Is Keynesianism dead? A new era.
Keynes reasoned that government needed to act as spender and risk-taker of first resort. Doing so could revive the animal spirits of the private sector and, with them, growth. And when put into practice, this Keynesian multiplier largely worked, helping reflate the world out of the Depression. Having dominated policymaking up to the 1970s, Keynesianism was then jettisoned for monetarist policies as stagflation displaced stagnation. A remarkable comeback in response to a new set of conjoined crises, the global financial crisis, Covid and the Russia-Ukraine war. Indeed, the new interventions have dwarfed any previous peacetime stimulus. But if people anticipate that borrowing today means higher taxes tomorrow, stimulus might prompt saving rather than spending — something first identified by David Ricardo in 1820. Historically, economists have been sceptical about the ability of households and companies to anticipate future tax rises when making spending choices. But ... After missing inf...
