Talk:Keynesian economics

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What is the 'Free Institute of Economic Research'?[edit]

This unaccredited institute has been putting articles on subjects like Welfare Economics, European Union, and related. I have tried to find about them online, to no avail. It is a breach of NPOV to use wikipedia for self-promotion and advance of private agendas. —Preceding unsigned comment added by 130.58.194.209 (talkcontribs)

spending and investment[edit]

"If the government increases its spending, then the citizens are encouraged to spend more because more money is in circulation. People will start to invest more, and the economy will climb back up to normal."

that is not even a crude simplification ... it's somewhat wrong

private spending = consumption

private saving = investemt

Definition[edit]

I made a change to the definition recently from "a macroeconomic school based on K" to "the group of macroeconomic schools based on K". I did this because of the name--Keynesian economics, as in Keynes. Any macroeconomic school of thought based on his stuff should be called "Keynesian" and any macroeconomic school of thought called "Keynesian" should be based on his stuff (unless it's based on another Keynes). Historically, "Keynesian economics" has referred to a specific set of theories, but if someone took Keynes' work and offered a different spin on it, it would still be "Keynesian" as long as it borrowed heavily from his work. Furthermore, there are profound doctrinal differences between various sub-schools of Keynesianism, so it would appear that "Keynesian economics" as it is commonly understood (as a group of macroeconomic ideas based on Keynes as opposed to any group of macroeconomic ideas based on Keynes) is already a group of schools and not one school. Byelf2007 (talk) 24 April 2012

Dr. Guerrazzi's comment on this article[edit]

Dr. Guerrazzi has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:


Keynesian economics served as the standard economic model in the developed nations during the later part of the Great Depression, World War II, and the post-war economic expansion (1945–1973), though it lost some influence following the oil shock and resulting stagflation of the 1970s because it was not able to explain the occurrence of high inflation vis-à-vis high unemployment.

The advent of the financial crisis of 2007–08 caused a resurgence in Keynesian thought,[5] [in addition to [5] I will also quote Guerrazzi, M. (2015), Animal spirits, investment and unemployment: An old Keynesian view of the Great Recession, EconomiA, Vol. 16, No.3, pp. 343–358.]

As Irving Fisher argued in 1933, in his Debt-Deflation Theory of Great Depressions, deflation (falling prices) can make a depression deeper as falling prices and wages made pre-existing nominal debts more valuable in real terms. Moreover, if the nominal interest rate has achieved a lower bound (liquidity trap) and prices are falling, the real interest rate tends to rise and this leads to postpone both consumption and investment by depressing aggregate demand.


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  • Reference : Paolo Gelain & Marco Guerrazzi, 2010. "A DSGE Model from the Old Keynesian Economics: An Empirical Investigation," CDMA Working Paper Series 201014, Centre for Dynamic Macroeconomic Analysis.

ExpertIdeasBot (talk) 18:40, 27 June 2016 (UTC)

Dr. Hughes Hallett's comment on this article[edit]

Dr. Hughes Hallett has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:


Historical context, para 7: "For example, if a government continued to run a deficit of 10% both last year and this year, this would represent neutral fiscal policy (although it would not have been neutral when that deficits was set up)."

Historical context, para 8:"....bringing them back to equilibrium.The stickiness of prices and in particular wages in the short to medium term is a central concern of Keynesian thinking."

Wages and spending, para 1: "....because of laws and wage contracts.Evidence of the pervasive influence of wage contracting is given in papers by John Taylor Taylor, John B (1980). "Aggregate Dynamics and Staggered Contracts," Journal of Political Economy, 88,1-23.

Active fiscal policy, para 4: This para or a new para should mention the power of automatic stabilisers as automatic if incomplete countercyclical policies

Active fiscal policy, para 6: " Further, private investment can be "crowded in" in bad times."

Active fiscal policy, para 7: "government investment in public goods that will not be provided by profit-seekers will encourage the private sector's growth. In fact, the growth maximising level of debt depends on the (marginal) rate of return on public capital" Reference: Checherita, Cristina, Andrew Hughes Hallett and Philipp Rother (2013), “Fiscal sustainability using growth-maximising debt targets” Applied Economics, 46, 638-647.

Postwar Keynesianism, para 6: "rejecting the neutrality of money.Once neutrality of money is gone, it becomes important to learn how to coordinate fiscal and monetary policies" A reference for this point: Hughes Hallett, Andrew (1986) "Autonomy and the Choice of Policy in Asymmetrically Dependent Economies", Oxford Economic Papers, 38, 516-44.

Monetarism, para2: .....[31],[31], [32], where reference [32] is Crowley, Patrick , Andrew Hughes Hallett (2015) "Great Moderation or Will o' the Wisp? A time-frequency decomposition of GDP for the US and UK", Journal of Macroeconomics, 44, 82-97


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  • Reference : Acocella, Nicola & Di Bartolomeo, Giovanni & Hughes Hallett, Andrew, 2008. "When Can Central Banks Anchor Expectations? Policy communication and controllability," CEPR Discussion Papers 7078, C.E.P.R. Discussion Papers.

ExpertIdeasBot (talk) 19:48, 1 July 2016 (UTC)

Dr. Pappa's comment on this article[edit]

Dr. Pappa has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:


well drafted and accurate info


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  • Reference : Stefano Gnocchi & Daniela Hauser & Evi Pappa, 2014. "Housework and Fiscal Expansions," Working Papers 14-34, Bank of Canada.

ExpertIdeasBot (talk) 16:08, 11 July 2016 (UTC)

Dr. Creel's comment on this article[edit]

Dr. Creel has reviewed this Wikipedia page, and provided us with the following comments to improve its quality:


"The advent of the financial crisis of 2007–08 caused a resurgence in Keynesian thought,[5] which continues as new Keynesian economics." : the New Keynesian economics started before the crisis of 2007-2008 - it is already present in the 1990s. I would not say "continues with". The advent of the crisis certainly revived New Keynesian Economics with the introduction of nominal and financial frictions in dynamic-stochastic general equilibrium (DSGE) model.

Regarding the "historical context", I would also argue that Keynes assumed that prices could be sticky: an imbalance between supply and demand would be matched by a change in traded volumes, not a change in prices. Hence, under a depression, the lack of demand would translate in a decrease in supply (and an increase in inventories), at fixed prices. This point is mentioned in section "excessive savings", but it could also fit this historical context. Keynes gave birth to a new concept: unemployment equilibrium (all markets clear but some involuntary unemployment remains)

In this section "historical context", the notion of involuntary unemployment, key in the Keynesian analysis, should be mentioned. The same should occur to "effective demand" and the "paradox of thrift" which are key to understand Keynesian economics.

"Some (such as Paul Krugman) see this latter kind of liquidity trap as prevailing in Japan in the 1990s. Most economists agree that nominal interest rates cannot fall below zero. However, some economists (particularly those from the Chicago school) reject the existence of a liquidity trap.": this section could be updated, mentioning that non-standard monetary measures, like Quantitative easing, have been implemented to circumvent the liquidity trap (and the so-called zero-lower bound).

I am not sure that the use of "active fiscal policy" and "the (fiscal) multiplier effect" should be in separate sections. The use of active fiscal policy is explained by the fiscal multiplier effect.

The multiplier effect is not well described. It goes the following. Under low effective demand, e.g. a depression, the increase in government outlays increases effective demand and leads to an increase in output and income; the rise in income produces a subsequent increase in private outlays (consumption, investment) which makes the initial increase in government outlays produce a disproportionate increase in effective demand and supply, hence the "multiplier effect". The "multiplier effect' can be constrained if households are unwilling or unable to consume (high savings" propensity), if debt financing induces an increase in interest rates and a decrease in private investment (crowding-out effect), and/or if the degree of openness is high (the share of imports in consumption is high).

The IS-LM model has changed to the IS-MP (Monetary policy) and has been revived since the Global financial crisis by David Romer or Paul Krugman.

I was a bit puzzled when I read in section "public choice theory" references to Marxist economists and to Buchanan. The paragraph dedicated to the former should have its own title, like "Marxist theory and the Post-Keynesian school".


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We believe Dr. Creel has expertise on the topic of this article, since he has published relevant scholarly research:


  • Reference : Aurelie Cassette & Jerome Creel & Etienne Farvaque & Sonia Paty, 2010. "Governments under influence: Country interactions in discretionary fiscal policy," Documents de Travail de l'OFCE 2010-25, Observatoire Francais des Conjonctures Economiques (OFCE).

ExpertIdeasBot (talk) 16:13, 11 July 2016 (UTC)

Dr. Holden's comment on this article[edit]

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Some problems in this paragraph:

Two points are important to note at this point. First, deficits are not required for expansionary monetary policy, and second, it is only change in net spending that can stimulate or depress the economy. For example, if a government ran a deficit of 10% both last year and this year, this would represent neutral fiscal policy. In fact, if it ran a deficit of 10% last year and 5% this year, this would actually be contractionary. On the other hand, if the government ran a surplus of 10% of GDP last year and 5% this year, that would be expansionary fiscal policy, despite never running a deficit at all. This is clearly about fiscal policy and not monetary policy, as it says in the beginning. More importantly, whether fiscal policy is viewed as expansionary is usually based on the structural deficit, where one adjusts tax revenues and expenditure on unemployment benefits for the cyclical situation of the economy. Moreover, both the change in the deficit and the level of the deficit are relevant. The whole section about other schools of economics seems out of place, and in particular the text under the headline Public choice theory has little to do with public choice theory. There should be a link to new Keynesian economics in the article.


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We believe Dr. Holden has expertise on the topic of this article, since he has published relevant scholarly research:


  • Reference : Holden, Steinar & Sparrman, Victoria, 2011. "Do Government Purchases Affect Unemployment?," Memorandum 17/2011, Oslo University, Department of Economics.

ExpertIdeasBot (talk) 18:54, 26 July 2016 (UTC)