Keynes’s New Heirs by the Economist

"Keynes's New Heirs." Economist. November 23, 2013.


For economists 2008 was a nightmare. The people who teach and research the discipline mocked by Thomas Carlyle, a 19th-century polemicist, as “the dismal science,” not only failed to spot the precipice, many forecast exactly the opposite—a tranquil stability they called the “great moderation.” While the global economy is slowly healing, the subject is still in a state of flux, with students eager to learn what went wrong, but frustrated by what they are taught. Some bold new projects to retune economics aim to change this.

Britain has form here. In the early 1930s economics was in a terrible state. The global economy was stuck in a rut, and economists could not explain why. Two Britons changed things. In 1933, John Maynard Keynes, an economist at Cambridge University, supplied the raw ingredients: a new theory that explained how deficient demand could lead to persistent recessions and long-term unemployment. The ideas were radical but technical. They really took off when John Hicks, then also at Cambridge, distilled Keynes’s ideas into a simple model which quickly became the backbone of undergraduate teaching.