Chapter

Rethinking the Keynesian Revolution

Tyler Beck Goodspeed

in Rethinking the Keynesian Revolution

Published in print September 2012 | ISBN: 9780199846658
Published online September 2012 | e-ISBN: 9780199950126 | DOI: http://dx.doi.org/10.1093/acprof:oso/9780199846658.003.0007
Rethinking the Keynesian Revolution

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The central argument of this book is that Keynes and Hayek both consistently adhered to a theoretical approach to monetary economics, separate from the quantity theory and general equilibrium traditions of Irving Fisher and Léon Walras, established by the late nineteenth-century Swedish economist Knut Wicksell. The core of this Wicksell “connection” consists of three themes. The first is that a monetary economy is fundamentally different from a real, barter economy with money. Second, intertemporal coordination is the central problem in macroeconomics; whether and to what extent the rate of interest can effectively coordinate separate decisions to save and invest, and the market for financial assets, constitutes the sine qua non of economic fluctuations. Finally, the Wicksell connection is about the economics of information, or how, in the absence of a Walrasian auctioneer or hyper-rational representative agent, it is the function of markets and the price mechanism to transmit information. These themes suggest a Wicksell-Keynes-Hayek research agenda, distinct from current mainstream macroeconomics. Not only did Keynes and Hayek agree on far more than is typically recognized, but also that both would have disagreed in fundamental ways with modern macro.

Keywords: Keynes; Hayek; Wicksell; Walras; macroeconomics; money; intertemporal coordination; interest rate; information transmission

Chapter.  4878 words.  Illustrated.

Subjects: Economic Systems

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