Keynes and the Birth of Modern Macroeconomics
AbstractThe 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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Bibliographic InfoPaper provided by University of Western Ontario, Economic Policy Research Institute in its series University of Western Ontario, Economic Policy Research Institute Working Papers with number 20052.
Date of creation: 2005
Date of revision:
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Postal: Economic Policy Research Institute, Social Science Centre, University of Western Ontario, London, Ontario, Canada N6A 5C2
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macroeconomics; Keynesian economics; markets; money; interest rates; unemployment; multiplier;
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- 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 Economic 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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