Chapter 1: Been There Done That: The Political Economy of Déjà Vu
Peter J. Boettke, Daniel J. Smith and Nicholas A. Snow In spite of the incredible reputation of the General Theory, I could not find in it a single important doctrine that was both true and original. What is original in the book is not true, and what is true is not original. In fact, even most of the major errors in the book are not original, but can be found in a score of previous writers. Henry Hazlitt (1995 : 3) We have been going back and forth for a century. I want to steer markets (Keynes). I want them set free (Hayek). John Papola and Russell Roberts (2010) 1 INTRODUCTION In the midst of the current financial crisis the economics profession has seen a monumental resurrection of Keynesian ideas. The debate, which Keynes started back in the 1930s, is being picked up again, not where it left off, but in exactly the same place it started. While Keynesian theories were carefully critiqued by new classical economists and in the most part discarded by the profession, Keynesian models and prescriptions became a staple of politics and macroeconomic textbooks. Obviously, neither side of the debate articulated their views adequately and on the same terms. If the economics profession is going to escape this perpetual déjà vu of cycling through the same debate every time an economic crisis emerges, the profession must discard entrenched ideologies and turn back to the sound but creative application of basic economics. On 17 October 1932,...
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