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Classical Economics and Keynes
The author of Macroeconomics: An Introduction responds to the review of his book titled, “Competing Frameworks of Economic Thought” (EPW, 18 December 2021).
The author is grateful to Mohib Ali for his helpful comments.
In Rahul Menon’s largely appreciative review of my book, he states that “there are certain shortcomings in the discussion on Keynes that unfortunately blunts some of the book’s more significant propositions” (p 29). Menon’s criticisms may be summarised, following his order, as: (i) the differences between the Classical and Keynesian economics “are not stressed nor discussed” (p 30) and that the assumption of less-than-full employment in Keynes is fundamentally different from that in classical economics; (ii) a discussion of “the implications of different values of the marginal propensity to consume on the multiplier” is “essential” “in any introductory work on macroeconomics” (p 30); (iii) drawing a simple correspondence between the proponents of Marginalism and exogenous money and that of Keynesianism and endogenous money; and (iv) lack of “references to relevant literature demonstrating” the “positive relationship between interest rates and inflation” (p 31).
I shall first engage with the substantive issues underlying the points (i) and (iii) and respond to points (ii) and (iv), which are minor, subsequently.
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