4. Keynes on Bank Money and the ‘Monetary Theory of Production’

Keynes devoted most of his intellectual efforts to the development of a theory that encompasses both money and production as the underpinnings of the economic realm. This chapter singles out Keynes’s major discoveries in this regard, emphasizing their importance to understanding the workings of any monetary economy of production. Keynes’s identities are revisited, stressing the logical relationships between real output and nominal income as well as between production and consumption. The originality of the British economist appears to be lying most and foremost in the concept of wage-unit as the objective (numerical) measure of economic value, clearing the way for a fundamental understanding of national payments both in theory and in practice.