Tuesday, August 20, 2013

Thumbing through the General Theory again...

...for class. Keynes is at the end of the semester so I am leaving the exact nature of the lectures TBD right now, but I want to get a general idea of what I want to do so I've been rereading. I was reading the chapter on expectations last night (chapter 5, not the chapter 12 stuff Krugman refers to in his discussion of the two different ways of reading the General Theory). First and foremost, it's very good. But it also struck me that New Keynesianism, for all the crap it gets from the Post-Keynesian crowd, is really the rest of the economics profession catching up to the General Theory. None of the rational expectations revolution would have been problematic for Keynes, and a forward-looking IS curve with a monetary policymaker that manages expectations is precisely what he discusses from the very beginning.

When you model, of course, you don't bite it all off in one go. I think the Old Keynesian interlude was necessary in that sense. But the sorts of people who get nostalgic for good ol' IS-LM or for the Post-Keynesian stuff are, I think, missing out big. There's value in the Post-Keynesian material and there's pedagogical value in IS-LM, but no cause for turning the clock back before the 1970s. This isn't some kind of partisan's claim that we have to hew to Keynes. We drop him when there's good reason to. It's just to say that Keynes was a genius who offered a paradigm shift, that science progresses, but recognizing that there was clearly a lot genius left to be formalized that gave people things to do for several decades.

I think I'm going to really enjoy reading this cover-to-cover again. I've only selectively read it lately (although I've probably worked through the whole thing on a selective basis) - haven't read it all the way through since 2006.

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