Chapter 4: Teaching open-system economics
The urgency of the need to address the financial and economic crisis which began in 2007 has encouraged public discussion of Keynesian theory and policy. The focus has almost exclusively been on Keynes’s views on the role of fiscal policy in addressing deficient aggregate demand. Given the inattention in the mainstream literature in recent decades to fiscal policy, and even more to Keynes, this is a remarkable development. It is to be hoped that the economics curriculum adapts in order to introduce students to Keynes and Keynesian policy. But this renewed interest in Keynes is very selective, being confined to what Coddington (1976) characterised as ‘hydraulic Keynesianism’. This approach was contrasted with what he called ‘fundamentalist Keynesianism’, which drew much more extensively on Keynes’s work and particularly on his views on uncertainty, within his theory of knowledge. Many Keynesians in the ‘fundamentalist’ mould have drawn attention to the wider importance of Keynes’s theory of knowledge, not only in order to explain the crisis, but also to suggest policy solutions (for example, Skidelsky 2009). But this wider focus on Keynes has not penetrated the mainstream discourse, with the notable exception of Stiglitz (2010), who addressed it only to dismiss it.
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