Economic Events and Keynesian Ideas: The 1930s and the 1970s

Keynes' General Th&ry was a brilliant attanpt to plain the paradox of 1CM interest rates, ineffectual easy rn,netaxy policy, and lowinvestrtnt during the Great Depression. We argue that Keynes' failure to distinguish between low naninal and high real interest rates led hint to misinterpret a tight and ail too effective nonetary policy and unnecessarily hypothesize a downward shift in investhent dnand. Keynesian ideas in tux profoundly influenced econanic policy in the 1960s and 1970s. The resulting postwar inflation -- rather than scholarship on what actually happened in the 1930s -- appears to be the primary reason for the waning influence of the ideas derived frcin the General Theory.