John Taylor

What Does Anti-Keynesian Mean?

In the latest edition of his excellent series of podcast interviews, Russ Roberts asked me toward the end what I thought about being characterized as anti-Keynesian as I was in this Economist post The rise of the anti-Keynesians. In a follow-up to theEconomist article, David Altig, with basic agreement from Paul Krugman, argued that it was a misnomer because I developed and used macro models (now commonly called New Keynesian) with price and wage rigidities in which the government purchases multiplier is positive (though usually less than one), or because the Taylor rule includes real variables in addition to the inflation rate. In my view, rigidities exist in the real world and to describe accurately how the world works you need to incorporate such rigidities in your models, which of course Keynes emphasized. But you also need to include forward-looking expectations, incentives, and growth effects—which Keynes usually ignored.

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