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I am going to reproduce a relevant comment (not mine) from a discussion of this article at macrobusiness http://www.macrobusiness.com.au/2016/04/weekend-links-1

by wycx 11y ago

I am going to reproduce a relevant comment (not mine) from a discussion of this article at macrobusiness http://www.macrobusiness.com.au/2016/04/weekend-links-16-17-april-2016/#comment-2580002 http://www.macrobusiness.com.au/2016/04/weekend-links-16-17-.... "Part of the reason for neoliberalisms success is the lie (which Monbiot has repeated) that Keynesianism was proved wrong during the stagflation period of the 70’s and 80’s. Keynesians like Tobin (who Samuelson called the greatest economist of his generation ie. better than Samuelson) were actually proved right. It the late 60’s early 70’s, before the oil shocks and fed easy money, they had already worked out an adjusted Phillips curve where inflation was a function of unemployment and lagged or entrenched inflation. Everything that happened from 1972 until today has vindicated this view. In the early 80’s inflation was brought down from an entrenched high rate, only through a dramatic increase in unemployment. And once it was reduced it stayed there, even while unemployment stayed high. This vindicated Tobin, and contradicted Friedman, who said inflation should keep falling as long as unemployment remained high (it didn’t). Likewise in the post 2008 world – Tobins Phillips curve has been spot on, high unemployment yet stable although very low inflation. Again Friedman proved wrong. Keynesianism didn’t fail in the 70’s and 80’s. Economics failed, and has failed ever since. Unfortunately dimwitted journalists and liberal academics always need a black and white over simplified narrative of epoch changing events where one ideology replaces another. Keynesianism figured it out in 1933 and has been correct ever since."

entee 11y ago
Generally I agree with the Keynesians, but I'm skeptical that the explanation for the stagnation in median wages (employment has gone up and down, was down to 4% in the late 90's) we have observed for past several decades is due to Neoliberalism. There are a lot of drivers including massive technological change and the complex effects of a reduction in trade barriers that have all played a role. Perhaps economics is failing, but I think it's not entirely because of a Neoliberal vs. Keynesian dichotomy, it's at least as much because the economy is shifting and we haven't come up with a good economic paradigm for coping with these rather important shifts. That said, I think a more Keynesian approach to economics is well warranted. Largely they have had a much better approach to monetary policy in the recent crisis.

by wycx 11y ago

entee 11y ago

Generally I agree with the Keynesians, but I'm skeptical that the explanation for the stagnation in median wages (employment has gone up and down, was down to 4% in the late 90's) we have observed for past several decades is due to Neoliberalism. There are a lot of drivers including massive technological change and the complex effects of a reduction in trade barriers that have all played a role. Perhaps economics is failing, but I think it's not entirely because of a Neoliberal vs. Keynesian dichotomy, it's at least as much because the economy is shifting and we haven't come up with a good economic paradigm for coping with these rather important shifts. That said, I think a more Keynesian approach to economics is well warranted. Largely they have had a much better approach to monetary policy in the recent crisis.