Keynesian Revolution - The Revolution That Never Was

The Revolution That Never Was

According to post Keynesian economists and some others such as Charles Goodhart, in the academic sphere the so called revolution failed to properly get off the ground, with neo Keynesian economics being Keynesian in name only. Such critics have held that Keynes's thinking was misunderstood or misrepresented by the revolutions leading popularisers, the founders of neo Keynesian economics such as John Hicks and Paul Samuelson. The post Keynesians felt neo Keynesianism excessively compromised with the classical view. For Paul Davidson the revolution was "aborted" in its early years; for Hyman Minsky it was "still born"; while for Joan Robinson the revolution led to a "bastard Keynesianism".

A suggested reason for the distortion is the central role John Hicks's IS/LM model played in helping other economists understand Keynes's theory – for post Keynesians, and by the 1970s even Hicks himself, the model distorted Keynes's vision.

A second reason offered is the attacks on the more progressive expressions of Keynes's views that occurred due to McCarthyism. For example, while initially popular, Lorie Tarshis's 1947 text book introducing Keynes's ideas, The elements of economics was soon under heavily attacked by those influenced by McCarthy. The book's place as a leading text book for Keynes's ideas in America was taken by Paul Samuelsons Principles of Economics. According to Davidson, Samuelson failed to understand one of the key pillars of the revolution, the refutation ergodic axiom (i.e. saying that economic decision makers are always confronted by uncertainty – the past isn't a reliable predictor of the future).

Economists Robert Shiller and George Akerlof re-asserted the importance of recognising uncertainty in their 2009 book Animal Spirits.

Another reason for the distortion of Keynes's views was his low level of participation in the intellectual debates that followed the publication of his General Theory, first due to his heart-attack in 1937 and then due to his busyness with the war. It has been suggested by Lord Skidelsky that apart aside from his busyness and incapacity, Keynes didn't challenge models like IS/LM as he perceived that from a pragmatic point of view they would be a useful compromise.