Lance Taylor, Guest Blogger
The only way to understand the Great Crisis and how to deal with it is through the economics of John Maynard Keynes and his closest followers. For the details see my new book, Maynard’s Revenge: The Collapse of Free Market Macroeconomics (Harvard University Press). Three ideas emphasized by Keynes 75 years ago are crucial for understanding the contemporary situation.
The first is that economic actors operate under fundamental uncertainty — at times they cannot predict or even imagine the nature of future developments. In the mid-2000s Federal Reserve Governor Ben Bernanke extolled a “Great Moderation” in macroeconomics. He did not, and probably could not, think about the tsunami that was about to strike. Rather, he accepted widespread market conventions that all was well. Keynes thought that such conventions might persist for a time, but then could rapidly break down.
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