Keynes’s Macroeconomics Rethought
Chapter 1: The Financial Crisis of 2008 and the UnKeynesian Keynes
Resurgence of the name of Keynes has never caught more attention among journalists and politicians nor provoked such debate worldwide than since the start of the current financial crisis. What is presumed under the name of Keynes is, however, in fact Keynesianism – in sum, government interventionism in the form of three policies, all geared to promote consumerism in order to sustain employment: (1) there must be aggregate Demand management; (2) monetary and fiscal policies should be used to sustain Demand; (3) High Demand must be achieved, even if it means Budget Deficits. There is so much written about Keynes that one would have thought everything about his theory would be known by now. Ongoing economic policy controversies attest, however, to the contrary. Keynes was indeed an extremely prolific writer and a fierce debater whose use of the language presented the world with many quotable quips. If one leaves, however, his analogies, cynical twists, and self-deprecating humour to the cartoonists, and focuses on a thorough reading of the core of his theory, as found in A Treatise on Money and The General Theory, one would find that no part of the triad above resembles what Keynes’s theory proposed. Keynesianism itself is a product of neoClassical economics of whose very foundation Keynes was critical. Keynesianism old and new would have been an anathema to Keynes. A return to the theory of Keynes himself would set remedies to the 2008 economic crisis in a different light. Economists have recently pointed quite correctly to...
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