In short, hard-core Austrians argued that integrating Austrian economics into the Keynesian
model would be like mixing oil and water, or squaring a circle.
In addition to partial debt relief, sound Keynesian
economics would suggest some increased social spending and public infrastructure projects to create employment.
The consequence of these cuts, however, has been exactly what the Keynesians
predicted: With both private and public spending drying up, the economies of these nations tanked.
1998) Post Keynesian
Price Theory, Cambridge: Cambridge University Press.
A second criticism of the Keynesian
multiplier stems from Austrian criticisms of empirical studies in general.
The exploitation of the inflation-unemployment tradeoff soon became the central tenet of Keynesian
It should come as no surprise that neoclassical, Keynesian
, and Marxian economists all promote their respective theories as the most consistent with reality while dismissing alternative theories as inadequate.
Perhaps its mains shortcoming is the lack of critical analysis of the Keynesian
active policies of the post--World War II policies.
For decades the battle was between the Keynesians
and the Monetarists, adherents of Milton Friedman's system of thinking.
It is paradoxical that people accept, without any rigorous analysis, the idea that whenever there is an economic crisis, governments must apply Keynesian
solutions--namely, increase aggregate demand, especially consumption and public expenditures.
In the Keynesian
model, recessions reflect a decline in the demand for goods and services.
explanation is that we're still recovering from the financial panic, though it's worth recalling that in January 2010 the Fed predicted that growth in 2012 would be 3.