Check out Steven Kates’ incisive article here. Perhaps someone like Ross Gittins, who is meant to write three columns a week on economic issues, may in the next few years find time to address this issue. Excerpt:
Keynes was at pains to demonstrate that his General Theory was a full book-length effort to refute Say’s Law. That was the expressed intent of the book and that is what it most assuredly did. And it is an either-or proposition. Either Say’s Law is valid or Keynesian economics is valid. They are mutually exclusive. If one is right the other cannot be. If you agree with Keynes and reject Say’s Law, then you are a Keynesian because that is all that Keynes wanted you to do. Everything in the General Theory was stitched together in order to show that Say’s Law was wrong. Therefore, if you think Say’s Law is wrong and Keynes was right, then you are a Keynesian. …
Keynesian theory, so far as explaining the onset of recessions is concerned, is utterly without penetration or insight. It is only because we have known nothing else for seventy years that we put up with it. But it cannot explain a thing.
But not only is Keynesian economics useless in explaining why the recession occurred, it is even less useful in trying to think through what ought to be done next.
A Keynesian sees the problem as demand deficiency. Nothing else is considered. The policy solution is therefore some variant of instructions on how to raise aggregate demand, whether by lowering interest rates or raising public spending. Deficit finance is an intrinsic part of the Keynesian program.