Critique on Keynes

Rami Jaloudi

History of Economic Thought:

Referee Report # 3

For Sarah Hudson

The writer begins with an introduction in which it is stated that the schools of thought were contradictory in their theories. What should have been answered is how and from what perspective: Neo-classical or Keynesian? The main points of her paper are the following: "Neo-classicists, such as Friedman, hold that the U.S. failed to provide liquidity to its banks," which caused the great depression; if the government does not intervene, the economy would then head towards full employment. Keynesian economists, on the other hand, believe that the government should intervene actively through means of fiscal and monetary policy to promote full employment and economic growth (with price stability). Moreover, they believe that the cause of the Great Depression was due to the government not intervening as they should have.

The writer assumes that the Great Depression could have been resolved by both the Keynesian method, or the Neo-classical, however, does not state the cause of it or methodology. There may be no wrong or right answer, nonetheless, some reason for it should have been drawn; this approach would clarify what the Keynesian or Neo-classical remedies are. The writer does not develop the main points throughout the paper. She goes on restating the ideas by saying that Friedman believes that the economy is

"self-adjusting and regulating" and that "Keynesian economists credit good monetary and fiscal policy with getting an economy out of recessions and periods of low growth.

I did not get a sense of what side she was advocating, it seems that she may have been neutral. Furthermore, she did not state the two schools of thought's analysis of th macroeconomy, which led them to think that their methodology was correct (according to them). In reference to the monetarists (especially Friedman) she did not mention how they advocated steady and consistent growth of money stock.

In her conclusion, she stated that "human behavior is complex and often hard to predict. Keynesian ans Neo-classical economists are often trying to make sense of the nonsensical". It seems that she was advocating "rational