Arbeitspapier
The dismal state of macroeconomics and the opportunity for a new beginning
The Queen of England famously asked her economic advisers why none of them had seen it (the global financial crisis) coming. Obviously, the answer is complex, but it must include reference to the evolution of macroeconomic theory over the postwar period - from the Age of Keynes through the Friedmanian era and the return of Neoclassical economics in a particularly extreme form, and, finally, on to the New Monetary Consensus, with a new version of fine-tuning. The story cannot leave out the parallel developments in finance theory - with its efficient markets hypothesis - and in approaches to regulation and supervision of financial institutions. This paper critically examines these developments and returns to the earlier Keynesian tradition to see what was left out of postwar macro. For example, the synthesis version of Keynes never incorporated true uncertainty or unknowledge and thus deviated substantially from Keynes's treatment of expectations in chapters 12 and 17 of the General Theory. It essentially reduced Keynes to sticky wages and prices, with nonneutral money only in the case of fooling. The stagflation of the 1970s ended the great debate between Keynesians and Monetarists in favor of Milton Friedman's rules, and set the stage for the rise of a succession of increasingly silly theories rooted in pre-Keynesian thought. As Lord Robert Skidelsky (Keynes's biographer) argues, Rarely in history can such powerful minds have devoted themselves to such strange ideas. By returning to Keynes, this paper attempts to provide a new direction forward.
- Language
-
Englisch
- Bibliographic citation
-
Series: Working Paper ; No. 652
- Classification
-
Wirtschaft
History of Economic Thought through 1925: Historical; Institutional; Evolutionary
History of Economic Thought: Macroeconomics
Current Heterodox Approaches: General
General Aggregative Models: Marxian; Sraffian; Kaleckian
General Aggregative Models: Keynes; Keynesian; Post-Keynesian
Financial Crises
- Subject
-
efficient markets hypothesis
Keynesian economics
orthodoxy
heterodox economics
Minsky
uncertainty
rational expectations
new classical
new monetary consensus
monetary theory of production
effective demand
special properties of money
the end of laissez-faire
financial instability hypothesis
- Event
-
Geistige Schöpfung
- (who)
-
Wray, L. Randall
- Event
-
Veröffentlichung
- (who)
-
Levy Economics Institute of Bard College
- (where)
-
Annandale-on-Hudson, NY
- (when)
-
2011
- Handle
- Last update
-
10.03.2025, 11:41 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Wray, L. Randall
- Levy Economics Institute of Bard College
Time of origin
- 2011
Other Objects (12)
Is Keynesianism Institutionalist?: An Irreverent Overview of the History of Money from the Beginning of the Beginning to the Present
The ownership society: Social security is only the beginning ...
Macroeconomics meets Hyman P. Minsky: the financial theory of investment
Did the Clinton rising tide raise all boats? Job opportunity for the less skilled
The financial crisis viewed from the perspective of the "social costs" theory
The Origins of Money and the Development of the Modern Financial System
The Fed and the new monetary consensus: The Case for Rate Hikes, Part Two
Global Financial Crisis: A Minskyan interpretation of the causes, the Fed's bailout, and the future
Outside money: The advantages of owning the magic porridge pot
The Development and Reform of the Modern International Financial System
The euro crisis and the job guarantee: A proposal for Ireland
The Case for Rate Hikes: Did the Fed Prematurely Raise Rates?
Is Keynesianism Institutionalist?: An Irreverent Overview of the History of Money from the Beginning of the Beginning to the Present
The ownership society: Social security is only the beginning ...
Macroeconomics meets Hyman P. Minsky: the financial theory of investment
Did the Clinton rising tide raise all boats? Job opportunity for the less skilled
The financial crisis viewed from the perspective of the "social costs" theory
The Origins of Money and the Development of the Modern Financial System
The Fed and the new monetary consensus: The Case for Rate Hikes, Part Two
Global Financial Crisis: A Minskyan interpretation of the causes, the Fed's bailout, and the future
Outside money: The advantages of owning the magic porridge pot
The Development and Reform of the Modern International Financial System
The euro crisis and the job guarantee: A proposal for Ireland
The Case for Rate Hikes: Did the Fed Prematurely Raise Rates?
Is Keynesianism Institutionalist?: An Irreverent Overview of the History of Money from the Beginning of the Beginning to the Present
The ownership society: Social security is only the beginning ...
Macroeconomics meets Hyman P. Minsky: the financial theory of investment
Did the Clinton rising tide raise all boats? Job opportunity for the less skilled
The financial crisis viewed from the perspective of the "social costs" theory
The Origins of Money and the Development of the Modern Financial System
The Fed and the new monetary consensus: The Case for Rate Hikes, Part Two
Global Financial Crisis: A Minskyan interpretation of the causes, the Fed's bailout, and the future
Outside money: The advantages of owning the magic porridge pot
The Development and Reform of the Modern International Financial System
The euro crisis and the job guarantee: A proposal for Ireland