2008–2009 Keynesian Resurgence - in Academia

In Academia

Among academic economists, an important distinction of relevance to the resurgence is between economists who have a prominent presence in mainstream political and popular debate, and those who do not. A marked shift towards Keynesian thinking took place among prominent economists. Some such as Paul Krugman, James Galbraith and Brad Delong were already Keynesians, but in 2008 began to get considerably more attention for their advocacy of Keynesian policy. Others such as Richard Posner and Martin Feldstein, had previously been associated with anti-Keynesian thinking, yet by 2009 publicly converted to Keynesian economics with considerable impact on other economists.

This shift towards Keynesian thinking was widely shared by many politically active economists across the world. In the years leading up to the resurgence, Germany had been home to some of the most outspoken critics of Keynesianism, yet according to economist Sebastian Dullien writing in December 2008, "important voices in the German economic profession are now calling for a large stimulus package, passed as quickly as possible". The New York Times reported that in the March 2008 annual meeting of the American Economic Association mainstream, economists had remained hostile or at least sceptical about the government’s role in enhancing the market sector or mitigating recession with fiscal stimulus – but in the 2009 meeting virtually everyone voiced their support for such measures.

There were a few high profile dissenters, such as Robert Barro and Eugene Fama, but in 2008 and early 2009 their objections had little influence on mainstream debate. A dissenter from Germany was Alexander Von Neubacher, who complained in January 2009 that "I simply cannot understand how so many economics professors have done a complete U-turn. Have they all gone mad?"

Among the less publicly prominent economists, who tend to debate only with their fellows and write mainly in technical journals, a substantial shift in opinion was less obvious. Speaking in March 2009, Galbraith stated that he has not detected any changes among academic economists, nor a re-examination of orthodox opinion in the journals.

Until 2008, the dominant consensus among mainstream economists was that fiscal stimulus did not work. The mainstream of New Keynesians and New Classical economists had previously agreed monetary policy was sufficient for most downturns and the two schools of thought only debated technicalities. The extent of the recession made New Keynesians re-evaluate the potential of large stimulus, and their debates with New Classical economists, who often opposed stimulus entirely, became substantive. Some economists (primarily post-Keynesians) have accused the New Keynesian system of being so integrated with pro-free market neo-classical influences that the label 'Keynesian' may be considered a misnomer.

The 2008 financial crisis has led economists to pay greater attention to Keynes’s original theories. In February 2009, Robert Shiller and George Akerlof argued in their book Animal Spirits that the current US stimulus package was too small, as it does not take into account loss of confidence or do enough to restore the availability of credit. In a September 2009 article for The New York Times, on the lessons economists should learn from the crisis, Paul Krugman urged economists to move away from neoclassical models and employ Keynesian analysis:

By mid-2010 interest in Keynes idea's was still growing within academia, even while the apparent consensus among prominent economists had fractured and the revival in Keynesian policy making had partially stalled.

In October 2011 journalist John Cassidy noted the large number of new books that have recently came out about Keynes, including from leading universities like Cambridge and MIT, with more books due to come out towards the end of 2011.