Keynesianism: Alive, If Not So well, at Forty

Abstract

Keynesianism is the new way of thinking about the economy which John Maynard Keynes promised to provide in his General Theory of Employment,Interest and Money It was, of course, not a new kind of logic or some way of thinking “with ones blood” or anything like the mystical irrationalisms with which we are plagued today. Any genuine contribution can consist only of pointing out logical errors, of spelling out implicit assumptions or of changing the assumptions. Of these three, the first disqualifies the conclusions and the second opens up the theory to scrutiny, but only the third can lead to different conclusions. If the different conclusions suggest different policies to be followed, the contribution can be important in determining what those in authority should be not only thinking but doing about the economy. This is what Keynes had in mind when he bragged about what he was going to do, and I do not see how anyone can doubt that he did indeed succeed in doing this. The essence of the Keynesian revolution was to establish the recognition of the responsibility of the government to maintain a satisfactory level of employment in the economy — by showing that there is no effective automatic market mechanism for achieving this.