An interesting article by Peter Coy:
Peter Coy, “John Maynard Keynes Is the Economist the World Needs Now,” Bloomberg Business Week, October 30, 2014.
Some minor points:
(1) on the US (and in other nations), the essential early “medicine” – Keynesian stimulus – did work, but more was needed, though this is brought out later in the article.
(2) also, the US was using Keynesian macroeconomic management well before the Kennedy tax cut of 1964.
With its talk of the zero “lower bound” and monetary policy as an effective way to control inflation too (when it is not), the analysis clearly has the feel of New Keynesian economic theory, rather than heterodox Keynesianism.
"Keynes said governments should run surpluses during boom times to pay off their debts and soak up excessive private demand."
ReplyDeleteI'd love to see a citation for that...
@Phlip Pilkington Keynes did write that "the boom, not the slump, is the time for austerity at the Treasury" (John Maynard Keynes, Collected Writings of John Maynard Keynes, Vol. 21. 1937; London: Palgrave Macmillan, 1983). I believe this was in an article published in the NYT (or the Times, I forget which). I used to have a pdf of it somewhere, but can't put my hand on it right now. Granted, though, he did not say (although maybe he meant it) that the object of running surpluses was to soak up excessive private demand.
ReplyDelete"With its talk of the zero “lower bound” and monetary policy as an effective way to control inflation too (when it is not),
ReplyDeleteLK,
Your dismissal of monetary policy is infuriating. Its also anti-empiricial. Ever heard of a man called Paul Volcker.
Before you mention the recession of the early 1980's " you said "control inflation"
you didn't mention what it costs. Do you deny that if the central bank raises the interest rate it pays on reserves, sells securities and drains base money it will crush inflation, albeit with a severe recession?
No Post Keynesian denies that if you raise interest rates to some disastrously high level you will almost certainly induce a bad recession, and that as a side effect of this there will be disinflationary tendencies.
DeleteBut what I disputed is not this, but that "monetary policy" is "an effective way to control inflation". It is not; it is highly blunt and crude instrument, and sometimes quite unrelibale.
What Post Keynesians deny is that monetary policy is some fine tuning, effective way to control inflation. They are correct on this.