NBER WORKING PAPERS SERIES ‘THE REINCARNATION OF KEYNESIAN BCONOMZCS N. Gragory Mankiw Working Paper No. 3885 [NATIONAL BUREAU OF ECONOMIC RESEARCH 1050 Massachusetts Avenue Cambridge, MA. 02238 October 1991 Prepared for the Septerher 1991 meeting of the European Economic Association in Canbriage, England. thie paper is part of NBER's Fesearch programs in Economic Fluctuations and Monetary, Economics. "Any opinions expressed are those of the auchor and not those of the National Bureau of Economic Research.NBER Working Paper 43885 October 195% THE REINCARNATION OF KEYNESIAN ECONOMICS ‘This paper discusses the reenergence of Keynesian economics uring the past decade. It highlights the substantial differences between new Keynesian economics and the convictions of early Keynesians. In particular, it points out that now Keynesians have adopted many views that were once considered smonetarist* or ‘classical.* It concludes that the term "Keynesian * may have outlived its usefulness. N. Gregory Mankiw 1050 Massachusetts avenue Cambridge, MA 02138‘he eftle of thts session, “Kaynestan Eeoneaies Today, sys much shous what hes happened in macrosconontcs uring the past decade. Uhen began graduate achool at MIT in 1900, {¢ was not at all cleae that Keynesian economics would st611 be sround in the 1990s, Keynes Looked ae Af he vere Leaving macroeconoaice and entering the history of thought. The leading intellectual figure of the day was Robert Lucas, and he had ehis to say shout the state of Keynesian ecoraaice! one cannot Find good, under-forty economists who fdentify thenselves for their work as “Keynesian. Indeed, poople aven take offense if to ar “Keynesfans.* At research seminars, people don’e take Keyoosian cheorLsing seriously anyzore; the audience starts to vhtsper and giggle co one another," ‘wseas called his article, "The Death of Kaynesian Ezonoekes. © From our current perspective, {€ Ls clear that thts obstusry was premature, Today, Keynesian theorizing does not inepixe vhispers end sigeles from the audience, There are many econoaiees under the age of forty vho do not take offense when their work Je called *Keynesten,* and count ayzelf az one of then. If Keynesian economics wer dead in 1980, then ‘today Le has een vetnearnated bled sone of the articles that avd Romer and I have vecently 4 en central to thie reincarnation in a cvo-volune collection called Ny Keonesian Economist. The topics covered in his collection--such 6¢ nperfect competition, seni costs, coordination faflure, and efficiency 1 those that have doninated dfecussions anong Keynestans over the