Bastard Keynesianism

Abstract

This is the name given by Joan Robinson to certain developments which occurred in Keynesian economics following the publication of the General Theory, principally in the USA. They culminated in the system of thought which is more usually known as the neoclassical synthesis. The basic idea was that the notion of equilibrium of the economic system in traditional theory (traditional in the sense of Harrod 1937), in which all markets (including the labour market) clear, was an accurate description of the outcome of tendencies in the economic system. However, the forces in the economy which allowed this position to be sought were weak, were often frustrated by rigidities and imperfections, and in any event took a long time to work themselves out. The economy would often be found for long periods of time experiencing sustained unemployment due to a deficiency of overall demand. Therefore there was a role for government intervention to reinforce and speed up the processes whereby the economy found its way to its full employment equilibrium position; once there, the traditional theory of resource allocation and income distribution would come into its own again. That is to say, an equilibrium position has been shown to exist within the bounds of traditional theory, so that Keynes has a place not so much as a theorist but as a sensible propagator and rationalizer of policies in the short period, over the cycle and perhaps permanently, as the average level of unemployment reflected a permanent tendency to a deficiency in aggregate demand.