Economic theory that is relevant to the real world is always a product of its time, taking for granted the institutions and behaviours that characterise that time. Old books, like Keynes’s General Theory, present a conundrum: how much is still pertinent today and what revisions are necessary to bring the theory into line with changes in the economic system since the book was written. This chapter attempts an answer to that question. It is argued that the principle of effective demand and liquidity preference is almost unchanged, but that globalisation and changes to the banks’ behaviour pose serious questions for the theory, as does our new awareness of resource constraints and climate change. The underlying methodology remains the best on offer and should be retained in any revision.
Victoria Chick and Sheila C. Dow
Victoria Chick and Jesper Jespersen
Victoria Chick and Alan Freeman
This chapter explores the evidence for, and the consequences of, Keynes’s evaluation of the long-term prospects for capitalism. It is 65 years since the Second World War cleared the way for the post-war ‘Golden Age’ of growth and accumulation. The advanced economies now, however, face a marked and persistent slowdown (Blanchard 2015). There is no shortage of suggested causes, ranging from inequality (Piketty 2014), to financialisation (Stockhammer 2004), low real interest rates and low inflation (Summers 2014) and structural budget deficits (Jespersen 2016). Priority, or even causal precedence, has yet to be assigned to any one of these diverse but interlinked factors.