Economics · A History of Economic Thought by V Lokanathan
Chapter 29 : NEO-KEYNESIAN AND NEW-KEYNESIAN ECONOMICS
Table of contents33 sections
- 1.NEO-KEYNESIAN AND NEW-KEYNESIAN ECONOMICS
- 2.Neo-Keynesian Economics
- 3.Key Terms
- 4.📌 Exam Tidbits
- 5.Investment and Growth
- 6.Key Terms
- 7.📌 Exam Tidbits
- 8.Distribution Theory
- 9.Key Terms
- 10.📌 Exam Tidbits
- 11.Reswitching
- 12.Key Terms
- 13.📌 Exam Tidbits
- 14.A Second Revolution
- 15.Key Terms
- 16.📌 Exam Tidbits
- 17.New Keynesian Economics
- 18.Key Terms
- 19.📌 Exam Tidbits
- 20.Labour Market Failures: Efficiency Wages
- 21.Key Terms
- 22.📌 Exam Tidbits
- 23.Taylor Rule
- 24.Key Terms
- 25.📌 Exam Tidbits
- 26.The New Keynesian Phillip's Curve
- 27.Key Terms
- 28.📌 Exam Tidbits
- 29.Policy Implications
- 30.Key Terms
- 31.📌 Exam Tidbits
- 32.Conclusion
- 33.Quick-Recall Box
Chapter preview
NEO-KEYNESIAN AND NEW-KEYNESIAN ECONOMICS
Neo-Keynesian Economics
- Definition & Origin: Refers to the doctrines of a small but influential group of post-Keynesian economists associated with Cambridge University (England).
- Core Foundation: They accept the basic ideas of John Maynard Keynes as laid out in his book 'General Theory of Employment, Interest and Money' (1936).
- Key Thinkers: Joan Robinson, Nicholas Kaldor, Luigi Pasinetti, and Piero Sraffa.
- Also includes Polish economist Michel Kalecki, who independently worked out a general theory of employment similar to Keynes.
- Ideological Links: Neo-Keynesians share much in common with David Ricardo and Karl Marx. Consequently, their work is sometimes referred to as neo-Ricardian and/or neo-Marxian.
- Their writings feature leftist overtones, though they are not considered socialists as such.
- Key Publications: Their writings are predominantly found in The Cambridge Journal of Economics and the Journal of Post-Keynesian Economics (published in the United States).
- The Stagflation Crisis & Rise of Neo-Keynesianism:
- During the 1970s, policymakers began discrediting Keynesianism due to the onset of Stagflation (simultaneous rising unemployment and inflation).
- Orthodox Keynesians (Hicks, Samuelson, Tobin) considered stagflation a paradox and had no answer to it, leading to a decline in their influence.
- Neo-Keynesians claimed they had an answer to stagflation. Their theory appealed to those who disagreed with both monetarism and mainstream neo-classical economists.
- Policy Stance: To control price inflation, Neo-Keynesians generally favour an incomes policy in addition to fiscal policy.
| Concept | Orthodox Keynesians | Neo-Keynesians |
|---|---|---|
| Key Thinkers | Hicks, Samuelson, Tobin | Robinson, Kaldor, Pasinetti, Sraffa, Kalecki |
| View on Stagflation | Considered it a paradox; had no answer to it. | Claimed to have an answer to the problem. |
Key Terms
| Concept | Definition |
|---|---|
| Neo-Keynesian Economics | The doctrines of a small but influential group of post-Keynesian Cambridge (England) economists. |
| Stagflation | The simultaneous occurrence of rising unemployment and inflation. |
📌 Exam Tidbits
- John Maynard Keynes (1936): Authored 'General Theory of Employment, Interest and Money'.
- Michel Kalecki: Independently developed a general theory of employment similar to Keynes.
- 1970s: The decade orthodox Keynesian influence declined due to stagflation.
- Orthodox vs Neo-Keynesian — the difference is: Orthodox Keynesians…
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View plans Chapter 30 : JOAN ROBINSON (1903-1983)