'Right Back Where We Started From': From 'the Classics' to Keynes, and Back Again

Roy H Grieve

Research output: Working paperDiscussion paper

1 Citation (Scopus)

Abstract

The purpose of this paper is to highlight the curiously circular course followed by mainstream macroeconomic thinking in recent times. Having broken from classical orthodoxy in the late 1930s via Keynes’s General Theory, over the last three or four decades the mainstream conventional wisdom, regressing rather than progressing, has now come to embrace a conception of the working of the macroeconomy which is again of a classical, essentially pre-Keynesian, character. At the core of the analysis presented in the typical contemporary macro textbook is the (neo)classical model of the labour market, which represents employment as determined (given conditions of productivity) by the terms of labour supply. While it is allowed that changes in aggregate demand may temporarily affect output and employment, the contention is that in due course employment will automatically return to its ‘natural’ (full employment) level. Unemployment is therefore identified as a merely frictional or voluntary phenomenon: involuntary unemployment - in other words persisting demand-deficient unemployment - is entirely absent from the picture. Variations in aggregate demand are understood to have a lasting impact only on the price level, not on output and employment. This in effect amounts to a return to a Pigouvian conception such as targeted by Keynes in the General Theory. We take the view that this reversion to ideas which should by now be obsolete reflects not the discovery of logical or empirical deficiencies in the Keynes analysis, but results rather from doctrinaire blindness and failure of scholarship on account of which essential features of the Keynes theory have been overlooked or misrepresented. There is an urgent need for a critical appraisal of the current conventional macroeconomic wisdom.
LanguageEnglish
Place of PublicationGlasgow
PublisherUniversity of Strathclyde
Pages1-23
Number of pages24
Volume14
Publication statusPublished - 2014

Fingerprint

John Maynard Keynes
Conception
Aggregate demand
Unemployment
General theory
Macroeconomics
Wisdom
Full employment
Orthodoxy
Labour market
Logic
Labor supply
Textbooks
Involuntary unemployment
Neoclassical model
Macroeconomy
Productivity
Price level

Keywords

  • keynes's general theory
  • 'classical' macroeconomics
  • involuntary unemployment
  • the ad/as model

Cite this

Grieve, R. H. (2014). 'Right Back Where We Started From': From 'the Classics' to Keynes, and Back Again . (01 ed.) (pp. 1-23). Glasgow: University of Strathclyde.
Grieve, Roy H. / 'Right Back Where We Started From' : From 'the Classics' to Keynes, and Back Again . 01. ed. Glasgow : University of Strathclyde, 2014. pp. 1-23
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Grieve, RH 2014 ''Right Back Where We Started From': From 'the Classics' to Keynes, and Back Again ' 01 edn, University of Strathclyde, Glasgow, pp. 1-23.

'Right Back Where We Started From' : From 'the Classics' to Keynes, and Back Again . / Grieve, Roy H.

01. ed. Glasgow : University of Strathclyde, 2014. p. 1-23.

Research output: Working paperDiscussion paper

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Grieve RH. 'Right Back Where We Started From': From 'the Classics' to Keynes, and Back Again . 01 ed. Glasgow: University of Strathclyde. 2014, p. 1-23.