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Criticisms Of Keynesian Thesis

 Criticisms of Keynesian Thesis

The following are the criticisms of Keynesian Thesis.

  • Aggregate Demand

    Keynes declared that the level of employment is based on the level of aggregate demand which was in turn ascertained by the inactive consumption demand and active investment demand. And unemployment resulted from the lack of aggregate demand. According to Prof. Schlesinger, the Keynesian thesis of aggregate demand suffered from certain inherent defects which made his thesis of employment unrealistic.

    He opines that “Over all demand is of course to some extent affected by relations on the supply side, Keynes’ treatment of demand was thus over simple in that it neglected the possibility that the relative prices prevailing in the different sectors determine, in-part the total amount of outlays.”

  • Aggregate Supply

    Professor Don Patinkin regards Keynes treatment of the aggregate supply function inadequate. The aggregate supply is considered as stable during the short run. Moreover, the representation of the aggregate supply curve by the 45 degree line in the Keynesian cross diagram conveys the meaning that “demand creates its own supply.”

    Conversely, it implies that the aggregate supply is ruled by aggregate demand. According to Patinkin, “this line of reasoning is yet another facility by product of the usual Keynesian neglect of the supply side of the commodity market.”

  • Rate of Interest

    The Keynesian thesis of interest rate ascertainment has been sternly censured by post Keynesian economists. Keynes made the rate of interest ascertained by the demand for and supply of money. The demand for money occurs from the transactions cause, the defensive motive and the speculative object. Only the speculative demand for money is considered interest elastic whereas the transactions demand is regarded interest inelastic.

  • Dynamic Theory

    Keynes considered his thesis dynamic and called it “The thesis of shifting equilibrium.” Keynes introduced a constituent of dynamism in his thesis through the prospects. But his study was apprehensive with the level of employment at any time. It is a lag less study. He made no effort to demonstrate the process of change from one position of symmetry to another, nevertheless. His method of contrasting various diverse symmetry levels of earnings has been termed comparative statics.

  • Short run Economics

    Another condemnation of the Keynesian economics is that it is appropriate to the short run. Keynes therefore assumed a given stock of capital tool, active practice, choices and behaviour of the people, organisation, dimension of populace etc. but all these aspects vary during the short run. This makes Keynes’ study imaginary. Also economics is an incomplete analysis with not concentrating on the long run effects of these forces on the economy.

  • Perfect Competition

    Another flaw of the Keynesian thesis is that it is based on the imaginary hypothesis of perfect competition. This makes this thesis unsuitable to socialist or communist societies where the whole economy is synchronized by the state. There is no cyclical redundancy in such economies. Hence the query of applicability of Keynesian thesis in them does not arise.

  • Problem of Unemployment

    Keynes has been condemned for undertaking only cyclical redundancy and abandoning other kinds of redundancies to be found in the capitalist economies. He did not proffer any solution to frictional redundancy and technological redundancy. The difficulty of technological redundancy had been disregard by Keynes for the reason that he was unsuccessful in visualising the hasty technological unearthing which took place in the advanced capitalist nations.

Conclusion

  • The decisive assessment of Keynesian economics reveals that there are the Keynesians who extol Keynes and there are the anti-Keynesians like Hazlitt who “could not find a single doctrine that was both true and original.”
  • Conversely, Keynes’ supreme follower Dillard writes, “Keynes was an original thinker in the sense that he arrived at his ideas in his own way. The ideas he advanced were his own even though some one else may have expounded the same or similar ideas at an early date.”
  • Though the inconvenience of today are somewhat diverse from what they were when Keynes wrote his general thesis, yet most economists advance the present day troubles within the framework of the Keynesian study.
  • Inspite Samuelson’s severe condemnation of the general thesis as a badly written book, poorly prearranged and well suitable for classroom use, arrogant, bad tempered, polemical, not overly generous in its acknowledgements and supplied in meads and confusions, “it still remains the most popular treatise on economics whose technical apparatus has been absorbed into the general body of economics. There is hardly any book on macro economics monetary economics and public economics which is without the imprint of Keynesian thought and policy.”

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