Keynes’s relevance in the new millennium
- Publisher: Ministerio de Industria, Turismo Y Comercio (Spain)
This paper examines aspects of the economics of J M Keynes for the relevance that they may have to a number of current issues particularly those faced by central banks in the second half of 2008. In particular, we shall see that Keynes’s view of the importance of uncertainty in monetary economies is well-illustrated by the dilemma posed by the coincidence of recession and rising inflation rates. We shall also see that his view about the relationship between demand and what is fashionably described as the ‘natural rate’ of unemployment (and output) requires a radically different response from the one that current policymakers are likely to pursue.\ud However, since the latest developments in macroeconomics, which will actually inform policymakers during this crisis, have been described as a ‘consensus’, which presumably incorporates ‘the best’ of Keynesian and other traditions in macroeconomics, we start by asking just how much ‘Keynes’ there really is in the new consensus macroeconomics.