General Theory Quotes

“The analysis of the /General Theory /shows that inflation is a real, not
a monetary, phenomenon. It operates in two stages (once more giving a
crudely simple account of an intricate process). An increase in
effective demand meeting an inelastic supply of goods raises prices.
When food is supplied by a peasant agriculture a rise of the prices of
foodstuffs is a direct increase of money income to the sellers and
increases their expenditure. The higher cost of living sets up a
pressure to raise
wage rates. So money incomes rise all round, prices are bid up all the
higher and a vicious spiral sets in.

The first stage — a rise of effective demand — can very easily be
prevented by not having any development. But if there is to be
development there must be a stage when investment increases relatively
to consumption. There must be an increase in effective demand and a
tendency towards inflation. The problem is how to keep it within bounds.

Some schemes of investment that seem to be clearly indispensable to
improvements in the long run, such as electrical installations, take a
long time to yield any fruit and meanwhile the workers engaged on these
have to be supplied. The secret of non-inflationary development is to
allocate the right amount of quick-yielding, capital-saving investment
to the consumption-good sector (especially agriculture) to generate a
sufficient surplus to support the necessary large schemes.

It is in this kind of analysis, rather than in the mystifications of
“deficit finance,” that the clue to inflation is to be found. [pp. 110-11]”
― Joan Robinson, Economic Philosophy