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Lucas, Keynes, and the Crisis

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Abstract

This paper examines Robert E. Lucas's views on the relationship of macroeconomics to real world economic phenomena, and on Keynes's place in its history, suggesting that these stem from a particular and debatable understanding of how the subdiscipline has evolved. It considers some implications for today's awkward economic facts of aspects of Keynes' General Theory, not so much its speculations about the role of psychology and social conventions in the economic decisions of individual agents recently highlighted by Akerlof and Shiller (2009) however, as its insights into the influence of the monetary system on the coordination of these decisions, along lines later extended by Clower (1965) and Leijonhufvud (1968). It concludes that the questions about co-ordination that Keynes addressed, not to mention some of his answers, are well worth revisiting.

Suggested Citation

  • David Laidler, 2009. "Lucas, Keynes, and the Crisis," UWO Department of Economics Working Papers 20092, University of Western Ontario, Department of Economics.
  • Handle: RePEc:uwo:uwowop:20092
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    References listed on IDEAS

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    1. M. G. Hayes, 2006. "The Economics of Keynes," Books, Edward Elgar Publishing, number 12601.
    2. John F. Helliwell, 2006. "From Flapper to Bluestocking: What Happened to the Young Woman of Wellington Street?," Bank of Canada Review, Bank of Canada, vol. 2005(Winter), pages 31-39.
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    Cited by:

    1. William R. White, 2013. "Is Monetary Policy a Science? The Interaction of Theory and Practice over the Last 50 Years," SUERF 50th Anniversary Volume Chapters, SUERF - The European Money and Finance Forum.
    2. Giancarlo Bertocco, 2011. "Housing bubble and economic theory: is mainstream theory able to explain the crisis?," Economics and Quantitative Methods qf1116, Department of Economics, University of Insubria.
    3. Robert W. Dimand, 2014. "James Tobin and Modern Monetary Theory," Center for the History of Political Economy Working Paper Series 2014-5, Center for the History of Political Economy.
    4. Mettenheim Kurt, 2013. "Back to Basics in Banking Theory and Varieties of Finance Capitalism," Accounting, Economics, and Law: A Convivium, De Gruyter, vol. 3(3), pages 357-405, May.
    5. Rodolfo Signorino, 2011. "Economics in the Mirror of the Financial Crisis," Chapters,in: The Global Financial Crisis, chapter 11 Edward Elgar Publishing.
    6. Giancarlo Bertocco, 2011. "Finance and risk: does finance create risk?," Economics and Quantitative Methods qf1115, Department of Economics, University of Insubria.
    7. repec:clr:wugarc:y:2011:v:37i:1p:15 is not listed on IDEAS
    8. Moutot, Philippe, 2011. "Systemic risk and financial development in a monetary model," Working Paper Series 1352, European Central Bank.

    More about this item

    Keywords

    Crisis; Co-ordination; Clearing Markets; Auctioneer; Money; Financial Markets; Animal Spirits; Psychology; Keynes; Lucas;

    JEL classification:

    • 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
    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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