1. Keynes Seminar 12 November 2008 Mark Hayes Robinson College, Cambridge General Theory Reading Group 3: Measuring income and capital www.postkeynesian.net © PKSG 2008

2. Book II of The General Theory Chapter 4: The Choice of Units Chapter 5: Expectation As Determining Output And Employment Chapter 6: The Definition Of Income, Saving And Investment Chapter 7: The Meaning Of Saving And Investment Further Considered

4. p O S D

5. What is this farmer’s current output? Before harvest: one tractor, a ton of diesel and half a ton of seed-corn After harvest: one slightly older tractor, half a ton of diesel, seven tons of corn, and five tons of straw

6. Measuring current output “To say that net output to-day is greater, but the price-level lower, than ten years ago or one year ago, is a proposition of a similar character to the statement that Queen Victoria was a better queen but not a happier woman than Queen Elizabeth— a proposition not without meaning and not without interest, but unsuitable as material for the differential calculus. Our precision will be a mock precision if we try to use such partly vague and non-quantitative concepts as the basis of a quantitative analysis.” (GT, p. 40)

7. (GT, p. 44)

8. Book II of The General Theory Chapter 6: The Definition Of Income, Saving And Investment Chapter 7: The Meaning Of Saving And Investment Further Considered

12. Income as an equilibrium value That there should be such a thing as a market value for output is, at the same time, a necessary condition for money- income to possess a definite value and a sufficient condition for the aggregate amount which saving individuals decide to save to be equal to the aggregate amount which investing individuals decide to invest.

13. Next time: Michel De Vroey Université catholique de Louvain Keynes, Marshall and The General Theory