Abstract
In the years since the heyday of the rational expectations revolution, new economic challenges have presented themselves in ways that some say call that particular paradigm into question — much like the phenomenon of stagflation confounded many good Keynesian professional economists during the 1970s and 1980s. And if one may refer to the economics of Keynes as the “New Economics” — as many have — then it seems everything “New” is new again. In contrast to the perils of the 1970s and 1980s, which generated much new scholarship among academics, the Great Recession has not led to a genuine advancement of the frontier of economic science in any significant way. Instead what we have witnessed is a resurgence of existing Keynesian policy prescriptions within the public conscience. Why the resurgence of the Keynesian ideal? I would suggest two possibilities — both of which are true to some degree. First, the realities of political economy make economic life difficult for rational politicians and bureaucrats — even if they understand well the magnificence of the price system. Second, many among us remain true believers either in the economics of Mr. Keynes or in some denominational offshoot of the Keynesian faith as it has been handed down to us by our academic mothers and fathers.