Edited by Steven Kates
Possibly the strangest phenomenon in all of economics is the absence of a long tradition of criticism focused on Keynesian economic theory. Keynesian demand management has been at the centre of some of the worst economic outcomes in history, from the great stagflation of the 1970s to the lost decade and more in Japan following the expenditure program of the 1990s. And once again, following the Global Financial Crisis, it is incontrovertible that no stimulus program in any part of the world has been a success, each one having been abandoned as conditions deteriorated under the weight of public sector spending. This book brings together some of the most vocal critics of Keynesian economics. Each author attempts to explain what is wrong with Keynesian theory in ways that can be understood by those seeking guidance on where to turn for a more accurate explanation of the business cycle and on what to do when recessions occur.
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Chapter 4: The misdirection of Keynesian aggregates for understanding monetary and cyclical processes
Keynes took economic thinking back to a new “dark age.” At its core was its focus on macroeconomic aggregate building blocks: Aggregate Demand, Aggregate Supply, Total Output and Employment, and the average Price Level and Wage Level. This new world of Keynesian or macroeconomics turned its back on the contributions of nearly a century and a half before the appearance of The General Theory. Practitioners of Keynes’s macroeconomic framework threw to the wind the alternative theories developed for understanding many of the subtleties of the intricate and interdependent relationships of a market system, including monetary and cyclical processes.
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