Keynesian Dominance in Crisis Therapy

Kristina Spantig

Review of Political Economy, 2014, vol. 26, issue 3, 426-448

Abstract: The 1930s' debate about the short-run Keynesian response to crisis and Hayek's critique of its long-run consequences has significant contemporary parallels. This article examines, from a historical perspective, the Keynes-Hayek debate by considering the development of Keynesian economic theory, its ascension and application during financially sound times, the Hayekian critique, the monetary counter-revolution, and the Keynesian renaissance in the wake of the global financial crisis. It is shown that Keynesian fiscal measures prevail over the Hayekian approach in the midst of a crisis leading to rising inflation and public debt, depressed long-run growth and a new crisis.

Date: 2014
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DOI: 10.1080/09538259.2014.929235

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