A purported professional consensus has encouraged left-wing Keynesian
economists to preach, with much moral righteousness, against the socalled "austerity programmes" introduced by European governments in the past decade.
For instance, an economist who has been trained in a Keynesian-oriented department would tend to interpret a current economic event as per the Keynesian
frame of thought.
Krugman comes close to acknowledging this: New Keynesians
, he writes, "start with rational behavior and market equilibrium as a baseline, and try to get economic dysfunction by tweaking that baseline at the edges." Such tweaks enable New Keynesian
models to generate temporary real effects from nominal shocks, and thus justify quite radical intervention in times of emergency.
politics that emerges is one based on an awareness, common to Keynes and Marx (and Hegel), that the economies of liberal capitalism could never be self-regulating.
But the very popularity of the phrase "Keynesian
Revolution" reflects the special role Keynes played in recognizing the full implications of this transition from moral to materialistic economics, and reorganizing economics comprehensively in light of those implications.
Here is the context of that quote: "This slide from Keynesian
theory to particular policies was well illustrated in his seventh edition (1967), when Samuelson cited a statement by Milton Friedman, "We are all Keynesians
now." However, at the end of chapter 11, Samuelson (7:210) then referenced the full quotation from a 1966 interview of Friedman in Time magazine: "As best I can recall it, the context was: 'In one sense, we are all Keynesians
now; in another nobody is any longer a Keynesian
.'" Friedman (1968, p.
economics had failed to overcome or even prevent capitalist business cycles in the US.
Besides the outsized role Phillips' research played in the creation of a Keynesian
economic model that survived John Maynard Keynes' death, the man's biography is a whale of a story, which Harford succinctly captures.
One consequence of the so-called microfoundations project was that the field of macroeconomics itself underwent a radical transformation in which models of Keynesian
provenance were pushed off the main stage in favour of dynamic stochastic general equilibrium models occupied by representative agents with rational expectations.
argue for increased government spending.
It is not surprising if there is a hot debate about austerity policies in many European countries because most policymakers are Keynesians
, and this tradeoff is quite embarrassing for them.
explanation is that we're still recovering from the financial panic, though it's worth recalling that in January 2010 the Fed predicted that growth in 2012 would be 3.5% to 4.5%, not 2.2%.