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Back to the future with Keynes

  • Lee E. Ohanian

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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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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  1. Ljungqvist, Lars & Sargent, Thomas J., 1997. "The European Unemployment Dilemma," Working Paper Series 481, Research Institute of Industrial Economics.
  2. 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.
  3. 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.
  4. Ohanian, Lee & Raffo, Andrea & Rogerson, Richard, 2008. "Long-term changes in labor supply and taxes: Evidence from OECD countries, 1956-2004," Journal of Monetary Economics, Elsevier, vol. 55(8), pages 1353-1362, November.
  5. Tjalling C. Koopmans, 1963. "On the Concept of Optimal Economic Growth," Cowles Foundation Discussion Papers 163, Cowles Foundation for Research in Economics, Yale University.
  6. 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.
  7. T. W. Swan, 1956. "ECONOMIC GROWTH and CAPITAL ACCUMULATION," The Economic Record, The Economic Society of Australia, vol. 32(2), pages 334-361, November.
  8. Swan, Trevor W, 2002. "Economic Growth," The Economic Record, The Economic Society of Australia, vol. 78(243), pages 375-80, December.
  9. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
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