Keynes and his Consequences; A Theory of Stagflation

Abstract

Keynes attempted, in the general theory to develop a theory of the business cycle. However, this attempt was rather underwhelming given the significance of the subject matter. In this paper, our primary course of concern is not to give a scathing review overall, but rather to detail the fundamental fallacy that Keynes advocated. There is, in reality, no way to 'keep the boom, but abolish the slump.' Monetary expansion is not a tool by which new goods and services can be directly created, and to predicate ones economics wholly on a view of demand and not of production can only lead to incorrect and fallacious conclusions. What I hope to show is that the Austrian tradition should not fall into the same errors both Keynes, and their own predecessors did. We should not be either exclusively supply-side, or demand-side, we should recognise the dual interdependence of both on the structure of production.