A Return to Keynes

ECON-1005

Reflection Assignment 1

By: Kevin Murphy

A RETURN TO KEYNES?

Economics has moved beyond Keynes, but the Obama Administration's FED nominee hasn't

BY: THOMAS SOWELL

OCTOBER 15, 2013

www.nationalreview.com/article/_24326110/return-keynes-thomas-sow

Thomas Sowell is a Senior Fellow at the Hoover Institute of Stanford University. In this article he raises serious questions about new Federal Reserve Chairman Janet Yellens Economic Policies and the direction the Obama Administration is taking US Economic Policy.

Yellen's nomination has set off a flurry of media stories. As the first woman to occupy this position, hoprfully this doesn't mean any criticism of what she does will be attributable to Sex Bias or a War on Women.

The Federal Reserve has become such a major player in the US Economy that it needs far more scrutiny and criticism than it has received, regardless of who is in charge.

Yellen is a former Economics Professor at Berkely and has openly proclaimed her views on Economic Policy. These views deserve more careful scrutiny. She asks: "Will Capitalist Economies operate at full employment in the absence of routine intervention?". Her answer: "Cerainly not.". She represents the Keynesian Economics that once dominated economic theory and policy like a national religion-until it encountered 2 things: Milton Freidman and the "Stagflation" of the 1970's. Friedman is a Nobel Prize winner in Economics who helped shape the modern view of Economics brought by "Stagflation"(High Unemployment and High Inflation) caused by the OPEC Crises in the 1970's. Keynesians believed Government Policymakerscould choose a Trade Off between the Inflation Rate and the Unemployment Rate. That Trade Off was called the Phillips Curve. Developed by British Economist A. W. Phillips in 1958....