A critical examination of economics’s past and future, and how it needs to change, by one of the most eminent political economists of our time
The dominant view in economics is that money and government should play only a minor role in economic life. Economic outcomes, it is claimed, are best left to the “invisible hand” of the market. Yet these claims remain staunchly unsettled. The view taken in this important new book is that the omnipresence of uncertainty makes money and government essential features of any market economy.
Since Adam Smith, classical economics has espoused nonintervention in markets. The Great Depression brought Keynesian economics to the fore, but stagflation in the 1970s brought a return to small-state orthodoxy. The 2008 global financial crash should have brought a reevaluation of that stance; instead the response has been punishing austerity and anemic recovery. This book aims to reintroduce Keynes’s central insights to a new generation of economists, and embolden them to return money and government to the starring roles in the economic drama that they deserve.
Author(s): Robert Skidelsky
Edition: Hardcover
Publisher: Yale University Press
Year: 2018
Language: English
Pages: 512
Cover......Page 1
Half Title......Page 2
Title......Page 4
Copyright......Page 5
Dedication......Page 6
Contents......Page 12
List of Figures......Page 14
Preface......Page 18
i. Unsettled Issues......Page 22
ii. The Culprits......Page 25
iii. A Brief Sketch of the Book......Page 29
Appendix I.1: Ideas, Vested Interests and Cycles......Page 32
Part One History of Economic Thought......Page 40
i. The Classical Dichotomy......Page 42
ii. The Origins of Money......Page 44
iii. The Value of Money......Page 46
iv. Creditors and Debtors......Page 48
v. The Origins of the Quantity Theory of Money......Page 53
vi. The Demand for Money......Page 56
vii. Money, the Great Deceiver......Page 57
viii. Conclusion......Page 59
2. The Fight for the Gold Standard......Page 61
i. Prelude to the Gold Standard: the British Recoinage Debate of the 1690s......Page 62
ii. Nineteenth-century Monetary Debates: An Overview......Page 65
iii. Bullionists versus the ‘Real Bills’ Doctrine......Page 66
iv. Currency School versus Banking School......Page 70
v. Bimetallism......Page 71
vi. How Did the Gold Standard Actually Work?......Page 73
i. The Quantity Theory of Money: The Two Branches......Page 81
ii. Fisher’s Santa Claus......Page 83
iii. Knut Wicksell’s Credit Money version of the QTM......Page 88
iv. Was Wicksell a Quantity Theorist?......Page 91
Appendix 3.1: Fisher’s Equation......Page 92
i. Introduction......Page 94
ii. The Fertile State of the Mercantilists......Page 98
iii. The Wasteful State of the Political Economists......Page 102
iv. The Victorian Fiscal Constitution......Page 106
v. The Persistence of Mercantilism......Page 109
vi. Conclusion......Page 114
Part Two The Rise, Triumph and Fall of Keynes......Page 116
i. The Trouble with Money......Page 120
ii. The Problem with Fiscal Policy......Page 127
iii. The Macmillan Committee......Page 135
iv. The General Theory of Employment, Interest, and Money......Page 138
v. Policy Implications......Page 145
vi. Conclusion......Page 150
Appendix 5.1: Contrast Between the Classical and Keynesian Models......Page 153
Appendix 5.2: The Fiscal Multiplier......Page 154
i. Keynesianism Ascendant......Page 158
ii. Full Employment Keynesianism: 1945–60......Page 162
iii. Growth Keynesianism: 1960–70......Page 169
iv. Reasons for the Strength of the Boom......Page 175
v. Stagflation Keynesianism: 1970–76......Page 183
vi. Great Britain: the End of the Keynesian Road......Page 188
7. The Theory and Practice of Monetarism......Page 192
i. Keynes and the Classics......Page 193
ii. The Neo-classical Synthesis......Page 194
iii. The Emergence of the Counter-orthodoxy......Page 195
iv. Monetarism......Page 197
v. The Monetarist Experiment: 1976–85......Page 205
vi. Monetarism’s Fiscal Legacy......Page 211
vii. From Friedman to the New Consensus: 1985–2008......Page 215
viii. Conclusion......Page 222
Appendix 7.1: IS/LM, the Keynesian Teaching Tool......Page 224
Appendix 7.2: The Modelling of Expectations......Page 226
Appendix 7.3: The Central Bank Reaction Function......Page 233
Part Three Macroeconomics in the Crash and After, 2007–......Page 236
i. The Fiscal Crisis of the State......Page 242
ii. The British Debate......Page 246
iii. Austerity: A Comparative Assessment......Page 262
iv. Conclusion......Page 265
Appendix 8.1: Monetary Financing of the Deficit......Page 267
9. The New Monetarism......Page 269
i. Pre-crash Monetary Orthodoxy......Page 270
ii. Why Quantitative Easing?......Page 274
iii. Quantitative Easing Programmes, 2008–16......Page 277
iv. How was QE Meant to Work?......Page 279
v. Assessment......Page 284
vi. Conclusion......Page 298
Appendix 9.1: A Note on Tim Congdon......Page 300
i. The Indifference of Mainstream Theory to Inequality......Page 309
ii. The Microeconomics of Distribution......Page 311
iii. Distribution and the Macroeconomy......Page 314
iv. The Modern Under-consumptionist Story......Page 319
v. Conclusion......Page 326
11. What Was Wrong with the Banks?......Page 328
i. Pre-crash Orthodoxy......Page 329
ii. Theory......Page 331
iii. Understanding Banking: Some Essential Terms......Page 337
iv. Loosening the Regulatory Noose......Page 339
v. Financial Innovation......Page 343
vi. Conclusion......Page 348
Appendix 11.1: Why Didn’t the Credit Ratings Agencies Do Their Job?......Page 350
i. Introduction......Page 352
ii. A Pre-crash Bird’s-eye View......Page 355
iii. Some Basic Theory......Page 356
iv. Current Account Imbalances as a Cause of Meltdown?......Page 357
v. Saving Glut versus Money Glut......Page 359
vi. Banking Imbalances......Page 363
vii. Conclusion......Page 364
Part Four A New Macroeconomics......Page 366
i. Introduction......Page 368
ii. What Should Governments Do and Why?......Page 370
iii. A New Macroeconomic Constitution......Page 372
iv. The Inflation Problem......Page 379
v. Making Banking Safe......Page 382
vi. Inequality......Page 389
vii. Hyper-globalization and its Discontents......Page 392
viii. Reforming Economics......Page 405
Notes......Page 412
Bibliography......Page 448
B......Page 482
C......Page 485
D......Page 488
E......Page 489
F......Page 491
G......Page 494
I......Page 496
K......Page 498
L......Page 500
M......Page 501
N......Page 504
P......Page 506
Q......Page 507
R......Page 508
S......Page 509
U......Page 511
Y......Page 513
