The tragic failure of Keynesian economics


What we call “Keynesian” economics is not some minor sub-division of economic theory but is the very essence of macroeconomics itself. Keynes in 1936 had one central idea in writing his General Theory , and that was to demonstrate that demand deficiency could cause recession and that therefore some kind of demand-side stimulus could and should be used to cure the problem of unemployment. Thus, to the extent that macroeconomics is infused with notions of aggregate demand, it is Keynesian. Indeed, for 90-plus percent of economists, so far as macroeconomic issues are concerned, that is all they know. They do not think in any other way, and if asked to do so, would not know how.



SIGN UP FOR IEA EMAILS