National Income Accounting
With war again looming, the need to assess available resources and the tax base became urgent. The GT provided the framework. In his pamphlet, How to Pay for the War (Keynes 1940 [1972]: 367-439), Keynes regretted the poor standard of the official statistics on national income and output.
During the war, the Treasury set up a unit for the development of national accounts, headed by James Meade and Richard Stone. Keynes used their calculations to estimate how much purchasing power could be left for private consumption without causing excess demand (and inflation) and thus the required level of taxation and deferment of purchasing power by forced saving. These measures helped to secure public borrowing at low cost and reduce inflationary pressure, in sharp contrast to the situation during the 1914-18 war.The Dutch economist Jan Tinbergen used national accounting data from the interwar period in a pioneering income-expenditure model of the Dutch economy (Tinbergen 1939) using econometric methods. Keynes was sceptical of using econometric methods to illuminate the present situation, let alone to predict the future, on the grounds that the stability of economic relationships which these methods presuppose is not present. To him a model should rather be part of a way of thinking, an aid to the organization of perceptions and ideas. However, economists found the attractions of econometric techniques more compelling than Keynes’s argument.
There was a flurry of comments and objections to the GT shortly after its publication, but poor health and later preparations for war and the war itself meant that Keynes would never write another book of major importance to economic analysis. However, he responded to some of the main critiques of GT by writing a number of papers where he elaborated on, among other issues, methodology (see especially, Keynes 1938 [1973]), the rate of interest and theory of finance Keynes 1937a, 1937b [1973].