Schools of Thought in Economics
Edited by Gilbert Faccarello and Heinz D. Kurz
Chapter 30: Keynesianism
A.K. Dasgupta published Epochs of Economic Theory in 1985. It quickly became a classic. Its major theme was that the development of dominant theories in economics reflected the historical events of the epochs with which they were associated. Dasgupta identified three epochs: classical including Marx, marginalist (he objected to the use of neoclassical to describe the second epoch) and Keynesian. He took a long – and correct – perspective, for the death of Keynes, over 80 years on from the publication of The General Theory, now resembles the greatly exaggerated notice of the death of Mark Twain. Why? To answer, it is useful, first, to examine the elements of the major approach that Keynes inherited from his teachers, especially Marshall and Pigou, and also from Malthus and Ricardo, and to show how he modified or scrapped them in order to build his own new system. Secondly, we point out that though in essence what Joan Robinson (1964) dubbed pre-Keynesian theory, after Keynes has dominated the past 40 years and more of economic theory and sometimes policy, yet it is now being proved wrong-headed and inapplicable, just as it appeared to Keynes, and was, as he moved from A Tract (1923) to A Treatise on Money (1930) (which had feet in both worlds) to The General Theory (1936) and after. It may be argued that Keynes had to rationally reconstruct the system which he (inappropriately) named classical until Pigou’s 1933 book on the theory of unemployment provided him with a detailed and comprehensive example of what he had in mind. (Ambrosi (2003) makes the definitive case for this reading.) Finally, it is argued that because of the particular ways in which Keynes’s thought developed, his system, though still relevant and applicable (the “tract for our times” most convincingly arguing this is Taylor (2010)) nevertheless may be set out even more appropriately and relevantly within the approach of Michal Kalecki.
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