Markets, Productivity, and Happiness in a Historical Perspective

Jacques Rueff and his critique of John Maynard Keynes's theory. Economic analysis, epistemological framework, and political dimension.

Daou Marie, University of Montpellier

This article invites us to discover a controversy not very well known between Keynes and Rueff on the unemployment, its explanations, and its remedies. In this article, the opposite view between Keynes and Rueff will be specify from a particular entrance point, not still studied by the literature, the Rueff’s review (1947; 1975) of The General Theory of Employment, Interest and Money (Keynes 1936). The interest of his criticism lies in its multidimensional view: theoretical, empirical, and epistemological. The main opposition between Rueff and Keynes lies in the nature of some economic variables. More precisely, two are at the heart of Rueff’s criticism. The first one is the price. For Keynes, prices are a “pasty matter” (Keynes 1929: 6), whereas, for Rueff, they are by nature flexible. The second variable is the monetary supply and more precisely its exogeneity. Keynes supports the idea that it is up to the demand of money to adjust to the supply because it fundamentally has an exogenous character. For Rueff, this approach is wrong. He stressed on the endogenous nature of the money supply: “the quantity of money in circulation, contrary to what lay people believe, is not fixed by the market authorities” ((1947] 1979: 289). It is by mobilizing facts and his experience that Rueff insists on “the fallacies of Lord Keynes General Theory” (Rueff 1947). However, I think that Rueff’s criticism of Keynesian theory is deeper and more complex. To have a better understanding it, I am convinced that it is needed to return to his methodological and epistemological principles. This is on this point that lies for us the originality of Rueff’s criticism compared with the other criticisms of The General Theory, but also regarding to his own previous criticism of Keynes’ thought on German transfers. Thus, he stressed on the “Euclidean” framework of economic theories and rejected non-Euclidean theories in the field of non-scientific theories–because they are unverified by experience–he even considered that they were the worst way to follow for building economic policies. On the contrary, Keynes (1936: 16) stressed on the need to build a non-Euclidean economy ten years later, so much the (neo)classical theory was become for him a failure. Indeed, he saw in Say’s law, the “Euclidean postulate” of economic theory, whose one would have to free oneself to understand the situation which prevailed in the 1930s and concluded to the practical ineffectiveness of the remedies inspired by the (neo) classical theory. Thus, Keynes and Rueff seemed to have neither the same view nor the same references when they dealt with to Euclidean and non-Euclidean theories. In that sense, we are convinced that their epistemological position, and their point of view on the nature of economic theory can shed light on their economic oppositions.

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Keywords: Rueff, Keynes, unemployment, flexibility and rigidity of prices, exogeneous and endogenous money supply, euclidean theory

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