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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.

Suggested Citation

  • Lee E. Ohanian, 2008. "Back to the future with Keynes," Quarterly Review, Federal Reserve Bank of Minneapolis, issue Jul, pages 10-16.
    • Handle: RePEc:fip:fedmqr:y:2008:i:jul:p:10-16:n:v.32no.1
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    Cited by:

    1. Alexander Bick & Nicola Fuchs-Schündeln & David Lagakos & Hitoshi Tsujiyama, 2019. "Why are Average Hours Worked Lower in Richer Countries?," NBER Working Papers 26554, National Bureau of Economic Research, Inc.
    2. Alexander Bick & David Lagakos & Hitoshi Tsujiyama & Nicola Fuchs-Schündeln, 2019. "Explaining Hours Worked Across and Within Countries: Income Effects vs. Taxes and Transfers," 2019 Meeting Papers 1363, Society for Economic Dynamics.
    3. Tapia, Jose, 2015. "Profits encourage investment, investment dampens profits, government spending does not prime the pump — A DAG investigation of business-cycle dynamics," MPRA Paper 64698, University Library of Munich, Germany.
    4. Bick, Alexander & Fuchs-Schündeln, Nicola & Lagakos, David & Tsujiyama, Hitoshi, 2022. "Structural change in labor supply and cross-country differences in hours worked," Journal of Monetary Economics, Elsevier, vol. 130(C), pages 68-85.
    5. Anna Carabelli & Mario Cedrini, 2011. "The Economic Problem of Happiness: Keynes on Happiness and Economics," Forum for Social Economics, Springer;The Association for Social Economics, vol. 40(3), pages 335-359, October.
    6. Jason Potts, 2017. "Institutions hold consumption on a leash: an evolutionary economic approach to the future of consumption," Journal of Evolutionary Economics, Springer, vol. 27(2), pages 239-250, April.

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    Economic history; National income;

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