Exit Keynes the Friedmanite, Enter Minsky’s Keynes

The Levy Institute has the one pager Exit Keynes the Friedmanite, Enter Minsky’s Keynes by Robert J, Barbera co-director of the Center for Financial Economics at the Johns Hopkins University.

Brad DeLong recently reposted his 1996 review of John Maynard Keynes’s A Tract on Monetary Reform(1924). DeLong makes the case, quite compellingly, that Keynes, in this book, provides us with the best monetarist monograph ever written. DeLong leads, however, with a sentence that, in 2013, he might want to alter: “This may well be Keynes’s best book.”

It was the complete failure of the monetarist framework that led Keynes to deliver his General Theory in 1936. Quite sadly, in 1996 the Washington Consensus had effectively embraced the minimalist view of monetary policy responsibilities articulated by Keynes in 1924. And in so doing they set the world up for a 1929-style financial crisis in 2008–9

Finally, I understand why I was more right about the economy from Bill Clinton’s administration through the current moment than most of the economics professors of recent years.  I learned my economics in the early 1960s.  I was not lulled into the nonsense that the professionals fell into around 1996.  The explanation of the two parts of Keynes’ career explains how two people can come to very different conclusions about what Keynes’ said.

I learned the Keynes that was based on what he learned during the depression.  I didn’t realize that what he learned from the depression refuted a lot of what he thought before then.  Of course it is silly of me to not have realized that a well respected economist having learned something from an experience must have meant that he didn’t know this before he had his great epiphany.  If he didn’t know it before, then he must have thought something else before.

It is so clear when someone explains it to you.

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