Back to the Future with Keynes
Back to the Future with Keynes
This chapter analyzes Keynes’s essay Economic Possibilities for our Grandchildren and shows that Keynes had an understanding of modern economic growth that was at least twenty-five years ahead of his time. His views about long-run growth are very similar to today’s frontier growth theory, more so than his much better known and much more influential views about business cycles. His qualitative and quantitative predictions of the continuing success of the leading economies were remarkably accurate, and this led him to try his hand on the much broader and wide-ranging field of the social scientist and social critic. Here is where Keynes fails; here, his assessments are inaccurate in a manner that reflects his idiosyncratic views about human nature and the counterfactual view that the income elasticity of leisure was much higher than that of consumption in the long run.
Keywords: modern economic growth, long-run growth, frontier growth theory, business cycles, social scientist, social critic, idiosyncratic views, human nature, income elasticity of leisure, consumption
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