Afternoon Must-Read: Simon Wren-Lewis: Is Keynesian Economics Left-Wing?

Simon Wren-Lewis: More Asymmetries: Is Keynesian Economics Left-Wing?: “I’m often perplexed by those who dispute Keynesian ideas….

…A whole revolution in macroeconomic theory was based around a movement that wanted to overthrow Keynesian ideas…. The people who built these models did not describe them as assuming monetary policy worked perfectly: instead they said it was all about assuming markets worked. As a description this was at best opaque and at worst a deliberate deception. So why is there this desire to deny the importance of Keynesian theory coming from the political right?… Monetary policy is state intervention…. To someone of a neoliberal or ordoliberal persuasion they are discomforting. At the macroeconomic level, things only work well because of state intervention. This was so discomforting that New Classical economists attempted to create an alternative theory of business cycles where booms and recessions were nothing to be concerned about, but just the optimal response of agents to exogenous shocks…. Keynesian theory is not left wing, because… it is just about how the macroeconomy works. On the other hand anti-Keynesian views are often politically motivated, because the pivotal role the state plays in managing the macroeconomy does not fit the ideology. Is this asymmetry odd? I do not think so–just think about the debate over climate change…. To claim that the majority of anti-Keynesian views were innocent of ideological preference would be like–well like trying to pretend that monetary policy has no role in stabilising the business cycle…”