Broadening the application of hysteresis in economics: institutions, policy lock-in, psychology, identity, and ideas

Thomas Palley

No 92-2023, FMM Working Paper from IMK at the Hans Boeckler Foundation, Macroeconomic Policy Institute

Abstract: Keynes' General Theory was a massive step forward relative to classical economics, but it was also a step backward in its denial of the conflictual nature of capitalism. There is need to understand Keynes' technical contributions regarding the workings of monetary economies, but also need to understand the flaws within his thinking and the consequences thereof. Keynes made a fundamental contribution elucidating the mechanism of effective demand, and he also has claim to be the preeminent monetary theorist. However, owing to his denial of conflict, he had a flawed view of capitalism which is why establishment Keynesianism struggles to explain contemporary stagnation. That flawed view also undermines the case for Social Democracy. Contrary to conventional wisdom, his view of capitalism is supportive of Neoliberalism and Keynes can be viewed as a compassionate (Third Way) Neoliberal.

Keywords: Hysteresis; institutions; policy lock-in; psychology; identity; ideas (search for similar items in EconPapers)
JEL-codes: B40 E10 E12 E32 P50 (search for similar items in EconPapers)
Pages: 53 pages
Date: 2023
New Economics Papers: this item is included in nep-his, nep-hme, nep-hpe and nep-pke
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Citations: View citations in EconPapers (1)

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Journal Article: Broadening the application of hysteresis in economics: institutions, policy lock-in, psychology, identity, and ideas (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:imk:fmmpap:92-2023

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