Keynesian economics – a spectacular success

Michael Roberts Blog

Recently, Paul Krugman, Nobel prize winner, doyen of Keynesian economics and the world’s leading economic blogger, attacked yet again the monetarist-Austerian wing of mainstream economics for claiming the Keynesian macroeconomics theory had been proved wrong.  On the contrary, according to Krugman, Keynesian theory and its policy prescriptions had been triumphantly right,

“When I tell people that macroeconomic analysis has been triumphantly successful in recent years, I tend to get strange looks. …I stand by my claim, however. The basic macroeconomic framework that we all should have turned to, the framework that is still there in most textbooks, performed spectacularly well: it made strong predictions that people who didn’t know that framework found completely implausible, and those predictions were vindicated.”

What does Krugman mean by this framework?  Well, he says, it is the version of Keynes’ monetary theory developed by John Hicks back in 1937.  According to Krugman, Hicks’s book

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