Keynes and the Birth of Modern Macroeconomics

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Keynes and the Birth of Modern Macroeconomics

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David Laidler (University of Western Ontario)

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David Laidler

Abstract

The usual description of Keynes's macroeconomics as relying on the postulate of money wage stickiness to explain unemployment, and advocating fiscal policy as its cure, is largely mythical. Rather he was concerned with exploring the theoretical idea that an economy co- ordinated by monetary exchange is prone to market failures that create unemployment. The origins of this idea in what Keynes called "classical" economics can be traced back at least as far as John Stuart Mill, though he himself preferred to claim the much less orthodox Malthus as his antecedent. Be that as it may, Keynes's own emphasis on income and employment variations as both the result of and the "solution" to specifically inter-temporal failures was highly original. The idea that monetary exchange might involve co-ordinatioin failures of any sort has now largely disappeared from macroeconomics, under the influence of New-classical economics.

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Paper provided by University of Western Ontario, RBC Financial Group Economic Policy Research Institute in its series University of Western Ontario, RBC Financial Group Economic Policy Research Institute Working Papers with number 20052.

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Date of creation: 2005
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Handle: RePEc:uwo:epuwoc:20052

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Postal: RBC Financial Group Economic Policy Research Institute, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2
Phone: 519-661-2111 Ext.85228
Web page: http://economics.uwo.ca/econref/WorkingPapers/

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Find related papers by JEL classification:
B12 - Schools of Economic Thought and Methodology - - History of Economic Thought through 1925 - - - Classical (includes Adam Smith)
B22 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Macroeconomics
B31 - Schools of Economic Thought and Methodology - - History of Thought: Individuals - - - Individuals

This paper has been announced in the following NEP Reports:

NEP-ALL-2005-02-13 (All new papers)
NEP-HIS-2005-02-13 (Business, Economic & Financial History)
NEP-HPE-2005-02-13 (History & Philosophy of Economics)
NEP-PKE-2005-02-13 (Post Keynesian Economics)

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This page was last updated on 2009-11-10.

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