Yoshie wrote:
>When I went to college, in contrast, teachers in economics spent much time
>criticizing Keynesians from one neoclassical point of view or
>another. They said Keynesians couldn't come up with a viable solution to
>stagflation, which destroyed the authority of Keynes.
hi, Yoshie. The experience in the US was similar. In the 1970s, the
official Keynesian line (which was aggregate demand plus the Phillips
Curve) fell apart, under the hammer blows of Milton Friedman, who argued
that stagflation was the "natural" result of low unemployment (ignoring
such complications as the sudden increase in oil prices after 1973 and
1979). The fall in the rate of profit after the mid-1960s encouraged the
intensification of the employers' offensive, which pushed for more
conservative economic policies and theories. (On my desk, I have a book by
Liebling (1980), a well-respected economist, who argues that the profit
rate fell and needs to be actively brought up to snuff by the government
"Draconian measures": moderating the growth of government expenditures,
increasing corporate saving, and encouraging individual saving. Of course,
this is what happened, with all these changes being biased toward
increasing the inequality of wealth, power, and income.
The less official Keynesian line (that of people like Abba Lerner) involved
using price controls (including "tax-based incomes policies") to curb
stagflation. This was put into practice under Nixon, who undermined its
legitimacy by using the price controls to help get re-elected and by
controlling wages more than prices. This experience (or at least Nixon's
efforts to get re-elected) encouraged a lot of economists to turn against
price controls.
Keynes himself had nothing to say about stagflation, as far as I know. If
he did say something, it would be interesting to know about it.
Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
