This, too, can be many months. Yet many Keynesians still believe that more modest goals for stabilization policy—coarse-tuning, if you will—are not only defensible but sensible. For example, an economist need not have detailed quantitative knowledge of lags to prescribe a dose of expansionary monetary policy when the unemployment rate is very high.
Finally, and even less unanimously, some Keynesians are more concerned about combating unemployment than about conquering inflation. They have concluded from the evidence that the costs of low inflation are small. However, there are plenty of anti-inflation Keynesians. Needless to say, views on the relative importance of unemployment and inflation heavily influence the policy advice that economists give and that policymakers accept.
Keynesians typically advocate more aggressively expansionist policies than non-Keynesians. The brief debate between Keynesians and new classical economists in the s was fought primarily over a and over the first three tenets of Keynesianism—tenets the monetarists had accepted.
New classicals believed that anticipated changes in the money supply do not affect real output; that markets, even the labor market, adjust quickly to eliminate shortages and surpluses; and that business cycles may be efficient. In the s, the new classical schools also came to accept the view that prices are sticky and that, therefore, the labor market does not adjust as quickly as they previously thought see new classical macroeconomics.
Before leaving the realm of definition, I must underscore several glaring and intentional omissions. First, I have said nothing about the rational expectations school of thought. Other Keynesians accept the view. But when it comes to the large issues with which I have concerned myself, nothing much rides on whether or not expectations are rational.
Rational expectations do not, for example, preclude rigid prices; rational expectations models with sticky prices are thoroughly Keynesian by my definition. I should note, though, that some new classicals see rational expectations as much more fundamental to the debate.
Prior to , Keynesians believed that the long-run level of unemployment depended on government policy, and that the government could achieve a low unemployment rate by accepting a high but steady rate of inflation. In the long run, they argued, the unemployment rate could not be below the natural rate. So the natural rate hypothesis played essentially no role in the intellectual ferment of the — period.
Third, I have ignored the choice between monetary and fiscal policy as the preferred instrument of stabilization policy. Economists differ about this and occasionally change sides. By my definition, however, it is perfectly possible to be a Keynesian and still believe either that responsibility for stabilization policy should, in principle, be ceded to the monetary authority or that it is, in practice, so ceded.
In fact, most Keynesians today share one or both of those beliefs. Keynesian theory was much denigrated in academic circles from the mids until the mids. It has staged a strong comeback since then, however. The main reason appears to be that Keynesian economics was better able to explain the economic events of the s and s than its principal intellectual competitor, new classical economics.
Bill Clinton's expansionary economic policies fostered a decade of prosperity. He created more jobs than any other president. Homeownership was The poverty rate dropped to Obamacare slowed the growth of health care costs. International Monetary Fund. Franklin D. Treasury Direct. Yonkers Public Schools. Accessed Jan. Library of Congress. National Archives and Records Administration.
Center on Budget and Policy Priorities. Council on Foreign Relations. Financial Crisis - February U. Housing Bubble Bursts. The Library of Economics and Liberty. The Wharton School. Socialist Party. Communism and Computer Ethics. Federal Reserve Bank of Minneapolis. University of Virginia Miller Center. Roosevelt - Key Events. Northeastern University Economics Society. Clinton White House. Sharpe, Actively scan device characteristics for identification.
Use precise geolocation data. Select personalised content. Create a personalised content profile. Measure ad performance. Select basic ads. He is also an emeritus professor of economics with the Naval Postgraduate School and a research fellow with the Hoover Institution at Stanford University. He earned his Ph. John Maynard Keynes About the Author David R. Selected Works Indian Currency and Finance.
Reprinted in Keynes, Collected Writings. The Economic Consequences of the Peace. New York: Harcourt, Brace, and Howe. A Tract on Monetary Reform. The Economic Consequences of Mr. A Treatise on Money. This would require the government to borrow money and temporarily run a deficit. Keynes pointed out that newly employed public project workers and suppliers would have cash to spend again, causing more demand for goods and services from private businesses.
With more orders coming in, Keynes predicted, businesses would regain confidence and begin to hire workers. These workers would in turn spend their paychecks, multiplying demand, and so on.
The Treasury continued to insist on spending cuts and balanced budgets. Keynes advised Roosevelt to focus first on the terrible unemployment problem. Keynes presented his case for the government to borrow and spend large amounts of money on public-works projects. Nevertheless, Keynes had many meetings with government officials, Wall Street investors, business leaders, and university economists.
He tried his best to persuade them to embrace his big idea that explained why severe depressions occurred and how to end them. Keynes had been working on the puzzle of persisting unemployment in Britain for over a decade. In his book, Keynes declared that free-market capitalism had failed to provide a remedy for an economy stuck in a long-lasting depression with mass unemployment.
He wrote that relying on traditional monetary solutions like lowering interest rates was not enough. In uncertain times, businesses and individuals shy away from borrowing and lending money. When effective demand is up, businesses are profitable and employment is high. When uncertain consumers and investors sharply cut back on their spending, effective demand drops. Businesses lose confidence about future sales and income.
To cut costs, they start to lower prices, reduce wages, and lay off workers. Unemployed workers do not have much money to spend, which further reduces spending throughout the economy. Thus, a vicious downward spiral goes into motion, leading to failed businesses and mass unemployment. Keynes challenged a key free-market principle that saving is always good because it provides the money for investing in businesses.
Keynes agreed saving was a good idea during normal economic conditions. But he argued that it hurt the economy in a depression. If people hoard their cash in a depression, he said, they will obviously spend less. Keynes recognized that it makes sense for individuals to hold on to their money in uncertain times, but he pointed out that their reduced spending harms the economy as a whole. As people spend less, companies sell less and invest less in production.
The economy gets worse. Keynes answered that government should take on this role. Keynes pioneered the use of national economic statistics macroeconomics. Keynes called for governments in a depression to hire jobless workers directly for public works like roads, dams, and schools. He said that the government would have to borrow the money by selling treasury bonds. It should not attempt to balance its budget but should run a temporary deficit.
Keynes concluded that lowering interest rates, expanding the money supply, and other monetary policies could only go so far. Getting an economy out of a deep depression, he argued, required fiscal policy measures such as government borrowing and deficit spending. He also thought tax cuts could help, but he noted that people were likely to save some or all the money they gained rather than spend it. But he thought the government could address these problems by increasing taxes once prosperity returned.
This was his big idea. Traditional economists argued against deficit spending and government intervention in the economy. They pointed out that in the long run the economy would correct itself. Older economists tended to defend free-market principles and warn about the dangers of government intervention in the private enterprise system. Hayek, an Austrian free-market economist and harsh critic of socialism.
When Keynes published his book in , the New Deal was operating in the U. Numerous government employment programs such as the Works Progress Administration WPA hired workers to construct government buildings, roads, and other public projects.
Keynes calculated that the U. But the New Deal borrowed and spent far less. The government even raised taxes, further crippling consumer and investor demand.
0コメント