Keynes and the "Keynesian" Phillips Curve (original) (raw)

History of Political Economy, 1999

Abstract

This article attempts to correct some terminological inexactitude by marshalling evidence in favor of two related propositions. The first is that the policy of tolerating ongoing inflation in the hope of sustainably reducing unemployment should properly be called pseudo-Keynesian. The second proposition is that the policy of increasing unemployment in the hope of obtaining benefits with respect to inflation should prop-erly be called anti-Keynesian. The collapse of the Keynesian Phillips curve was, therefore, a failure of old Keynesian economics, but not a failure of the economics of John Maynard Keynes. Robert Solow (1978, 147) concluded that there was “little that is specifically Keynesian about [the Phillips curve] either historically or analytically”; but when the experiment of tolerating higher inflation was seen to be associated with an increase in rates of unemployment, a profound sense of crisis arose among econometricians, economists in general, and Keynesian economists in particular. Inflation had pro-duced a “general crisis of capitalism and the stability of Communist prices shines like a good deed in a naughty world ” (Wiles 1973, 377). Sidney Weintraub (1978, 209)-a Cassandra in these matters-noted that Phillips curves “now generated postmortems not predictions. ” By

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