The Institute for New Economic Thinking (INET) website currently features a series of interviews with Lance Taylor, Arnhold Professor of International Cooperation and Development, The New School for Social Research. The interviews, conducted by INET executive director Rob Johnson, revolve around Taylor’s recent book, Maynard’s Revenge: The Collapse of Free Market Macroeconomics (Harvard, 2010).
In the discussions, which touch on topics including The Flaw in Fiscal Conservatives’ Logic,, Natural Cycles of Recovery,, and income distribution, explore how the financial crisis challenges the free market-focus that has dominated economic thinking since the early 1980’s. Taylor advocates a return to the heterodox economic theory of John Maynard Keynes (hence the book’s title), which defined western financial policy during the post-World War II period.
In opposition to classical economics’ laissez-faire ideal, Keynes saw a larger role for federal governments and central banks in driving employment and economic stability. In the interviews, Taylor argues that the failure of the US government to intervene and ensure wage growth commensurate with inflation was one of the fundamental causes of the financial crisis: Real wages stagnated, and households found themselves struggling to maintain the living standards to which they had become accustomed, and then they ran up debt,, he says.