N. Gregory Mankiw on John Maynard Keynes

“If you were going to turn to only one economist to understand the problems facing the economy, there is little doubt that the economist would be John Maynard Keynes. Although Keynes died more than a half-century ago, his diagnosis of recessions and depressions remains the foundation of modern macroeconomics. His insights go a long way toward explaining the challenges we now confront.”

“Which brings us to a third group of macroeconomists: those who fall into neither the pro- nor the anti-Keynes camp. I count myself among the ambivalent. We credit both sides with making legitimate points, yet we watch with incredulity as the combatants take their enthusiasm or detestation too far. Keynes was a creative thinker and keen observer of economic events, but he left us with more hard questions than compelling answers.”

“I integrate the insights of Keynesian and classical theories. Although Keynes’s General Theory provides the foundation for much of our current understanding of economic fluctuations, it is important to remember that classical economics provides the right answers to many fundamental questions. In this book I incorporate many of the contributions of the classical economists before Keynes and the new classical economists of the past several decades. Substantial coverage is given, for example, to the loanable-funds theory of the interest rate, the quantity theory of money, and the problem of time inconsistency. At the same time, I recognize that many of the ideas of Keynes and the new Keynesians are necessary for understanding economic fluctuations. Substantial coverage is given also to the IS–LM model of aggregate demand, the short-run tradeoff between inflation and unemployment, and modern models of business cycle dynamics.”