Was Keynes a Keynesian?

Paper Summary:

This paper explains that the old Keynesians and the new Keynesians of the 1990s presume that both prices and wages tend to be stringent over a short period; as a result, the amount or the quantity of output begins to adjust itself according to the changes observed in the aggregate demand. The author points out that the major reason for the split in thought is the fact that John Maynard Keynes left his analysis of the "General Theory of Unemployment" incomplete. The paper relates that both groups have discussed and explained the saving mechanism and its impact; but, where old Keynesians evidently opposed saving, the new Keynesians gave many pro saving statements.

From the Paper:

"Mankiw, the leader of the new Keynesians, explains and makes use of the fundamental tools involved in the Keynes general theory including IS and LM curves, aggregate supply and aggregate demand, and the multiplier and accelerator. However, unlike the old Keynesians, Mankiw, his subordinates and colleagues sought benefit of the economy in the saving approach. Where old Keynesians saw a marked decrease in the output levels due to savings, Mankiw claimed and showed how saving at a high rate can cause the output levels to soar. Making use of the "Solow growth model", Mankiw explained and established a clear link between saving phenomenon and higher levels of output as well as the resultant "steady-state capital stock" in the following words: "the saving rate is a key determinant of the steady-state capital stock."

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