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Back to the future with Keynes

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  • Lee E. Ohanian

Abstract

This article analyzes Keynes's "Economic Possibilities for our Grandchildren"- an essay presenting Keynes's views about economic growth into the 21st century - from the perspective of modern growth theory. I find that the implicit theoretical framework used by Keynes to form his expectations about the 21st-century world economy is remarkably close to modern growth models, featuring a stable steady-state growth path driven by technological progress. On the other hand, Keynes's forecast of employment in the 21st century is far off the mark, reflecting a mistaken view that the income elasticity of leisure is much higher than that of consumption.

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Bibliographic Info

Article provided by Federal Reserve Bank of Minneapolis in its journal Quarterly Review.

Volume (Year): (2008)
Issue (Month): Jul ()
Pages: 10-16

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Handle: RePEc:fip:fedmqr:y:2008:i:jul:p:10-16:n:v.32no.1

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Keywords: Economic history ; National income;

References

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  1. Harold L. Cole & Lee E. Ohanian, 2002. "The Great U.K. Depression: A Puzzle and Possible Resolution," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 5(1), pages 19-44, January.
  2. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
  3. Tjalling C. Koopmans, 1963. "On the Concept of Optimal Economic Growth," Cowles Foundation Discussion Papers 163, Cowles Foundation for Research in Economics, Yale University.
  4. Cole, Harold L & Mailath, George J & Postlewaite, Andrew, 1992. "Social Norms, Savings Behavior, and Growth," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1092-1125, December.
  5. Swan, Trevor W, 2002. "Economic Growth," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 375-80, December.
  6. Cooley, Thomas F & Ohanian, Lee E, 1997. "Postwar British Economic Growth and the Legacy of Keynes," Journal of Political Economy, University of Chicago Press, vol. 105(3), pages 439-72, June.
  7. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  8. Lee Ohanian & Andrea Raffo & Richard Rogerson, 2006. "Long-term changes in labor supply and taxes: evidence from OECD countries, 1956-2004," Research Working Paper RWP 06-16, Federal Reserve Bank of Kansas City.
  9. Lars Ljungqvist & Thomas J. Sargent, 1998. "The European Unemployment Dilemma," Journal of Political Economy, University of Chicago Press, vol. 106(3), pages 514-550, June.
  10. Shone,Ronald, 2002. "Economic Dynamics," Cambridge Books, Cambridge University Press, number 9780521017039.
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Cited by:
  1. Anna Carabelli & Mario Cedrini, 2011. "The Economic Problem of Happiness: Keynes on Happiness and Economics," Forum for Social Economics, Taylor & Francis Journals, vol. 40(3), pages 335-359, January.

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