Macroeconomics is casilv the most unsettled area of modern economics. Conflicting explanations abound over why interest rates or prices on average rise or fall. Dispute continues over whether government tax policies should encourage consumer spending or saving. Similarly, it is unsettled whether government spending should be a principal instrument of economic growth promotion or rather be limited to the minimal role of national defence, the administration of justice, including the protection of private property and enforcement of contracts, and the enactment of laws to facilitate commercial enterprise.
The classical economists, especially Adam Smith, David Ricardo, J.-B.Say, and J.S.Mill, provided clarifications as well as answers to the above questions, which Alfred Marshall carried into the twentieth century. However, failing to interpret correctly economic concepts as employed by the classical economists, John Maynard Keynes dismissed the classical explanations and conclusions as being irrelevant to die world in which we live. The trauma of the Great Depression and Keynes's changed definition of economic concepts, aided by the work of Eugcn Bohm-Bawcrk, have made it difficult for modern economists to fully appreciate the classical insights. This book clarifies the classical explanations to help resolve the continuing theoretical and policy disputes. Key chapters include:
On the definition of money
Keynes's misinterpretation of the classical theory of interest
The classical theory of growth and Keynes's paradox of thrift
The mythology of the Keynesian multiplier.