Chapter 6: Possible Keynesian Explanations and Responses
This chapter’s major concern is how Keynesians would seek to explain the present financial meltdown. While there are many Keynesians and many different Keynesian traditions, the aim here will be to outline a series of arguments that are consistent with the ‘Keynes’ who made the case that his General Theory represented a revolution in economic thought and a departure with market liberal thinking. The financial meltdown, therefore, cannot be explained within that cluster of New Keynesian perspectives which sought a synthesis between Keynes and market economics, that is, seeking explanations around issues of market failure such as the issue of externalities or asymmetric information, as has been outlined recently by Summers (2010), Stiglitz (2010) and Haldane (2010). There is always a problem in seeking to explore what constitutes a Keynesian perspective; after all, not all those who declare themselves to be Keynesians are necessarily agreed on the central principles that define a Keynesian perspective. Attempts to define the core assumptions that shape a Keynesian perspective will always either ignore or attempt to homogenize some major and very important differences and areas of disagreements between economists who see themselves as Keynesians or post-Keynesians (Arestis and Skouras 1985). The problem is that there may be there many different types of Keynesians. As Harcourt has suggested: I certainly do not think that the approaches that come under this heading, though they provide important and substantial insights, have yet reached a coherent steady-state . . . the people who come under this umbrella (Keynesians) are a heterogeneous...
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