by Paul Davidson, Editor of the Journal of Post Keynesian Economics

The last line of the original manuscript of my book JOHN MAYNARD KEYNES [Palgrave , London and New York 2007] was written in July 2006. In that line I noted that when, not if, the next Great Depression hits the global economy Keynes’s General Theory analysis will be rediscovered by economists. As this is being written in October 2008 it appears that this time has come.

WHAT CAUSED THE ECONOMIC AND FINANCIAL CRISIS OF 2008?

The Winter of 2007-2008 will prove to be the winter of discontent and the beginning of the end in the classical theory of the efficiency of global financial markets. For more than three decades mainstream economists had preached, and politicians had swallowed, the myth of the efficiency of such free markets.

Those who do not study the lessons of history are bound to repeat its errors. Economists forgot the events of the Great Depression and the collapse of unfettered financial markets that followed the “Roaring Twenties” prosperity. For history has repeated itself with the growth of deregulated markets and the prosperity of the 1990s ending up in 2008 with the Greatest Recession since the Great Depression.

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