Zbornik radova Ekonomskog fakulteta u Rijeci : časopis za ekonomsku teoriju i praksu (Dec 2009)
Keynes and economic crisis: some reconsiderations
Abstract
In this paper we read Keynes’s “General Theory of Employment, Interest and Money” from the point of view of the main causes of the economic crisis in general and particularly the present world economic crisis. We compare Keynes’s approach to the crisis with the work of contemporary distinguished economists. We conclude that a drop of marginal efficiency of capital is the main cause of the economic crisis and depression, and that such a drop is an unavoidable consequence of functioning of a market capitalist economy. Such a view differs significantly from the deliberations of many economists who hold insufficient demand as the main cause of the crisis. We think that insufficient demand appears on the surface as a cause of the crisis. However, insufficient demand is just a consequence of a previously overheated economy faced with the drop of MEC. Consequently, a crisis cannot be prevented by expansive financial policy. Therefore it should come as a surprise that Keynes in the last year of his life retreated from his ideas expressed in “General Theory” and declared himself as not Keynesian any more (Hutchison, 1981).We think that major systemic, institutional as well as structural changes need to be taken in majority of developed economies in order to cope efficiently with present and future crisis.
