“If you were going to turn to only one economist to understand the problems facing the economy, there is little doubt that the economist would be John Maynard Keynes. Although Keynes died more than a half-century ago, his diagnosis of recessions and depressions remains the foundation of modern macroeconomics.”
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In today’s Washington Post, Dana Milbank pens a column “John Maynard Keynes, the GOP’s latest whipping boy.” It might as well have been called: What of Keynes?
The argument about how best to respond to the economic crisis — Tax cuts? Deficit spending? Monetary intervention? — is largely premised on the Keynesian view that government should somehow boost demand in a recession. The alternative is for the government to do nothing, something politicians are unlikely to embrace.
Consider:
-That public purse strings should be used counter-cyclically is a very Keynesian concept.
-The idea that demand is an important driver of the economic cycle” — aka Keynesianism — “is uncontroversial” according to Greg Mankiw, George W. Bush’s former chairman of Council of Economic Advisors.
-Keynes’s place in economics is similarly unassailable.
-Economists offering alternatives to Keynes claimed markets behave efficiently. Those ideas collapsed — along with everything else — in 2008.
-With business and consumers refusing to spend, Keynesian theory says it’s up to the government to stimulate consumption — by spending more or by using tax cuts to stimulate demand.
-Does the GOP have new ideas of their own? Their assault on Keynes does lend credibility to the charge that Republicans can only push back against other (original) thinkers, and have no new ideas — at least, none since Reagan.
CrowdQuery: What is Keynes place in modern economic thinking? What policies is Keynes directly — and indirectly — impacting ?How important is Keynes to modern economic theory ?
NOTE: I care less about the politics than I do the economics. Stay focused on the policy and economic considerations, and not cheer-leading your favorite politico…
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