Alternative Explanations of How the Capitalist Economy in Which We Live Operates

Paul Davidson

Chapter Chapter 2 in Who's Afraid of John Maynard Keynes?, 2017, pp 7-17 from Springer

Abstract: Abstract In Congressional testimony, Alan Greenspan, the former Chairman of the Federal Reserve System, admitted that his classical theory assured him that the financial crisis should not have occurred. This chapter explains in detail why Greenspan’s theory misled him. There are two different economic theories that attempt to explain the operation of our market oriented system namely (1) the mainstream classical theory and (2) the Keynes-Post Keynesian theory. The basic difference in these theories is the underlying presumptions. Classical theory assumes each decision maker in the marketplace know the economic future while the Keynes theory asserts that the future is uncertain and decision makers know they cannot know with certainty the future outcomes of current market decisions.

Keywords: Keynes's Theory; Money Contracts; Derivative Securities; Real Contract; Prime Mortgage (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:spr:sprchp:978-3-319-64504-9_2

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DOI: 10.1007/978-3-319-64504-9_2

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