Tuesday, December 30, 2008

Unending Keynesian phase

Meghnad Desai writes in the FE few observations on current financial crisis with murmuring the Keynes theory. 

  •  Previous booms were confined to the developed world, the Golden quarter century of Keynesianism, for example…. 
  • with long memories or at least a smattering of knowledge of Marx, Hayek or Keynes or even Charles Kindleberger and Hyman Minsky would know that capitalism has cycles of irregular length. Every boom breeds bad investments, over expansion of credit, over spending by consumers, acquisition of increasingly risky and dubious assets. 
  • If it does not work then we need a new economics. So far the boom has been a product of the sweetwater economics of Chicago and the cure will come from the saltwater Keynesians of the East Coast of USA. The rest may mutter about market failure or Lenin , but they don’t have any new answers. New economics will require some economist(s), who can think dispassionately, and rigorously leaving sentiments aside. John Maynard Keynes was one such. Another one will come along. How do I know? I know there are cycles in economic ideas just as much as in capitalism”.

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