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The Keynesian revolution and classical theory

In: Classical Economic Theory and the Modern Economy

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Abstract

The chapter provides an introduction to classical economic theory in contrast to modern macroeconomics. Classical economists denied that recessions, which were frequent, were ever caused by oversaving and a lack of demand, and that increased public spending could ever hasten a return to full employment. Modern economic theory and policy since 1936 has emphasized demand deficiency as the major, if not the sole cause of recessions, and that an increase in public spending not only can but is necessary to generate recovery. The classical theory of the cycle, it is argued, remains the deepest analysis of the operation of an economy ever devised.

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  • ., 2020. "The Keynesian revolution and classical theory," Chapters, in: Classical Economic Theory and the Modern Economy, chapter 4, pages 56-84, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:17468_4
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    Economics and Finance;

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