After writing the post about Michael Spence and his proposal for the advanced countries to pursue an export-led growth strategy as way out of the crisis, I became intrigued with looking at how mainstream economics thinks exit will happen. So I have been spending time trying to find the answer to this question.
Tag: john cochrane
Does New Keynesian Theory Confirm Marx?
An interesting confirmation of labor theory is apparently buried in New Keynesian theory, according to John Cochrane in a recent post to his blog, The Grumpy Economist, “All state spending is wasteful”.
But, before you dismiss this as just the typical ideology-driven nonsense spewed by a neoliberal enemy of fascist state social spending, take a moment to hear Cochrane out:
“While fiddling with a recent paper, “The New-Keynesian Liquidity Trap” (blog post), a simple insight dawned on me on the utter and fundamental difference between New-Keynesian and Old-Keynesian models of stimulus.”
That fundamental difference, according to Cochrane, is that the “old” Keynesian model assumes that as income increases so does consumption:
The Real Movement 