I resurrect this thread merely to note the continuation of this
conversation in the review I have done of *Capitalist Revolutionary:
John Maynard Keynes* by Roger Backhouse and Brad Bateman. I attach the
link here for completeness. 

http://eh.net/book_reviews/capitalist-revolutionary-john-maynard-keynes


Perhaps historians of economics are not the right people to be raising
these issues with but if even here we cannot discuss the effect of the
Keynesian Revolution on theory and policy, where else can it be done? If
historians don’t discuss theory and theorists don’t discuss history
- and if Keynesian economics is the empty vessel it appears to me to be
- we as a discipline are in a bind from which it is hard to see our way
out. To me, the issues of interest are the ones I state at the start of
the review and at the end: 

“The book is about the non-war in economics that ought to be
happening but isn’t. It is a defense of Keynes and Keynesian economics
against post-stimulus attacks that, other than in a few instances, have
not occurred at all. It sets Keynes up as a counter to an extreme
libertarian laissez-faire strawman view of how economies ought to be
left alone in all instances, first in their regulation and then in
allowing recessions to burn themselves off when they come. They
therefore conclude that given this is the choice, Keynes is the answer.
Well, if that were the choice, Keynes would be the answer, but since
it’s not the actual choice we have, they do not really satisfy the
criticisms of anyone who holds neither Keynesian nor such extreme
libertarian views…. 

“Books such as this also take us farther away from a proper
understanding of how an economy works and what can and should be done to
improve the operation of our economic system. In my view, based on the
recent evidence of the stimulus, Keynes and Keynesian economics really
do need to be abandoned. Who would any longer trust a policy based on an
explicitly Keynesian model? We should therefore be looking at
alternatives to this Keynesian vision, and in my view, the most useful
place to look would be at the theories of the cycle developed by those
long ignored classical economists who quite well understood that
recessions were a periodic certainty, had explanations for the causes of
such recessions and knew what to do when they inevitably occurred. 

“The book Bateman and Backhouse have written seems to be a call for
complacency, which in my view is the last thing we economists are in
need of today.” 

In other words, do C+I+G, IS-LM and AS-AD help explain how an economy
works and are they a proper framework on which to structure policy? If
they are not, and there are certainly strong reasons for thinking they
are not, why are we as a profession doing nothing about it? Debt as far
as the eye can see and a labour market that just will not recover should
at least be the start of a serious discipline-wide investigation over
what went wrong and why. 


Dr Steven Kates
School of Economics, Finance
    and Marketing
RMIT University
Level 12 / 239 Bourke Street
Melbourne Vic 3000

Phone: (03) 9925 5878
Mobile: 042 7297 529