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Alesina and the Keynesians: Austerity and Say’s Law

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  • Steven Kates

Abstract

Alberto Alesina’s empirical work has led to re-examination of Keynesian theory and policy. His demonstration that reductions in public spending are often followed by improvements in economic conditions is a direct contradiction of modern macroeconomic theory, where increases in aggregate demand are seen as the most important precondition for recovery even where such increases in demand are unproductive in themselves and largely wasteful. The present paper suggests that the theoretical framework necessary to understand Alesina’s empirical results is embedded within the classical theory of the cycle which argues that only value adding production could lead to recovery. Most importantly, the paper argues that only through a correct understanding of Say’s Law of markets can Alesina’s empirical results be properly understood. Copyright International Atlantic Economic Society 2012

Suggested Citation

  • Steven Kates, 2012. "Alesina and the Keynesians: Austerity and Say’s Law," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 40(4), pages 401-415, December.
  • Handle: RePEc:kap:atlecj:v:40:y:2012:i:4:p:401-415
    DOI: 10.1007/s11293-012-9330-6
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    References listed on IDEAS

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    1. Steven Kates, 2010. "Influencing Keynes: the intellectual origins of the General Theory," History of Economic Ideas, Fabrizio Serra Editore, Pisa - Roma, vol. 18(3), pages 33-64.
    2. Alberto Alesina & Silvia Ardagna, 2010. "Large Changes in Fiscal Policy: Taxes versus Spending," NBER Chapters, in: Tax Policy and the Economy, Volume 24, pages 35-68, National Bureau of Economic Research, Inc.
    3. F. M. Taylor, 1909. "Methods of Teaching Elementary Economics at the University of Michigan," Journal of Political Economy, University of Chicago Press, vol. 17(10), pages 688-688.
    4. Roger J. Sandilands, 1990. "Nicholas Kaldor’s Notes on Allyn Young’s LSE Lectures 1927-29," Journal of Economic Studies, Emerald Group Publishing, vol. 17(3/4), December.
    5. Steven Kates, 2011. "Free Market Economics," Books, Edward Elgar Publishing, number 3794.
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    Cited by:

    1. Ionela Baltatescu, 2014. "Eu Type Of Austerity: Brief Analysis And Criticism," Global Economic Observer, "Nicolae Titulescu" University of Bucharest, Faculty of Economic Sciences;Institute for World Economy of the Romanian Academy, vol. 2(2), pages 85-92, November.

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    JEL classification:

    • B00 - Schools of Economic Thought and Methodology - - General - - - History of Economic Thought, Methodology, and Heterodox Approaches
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory

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