From a small northwestern observatory…

What we call “Keynesianism” or “Keynesian Economics” really owes more of a tip-of-the-hat to a fellow named John Hicks, who in 1937 wrote “Mr. Keynes and the Classics” which, in effect, put Keynes’ somewhat theoretical constructs, his General Theory, into more practical terms. Hicks followed up with his own classic textbook, Value and Capital, which should be must-reading for all advanced economics students.

I say should, but, sadly, it really isn’t. Even when it was prescribed by elderly professors, a whole generation of younger students tended to gloss over both Hicks and Keynes in favor of more “practical” economic topics. After all, who was going to write a dissertation on the IS-LM curve?

Now that we’re all “Keynesians” again (or more properly “Hicksians”), it’s helpful to go back to basics, and I’m specifically referring to that frequently discounted IS-LM curve. A few days ago, I was struck by how little I remembered about these things. With some chagrin, I started doing some research, and found out I’m not the only one — even the best economists in the world are starting to dust off old advanced macro texts and re-remember just how an economy is supposed to work. For a great and relatively brief exposition on this oft-abused topic, I’d refer you to some class notes written by Paul Krugman a few years ago when he was “stuck” by his department at MIT to teach a quarter of Macro Econ Theory to grad students and also had to dust off these concepts. Thanks to the internet, nothing you ever write (particularly if you’re a future Nobel Prize winner) is totally forgotten, and you can read it on-line here. For a little extra commentary, I’d refer you to a 2006 entry from Greg Mankiw’s blog here.