Keynesian economics, which proposed that the government could use monetary and fiscal policy to help the economy avoid the extremes of recession and inflation, held sway for thirty years after World War II. However, it was discredited after the stagflation of the 1970s, which not only proved resistant to traditional Keynesian policies but was actually thought to be caused by them. By the 1990s, the anti-Keynesian counter-revolution seemed to reach its pinnacle with the award of several Nobel Prizes in economics to its architects at the University of Chicago. However, with the collapse of the dot-com boom in 2000 and the attacks of 9/11 a year later, the nature of macroeconomic policy debate took a turn. The collapse prompted a major shift in macroeconomic policy, as the Bush administration and other governments around the world began to resort to Keynesian measures - both monetary and fiscal policies - to stabilize the economy. The Keynesian rebirth has been most dramatically illustrated during the past year when central banks have pumped billions of dollars of liquidity into the world's financial system to address the crises of confidence, illiquidity, and insolvency that were triggered by the sub-prime lending crisis. "The Return to Keynes" puts Keynesian economics in a fresh perspective in order to assess this surprising new era in economic policy making.
Introduction The Return to Keynes by Bradley W. Bateman and Toshiaki Hirai and Maria Cristina Marcuzzo 1
1 Keynes Returns to America by Bradley W. Bateman 13
2 Japan's Long-Run Stagnation and Economic Policies by Yoshiyasu Ono 32
3 European Macroeconomic Policy: A Return to Active Stabilization? by Hans-Michael Trautwein 51
4 From the "Old" to the "New" Keynesian-Neoclassical Synthesis: An Interpretation by Richard Arena 77
5 Tobin's Keynesianism by Robert W. Dimand 94
6 The New Neoclassical Synthesis and the Wicksell-Keynes Connection by Mauro Boianovsky and Hans-Michael Trautwein 108
7 An Abstruse and Mathematical Argument: The Use of Mathematical Reasoning in the General Theory by Roger E. Backhouse 133
8 The General Theory: Toward the Concept of Stochastic Macro-Equilibrium by Hiroshi Yoshikawa 148
9 Keynes's Economics in the Making by Toshiaki Hirai 166
10 Keynes, Sraffa, and the Latter's "Secret Skepticism" by Heinz D. Kurz 184
11 Keynes and the War of Words by Gilles Dostaler 205
12 Keynes and Modern International Finance Theory by Marcello De Cecco 225
13 Keynes's Influence on Modern Economics: Some Overlooked Contributions of Keynes's Theory of Finance and Economic Policy by Jan A. Kregel 241
14 Current Global Imbalances: Might Keynes Be of Help? by Anna M. Carabelli and Mario A. Cedrini 257
References 277