AØKK08144U Seminar: How relevant is Keynes?

Volume 2014/2015
Education
M.Sc, of Economics
(Only available for Master students at Department of Economics)
Content

In contemporary debates about economic policy and how best to re-start growth, Keynes is a controversial figure. Great economists like Nobel Prize winners Paul Krugman and Joseph Stiglitz run columns (available in the Danish newspaper Politiken) where they routinely advocate “more Keynes”. More aggressive monetary policies, more expansionary fiscal policies, flexible exchange rates and all kinds of stimulating government interventions. They scapegoats are “the Europeans” – who according to Krugman and Stiglitz – are in for eternal stagnation, misery and political unrest as they are conducting wrong and irrelevant policies.

“The Europeans” (the ECB and German governments?) stick to long term reforms (to make pension systems sustainable, to raise pension ages, increase productivity and modernize labor markets and much else related to the supply-side of the economy), enhance the EMU and obtain balanced budgets in the near future. The Danish government is an ardent supporter of these policies, cost what it may in the polls; the “produktivitetskommission” stresses supply-side related measures as highly relevant here and now. When Europeans consider American economic policy, we talk about looming fiscal disaster and shake our heads in disbelief when watching the American political process. In the highly praised “House of Cards”, they never do anything real; it is all about spin, winning battles and what is worse! Maybe it works?

However, up to now, the American recovery has been faster and more robust than is the European. The US has recovered from the GDP loss of the late 00s – Europe has not, and Denmark is lagging far behind.

Are the Americans modern Keynesians and are the Europeans what the conservatives were in the 30s – or is any resemblance to the crisis 80 years ago irrelevant? Are Keynesian policies relevant and are they neglected in Europe – or is it the other way round that European supply-side reforms are what is needed?

Learning Outcome

In this seminar, we look at Keynes in the General Theory to find clues relevant for modern policymaking. The purpose is not so much to detect and discuss his important building stones of the GT still in use, the portfolio approach to financial allocation, the consumption function, the multiplier etc. but rather to see how unemployment equilibria are explained: nominal and real wage rigidities in combination with self-destructing expectations. Further, of course, to see how things could be improved upon: expansionary policies. Finally, Keynes did not believe in permanent growth (as Stiglitz and Krugman may do) but imagined a final steady state with little or no increase in standards of living; one may not find much about technical progress and productivity in the GT! You will also look in vain for remarks on wealth effects in the consumption function, on how to regulate a sophisticated financial system, on long-run fiscal stability, on climate change and many other things considered of great importance today!

  1. We check what is in the General Theory when it comes to explaining unemployment and compare this to contemporary stylized facts. Why should market failures and ill-behaved expectations amount to more in the late 00s than before?
  2. After Keynes, his model was augmented in many ways. We must have paper on the IS/LM (Hicks- Hansen-) model and on Samuelsson’s famous textbook model. What disappears and what is slipping in?
  3. The hey-day of Keynesianism, the great econometric macro models of the 1960s and 70s. Did they add to our understanding of macroeconomic policy?
  4. Keynesians unable to deal with inflation? The Phillips-curve and the monetarist counter attack. Friedman and Phelps explicitly attacks “sticky wages” as an assumption.
  5. The 1990 and early 00s – “macro is dead and textbooks should be rewritten”, what was the theoretical underpinning of this? New Classical economics with emphasis on growth?
  6. What did the Real Business Cycle Models add to the policy debate?
  7. The sustainability of public debt – are the EMU criteria relevant?

The present crisis. The battle between Keynesianism on the one side and austerity and supply-side reforms on the other.

Will be decided by the teacher in collaboration with the students.

B.Sc. of Economics
Planning meeting ind the begining of the semester,informed by the teacher, writing seminar paper during the semester and presentations at the end of the semester. More informations will be uploaded at Absalon by the teacher.

Planning meeting (compulsive): February 23, 14-16
Supervision: By appointment from February 23 to end March
Supervision meeting: March 9
Date for uploading all seminars: April 7.
Presentations: Week 23 and 24. (Schedule to be discussed in class)
  • Category
  • Hours
  • Exam
  • 0,3
  • Seminar
  • 0
  • Total
  • 0,3
Credit
7,5 ECTS
Type of assessment
Written assignment
Oral examination, 20 min under invigilation
A written seminar paper and a oral presentation for the others participans at the seminar.
Exam registration requirements
Attendance on the seminar. The mandatory commitment paper and seminar paper have been handed in at deadline.
Aid

Al aids for the written seminarpaper.

For the oral presentation the slices for the presentation. The teather can specifiy what els is allowed.

Marking scale
7-point grading scale
Censorship form
External censorship
up to 20 % censorship at the seminarpaper
Exam period
Is decided and informed by the teacher at the compulsive planningmeeting.
Re-exam
As ordinary.
Criteria for exam assesment

The student must in a satisfactory way demonstrate that he/she has mastered the learning outcome of the course.