The Great Recession and The Failure of Keynes

George Bragues

This lecture was given by George Bragues on Friday January 21st at the Institute for Liberal Studies seminar: From the Great Depression to the Great Recession: How Should Governments Respond to Crisis?

From George’s lecture – which can be read in full here

My topic today concerns John Maynard Keynes. Anyone who has read anything on the financial crisis and the recent recession has certainly come across his name. And, usually, when his name has been cited, mention is made that Keynes is “back”, that his economic thought has been “resurrected” and become “relevant” again in this trying period.

What I’m going to argue today is that Keynes never really went away. Yes, he wasn’t top of mind in the Zeitgeist in the two or so decades prior to the financial crisis. But his thought was still making itself felt in the policymaking arena. Keynes famously said:

Practical men, who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.

My contention is that Keynes was that academic scribbler. And while, “madmen” is too strong a word to describe the individuals in question, the persons in authority who were hearing voices were none other than Alan Greenspan and Ben Bernanke. In this way, Keynesian thinking led us into the crisis. Not only that, when Keynes’ authority was explicitly invoked to support the extraordinary monetary and fiscal policy measures taken to address the crisis, the Keynesian approach both failed to get us out of the Great Recession and has made matters worse going forward.

You can download George’s presentation here The Failure of Keynes

And listen to it below

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