Classical economics versus Keynesian economics
I am trying to make a summary table for teaching macroeconomics. This is simplified, of course, but useful still, I hope:
What other rows should I have?
Classical
Economics
|
Keynesian
Economics
|
|
Say’s Law
|
Always holds.
|
Only holds when
leakages do not exceed injections.
|
Unemployment
|
High unemployment is a structural
problem.
|
High unemployment can come from insufficient
aggregate demand.
|
Equilibrium
|
Markets equilibrate
quickly.
|
Markets may
equilibrate slowly.
|
In response to a supply or
demand change…
|
A price change will produce a stable
equilibrium.
|
The other curve may shift, producing a
cascade of changes.
|
In response to a recession…
|
Let the market work
things out.
|
The government should
engage in stimulus spending.
|
Expectations
|
Market actors' expectations rapidly converge towards a stable equilibrium.
|
One group of market actors' expectations may affect another group's and that group's then affect the first one's so as to repeatedly destabilize the economy.
|
What other rows should I have?
Something about money but I hesitate to say what - money is a veil, stable and doesn't matter, money can be unstable and matters a great deal. Rational expectations vs irrational exuberance?
ReplyDeleteYes, Lord, there is certainly something about expectations I'm missing, and I think you are on the right track as to what it is.
DeleteI added an "expectations" row after thinking about your comment.
DeleteNix the "In response to a recession…" row. At that point they're no longer acting in the role of economist.
ReplyDeleteNo, whether what you say is correct or not -- and I am largely on your side -- these fine distinctions don't belong in Macro I, and that row is crucial for making the whole study "relevant."
DeleteAt least change the color of the box backgrounds to match the alternating pattern.
DeleteWhy can't this distinction be made in economics?
Done.
Delete"Why can't this distinction be made in economics?"
What are you talking about?!
You said "these fine distinctions don't belong in Macro I". I don't see why that is the case. In fact, I think it would be probably be something important to emphasize given the number of people who walk away from economics with the idea that it's normative or some equally confused line of thought.
DeleteI'm happy if I can get them to remember who Keynes was and that he liked stimulus.
DeleteYou should fix the color of the second and third boxes in the sixth row. They aren't following the alternating pattern of light blue and dark blue.
ReplyDelete