was submitted in instalments, the First Galley itself was not produced in one go, but in sections in October, December 1934 and January, May and summer 1935. As a result of this, parts of the First Galley actually postdate the Second Galley.
(4) Although we do not have the First Galley versions of Chapter 17, 'The Psychological and Social Incentives to Liquidity', or Chapter 19, 'The Essential Properties of Interest and Money', that they were produced is confirmed by Robertson's letter to Keynes of 3 February 1935 (JMK.13, pp. 496-506) and other material.
(5) The Galley Table of Contents differs considerably from the table of contents of the General Theory, as a result of Keynes's having greatly amended the Third Galley in August 1935.
  Our second source for the proofing process is the First Galley. By 13 September 1934 Keynes had sent off the first three chapters (that is, Book I). The titles of the chapters are the same as those of the corresponding chapters of the General Theory (though we should bear in mind that Chapter 3, 'The Principle of Effective Demand', differs in substance from its precursor). The galley for these chapters came out on 10 October. Keynes delivered his lectures for the Michaelmas term of 1934 on the basis of this galley in conjunction with the manuscript comprising Chapters 4-14. That Keynes felt this manuscript was in need of revision is borne out by two letters to Kahn (JMK.13, pp. 484-485). On 18 September, Keynes writes: 'I'm working fairly hard and have found out one or two interesting novelties. In particular, I think I've solved the riddle of how to define Income in some sort of a net sense - and it comes out very near to the money value of the Prof's national dividend. The deduction from the gross sales proceeds of the output of a given equipment necessary to yield income is that part of the quasi-rent which is necessary to induce the entrepreneur not to leave his equipment idle. This works just as well when the initial equipment is a half-finished machine or a ton of copper. In other words the appropriate depreciation allowance is the sacrifice involved in using the equipment as compared with postponing its use, as estimated by the entrepreneur himself. I haven't as yet thought this through to the end, but it looks to me promising'. Nine days later, on 27 September, he writes: 'I am getting towards the end of the re-writing which you led me into and will show you the new way for dealing with net income in detail next term. It is clumsy in some ways but the best I have done yet'. These progress reports relate mainly to Chapter 6, 'The Meaning of Income', which deals with user cost and Chapter 7, 'The Definitions of Quasi-Rent, Saving and Investment', of the Galley Table of Contents.
  Keynes's next step was to send the publisher first Chapters 4-11 and then Chapters 12-19, which respectively correspond to Chapters 4-9 and Chapters 11-17 of the General Theory. The galleys for these are thought to have come out somewhere between early December 1934 and mid-January 1935. This point, thus, marks the virtual birth of the General Theory. And it is at this point too that Keynes sent off to Robertson４ Chapters 1-19, which collectively we will call 'First Galley I'.
  Our third source for the proofing process is the revision of First Galley I, i.e., the Second Galley. It is particularly interesting from our point of view on account of the fact that Chapter 17, 'The Psychological and Social Incentives to Liquidity', and Chapter 19, 'The Essential Properties of Interest and Money', which correspond to Chapters 15 and 17 of the General Theory respectively, are both extant. Judging from the fact that the second galleys for Chapters 1-6 were ready on 29 January 1935, it would seem  that some of First Galley I must have been revised and returned to the publisher by the end of 1934. The remaining part of First Galley I would then have been revised by the end of January 1935, as is confirmed by the letter Keynes wrote to Kahn on 15 January (〓JMK. 13, p. 525), in which he says: 'I have done two more chapters for you, if you have time to look at them. Between them they cover the ground of the philosophical chapter, ninety per cent re-written. I rather want to know what you think of my latest concerning the fundamental characteristics of interest which has been considerably remodelled and is, I think, rather beautiful, if it is correct'. This would appear to relate to Chapter 18, 'Philosophical Considerations on the Essential Properties of Capital, Interest and Money', of 'The General Theory' (see Table 12-1), suggesting that Keynes reworked this as Chapter 18, 'Sundry Observations on the Nature of Capital', and Chapter 19, 'The Essential Properties of Interest and Money'. In response, the publisher returned the remainder of the Second Galley, i.e. Chapters 7-19, to Keynes towards the end of April 1935 (see Table 13-1).
  The fourth source for the proofing process is the manuscript comprising the texts of Chapters 20-25 of the Galley Table of Contents, which cover the same material as Chapters 10 and 18-22 of the General Theory. Two pieces of evidence suggest that Keynes probably sent this off to the publisher after the end of March 1935. Firstly, he announced in his letter to Kahn of 26 March 1935 (JMK.13, p. 525): 'I have now finished a full-dress critique of the Prof. [Pigou] to go in as an appendix to the chapter on changes in money wages'. This would indicate that he had already finished writing 'Appendix on Professor Pigou's Theory of Unemployment' to Chapter 23, 'Changes in Money Wages', which corresponds to 'Appendix on Prof. Pigou's Theory of Unemployment' to Chapter 19, 'Changes in Money Wages', of the General Theory. Secondly, this manuscript was sent off for comment to several other economists in June 1935. From these we deduce that Keynes received the galley in May 1935. We will call this galley 'First Galley II'.
  The fifth source is the Third Galley (June 1935), comprising Chapters 2-6, which correspond to Chapters 2-5 and part of Chapter 6 of the General Theory. We know that in early June 1935 Keynes sent off to Harrod, Hawtrey, Kahn, and Joan Robinson the following: (i) Chapter 1 of the Second Galley; (ii) Chapters 7-19 of the Second Galley, which correspond to some of Chapter 6, all of Chapter 7, Section IV of Chapter 8, Sections I-III of Chapter 8, Chapters 9-14, Appendix to Chapter 14, and Chapters 15-17 of the General Theory: and (iii) First Galley II (Chapters 20 to 25). This means that what they received was Chapters 1-25 of the Galley Table of Contents, corresponding to Chapters 1-22 of the General Theory. From Keynes's letter to Macmillan of 31 July 1935５　we furthermore know that: (i) he had by then sent the final pages of the Third Galley to the printer; (ii) he thought printing would commence in early September, and expected the book to appear on or about 1 November 1935. He tells Macmillan: 'I have now sent to Clark's [the printer] the last pages for galley proof....I should say that the publication on about November 1st might be aimed at....Thus printing off might begin early in September'.
  The sixth source item concerns Chapters 26-28 of the Galley Table of Contents. Regrettably, although the galley for these is not extant, the chapter titles are known; Chapter 26, 'Notes on Mercantilism and the Usury Laws', Chapter 27, 'Notes on the History of the Notion of 'Effective Demand', and Chapter 28, 'Is an Individualist Economy Capable of Providing Full Employment?'.６　Chapters 26 and 27 together would correspond to Chapter 23, 'Notes on Mercantilism, the Usury Laws, Stamped Money and Theories of Under-Consumption'７, and Chapter 28 to Chapter 24, 'Concluding Notes on the Social Philosophy towards Which the General Theory Might Lead', of the General Theory. From Keynes's letter to Robinson of 3 September 1935 (JMK. 13, pp. 650-651) it is clear that he did send off the last three chapters to her, and that he was still continuing to work in accordance with the sequence of the Galley Table of Contents:
I now have a spare copy of the last three chapters of my book and send them herewith. The last two chapters are completely unrevised. Roy [Harrod] strongly objects to chapter 26 as a tendentious attempt to glorify imbeciles. ...I have been occupied for several weeks in somewhat re-writing BookⅠand completely re-writing Book II. In the case of Book II practically not a word of the version you have read has been left standing. I will let you see this in due course, particularly since I have somewhat modified my definition of user cost. I hope you will think it an improvement (JMK.13, pp. 650-651).
  On the evidence of this letter, the contents of the galleys he sent to some of his fellow-economists in June 1935, and a further letter to Daniel Macmillan, dated 11 September 1935８, Keynes's work on these chapters, and their appearance in galley form, must have taken place between June and July. We will refer to this set of proofs as 'First Galley III'.
  The seventh source item is the revision work after First Galley III, the evidence for which comes from Keynes's earlier mentioned letter to Robinson of 3 September 1935, as well as another letter to Hawtrey, dated 4 September 1935 (〓JMK. 13, pp. 576-577). The first reveals that he had for several weeks (that is, during August) been engaged in rewriting Book I (Chapters 1-3), and that he had completely rewritten Book II (Chapters 4-9). In his letter to Hawtrey Keynes also refers to a revision of Book III (Chapters 10-11), as follows: 'I have...completed my re-writing of the first three books, namely chapters 1 to 11, and have, therefore, carefully considered your notes up to that point'. In addition, we can infer from Hawtrey's detailed comments, and from Keynes's response to these of 1 October 1935, that Keynes had also already embarked on the rewriting of Book IV. This work of revision we designate 'The Great Revision'.
  The eighth source of information on the proofing process relates to the revision of First Galley III. We may suppose that Keynes carried out this revision work between September and October, on the evidence of his letter to Robinson of 3 September to which we referred above, and his letter to Robertson of 10 October (JMK. 13, pp. 523-524), in which he says: 'I...have been plugging away at the proofs....I am now practically finished, and am sending my galleys to the printers to be paged'.  We may also presume that the change-over from the Galley Table of Contents to the table of contents of the General Theory was made in the same period. We will refer to this revision work as 'The Changeover'.
  In his letter to Macmillan dated 9 January 1936 Keynes writes: 'Thanks for the enclosed proof of the jacket. I have some changes of wording.... I now have the exact size of the book for the leaflet, namely, xii plus 403 [which includes the index]'.９　After 19 January or thereabouts, the General Theory was out of his hands. It was published１０ on 4 February 1936.
  The course of this somewhat convoluted and involved proofing process, preceding the Great Revision, is schematised in Table 13-1 below.
2. From the Pre-First Proof Typescript to First Galley III
  Let us now look at the developmental process which the General Theory underwent from the Pre-First Proof Typescript of summer 1934 up to First Galley III, which was produced in June or July 1935. It is worth noting the following points in advance. First, the First Galley is the most telling of the galleys for our purpose. There are two reasons for this: (i) the galley is written in line with the Galley Table of Contents, which leads us to suppose that the First Galley laid the foundations for succeeding galleys; (ii) by examining the appendix to Volume 14 of JMK, entitled 'Variorum of Drafts of the General Theory' (〓JMK. 14, pp. 351-512; hereafter referred to as the 'Variorum'), we can confirm that in the Second and Third Galleys Keynes for the most part made only formal revisions, though there were a few exceptions to this. It will therefore be convenient for us to deal with these when we come to discuss the First Galley.
  Second, we need to compare and contrast the developments in this particular set of galleys not only with Keynes's economic-theoretical development prior to their production, but also with the theory presented in the corresponding parts of the General Theory. For the first set of comparisons we focus on the new ideas each set of galleys contains. For the second set of comparisons, in addition to the new ideas found in each set of galleys, we will also examine more formal aspects of the text, such as the degree of completion, as this will assist us in clarifying in concrete terms the degree to which Keynes changed and did not change his theory in the process.
  A. The Pre-First Proof Typescript
  In the light of Keynes's subsequent theoretical amendments, the Pre-First Proof Typescript can be divided into two parts. The first part consists of Chapter 4, 'The Choice of Units', Chapter 5, 'Expectation as Determining Output and Employment', and Chapter 9, 'The Marginal Efficiency of Capital'. (In this typescript, the chapter entitled 'The Marginal Efficiency of Capital' appears as Chapter 9; in First Galley I and after it appears as Chapter 12. See JMK.14, p. 458.) These chapters are almost identical to the corresponding parts of the General Theory, not only in substance but also in form. Regarding Chapters 4 and 5, minor changes only were made throughout the First, Second, and Third Galleys. In the case of Chapter 9, minor changes only were introduced in the First and Second Galleys, with no changes in the Third. In other words, the Pre-First Proof Typescript is the prototype for Chapters 4, 5, and 11 of the General Theory.
  The second part of the Pre-First Proof Typescript consists of Chapter 6, 'The Meaning of Income' alone.１１　This chapter differs considerably in form from the corresponding part of the General Theory. Having made some changes in First Galley I, Keynes then confined himself to small formal revisions until the Third Galley stage. 'The Great Revision', however, was to witness a substantial amount of formal revision before the General Theory was eventually finalised.
  We will examine the points of difference between the Pre-First Proof Typescript and Keynes's ideas in the period before it as well as the points of difference between the Pre-First Proof Typescript and the corresponding parts of the General Theory. As far as the area covered by the Pre-First Proof Typescript is concerned, we will also examine the points of difference between the Pre-First Proof Typescript and the galleys which followed it. In this context, the employment function and the definitions of some fundamental concepts merit particular attention.
  (a) The Employment Function
  The passage quoted below, which deals with the employment function, is the origin of Section IV of Chapter 4, 'The Choice of Units', of the General Theory, although it differs from Section IV in substance:
We can substitute for the supply function what we shall call the employment function. The employment function for a given firm (and similarly for a given industry or for industry as a whole) is given by N = F (Dｗ), where D　ｗ is the sale proceeds in terms of wage units, the expectation of which will induce a level of employment N. Similarly we can write (Dｗ/N) = Q(N), which relates the money proceeds per wage unit to the quan ity of employment, so that if N men produce an output O, (Dｗ/O) = Q(O) is the ordinary supply curve (JMK.14, p. 387).
  Keynes's intention might have been as follows. The employment function N = F(Dｗ) can be rearranged as
Dｗ　 = f(N)         (1)
  The next equation is obtained by dividing through equation (1) by N:
 Dｗ/N = f(N)/N = Q(N)  (2)
  Let us express the production function as
O = g(N)           (3)
  Then the following equation can be obtained from equations (2)and (3):
  　　　　　Dｗ/O = N・Q(N)/O = g－１(O)・Q (g－１(O))/O = Q′(O)１２　   (4)
  Keynes refers to equation (4) as the 'ordinary supply curve'. Here, therefore, he seems to consider the inverse of the employment function rather than the employment function itself.
  On the one hand, the employment function is a supply concept, in the sense that, as stated in the passage quoted above, Keynes considers that it can be a substitute for the 'supply function'. On the other hand, we know that it is of the same type as the employment function in the Summer Manuscript (see Section 2 (B) of Chapter 12), which was written at almost the same time as the Pre-First Proof Typescript. Therefore, the employment function in the Pre-First Proof Typescript may also be considered to have the characteristics of an equilibrium concept. This is verified by the following two considerations. Firstly, Keynes frequently changed his formulation of the employment function. As we saw in Section 1(A) of Chapter 12, in 'The General Theory' he expressed it by Dｗ= F(N). Then, in the Summer Manuscript, he defined the inverse of this function to be the employment function. He maintained this definition in the Pre-First Proof Typescript and First Galley I. He then reverted to the earlier definition for the Second and Third Galleys, only to switch back again in the General Theory. Secondly, the role which the aggregate supply function in the General Theory plays was carried on the back of the employment function, denoted by either Dｗ or D, right up to the General Theory (leaving aside the frequent changes in its definition). In the General Theory, these are replaced by Z (aggregate supply price), while D now denotes effective demand.１３ This likewise indicates that both the employment function and the aggregate supply function have the attributes of an equilibrium concept as well as those of a supply concept. In so far as we see the employment function from this point of view, it seems difficult to see how the 'ordinary supply curve' can be derived from it. Compared with this difficulty, the problem of the derivation of the ordinary supply curve per se is less important. Let it suffice to point out that: (i) in contrast to the other galleys, the production function is not used in First Galley I; (ii) from First Galley I up to the General Theory the 'ordinary supply curve' is formulated as the functional relation between the level of employment and the price level, so that it is not, in fact, a supply curve in the ordinary sense.
  (b) Some Fundamental Concepts
  Keynes devotes a lot of attention to fundamental concepts such as income, investment, saving, and effective demand. Chapter 6, 'The Definition of Income', of the Pre-First Proof Typescript considers such fundamental concepts in detail. This chapter is important for two reasons. One is that it forms the basis for Keynes's reflections on various fundamental concepts in the period from the Pre-First Proof Typescript to the Third Galley. The other is that it takes over Chapter 8, 'Investment and Saving', of 'The General Theory' and Chapter 8 (same title) of the Summer Manuscript.
  In First Galley I, Keynes inserts a new chapter - Chapter 7, 'The Definitions of Quasi-Rent, Saving and Investment'. The material in this chapter is also utilised, though in a dispersed manner, in Chapter 6, 'The Definition of Income, Saving and Investment', of the General Theory, so that it will be convenient to defer discussion of the fundamental concepts in question until the next chapter, and to confine ourselves for the present to observing that Chapter 6 of the Pre-First Proof Typescript is more significant for Chapter 6 of the General Theory than any of the galleys from First Galley I to the Third Galley.
  B. First Galley I (Chapters 1-19)
  First Galley I comprises nineteen chapters (1 to 19) of which Chapters 17 and 19 are no longer extant. The chapters to which we refer below without notice are those included in the Galley Table of Contents.
  (a) The State of Development Immediately Prior to First Galley I
  Let us now examine to what extent, and in what respects, Keynes had already arrived at the economic-theoretical position we find in the General Theory in the period immediately preceding First Galley I.
  As we observed (see Note 1 to Chapter 12), Chapter 13, 'The State of Long-Term Expectation' (referred to as the Pre-First Proof Index Version) was fairly complete in 'The General Theory', not only in substance but also in form, and attained completion in First Galley I. As we saw in Section 2 (A) above, Chapter 4, 'The Choice of Units', Chapter 5, 'Expectation as Determining Output and Employment', and Chapter 12, 'The Marginal Efficiency of Capital', had reached completion in the Pre-First Proof Typescript, in form as well as in content.
  As well as those, there are also places where Keynes had by this stage already in substance arrived at the position of the General Theory, though the presentation of these had not yet attained their final form. Chapter 2, 'The Postulates of the Classical Economics', can be traced back to the Second Manuscript of 1932. The frameworks of Chapter 10, 'The Propensity to Spend' ( JMK.14, pp. 444-449), and Chapter 11, 'The Psychological and Social Incentives to Spending and Saving' (JMK.14, pp. 449-454), were laid out in Chapter 10, 'The Propensity to Spend', of 'The General Theory' (cf. Section 1 (B) of Chapter 12 of the present book). The theory of liquidity preference, which is the core of Chapter 14, 'The General Theory of the Rate of Interest', is established in embryo form in 'The Monetary Theory of Production' (cf. Section 2 (D) of Chapter 8 of the present book).
  This is the background against which Keynes wrote First Galley I.
  (b) Features of the General Theory to be found in First Galley I
  At this point we proceed to identify the parts of First Galley I where Keynes sets out, even to the extent of putting them in the finally adopted form, arguments later presented in the General Theory. In following this necessarily somewhat complicated discussion, the reader is advised to consult Tables 13-2 and 13-3 below which set out the relationships between First Galley I and the General Theory on the basis of an investigation of the 'Variorum'.
  First Galley I can be divided into two parts: namely, Chapters 10 and 11 which deal with consumption and Chapters 14-19 which deal with the rate of interest.
  <1> Consumption (Chapters 10 and 11)
  As a preliminary, the following two points should be noted. First, there are many passages in common between Section III of Chapter 8, 'The Propensity to Consume: I. The Objective Factors', of the General Theory (the most important part of Chapter 8) and the corresponding parts of 'The General Theory'. Chapter 9, 'The Propensity to Consume: II. The Subjective Factors', of the General Theory was already almost complete in 'The General Theory'. Second, there is no discernible difference between Chapters 10 and 11 of First Galley I and the same chapters of the Second Galley, aside from minor changes in wording (though later in 'The Great Revision' of August 1935 Keynes does revise these chapters).
  Let us begin with Chapter 10, 'The Propensity to Spend'. This chapter treats the areas covered in Sections II and III of Chapter 8 of the General Theory. The content of Section III, which sets out the argument for the fundamental psychological law, remains almost unchanged from the presentation in First Galley I (JMK.14, pp. 446-447). However, Chapter 10 of First Galley I differs considerably from Section II of Chapter 8 of the General Theory in terms of the objective factors. We should remind ourselves (see Section 1 (B(b)) of Chapter 12 of the present book) that in 'The General Theory' Keynes identified the objective factors as: (i) the quantity of employment as determining the aggregate current rate of real income; (ii) the rate of interest; (iii) the state of long-term expectation. In First Galley I Keynes eliminates (i), leaving only (ii) and (iii) as the objective factors; he then proceeds to discuss (i) separately, substituting the quantity of employment for income (JMK.14, pp. 446-447). By the addition of the argument justifying the substitution of the quantity of employment for income (see GT, p. 90), the General Theory emerges out of First Galley I. The analysis of (ii), which is the same as in 'The General Theory', is taken in as the fourth objective factor, 'changes in the rate of time-discounting' in the General Theory (see JMK.14, pp. 448-449 and GT, pp. 93-94). The analysis of (iii), which is the same as that in 'The General Theory', is incorporated, to some extent, in 'windfall changes in capital-values not allowed for in calculating net income', the third objective factor in the General Theory.
  Chapter 11 corresponds to Chapter 9, 'The Propensity to Consume: II. The Subjective Factors', of the General Theory. However, whereas in 'The General Theory' Keynes includes financial provision among the subjective factors, in both  First Galley I and the General Theory he excludes it from the list of subjective factors. On the other hand, the argument concerning the influence of distribution on the propensity to consume restates the argument of 'The General Theory', namely that the employment function becomes a straight line with a slope of 45°. In the General Theory Keynes drops this argument and merely takes income distribution as given. Furthermore, with reference to the issue of 'negative saving', in First Galley I Keynes takes up negative saving by firms and 'unemployment relief financed by borrowing', in addition to the purchase of annuities, and death duties, treated in 'The General Theory'. In the General Theory , though, he refers only to 'unemployment relief financed by borrowing'. Aside from these changes, Chapter 11 is essentially the same as Chapter 9 of the General Theory.
  <2> The Rate of Interest(Chapters 14-19)
  Chapter 14, 'The General Theory of the Rate of Interest', is, apart from a few changes in wording, identical to the General Theory's Chapter 13 of the same title, in which the core of the theory of interest is articulated. In other words, in First Galley I Keynes's exposition of the theory of liquidity preference has, to all intents and purposes, already reached its final form. Only small revisions are made to Chapter 14 between First Galley I and the Second Galley. The same is true of Chapter 18, 'Sundry Observations on the Nature of Capital', which corresponds to Chapter 16 (same title) of the General Theory. Note that the origins of Section II can be traced back to the Second Undated Manuscript and the Pre-First Proof Typescript.
  Chapter 17, 'The Psychological and Social Incentives to Liquidity', and Chapter 19, 'The Essential Properties of Interest and Money'１４, of First Galley I (corresponding respectively to Chapter 15, 'The Psychological and Business Incentives to Liquidity', and Chapter 17, 'The Essential Properties of Interest and Money, of the General Theory) are not extant. However, Keynes's letter to Kahn of 15 January 1935 (JMK.13, p. 525), and Robertson's letter to Keynes of 3 February 1935 (JMK.13, pp. 496-506), both confirm that they were written. The Kahn letter indicates that Keynes rewrote 90 per cent of these chapters in First Galley I, though the material evidence for this is not available to us. All we can say for certain is that Chapters 17 and 19 of the Second Galley, which were completed by 15 January 1935, are identical to Chapters 15 and 17 of the General Theory, apart from minor changes in wording.
  Chapter 15, 'The Classical Theory of the Rate of Interest', and Chapter 16, 'Notes on the Rate of Interest in Marshall's Principles of Economics, Ricardo's Principles of Political Economy, and Elsewhere', are extant. These correspond to, respectively, the General Theory's Chapter 14, entitled 'The Classical Theory of the Rate of Interest', excepting the appendix, and 'Appendix on the Rate of Interest in Marshall's Principles of Economics, Ricardo's Principles of Political Economy, and Elsewhere', to that chapter. Differences between First Galley I and the Second Galley with regard to these chapters concern only trivial points such as changes in wording. In 'The Great Revision', however, both chapters were considerably rewritten before being incorporated into the General Theory. This is confirmed by: (i) Keynes's letter to Kahn of 27 August 1935 (JMK.13, p. 634), in which he was thinking of completely rewriting the chapters dealing with the theory of interest; and (ii) the fact that of the chapters dealing with the theory of the rate of interest, Keynes rewrote these two chapters only.
  Keynes was spurred on to rewrite these two chapters by a discussion with Harrod, through which he came to realise that he had failed to make his theory of interest immune to misunderstanding.１５　Let us examine the two chapters more closely.
  Chapter 14 of the General Theory consists of 11 pages, of which 7 pages (pp. 177-183) comprise the part that Keynes rewrote completely. Nevertheless, an examination of Chapter 15 of First Galley I (JMK.14, pp. 474-479) reveals that there is no difference of argument between First Galley I and the General Theory. In both versions Keynes points out that the classical theory of interest rests on the presupposition of full employment, so that when income becomes an endogenous variable, the classical theory can no longer account for the actual rate of interest.１６
  A similar relationship can be discerned between the appendix to Chapter 14 of the General Theory and Chapter 16 of First Galley I (JMK.14, pp. 479-487). In this case Keynes completely rewrote four and a half (out of about seven and a half) pages of the appendix dealing with Marshall's and Pigou's theory of interest (that is, Section I). Yet when Chapter 16 of First Galley I and the relevant passages of Chapter 14 of the General Theory are compared, it is evident that there are no changes whatsoever to the argument. Both versions assert that 'The perplexity which I find in Marshall's account of the matter is fundamentally due, I think, to the incursion of the concept “interest", which belongs to a monetary economy, into a treatise [Principles of Economics] which takes no account of money' (GT, p. 189, and JMK.14, p. 484), and that 'Professor Pigou...leads us (in his Economics of Welfare ) to infer that the unit of waiting is the same as the unit of current investment and that the reward of waiting is quasi-rent, and practically never mentions interest, - which is as it should be' (〓GT, p. 190, and JMK.14, p. 484). Although the theme is common to the appendix to Chapter 14 of the General Theory and to Chapter 16 of First Galley I, in formal respects the first differs from the second in these points: (i) in First Galley I, Keynes points out that Marshall does not clearly distinguish quasi-rent as a return on assets from interest as a return on money１７, while in the General Theory he deletes this portion; (ii) Keynes's criticism of Pigou's theory of interest is more extensively developed in the General Theory, taking into account not only The Economics of Welfare, but also Industrial Fluctuations and The Theory of Unemployment.１８
  In addition to the above features of the General Theory to be found in First Galley I, First Galley I also incorporates Chapters 6-9 of Book II, 'Definitions and Ideas', and Chapters 2-3 of Book I, 'Introduction'. However, as these chapters were the focus of 'The Great Revision', we shall postpone our examination of them until the next chapter.
  C. First Galley II (Chapters 20-25)
  First Galley II is composed of Chapters 20-25 which exist only in the First Galley: these chapters appear in neither the Second nor Third Galleys. They correspond to Chapters 18, 20, 10, 19, 21, and 22 of the General Theory respectively. As we saw in Section 1, Keynes produced Chapters 1-6 of the Second Galley at the end of January 1935, First Galley II after the end of March 1935, and Chapters 7-19 of the Second Galley at the end of April 1935. First Galley II represents the final version of the parts of the General Theory to which it corresponds.
  Table 13-4 summarises the relation between First Galley II and the General Theory. Chapter 22, 'The Marginal Propensity to Consume and the Multiplier', becomes Chapter 10 (same title) of the General Theory; Chapter 20, 'The Equilibrium of the Economic System', becomes Chapter 18, 'The General Theory of Employment Re-stated'; Chapter 21, 'The Employment Function', becomes Chapter 20 (same title); Chapter 23, 'Changes in Money-Wages', becomes Chapter 19 (same title); and Chapter 24, 'The Theory of Prices' becomes Chapter 21 (same title). Chapter 25, 'Notes on the Trade Cycle', does not appear to be extant (it does not appear in JMK).
  As far as First Galley II is concerned, Chapters 22, 'The Marginal Propensity to Consume and the Multiplier', and 21, 'The Employment Function', are, to a certain degree, related to the preceding manuscripts. Regarding the former, Keynes initially developed the basic idea in the First Undated Manuscript (see Section 2 (A) of Chapter 11). Regarding the latter, Keynes initially developed his argument concerning the employment function in 'The General Theory' and in the Summer Manuscript, though the argument still remained unclear (see Section 1 (A) and Section 2 (B) of Chapter 12). In Chapter 3, 'The Principle of Effective Demand', of First Galley I, Keynes defines the employment function as D′= F(N) (D′denotes 'the supply price' in the sense of an expectation of sale proceeds [in the Third Galley, this is also called 'the aggregate cost of production]), N the volume of employment). However, in Chapter 21 of First Galley II he defines it as N = F(D)１９ (where D denotes effective demand). Then, in what we are calling 'The Great Revision', Keynes tries to clear up the confusion, by, on the one hand now referring to the employment function of First Galley I as the 'aggregate supply function', while on the other calling the employment function of First Galley II the employment function.２０　In 'The Great Revision', Keynes also for the first time uses the concept of the 'aggregate demand function', and re-defines effective demand as exclusive of 'user cost'. From this development we can infer that the employment function, N = F(D　ｗ), of the General Theory is a function of the equilibrium value, DＷ　effective demand in terms of wage units). This inference can be verified by examining the theoretical structure of the General Theory directly, which we do in Chapter 15.
  Chapter 23, 'Changes in Money Wages: Appendix on Professor Pigou's Theory of Unemployment', can be traced back to the following sequence of events: (i) Keynes launches his attack on Pigou's book (Pigou, 1933) in September 1933, and engages in fierce debate with Robertson about it (see JMK.13, pp. 309-326); (ii) Keynes discusses the book in his first lecture of the Michaelmas Term of 1933 (see Section 1 of Chapter 11); (iii) in a letter to Kahn dated 26 March 1935, Keynes says that he has finished writing an appendix in which he deals with Pigou's book (JMK.13, p. 525).２１
  Aside from these three chapters, we find no precursors to First Galley II in the earlier manuscripts.
  As indicated in Table 13-4 below, no difference in content can be discerned between First Galley II and the corresponding parts of the General Theory beyond very slight stylistic revisions such as minor changes in wording. The only exception to this (see JMK.14, p. 504) occurs in Section II of Chapter 20, 'The Equilibrium of the Economic System', where Keynes summarises the argument developed in the preceding chapters. This section was considerably rewritten after First Galley II, possibly at the time of 'The Great Revision'.
  D. First Galley III (Chapters 26-28)
  First Galley III contains three chapters from the Galley Table of Contents: Chapter 26, 'Notes on Mercantilism and the Usury Laws', Chapter 27, 'Notes on the History of the Notion of 'Effective Demand', and Chapter 28, 'Is an Individualist Economy Capable of Providing Full Employment?' (see JMK.13, p. 526). These three chapters, together with Chapter 25, 'Notes on the Trade Cycle', constitute Book VI, 'Short Notes on Some Applications of the General Theory'. As far as the tables of contents are concerned, these can be traced back to the following: (i) Chapter 17, 'Historical Notes', of the First Manuscript (1933; see Table 10-1); (ii) Chapter 20, 'Notes on the Trade Cycle', Chapter 21, 'Notes on the History of Cognate Ideas', of the Third Manuscript (1933; see Table 10-1); (iii) Chapter 25, 'Notes on Mercantilism, the Balance of Trade and Foreign Investment', Chapter 26, 'Is an Individualist Economy Capable of Providing Full Employment?', and Chapter 27, 'Notes on the History of Similar Ideas', of 'The General Theory' (see Table 12-1).
  That Keynes must have produced these chapters in June or July 1935 is borne out by the letter to his mother of 9 August ( JMK.13, p. 653) and the letter to Harrod of 17 August (JMK.13, p. 542). Because First Galley III is not extant, its contents are beyond our direct reach. However, we are in a position to make three observations.
  First, in the Harrod letter, Keynes writes: 'Chapter 26 is too long, I think, and wants a little cutting. In chapter 27 the emphasis hasn't worked out as I intended, and it will need some re-consideration'. Hence it may be inferred that Keynes transferred the contents of Chapter 26 to the following sections of Chapter 23, 'Notes on Mercantilism, the Usury Laws, Stamped Money and Theories of Under-consumption', of the General Theory: Sections I-IV (on Mercantilism), Section V (on the Usury Laws), and Section VI (on the theory of Gesell), while reworking the contents of Chapter 27 as Section VII (on theories of under-consumption) of Chapter 23 of the General Theory.
  Second, we possess references which have a bearing on the origins of some of the ideas forming the substance of Chapter 23 of the General Theory. The starting point may be regarded as 'Historical Retrospect' (1932; JMK.13, pp. 406-407), which could be connected with Chapter 17, 'Historical Notes', of the First Manuscript (1933), because it is there that Keynes pronounces himself in favour of '(1) Mercantilist and Protectionist policies as tending to increase foreign investment by improving the balance of trade; (2) Anti-usury laws２２　and principles of cheap-money policies as tending to increase home investment by lowering the rate of interest; (3) Expenditure as being a thing in itself “good for trade" by diminishing the excess of S over I' (〓JMK.13, p. 407). Here it is worth reminding ourselves that 'Historical Retrospect' is close to 'The Monetary Theory of Production' in terms of its basic tenor. Also, we have a hand-written note relating to Keynes's 1932 spring lectures (JMK. 29, p. 48) in which he refers to 'Mercantilism and Protection'. Keynes also discusses the seeds of his ideas in his lectures for the Michaelmas term of 1932 (see Section 2 of Chapter 9). In Section III of Chapter 23 of the General Theory Keynes makes liberal use of Hecksher's Mecantilism (1935), quoting various mercantilist authors' statements to argue that some of the ideas he develops in the General Theory may be found in their writings.２３ The ideas in question are: (i) scepticism about the policy of laissez―faire２４; (ii) the theory of liquidity preference; and (iii) the need to distinguish between the rate of interest and the marginal efficiency of capital. (For the record, Hecksher (1935) was first published in Swedish in spring 1931, then in German in autumn 1932; the English version, a translation from the German, came out in 1935.) Keynes's extensive quotation from the book probably reflects its recent availability in English. The following remark is worth noting: 'Prof. Heckscher is himself an adherent, on the whole, of the classical theory and much less sympathetic to the mercantilist theories than I am. Thus there is no risk that his choice of quotations has been biassed in any way by a desire to illustrate their wisdom' (〓GT, p. 341, fn.1).
  In Section VII of Chapter 23 of the General Theory Keynes discusses theories of under-consumption. His line of argument on Malthus here can be traced back to 1922, but it is not until 1933 that he refers to the relation between unemployment and effective demand２５　(which we examined in Section 6 of Chapter 10). Here Keynes also provides a detailed discussion of Mummery and Hobson (1898), which must date from July 1935, for writing to Kahn on 30 July 1935 (JMK.13, p. 634), he states: 'the book Hobson helped him [Mummery] to write, The Physiology of Industry, is a wonderful work. I am giving a full account of it but old Hobson has had so much injustice done to him that I shan't say what I think about M's [Mummery's] contribution to it being, probably, outstanding'.
  Third, on the basis of his letter to his mother of 9 August 1935, we know that Keynes commenced on Chapter 28, 'Is an Individualist Economy Capable of Providing Full Employment?', in August 1935: 'I began the last chapter of my book this morning' (JMK.13, p. 653). Furthermore, from his letter to Robinson dated 3 September (JMK.13, pp. 650-651), we moreover know that the chapter had by that time been finished. We can infer that Chapter 28 became the basis of Chapter 24, 'Concluding Notes on the Social Philosophy towards Which the General Theory Might Lead', of the General Theory.
  Thus far we have examined all the chapters of the Galley Table of Contents, with the exception of Chapters 2, 3, and 6-9, which we examine in the next chapter. That is to say, we have completed our examination of the latest-written of the chapters listed in Table 13-1.
 
　　　　　　　　　Table 13-1  The Proofing Process before
`The Great Revision'
Chapter
　　　　
　 First　
Galley I＊
 Second
 Galley
  First
Galley II
  Third
 Galley
  First
Galley III 　　　　　　　　　　　　　　
　　　　　　　　　　　　　　
　　　　　　　　　　　　　　
　　　　　　　　　　　　　　
　　　　　　　　　　　　　　
　　　　　　　　　　　　　　
　　　　　　　　　　　　　　
　　　　　　　　　　　　　　
　　　　　　　　　　　　　　
　　　　　　　　　　　　　　
　　　　　　　　　　　　　　

　　　　
   1
　　　　
　　　　



　　　
　　　
　　　
　　　



　
　
　
　



　　　　　













　　　　　
　　　　　
　　　　　
　　　　　



　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　



   　H 　　　(the end　of  
   January
 1935)


 
　　　　
  2-3
　　　　
　
　
　
　
　
　
　
　
　
　
　
　
　
　　　
　　　
　
　
　　
　　
       2 (part)　
    H
(June 　　
   1935)　
     (the end
of January 
　　　　
  4-6
　　　　     
    R 1935)
　　　
　　　 　
　
　 
     M 　
　
　
　
　
　
    　　
　　 　　
　　
 ｉ
　
　
　
　
 　
　
　
　
　
     
　　　　
 7-14
　　　　
 
　
　　　
7 & 　　　
8 (part)　
　　　　　
reprinted
in　　　　
the Keynes
Papers　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　




    8 (part)　
　H 　　　
(the end　
of April　
1935) 　　 
　　　　
 15-19
　　　　
　　　
　　　
　　　
　
†
　  
   　 　　　 
　　　　
　　　　
 20-25
　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　



　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　
　　　　　



　　
　　
　　
　　
   　　H＊＊
   　 　　
　　　　
 26-28
　　　　



　　　　　
　　　　　
　　　　　


 
     (June or　
July 1935)
     　　


 　　



(Notes) 1.  The chapters are those of the Galley Table of Contents.
　      2.　 Mｉ: the parts used in the lectures in the Michaelmas 　　　　　　　　　term　in 1934.
             R : the parts sent to Robertson.
　　　　　   H : the parts sent to Harrod and others.
　      3.  The dates in parentheses indicate when the 　　　　　　　　　　　　galleysconcerned came out.
        4.　＊　: the period between early December 1934 and 　　　　　　　　　mid-January　1935.
＊＊: the period after the end of March 1935. Chs.21 -24 with　the date of 7-17 May 1935 (reprinted in the Keynes Papers).
†: Chs.17 and 19 are no longer extant.
 
            
 　　Table 13-2  First Galley I and the General　　　　　　　　　　　　　　　　 Theory
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　　
Book
　　


　　　　　　　　　
   First GalleyI
　　　　　　　　　
　　　　　　　　　


Period of
　
Establish-　
ment in　　
Substance

Period of
　　
Establish-
 　
ment in Form

   Corresponding
  Parts of the　
   General Theory
　　　　　　　　　


　　
Book
　

Book
 I
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　


Chapter 1, “The 　
　
 General Theory"
     First GalleyI  
　　　　　　　　　　　　

Chapter 1, “The
　　 General Theory"

　Book
  I　　　　　　　　

Chapter 2, “The　　
 Postulates of 　　
 the Classical 　　
 Economics"　　
　　　　　　　　
　　　　　　　　

　　　

Chapter 2, “The
　　 Postulates of　 the Classical　
　 Economics" 　
  

　　　　　　　　　
Chapter 3, “The　　
 Principle of　　　
 Effective 　　　　
 Demand" 　　　　　

　　　　　　　　　Chapter 3, “The
　　
 Principle of  Effective Demand" 　　　　　

   　
　　　　　　　　　　　　
　
　　　　　　　　　　　　
　　　　　　　　　　

　
　
　



 　　　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　




















    　　  　　　　　　

Book
 II
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　







Chapter 4, “The 　　
   Choice of Units"
     Pre-First Proof
　　    Typescript　　
Chapter 4, “The 　　Choice of Units"
　　
　　
　　
　　
　
　　　
　　
　　
　　
　　
　　
　　
　　
　　
　　





Chapter 5, 　　　　
 “Expectation as  
  Determining 
  Output and 　　　
  Employment" 
　　　　　　　　　　　　Pre-First Proof
　      Typescript　　　　
　　　　　　　　　　

Chapter 5, 　　　　 “Expectation as     Determining  
  Output and 　　　  Employment" 

　　　　　　　　　
　　　　　　　　　
　　　　　　　　　
Chapter 6, 　　　　
 “The Meaning of 
  Income"　　　　　
　　　　　　　　　
　　　　　　　　　
　　　　　　　　　
　　　　　　　　　
　　　　　　　　　
　　　　　　　　　
　　　　　　　　　
　　　　　　　　　

　　　　　　　　
　　　　　　　　
　　　　　　　　
　　　　　　　　
 　　　　　　　
　　　　　　　　
　　　　　　　　
　　　
　　　
　　　
　　　
　　　
　　　

* Parts of 　　　　  Sections I and
  II have　　　　　   corresponding
   parts in Chapter
  6, The    Definition of   Income, Saving    and Investment".
* Section III　　　
   corresponds to
  Sections II, III, and IV of    Appendix on UserCost to Chapter 6.

   　　　　　　　　　　　　





Chapter 7, “The　　
  Definitions of
  Quasi-Rent, 
  Saving and 　　　
  Investment" 
　　　　　　　　　
　　　　　　　　　

　　　　　　　　
　　　　　　　　
　　　　　　　　
　　　　　　　　


　　　
　　　
　　　
　　　


* Section I is　　　
  deleted. 　　　
* Some correspond- 　  ing parts are
  found　　　　　dispersedly  through　  Chapter 6. 　


　　　　　　　　　
Chapter 8, “The　　
Meaning of Saving"　
　　　　　　　　　
　　　　　　　　　
　　　　　　　　
　　　　　　　　
　　　　　　　　

　　　
　　　
　　　

Chapter 7, “The　　 Meaning of 　　　　 Saving and　　 Investment, 　　 Further 　　　　 Considered"

　　　　　　　　　
Chapter 9, “The　　
 Meaning of　　　　
 Investment" 　　　
　　　　　　　　　
　　　　　　　　　

　　　　　　　　
　　　　　　　　
　　　　　　　　
　　　　　　　　


　　　
　　　
　　　
　　　


This corresponds　　   to Section IV of Chapter 8, “The  
 Propensity to　　 Consume: I. The  
 Objective 　　　　 Factors". 　　
　　
Book
II　　
　　
　　
　

Book
III
　　
　　
　　
　　





Chapter 10, “The　 Propensity to　　 Spend" (`The　　　
 Propensity to 　 Consume' in the    case of the  Third Galley) 　　
　　　　　　 `The　　
   General
    Theory'
　　　　

　　
　　
　　
　　　
　　　
　　　
　　

* This corresponds 　   to Sections II
  and III of 　　　  Chapter 8.　　　　
　　　　　　　　　


Chapter 11, “The　　
  Psychological and
  Social Incentives
 to Spending and  
 Saving" 　　　　


　　 ‘The
   General
   Theory'



　　　First　　  GalleyI
　　　　　　
　　　　　　



Chapter 9, “The　　 Propensity to　　　   Consume: II. The Subjective　　　　 Factors"　　　　


　　
Book
IV

　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　

　　
Book
　　

　　　　　　　　　
  First GalleyI
　　　　　　　　　
　　　　　　　　　
Period of
Establish-
ment in 　
Substance
Period of 　
Establish-　
ment in Form
　　　　　　
 Corresponding
 Parts of the
〓General Theory

   
        　　　

Book
 IV
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　


Chapter12, “The 　
 Marginal 　　　　
 Efficiency of　　
 Capital" 　　　　
　　　　　　　　　　　　
    Pre-First Proof
　　 Typescript 　　　　
　　　　　　　　　　　　
Chapter11, “The
 Marginal
 Efficiency of
 Capital"
  


Chapter 13, “The　
State of Long-　
Term Expectation"
　　　　　　　　　
    Pre-First Proof
    Index Version  
    (`The General  
      Theory')　　　　　
Chapter 12, “The
 State of Long-
 Term
 Expectation"
  


Chapter 14, “The　
General Theory　
of the Rate of 
 Interest"　　　　
　　　　　　　　　
`The　　　
 Monetary
Theory of
Produc-  
 tion'　　
　　　　　　
 First　　　
  GalleyI
　　　　　　
　　　　　　
Chapter 13, “The
General Theory of
 the Rate of
 Interest"

   



Chapter 15, “The　
 Classical Theory
of the Rate of 
 Interest"　　　　
　　　　　　　　　
　　　　　
 First　　
  GalleyI
　　　　　
　　　　　
　　　　　　
 Great　　　
 Revision
　　　　　　
　　　　　　
Chapter 14, “The
  Classical Theor
  of the Rate of
Interest" (except
 for Appendix)
   



Chapter 16, “Notes
on the Rate of 
 Interest in　　　
 Marshall's 　　　
 Principles of　　
 Economics, 　　　
 Ricardo's　　　　
 Principles of　　
　　　　　
　　　　　
　　　　　
　　　　　
First 　　
 Galley I
　　　　　
　　　　　
　　　　　　
　　　　　　
　　　　　　
　　　　　　
 Great　　　
 Revision
　　　　　　
　　　　　　
　　　　　　
　　　　　　
　　　　　　
Appendix to
  Chapter 14, “Ap
  pendix on the
  Rate of Interes
  in Marshall's
  Principles of
  Economics,
  Ricardo's
  Principles of
Political Economy
and Elsewhere"
   





  〓Political Economy  　　　　
   and Elsewhere　　
　　　　　　　　　 　　　　　
　　　　　

Chapter 17, “The　
 Psychological　　
 and Social 　　　
 Incentives to　　
 Liquidity" 　　　
First 　　
 Galley I
   or
Second 
Galley 
　　　　　　
　　　　　　
 Second 
   Galley 　
　　　　　　
Chapter 15, “The
 Psychological
 and Business
 Incentives to
 Liquidity"
   



　　　　　　　　　
　　　　　　　　　
Chapter 18, 　　　
 “Sundry　　　　　
  Observations on
  the Nature of
  Capital"　　　　
　　　　　　　　　
　　　　　　　　　
　　　　　　　　　
　　　　　　　　　

* Part of
   Section
II: Second
Undated 　
Manuscript
　　　　　
*Section　
II:Pre- 
 First　　
 Proof　　
Typescript
　　　　　
　　　　　　
　　　　　　
　　　　　　
 First　　　
  GalleyI
　　　　　　
　　　　　　
　　　　　　
　　　　　　
　　　　　　
　　　　　　
　　　　　　

Chapter 16,
 “Sundry
Observations on
 the Nature of
 Capital"



   






Chapter 19, “The　
 Essential　　　　
 Properties of　　
 Interest and 　　
 Money" 　　　　　


First 　　
 Galley I
  or　　　
Second　　
Galley 


　　　　　　
　　　　　　
 Second 
   Galley 　
　　　　　　


Chapter 17, “The
 Essential
 Properties of
 Interest and
 Money"


   
















    

　(Notes) 1. `Period of Establishment in Substance' refers to the period
             in which the corresponding parts of the General Theory
             were substantially established.
　        2. `Period of Establishment in Form' refers to the period in which
　　　　　　 only minor changes (such as changes in wording) were made.

　　　　　　　　　Table 13-3  First Galley II and the General Theory
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　
　







　　
Book
　　
　　
　　　　　　　　　
First Galley II 　
　
　　　　　　　　　
Period of
Establish-　ment inSubstance
Period of
Establish-
ment in Form
   Corresponding
  Parts of the    General Theory
　　　　　　　　
　　
Book
 　　　　　　　　
　　　　　　　　　　　　　　
　　　　　　　　
　　　　
　　　　

Book
  V
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　
　　





Chapter 20, “The　
　 Equilibrium of 
 the Economic　　　
 System" 　　　　　
　　　　　
　　　　　
　　　
　　　
　　
　　
Chapter 18, “The
　General Theory　of Employment　　 Re-Stated"　　　
Book
　IV


Chapter 21, “The　
　 Employment　　　　 Function" 　　
　　　　　
　　　　
　　　
　　
　　
　
Chapter 20, “The
Employment 　　　 Function"
Book
V


Chapter 22, “The　
Marginal　 Propensity to Consume and the  
 Multiplier" 　　　

First　　UndatedManuscript

Chapter 10, “The　Marginal　　Propensity to　 Consume and the
 Multiplier"　　
Book
III


    　　　　　　



Chapter 23,　“Changes in Money Wages"　　Appendix on 　　　
  Professor Pigou's
Theor　of Unemployment　　

　　　　　
　　　　　
　　　　　
　　　　　
Chapter 19, “Changes in  Money-Wages"　 Appendix to　 Chapter 19,“Professor Pigou's
Theory of　　 Unemployment'　
　　
　　
Book
V　
　　



    　　
    　　　
　　　
　　　
　　 　　
　　
　　
　

Chapter 24, “The　
　  Theory of Prices"
　　　　　
　　　
　　
Chapter 21, “The
  Theory of Prices"

Book
VI　
　　

Chapter 25, “Notes　
 on the Trade　 Cycle"　　　　　　

　　　　　
　　　　　
　　　　
　　　
　　　
　　
　　
　　
　
Chapter 22, “Notes  on the Trade 　　　 Cycle" 　　　　

Book
VI


 　　　　　
　　　　　　　　　
　　　　　　　　　
　　　　　　　　　
　　　　　　
　　　　　　　　　
　　　　　　　　　
　　　　　　　　　
　　　　　　　　　
　　　　　　
　　　　　　　　　
　　　　　　
　　(Notes) 1. `Period of Establishment in Substance' refers to the period
　　　　　　　 in which the corresponding parts of the General Theory were
　　　　　　　 in substance established.
　　　　　  2. `Period of Establishment in Form' refers to the period in which
　　　　　　　 only minor changes (such as changes in wording) were made.
　　　　　  3. Book VI of First Galley II is entitled “Short Notes
　　　　　　　 on Some Applications of the General Theory". Book V and
　　　　　　　 Book VI of the General Theory are entitled “Money-Wages
　　　　　　　 and Prices" and “Short Notes Suggested by the General Theory"
　　　　　　　 respectively.


　　　　　　　　　　　　　　　　　Notes
  1) Cf. JMK.14, p.351. In fact, there are three versions in existence which are precursors of Chapter 5, all written a little before the Pre-First Proof Typescript. They do not appear in JMK.
  2) The letter is included in Lord Keynes's Letters to Daniel Macmillan. Keynes wrote an article, 'Poverty in Plenty: Is the Economic System Self-Adjusting?' in The Listener, 21 November 1934 (〓JMK.13, pp. 485-492), in which he mentioned Henderson and Robbins as those who believe in the self-adusting ability of the existing economic system, while Dalton and Hobson as those who deny it. Marxism is argued to be included in the self-adjusting school.
  3) It should be added that this reconstruction of the sequence of events is in part based on information found in Keynes's Papers.
  4) In fact Robertson did not receive the chapter corresponding to Chapter 10, 'The Marginal Propensity to Consume and the Multiplier', of the General Theory. The correspondence about the galleys between Robertson and Keynes continued until March 1935. Robertson remarked, in his letter to Keynes dated 3 February 1935, that 'I've found it extremely hard to see the wood for the trees or to make up my mind where I stand about the whole thing' (JMK.13, p. 497), or .in his letter to Keynes dated 10 February 1935, that 'a large part of your theoretical structure is still to me almost complete mumbo-jumbo!' (JMK. 13, p. 506). Keynes's reply was that Robertson did not discuss the essential points of his theory at all. The only chapters to which Robertson agrees are Chapters 14 and 17: 'I think there is little if anything said in these chapters with which I disagree' (〓JMK. 13, p. 499). Even this agreement, however, seems to come from Robertson's view that the theory of liquidity preference is no more than an alternative version to the theory of loanable fund. See JMK.13, pp. 493-523, Moggridge (1992, p. 567), and Mizen and Presley (1995).
  5) Contained in Lord Keynes's Letters to Daniel Macmillan.
  6) Going by the table of contents of 'The General Theory' (see Table 12-1), Chapters 26, 27, and 28 will correspond respectively to Chapter 25, 'Notes on Mercantilism, the Balance of Trade and Foreign Investment', Chapter 27, 'Notes on the History of Similar Ideas', and Chapter 26, 'Is an Individualist Economy Capable of Providing Full Employment?'.
  7) In relation to this chapter, Clarke (1998, pp. 122-124) deals with Keynes's inclusion of Hobson's theory in the General Theory.
  8) Together with Keynes's letters to which we refer a little later in the text, this letter shows that Keynes made his last revision (the 'Great Revision') in this period: 'I expect very shortly to have sent my last major correction to Clark's [the printer]'.
  9) Contained in Lord Keynes's Letters to Daniel Macmillan.
  10) According to Keynes's note (in the Keynes Papers), the General Theory sold 7393 copies in 17 weeks. JMK does not contain all of the letters which were sent to Keynes immediately after the General Theory came out.
  11) For this title, see JMK.14, p.398, fn.2.
  12) The original is Q(O). Cf. JMK.14, p.387.
  13) The definition of 'effective demand' here differs from that in the General Theory.
  14) Concerning this chapter, we have Robertson's long comments (JMK.13, pp. 508-511), to which Keynes replied, saying that 'it has, I think, to be regarded as posterior [to previous chapters]' (JMK.13, p. 519), and Hawtrey's long comments (JMK.13, pp. 574-576).
  15) The discussion about the galleys between Keynes and Harrod begins with Harrod's letter to Keynes of 31 July and ends with Harrod's letter to Keynes of 10 October 1935 (JMK.13, pp. 527-565). The most serious subject of controversy between the two was the classical theory of the rate of interest. Keynes thought that the classical theory (the loanable fund theory) was incoherent. According to Keynes, this is the theory in which the rate of interest is determined by the equilibrium of investment and saving, on the assumption that income is given. Instead he insists upon the theory of liquidity preference. Harrod recognised some value in the classical theory. He agreed completely with the constructive part of Keynes's theory, but opposed his criticism of the classical theory of the rate of interest (Harrod held his stance thereafter, as found in Harrod (1969, pp. 173-174)). From Keynes's point of view, Harrod still remained partly in the world of classical economics. See esp. JMK. 13, pp. 530-552. For the relation between Harrod and Keynes, see also Kregel's paper in Harcourt ed. (1985). Blaug (1985, p. 637) questions Keynes's treatment of the classical theory of the rate of interest where Keynes refers only to the theories of Marshall and Pigou which deal only with the so-called 'direct mechanism' between money and prices.
  Milgate (Eatwell and Milgate eds., 1983, Chapter 5) maintains that 'In adopting Harrod's reconciliation Keynes sacrified his negative [critical] argument [developed in Chapter 15 of First Galley I] on the altar of the immediate success of the positive [constructive] theory. This has had the unfortunate consequence of appearing to lend support to interpretations of the General Theory which distort both the positive and negative parts of Keynes's contribution to the theory of interest' (p. 89).
  16) Pigou (1941, Chapter 7) criticises Keynes's critique of Marshall's theory of the rate of interest, saying that Keynes fails to recognise that Marshall puts forward a long-term theory in which the level of employment is exogeneously given.
  17) Cf. JMK.14, pp. 482-484.
  18) Cf. GT, pp. 189-190.
  19) This can be confirmed from the fact that the formulation of the employment function in both Chapter 21 of First Galley II and Chapter 20 of the General Thory is one and the same (In fact, Dｗ　as deflated by the wage unit is used).
  20) Here we assume that in 'The Great Revision' Keynes came to adopt the same functions as those of the General Theory. And this can be confirmed by the fact that Keynes used 'the aggregate supply function' and 'the aggregate demand function' in the second lecture (21 October) for the Michaelmas term of 1935 (see Table 14-1). Patinkin (1976, Note 14 to Chapter 8) states that the aggregate 'supply function' is found only in the General Theory. But the fact remains that Keynes used it prior to October.
  21) Pigou (1933) thinks that a cut in money wages contributes to increasing the level of employment. Pigou (1941) which largely accepts the system of the General Theory, stresses two conditions for the classical view to be met: (i) money wages must be flexible; and (ii) a cut in money wages must contribute to increasing the level of employment (see pp. 91-92). For recent studies which deal with Keynesian theories on the presupposition that money wages are inflexible, see Iwai (1981), pp.128-129, and Yoshikawa (1984), pp. 87-88.
  22) Very schematically, between the twelfth and the sixteenth centuries commerce and finance stood in low esteem in Europe. Up to the early modern period, the European mental picture of the world had been above all the 'organic' worldview of Scholasticism, as represented by St. Thomas Aquinas. In this view, the purpose of what we now distinguish as 'economic activity' was to propagate, in a subservient role, the smooth functioning of an organic society operating under the ideological hegemony of the Roman Catholic Church. The prevailing economic theory was that of just price, and usury was castigated by Aquinas on the grounds that 'to demand interest in addition to the return of the loan was to seek an unnatural and unjust gain'(Roll, 1938, p. 51); gain, that is, acquired at the expense of people engaged in ordinary occupations. Usury was one of the main causes of social tension and unrest throughout the period. However, as a result of the development of commercial capitalism and the Reformation (especially the radical Protestant Reformation), this organic view of the world was gradually superseded by mercantilism, which allotted a central place to economic enterprise, including the pursuit of commerce and finance. Profit-making was legitimised, so that the concept of usury was emancipated from the fetters of Christian ethics and came to be considered in the modern way. The new age was also that of political arithmetic as conceived by Petty. For more on this, see Tawney (1926), Chapters 1 and 2.
  With this historical process in mind, Keynes's argument in support of usury laws in the General Theory seems somewhat inappropriate, as he appears to discuss the usury laws in terms that suggest the medieval Church opposed usury on the grounds that it might hamper the growth of wealth by destroying the inducement to invest.
  23) In relation to Chapter 23 of the General Theory, Chapter 2, 'Keynes's Argument over Mercantilism', of Kobayashi (1952) is useful.
  24) Keynes's argument in The End of Laissez―Faire (JMK.9, pp. 272-294) that there are few economists in favour of laissez―faire seems rather extreme. This argument needs to be treated with some circumspection. Cf. Blaug (1985), p. 65 and p. 222, and also Section 2 (A) of Chapter 5 and Note 1 to Chapter 6 of the present book.
  25) On the issue whether or not Malthus should be considered to be a predecessor of Keynes, see Blaug (1985), p. 178, and Chapter 3, 'The Rate of Profit and Malthus's Optimal Propensity to Consume', of Negishi (1985). Negishi attaches importance to the relation between the rate of profit and production, in Malthus's theory. Interestingly enough, this leads to what in the present book we have designated the 'TM supply function' of the Treatise. In this sense we might say that the Treatise is closer to Malthus's theory than is the General Theory (see Section 6 of Chapter 10 of the present book).