The issue of what is Keynesianism has been brought up on this thread. As well as it's attendant question as to what Keynes would do, were he alive today.
John Cassidy, the New Yorker economics guru, and, in my estimation, one of the premier interpreters of economic thought in the country, has an essay that addresses both these questions in the current issue of The New Yorker. Just excellent.
Unfortunately, you have to either buy the New Yorker iPad app or subscribe to the magazine to read it. Or read it at Barnes and Nobles or a library.
I recommend it very highly. It's much better and more readable than the abstract would lead you to believe.
Here's the abstract and the link.
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Annals of Economics
The Demand Doctor What would John Maynard Keynes tell us to do now—and should we listen?
by John Cassidy
October 10, 2011
Subscribers can read this article on our iPad app or in our online archive. (Others can pay for access.)
ABSTRACT: ANNALS OF ECONOMICS about John Maynard Keynes. “The General Theory of Employment, Interest and Money,” by the English economist John Maynard Keynes, was published in February, 1936, and it provided an intellectual justification for the large-scale public-works programs that Keynes had been advocating for years, and that F.D.R.’s Administration had recently launched as part of the New Deal. Keynes argues against the idea that the economy will recover on its own, and in favor of active measures to spur growth and employment. His theory became the keynote of a new era of economic policymaking. Today, many regard Keynes as the economist whose sweeping theory remains the surest guide out of our current woes. In 2010, Britain’s new government turned away from expansionary policies and introduced major budget cuts, making arguments that harked back to Keynes’s opponents in the nineteen-thirties. On this side of the Atlantic, with unemployment remaining stubbornly high, conservative economists insisted that the Keynesian medicine had failed to cure the patient and had perhaps even worsened the disease. “Keynesian policy and Keynesian theory is now done,” Governor Rick Perry declared during a Republican presidential candidates’ debate last month. The publishing industry, at least, has been bullish on Keynes in the past few years. Mentions Robert Skidelsky’s “Keynes: The Return of the Master”; Peter Clarke’s “Keynes: The Rise, Fall and Return of the 20th Century’s Most Influential Economist”; Roger E. Backhouse and Bradley W. Bateman’s “Capitalist Revolutionary: John Maynard Keynes”; Nicholas Wapshott’s “Keynes Hayek: The Clash that Defined Modern Economics”; and Sylvia Nasar’s “Grand Pursuit. Keynes’s central insight was that the economy was driven not by prices but by what he called “effective demand”—the over-all level of demand for goods and services. In such a situation, the economy could easily remain stuck in a rut, until some outside agency intervened and spurred spending. In 1933, Keynes made the case that one dollar of additional government spending could ultimately generate two dollars in additional output and income. This was the so-called “multiplier” effect. These days, the strongest evidence for Keynesianism has been negative. The recent slowdown in the U.S. economy occurred just as Obama’s 2009 stimulus package was running dry. Astute conservatives have sometimes acknowledged that, fundamentally, Keynes was one of them. He came not to bury free enterprise but to save it from itself. Keynes understood how a financially driven economy, like ours, can go into self-sustaining downward spirals (and upward spirals) under the influence of crowd psychology and chronic uncertainty about the future. Keynes’s vision calls not merely for management of risk but for something politically and intellectually far more demanding: the acknowledgement of uncertainty.
newyorker.com |
