An Insider’s View on the Economics of Hyman Minsky
Chapter 6: The breakdown of the IS–LM synthesis: implications forpost-Keynesian economic theory
This chapter reproduces the second article that I co-authored with Minsky. The article’s aim is to discuss the state of the literature prevailing in the late 1980s, dominated by the IS–LM approach and by its critics. The monetarist and the new classical economics attack routed the IS–LM version of the Keynesian theory and the large-scale econometric models, removing them from the center of macroeconomic research. However, they were more successful as a critique of the IS–LM orthodoxy than as a basis for fruitful research and policy analysis. Post-Keynesian economists also attacked IS–LM orthodoxy, mainly because it mis-specified “the economic society in which we actually live”. It is suggested that a convergence between the new and the post-Keynesian economics might be fruitful.
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