Keynes, Keynesians and Contemporary Monetary Theory and Policy: An Assessment

Colin Rogers ()
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Colin Rogers: School of Economics, University of Adelaide

No 2008-05, School of Economics and Public Policy Working Papers from University of Adelaide, School of Economics and Public Policy

Abstract: There has been no Keynesian Revolution in economic theory but there has been an unacknowledged Keynes's Revolution in economic policy. Keynes's theoretical revolution rested on the adoption of monetary analysis and the application of the principle of effective demand to demonstrate the existence of multiple long-period equilibria. Keynes's policies - creating a role for `Big Government' and the `Big Bank' - follow from his theory and have changed the structure of the laissez faire economy. Many Keynesians fail to acknowledge either of these issues and continue the classical tradition of real analysis and the assumption of unique long-period equilibrium. Real analysis, as a special case of Keynes's monetary analysis, provides a distorted perspective of the responsibilities of monetary policy which largely accounts for the increasing fragility and volatility exhibited by financial markets over the past two decades.

Pages: 36 pages
Date: 2008
New Economics Papers: this item is included in nep-cba, nep-hpe, nep-mac, nep-mon and nep-pke
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