Quarterly Review 3212

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Back to the Future with Keynes

Lee E. Ohanian - Consultant

Published June 18, 2008

Abstract
This article analyzes Keynes’s “Economic Possibilities for our Grandchildren”—an essay presenting Keynes’s views about economic growth into the 21st century—from the perspective of modern growth theory. I find that the implicit theoretical framework used by Keynes to form his expectations about the 21st-century world economy is remarkably close to modern growth models, featuring a stable steady-state growth path driven by technological progress. On the other hand, Keynes’s forecast of employment in the 21st century is far off the mark, reflecting a mistaken view that the income elasticity of leisure is much higher than that of consumption.


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