Thursday, March 19, 2009

Mini-blog: Keynes has not left the building

I realize I've commented on this one before, but I'm struck anew by the continuing impact of Keynes on the contemporary teaching of macroeconomics. I'm just in the midst of teaching a chapter on how government policy, both fiscal and monetary policy, can be used to affect aggregate demand, and, a fortiori, help to stabilize the economy when prices are sticky and hence the aggregate supply curve isn't vertical at its long run, potential level. The two key concepts in the chapter, thus far, are liquidity preference, and the multiplier. Pure, unadeltered Keynes. More on this, after I've taught the remainder of the chapter.


And I'm back! The remainder of the chapter hasn't done much to change the picture. Keynes rules. The discussion of automatic stabilizers and the Friedman "insulation" argument for the flexible exchange rate also seem holdovers from older editions, and strangely irrelevant to the current macroeconomic crisis. Perhaps we're going to have to rewrite the textbooks now. One think is for sure, though: I expect that Keynes is likely to contine to figure prominently.

No comments: