ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Classical Economics and Keynes

The author of Macroeconomics: An Introduction responds to the review of his book titled, “Competing Frameworks of Economic Thought” (EPW, 18 December 2021).

In Rahul Menon’s largely appreciative review of my book, he states that “there are certain shortcomings in the discussion on Keynes that unfortunately blunts some of the book’s more significant propositions” (p 29). Menon’s criticisms may be summarised, following his order, as: (i) the differences bet­ween the Classical and Keynesian economics “are not stressed nor discussed” (p 30) and that the assumption of less-than-full employment in Keynes is fundamentally different from that in classical economics; (ii) a discussion of “the implications of different values of the marginal propensity to consume on the multiplier” is “essential” “in any introdu­ctory work on macroeconomics” (p 30); (iii) drawing a simple correspondence between the proponents of Marginalism and exogenous money and that of Key­nesianism and endogenous money; and (iv) lack of “references to relevant literature demonstrating” the “positive relationship between interest rates and inflation” (p 31).

I shall first engage with the substantive issues underlying the points (i) and (iii) and respond to points (ii) and (iv), which are minor, subsequently.

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Updated On : 26th Feb, 2022
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