The Anti-Keynesian School

                Some comments on this recent post nearly Schools of Thought macro remove maintain raised interesting issues which I had non thought plenty about, too which I desire to come upwards dorsum to after if I can. Here I desire to position forrad an thought suggested past times this from Jonathan Portes. We wrote these posts simultaneously too independently, too although I holler upwards Jonathan’s is consistent too complementary alongside what I had written, rereading it made me holler upwards a fleck to a greater extent than nearly what I was actually annoyed about.

Jonathan describes his puzzlement at existence labelled a Keynesian when he thought he was but next mainstream macroeconomic theory too evidence. It discusses how misleading it tin last to associate views nearly how the economic scheme industrial plant alongside policy positions which may last rather specific inward time, house too circumstance. Now I holler upwards these types of criticism, which I made inward my master post, apply to at to the lowest degree another schools of thought inward macro. For instance the label monetarist has many layers of meaning, from the real specific too policy related (money provide targeting) to the much to a greater extent than full general too theoretical (money matters). These layers may last related, but they produce non remove maintain to be.

Having said that, I holler upwards it is worth proverb a fleck to a greater extent than nearly the utilization of the specific term Keynesian, which both our posts focused on. It seems to me slightly odd when used to announce a schoolhouse of thought today, because it appears to last invoked to a greater extent than past times those who disagree alongside it than those who agree. Jonathan’s post service gave some clear examples of this. To caricature: nosotros produce non postulate to holler upwards likewise much nearly financial stimulus, because it’s a Keynesian policy. It is truthful that this form of contention is to a greater extent than ofttimes made past times politicians, journalists or bloggers than academics, but academics are non blameless here, too others ofttimes accept their cue from them.

The source for dismissive statements of this form in all likelihood goes dorsum to the 1980s. At the academic level, it reflects the defeat of the Keynesians at the hands of New Classical economists, without noting that things remove maintain moved on rather a lot since then. At the marking of policy inward the UK, it may also reverberate a perception on the correct of past times battles won.   

In contrast, those economists who utilization (New) Keynesian theory mostly holler upwards they are but applying criterion macroeconomic analysis. They are using the synthesis (e.g. the New Neoclassical Synthesis of Goodfriend too King) that I talked nearly inward that before post. They produce non holler upwards of themselves equally members of a schoolhouse of thought – they thought they were utilization of the mainstream.

                Is that but arrogance on their part? There are ii reasons for thinking it is not. First, it is this synthesis model that is used past times pretty good every primal banking concern equally the principal tool for doing monetary policy. That does non locomote into right, but it does give it a pretty skilful claim to existence mainstream macro. After all, it is mainly inward primal banks where macroeconomics is applied to the existent world. Second, equally the bear witness that prices are glutinous seems overwhelming (as Paul Krugman here.)

                So I desire to abolish the Keynesian school. Keynesian analysis should last utilization of the mainstream, too does non postulate to last embodied inward a schoolhouse of thought. However, for those that similar schools of thought, I volition supplant it alongside a novel one: the anti-Keynesian schoolhouse of thought. It covers all those who examine to dismiss Keynesian ideas similar financial stimulus at the nil bound, or countercyclical financial policy inward a monetary union, non through reasoned analysis, but past times but labelling it Keynesian.