Macroeconomics Quote of the Day
| Peter Klein |
From Mario Rizzo, who’s written a number of great posts on contemporary macroeconomic thought:
The truth is that pre-Keynesian economics was, in most ways, more sophisticated than the aggregate demand framework bequeathed to us by Keynes and his official interpreters.
Mario explains how Paul Krugman, like Keynes himself, puts forth a straw-man version of pre-Keynesian macroeconomics in which a) crises are impossible and b) only national aggregates matter. Actual pre-Keynesian macroeconomics, like today’s Austrianism, often focused on the composition of output and employment across firms, industries, and sectors. Only a few oddballs, like Foster and Catchings, the proto-Keynesian underconsumptionist theorists skewered by Hayek in “The Paradox of Savings,” worried about economy-wide underconsumption.