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Back to the Future with Keynes

Quarterly Review 3212 | Published July 1, 2008

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Lee E. Ohanian Consultant
Back to the Future with Keynes


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.

Reprinted from _Revisiting Keynes: Economic Possibilities for Our Grandchildren_, edited by Lorenzo Pecchi and Gustavo Piga, copyright 2008.