Laying the Foundations of Keynesian Economics

Keynes Keynes, John Maynard had propounded a new vision of the economy, and Hicks Hicks, John had turned this vision into a tractable model and a way for economists to analyze economic problems. Indeed Keynes Keynes, John Maynard ’s vision resonated well with many younger economists and some decision makers. But now the real work had started. A few decades were needed to flesh out the theory, fill the gaping holes in it, and show that indeed it was a good approximation to economic reality. But if the new vision and set of policies associated with it had to have any chance, its approval had to be more widespread than in the academic circles. Decision makers and the general public had to be convinced that the Keynesian prescription was worth trying and once adopted it would bear the promised fruits. In this chapter we shall concentrate on the theoretical and empirical development of Keynesian theory and in the next chapter discuss its policy effectiveness.