Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/70282
Authors: 
Laidler, David
Year of Publication: 
2010
Series/Report no.: 
EPRI Working Paper 2010-1
Abstract: 
The monetary economy has properties that cannot be analyzed using the tools of today's dynamic general equilibrium analysis. Keynes's economics, far from being an aberration in the otherwise orderly evolution of modern macroeconomics from Adam Smith's ideas about the invisible hand, was a major contribution to an ongoing tradition in monetary theory in whose creation Smith himself had played a part. Retrospective consideration of this tradition suggests that the property of the monetary economy critical to the generation of economic crises and the stagnation that follows them is its capacity to permit trading at false prices, a phenomenon ruled out by assumption in dynamic general equilibrium models. Not only Keynes's explanation of depression but also Hayek and Robertson's analysis of the role of unsustainable forced saving in the boom can be thought of as relying on this factor.
Subjects: 
crises
money
monetary economy
general equilibrium
cycles
sticky prices
flexible prices
false prices
rate of interest
forced saving
Keynesian economics
monetarism
new Keynesian economics
JEL: 
B12
B22
E12
E13
E32
E40
Document Type: 
Working Paper

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