Why did economists abandon Lord K?

Reality has brought Keynesians to the spotlights. As rock stars they show to the World the exit door to the current US and European financial mess. ¿Why did economists circumvent Keynesian ideas to the heterodox caves far from civilization?  Mainstream academy abandoned Keynesian models anytime between the late 70’s and the early 80’s. At that time, persistent inflation and strong currency fluctuations convinced economists that in an increasingly opened World economy the autonomy of the Central Banks were restricted by capital movements. Capital movements arbitrage any attempt of pursuing monetary independence. Moreover, under rational expectations agents preclude any fiscal stimulus. Additionally, state owned companies, starting by the Soviet ones, broke delivering hell instead of the promised heaven. The end of the soviet experiment and the Chinese approach to capitalism confirmed that the private enterprise and the market economies could efficiently solve production dilemma (let’s apart distribution). Economics crises are always social experiments full of flawed expectations and unfulfilled promises. Welcome back Lord K, economists were right in the long term, but in the meantime we need to stay alive…



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